Borrowing and business in Australia

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Monograph

Identifikator:: 836084659

URN:: urn:nbn:de:zbw-retromon-28892

Document type:: Monograph

Author:: Ricardo, David

Title:: Oeuvres complètes

Place of publication:: Paris

Publisher:: Guillaumin

Year of publication:: 1847

Scope:: 1 Online-Ressource (XLVIII, 752 S)

Collection:: Economics Books

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OVERSEAS TRADE AFTER 1890 101 It becomes possible to compute the actual terms of exchange by means of commodity values, i.e. to measure the net and gross barter terms of Australian trade, and to trace the steady deterioration in bargaining power which affected prosperity so disastrously. The table which now presents the result in the form designed by Taussig will convey the essential features of the trade position, and the graph which follows will show at a glance the real and logical explanation of the crisis of 1893. Bearing in mind the fall of 25 per cent. in the export price level after 1886, the strength of the national effort to accumulate credits abroad is shown by an amazing expansion in production which drove up the export surplus from approximately £22 millions in 1886 to an average of £33 millions for the six years following 1890, an increase in value alone of 50 per cent. The desperate nature of a trade situation caused, in the main, by excessive borrowing is now exposed ; and the mounting curve for the gross terms, the steady rise in that for net terms, and the fall in that for effective wages are charged with significance. (Fig. VII.) The plain text of this narrative is that the Australian episode was no ‘unique and unparalleled disaster’ as one economist has labelled it. It falls into place as merely one, albeit a distressing one, of a great series of such incidents occurring not merely in the economic history of Australia but in that of every new country. Further, by the very facts of its magnitude and of the severely isolated conditions of the experiment it has become a standard of measurement for subsequent Australian distur- bances of a similar character. The ‘incidents’ of 1901, 1907, and 1912 all reinforce the conclusions to be drawn from 1893, and provide a panorama of economic phenomena agreeing exactly with deductive expectation. ‘It is rare’, says Professor Taussig, after reviewing the Canadian experience, ‘that the possibility of verifying the deductions of theory is found so successfully; and it is of no little significance that for this particular sort of situation the conclusions of theory prove to be so completely verified.’* It may be claimed without any serious fear of contradiction that no neater case of such verifica- tion exists in the annals of international trade than that of the period leading up to the 1893 crisis in Australia. L Op. cit., p. 235.

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