196 THE BALANCE OF INDEBTEDNESS, 1918-28 
But the foregoing argument concerns the merely positive 
aspect of fluctuations in the commodity balance. The negative 
aspect concerns the definite restrictive effect of overseas loans 
upon exports, that is to say that borrowing not merely 
accelerates the rate of import movements, but also definitely 
retards the rate at which exports leave the country. Pre- 
sumptive evidence of this effect is contained in the following 
figures for the earlier and later phases of the latest Australian 
borrowing cycle. The statistics quoted hereunder show that, 
despite an expansion in total production, the proportion of 
production which has been exported has tended to diminish. 
Commodity Production and Exports 
6-year period. 
1914 to 1919-20 1,606 | 579 | 
1922-3 to 1927-8 2,566 | 836 
I. Production. 
£m. 
11. Exports. 
£m. 
Percentage 
II on I. 
36-0 
32-6 
This restrictive effect of borrowings upon exports needs careful 
examination, especially as we may, to some extent, be undoing 
with one hand, foreign loans, what we are attempting to do 
with the other, the tariff. Stated briefly, the diminishing pro- 
portion of total production which figures in the export trade is 
a result of four factors, all of which are closely connected with 
capital importation. (i) Australian raw materials are being 
increasingly manufactured for the home market, largely as a 
result of the tariff policy, but also because of the growing in- 
vestment of foreign capital in Australian industries. This may 
also be partly an inevitable result of the world-wide tendency 
to manufacture raw materials as near as possible to the point 
of production. (ii) The expansion of secondary industry tends 
to draw labour and capital away from primary industries, i.e. 
to throw the emphasis on production for the domestic rather 
than for the foreign market. The greater concentration of 
industries at the seaboard, the evidence of rural depopulation, 
and the very small proportion of the product of Australian 
secondary industry which is exported are all noticeable features 
of recent development. (iii) Expansive immigration policies, 
coincident with the carrying out of great developmental works 
and closer settlement, both tend to lower the exportable surplus