Chapter LVII: Section CXCIX: Influence of Foreign Trade

Foreign trade, that great means of coöperation of labor among different nations, affords such a remedy in a very special manner. It very frequently happens that the undertakers of one country, when a certain factor of production seems too dear at home, borrow it elsewhere. Thus, for instance, a country with a high rate of wages draws on another for labor, and one with a high rate of interest on another for capital.[199-1] We elsewhere consider such a course of things from the standpoint of the supplying country, which in this way is healed of a heavy plethora of some single factor of production which disturbs the harmony of the whole. (§§ 187, 259, ff.). But, at the same time, the supplied country, considered from a purely economic point of view, reaps decided advantages therefrom. If, for instance, a Swiss confectioner returns from Saint Petersburgh to his home, after having made a fortune in an honest way, no one can say that Russia has grown poorer by the amount of that fortune. This man made his own capital; if he were to remain in Russia, its national economy would be richer than before his immigration thither. Now, it is, at least, no poorer, and has in the meantime had the advantage of the more skilled labor of the foreigner.[199-2] And, so, when a capitalist living in Germany purchases Hungarian land, the national income of Hungary is diminished by the amount of the annual rent which now goes to Germany; but it receives an equal amount in the interest on capital, provided the purchase was an honorable one and the capital given in exchange for the land honestly invested.[199-3] If Hungary, in general, had a superabundance of land but a lack of capital, the economic advantage is undoubted.[199-4]

These economic rules, indeed, are applicable only to the extent that higher and national considerations do not in the interest of all, create exceptions to them. "Is not the life more than meat, and the body than raiment?" No rational people will allow certain services to be performed for them preponderantly by foreigners, even when they can be performed cheaper by the latter--the services of religion, of the army, of the state, etc. The same is true of landownership; and all the truer in proportion as political and legal rights of presentation and other forms of patronage are attached to it. Lastly, hypothecation-debts which go beyond certain limits, may entail the same consequences as the complete alienation of the land;[199-5] and Raynal may have been, under certain circumstances, right when he said, that to admit foreigners to subscribe to the national debt was equivalent to ceding a province to them.[199-6] It is obvious that a great power may do much in this relation that would be a risk to a small state.[199-7] [199-8]

[Footnote 199-1: "The transportation of productive capital
and industrial forces from one point where their services
are worse paid for, to another where they find a rich
reward, will not be apt to be made so long as the
equilibrium may be obtained [most frequently much more
easily] by the interchange of the products." (_Nebenius_,
Oeff. Credit, I, 48.) The repeal of the corn laws in England
certainly diminished the emigration of English capital.]

[Footnote 199-2: For an official declaration of the
Brazilian state in this direction, see Novara Reise.]

[Footnote 199-3: Basing himself hereon, _Petty_, Political
Anatomy of Ireland, 82 ff., questions the usual opinion,
that Ireland suffered so much from absenteeism. He says that
a prohibition of absenteeism carried out to its logical
conclusion would require every man to sit on the sod he had
tilled himself. _Carey_, On the Rate of Wages, 1835, 477,
calls English capitalists who draw interest from America,
absentees.]

[Footnote 199-4: The older political economists have, as a
rule, ignored this law, and were wont to consider every
payment of money to a foreign country as injurious. Thus,
for instance, _Culpeper_, Tract against the high Rate of
Usury, 1623, 1640, disapproves all loans made from foreign
countries, because they draw more money in interest, and in
repayment of the principal out of the nation, than they
brought into it at first; and all the more, as the loan is
generally procured, not in the precious metals, but in
foreign goods, of which there is a superabundance in the
home country. Similarly _Child_, Discourse of Trade, 1690,
79, who claims that the creditor was always fattened at the
expense of the debtor. Hence _v. Schröder_, Fürst, Schatz-
und Rentkammar, 141, advises that the capital borrowed in
foreign countries should be confiscated. Compare, also, _v.
Justi_, Staatswirthschaft, II, 461. And yet the very
simplest calculation shows, that if a man borrows $1,000 at
5 per cent. and makes 10, he is doing a good business with
the borrowed capital. This _Locke_, Considerations, 9,
recognizes very clearly. Compare, also, _J. B. Say_, Traité,
II, ch. 10, and _Hermann_, Staatsw. Unters., 365 seq.]

[Footnote 199-5: Think of the English creditors in Portugal
and the Genoese in Corsica (_Steuart_, Principles, II, ch.
29.) Considered simply from an economic standpoint, the
Edinburg Review, XX, 358, very clearly demonstrates that
England should recruit her army from Ireland, where wages
are so much lower than in Great Britain. But how dangerous
in a political sense! In 1832, one-fourth of the stock of
the United States Bank was in the hands of foreigners, and
hence its opponents nick-named it the "British Bank." By the
rules of the principal bank in Philadelphia, in 1836, only
American citizens were allowed a vote in its proceedings.
Similarly in the case of the Bank of France. (_M.
Chevalier_, Lettres sur l'Amerique du N. I, 364.) It may be
remarked in general, that the older political economists
have based correct political views on false economic
principles, while the more modern ignore them entirely.]

[Footnote 199-6: Compare _Montesquieu_, E. des Lois L, XXII,
17; _Blackstone_, Commentaries, I, 320.]

[Footnote 199-7: Thus Austria conceded, in 1854-55, a number
of railways to French capitalists, and always favored the
purchase of landed estates by small foreign princes. In the
latter case, Austrian influence abroad was much more
promoted by the measure than was foreign influence in
Austria.]

[Footnote 199-8: Every nationality is not worth the
sacrificing of the highest economic advantage or profit to
it. Or, would it be preferable to leave the Hottentots and
Caffirs, poor, barbarous and heathenish?]