22

ECONOMIC PRINCIPLES

the contrary. That part of gross interest, however, which
stands simply for the right of control of the capital, is, under
competition, subject to influences which operate to render it
a uniform charge. Though the market for capital is not
limited by national boundaries, supplies of capital do not
flow unimpeded over the whole world. Distance is, in some
cases, a real obstacle to the lender, operating especially to
cause the risks associated with a given loan to be estimated
at an amount differing from their real value. This is readily
intelligible, in view of the fact that distance is apt to be
associated with ignorance of the real conditions under
which the capital is to be employed. This ignorance may
add to the real risk as well as to the estimate of what the
risk is.
To some extent, then, different localities have their own
demand for, and supply of, capital, and their own price for
its loan. It is notorious that countries like England, France,
and Germany are better supplied with capital, relatively to
the opportunities they afford for its local investment, than
are countries like Canada, India, or even the United States.
The usual rate at which capital can be borrowed, the rate
at which it pays to borrow, stands higher in the countries
less well supplied than in those whose investment opportunities
 have been more completely provided for. In the
former there remain fields of profitable investment the like
of which have been long exhausted in the latter. Because
the opportunities for making capital yield a large profit are
more abundant, borrowers are able to offer more, and its
relatively scant supply prevents lenders from being driven to
offer it at very cheap rates in order not to keep it unlent.
The overflow, from countries more fully supplied, is checked
by the high estimate of the risks associated with employment
 of capital in the scantily supplied localities, and thus
under-supply in one country co-exists with over-supply in
another, using these terms in the rather loose sense in which
they are often employed in ordinary language. In a community
 where civil order is ineffectively maintained, or
the legislation touching the property of, or debts due
to, foreigners is unsatisfactory, the risks associated with