This freedom with which England has furnished financial resources to the rest of the world is sometimes called in question as having had, or being likely to have, bad effects upon the activity of production at home.  It is quite clear that the progress of international commerce and the division of labour among nations by which commodities of all kinds have been very greatly cheapened could not have been carried out if England and other comparatively far developed countries had not supplied the necessary capital for the development of the relatively backward parts of the earth.  If English money had not gone into building railways in America, Canada, Argentina, Australia, and all over the world, and supplying capital to the farmers and others who opened up these countries, food could not have been nearly as cheap as it is or as it was before the war, and clothes and other necessaries of life would have been at a very different price.  In fact, it may be said that if England had not acted as she has, as the world’s financier, the development of the world’s trade to anything like its present scale would have been altogether impossible.  If we could feel sure that the distribution of the world’s production had been as satisfactory as the wonderful increase in its output, there would be no question that all classes in England had been very greatly benefited by its financial activities abroad.  As it is, it is sometimes argued that English capital going abroad stimulates production in other countries and increases the demand for labour there, but that the demand for labour in England and its reward might have been on a higher scale if English capital had been kept at home.  This is a question which is, happily perhaps, outside my province at present, but it is one which demands serious attention.  This much can be said, that the years in which English capital has gone abroad with the greatest rapidity have also been those in which our export trade has been most active, and it is obvious that this must be so, because when England exports capital it does so in the form of lending money either to a foreign Government or to a foreign municipality, or to some company, English or foreign, which is conducting some enterprise in a foreign country.

In whatever way the money is lent the result is that the country to which it is lent is given so much buying power in England and consequently its demand for English goods is to that extent stimulated.  It does not follow, of course, that the whole amount of money that it borrows is actually spent in England.  It is possible that the Canadian railway which is raising money in England may spend it by buying steel rails in Belgium, but in practical fact the net result is that somebody or other abroad is given a claim on England which finally, by some roundabout process, takes effect in a demand for English goods and services.  At the same time, when one does admit that international finance is essential to international commerce and that the specialization, which is an essential product of commerce, is thereby quickened, we have to remember that the objections, such as they are, which can be put forward against the division of labour among individuals cannot be overlooked altogether when the division of labour is applied to nations.