250 THE IMMEDIATE FUTURE IN RELATION 
of production in the output of international goods. But the real 
income may be proportionately affected over long periods by 
net borrowings abroad, and affected detrimentally if there has 
been uneconomic and wasteful application of capital to export 
industries. If the hire of the capital applied is not balanced by 
the gold value of the increased output from those industries, the 
need for exports will be correspondingly increased. Classical 
economists find the ‘real ratio’ of international exchange in 
‘labour costs’, and by this the comparative advantage in inter- 
national trade is to be measured under ordinary circumstances. 
But it will not explain why a country must persist in exporting 
greater quantities of international goods produced at increasing 
costs, and at a corresponding disadvantage in international 
trade. The only fact which will explain this phenomenon in the 
case of debtor countries is the real fact of over-borrowing, i.e. 
of having the farm over-encumbered with mortgages. 
Relative to the loan situation, even more important are the 
trends to be noticed in the domestic sphere as between industries 
producing home-trade and those producing foreign-trade com- 
modities. Heavy interest payments abroad must depend upon 
a sufficiency of export commodities to provide the necessary 
credit instruments. This compulsory premium upon exports 
forces on an undue expansion of all industries producing foreign- 
trade as compared with those producing home-trade commo- 
dities. The fundamental economic effects of such a situation 
arise from the excessive concentration of national effort and 
capital, and especially of loan capital, upon the production of 
international goods ; and, despite current opinion to the contrary, 
it is extremely doubtful whether these industries share the 
national burden of external indebtedness to a proportionate 
degree. Thus, the ease with which capital has been borrowed 
in the past, the partial unloading of the interest charge for 
borrowed capital upon industries not employing the capital 
borrowed, and the political tendency in economic matters to 
take the line of least resistance, have all helped to attain the 
uneconomic situation outlined in the last chapter. 
Every consideration of the consequences to be expected from 
an abrupt termination of overseas borrowing shows the very 
real difficulties which lie in the way of such a consummation ; 
and it would be a disservice to belittle the risks involved in such