IMPORTATION OF CAPITAL INTO AUSTRALIA 73 
employed that the increased productiveness of the community 
does not counterbalance the additional burden of interest con- 
sequent upon the importation. 
The distinction between the effective use of new capital and 
its mere expenditure on luxury is an exceedingly difficult one 
to draw; and any conclusion may be profoundly modified by 
8 change in economic conditions which could not be foreseen 
at the time of borrowing. Fluctuations in price-level, credit 
constriction due to nervousness among investors, that psycho- 
logical vacillation between optimism and pessimism which is 
utterly unpredictable, destruction of capital through war or 
waste, rising labour costs, diminished managerial efficiency in 
industry and other factors which need not be specified, may so 
affect the situation as to change economic advantage to serious 
disadvantage, even though the original estimate of efficiency 
was sound in the circumstances under which it was made. Most 
of the ‘new’ countries are turning to the economist with a 
demand for a criterion by which the economic consequences of 
capital investment in the mass can be measured ; and it has to 
be confessed that the reply must, in the nature of the case and 
for the reasons just stated, fail to give complete satisfaction. 
But, even though the economist is not prepared to mark a clear 
line beyond which borrowing becomes dangerous, the results 
of the uneconomic use of new capital in relatively large masses 
is so plainly to be read that any access of caution induced in 
borrower or lender as a result of his researches is a decided gain. 
Edward Pulsford complained in 1892 that the intimate con- 
nexion between times of exuberant prosperity and large capital 
importations had never been studied.! ‘The public’, he affirmed, 
‘do not fully realize that it is an absolute impossibility to borrow 
in excess without bringing about a time of suffering more or less 
severe.” While we may plead some greater measure of public 
enlightenment in these days, the position is, in all essentials, 
unchanged. In vain will the voice of the academic prophet be 
raised in the financial wilderness while the volume of public 
indebtedness is determined by the sanguine expectations of 
politicians rather than by the prospects for the effective use of 
capital. 
The detection of capital movements in the mature communities 
1 Notes on Capital and Finance in Australia, 1892, 
3710