AUSTRALIAN ECONOMIC HISTORY 5 
Britain, and which have been strengthened by custom and 
mutual benefit, and it will be clear that a situation exists that 
is favourable in an exceptional degree to the isolation of the 
dominant factors in the business of the country. The smallness 
of the population, even now only little more than six millions 
of people, and the comparative simplicity of a trade organiza- 
tion that confines its activities so largely to a single overseas 
community, together with a financial dependency upon the 
mother country that is as complete now as it was in 1820, 
all combine to offer facilities for the investigation of trade 
phenomena that are not presented with anything like the 
same clarity by the complex and many-sided trading and 
financial associations of older communities with much larger 
populations. 
Arising from the importance of the part played by inter- 
national trade in the life of a community thus organized and 
controlled, is the consequence that the operation of any factor 
which seriously disturbs the equilibrium of trade will have 
profound effects on the business and prosperity of the country. 
And the one factor sufficiently powerful at all times and in all 
circumstances to have this effect is the introduction of foreign 
capital, or, to use the accepted term, borrowing. The causal 
sequence which connects borrowing with business crisis through 
the operation of increased volume of imports, adverse ex- 
changes, disturbed price levels, and hobbled credit is all too 
clear for its significance to be misinterpreted. 
Professor Taussig has remarked of the Canadian situation 
after 1900: ‘Occasionally it happens that there is a simple 
situation, a train of economic phenomena in which one cause 
alone is in operation, or is so predominantly in operation that 
others can be fairly set aside as negligible. . . . The import of 
capital was so great, overshadowed so completely all others, 
that there can be no error in attributing to this the main 
®conomic changes that appeared.’l The object of this study is 
to demonstrate that such a simple situation has existed during 
the greater part of Australia’s history as a collection of self- 
governing colonies or as a federation, and to show that the 
one cause adequate to explain economic changes that were 
gradual enough to affect, over long periods, our capacity to 
Y International Trade, p. 234.