232 THE ECONOMIC EFFECTS OF 
supplies, and amounts, in effect, to a depression of the will to 
save on the part of the borrowing community. 
Intimately associated with the consequences upon foresight 
and the ‘telescopic faculty’ as applied to public business is 
another of the utmost importance in its bearing upon national 
efficiency, i.e. the effect of long-continued loans in depressing 
the national capacity for saving. This shrinkage in the power 
to save, as distinct from the will to save, has its origin in the 
effect of a period of rising prices upon business efficiency, and 
particularly upon the efficiency of management in industry. 
Upward price movements, long continued, free business men 
from watching the most precarious factor in costings; and the 
result is an insidious tendency to slackness which permeates all 
business, both public and private. This damping-down of the 
incentive to efficiency in times of prosperity, and its stimulation 
in times of depression is, however, so well recognized that no 
further comment is necessary. 
Another consequence upon which much emphasis is placed 
by Viner, and the justice of which is upheld by the Australian 
instances examined, is the variation in price-levels throughout 
the course of the borrowing cycle. The alteration, as we have 
seen, is not only in the relative levels of prices in the borrowing 
and lending countries; but there is also that characteristic 
change in the price-levels for import, export, and domestic 
commodities. The relative changes in sectional price-levels has 
most to do with turning the advantage in overseas trade 
against the borrowing country in the later phases of the borrow- 
ing cycle. And this is bound to happen quite independently of 
internal developments, which could not produce changes in the 
level of prices of that kind and degree. The measurement of 
the terms of trade, especially of the gross terms, has demon- 
strated with a fair degree of accuracy the effects of this change 
1 See Copland, Trade Depression in Australia, paper before Section ‘@’, ALAAS. 
1923. Proc., pp- 561 ef seg., and Appendix to Report on Unemployment, Develop- 
ment and Migration Commission, 1928. 
% (Of. Copland, D. and M. Commission Report cited above. ‘Every major crisis 
n Australia emphasizes the fact that fluctuations in the prices of exports may be of 
more consequence in their effect on prosperity than variations in the volume of 
sxports. The price-level for exports vitally affects the balance of banking funds in 
London, and this has an important influence upon banking and credit conditions 
in Australia.’