Borrowing and business in Australia

Bibliographic data

Monograph

Identifikator:: 183051623X

URN:: urn:nbn:de:zbw-retromon-222122

Document type:: Monograph

Author:: Wood, Gordon L. http://d-nb.info/gnd/1239193688

Title:: Borrowing and business in Australia

Place of publication:: London

Publisher:: Oxford university press, H. Milford

Year of publication:: 1930

Scope:: xv, 267 Seiten; graph. Darst.

Digitisation:: 2022

Collection:: Economics Books

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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part V. Australia during and after the great war

Collection:: Economics Books

236 THE ECONOMIC EFFECTS OF excessive, the economist’s attitude would be stated somewhat in these terms. Excessive borrowing is that which, under the circumstances to be foreseen as far as may be in the future, promises to return less than it costs; in other words, that portion of the external debt is in excess of the national borrow- ing capacity the value of whose marginal net product from the national standpoint is less than the annual interest charge. When the final trade return provides through normal taxation an amount that is less than the charges for the use of the capital the safety-point has been passed. It is in fact a special case of the application of the law of diminishing returns; and bhe point which it is desirable to indicate is that at which the surve for increasing returns is at its highest. For in its broad aspect the problem is not so much the academic question whether public borrowing is expedient. It is rather, in that stage of industrial organization occupied by the Commonwealth, how much or how little each year the public debt should be increased. The position created is exactly similar to that of a business maintained partly by bank overdraft. The best of whether or not it is desirable to increase or diminish the overdraft, in effect to have a little more or a little less of capital in the business, implies the same decision as to the point at which borrowing becomes unprofitable. That is to say that the test is one of the marginal utility of the increment. So, in the national sense, productivity in relation to annual interest on the external debt is the only sound test of the economic advantage due to the increase in debt. It must be conceded, however, that there is a fundamental difference between the two cases. The solution of the problem for the private enterprise will depend upon the immediate prospective return, whereas that for the public undertaking must be decided to a greater extent by the potential returns in the more remote future, especially when development must anticipate a relatively rapid increase in population by immigration. Further, the mobilized credit of a state, and the greater long-period stability in the case of national undertakings, justify public borrowing to a greater degree than is the case in private business. } In considering problems of national indebtedness, moreover, it is important not to lose sight of the fact that the ultimate objective of both borrowing and taxation must be the improve-

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