LOANS AND INTEREST PAYMENTS 125
to the Allies during the Great War itself; tho here, as will be
shown in a later chapter, the conditions were quite exceptional and
the consequences unusual. It appeared again, and under conditions
not so exceptional, in the American loans of the post-war years.
It may continue to play a considerable part in the future. The
bankers who float loans are often representatives of manufacturing
enterprises for whose output they wish to secure a market. Gov-
ernments and the business public are fairly obsessed with a deter-
mination to promote exports in every possible way — the ineradi-
cable spirit of mercantilism. And where the loans are made not
merely for industrial purposes, but for military or naval equipment,
the combination of political and economic motives acts even more
strongly to link foreign loans directly with commodity exports.
It is the other sort of interlinking, however, that not deliber-
ately designed, which has played the larger part in the past and
may be expected on the whole to do so in the future. During
the greater part of the 19th century loans were made without
express stipulation of the kind just described. Great Britain
was then the main lending country. Great Britain was also the
cheapest place in which to buy industrial equipment. Borrowers
laid out a portion of the borrowed funds, tho not often the whole,
in buying British goods; they did so merely because they found it
to their own advantage to do so. The same has been the situation
with most of the loans made by the United States to foreign
countries in the post-war period, or at least after 1920. The
borrowers are free to do as they please with the proceeds of the
loans, and it is not to be foreseen whether they will use them in
any part for purchases in the United States.
In all these cases, whether there be express stipulation con-
cerning the purposes to which the loans shall be devoted, or a
purely commercial use of the funds in the lending country, the
effect of the borrowing on the substantive course of international
trade becomes direct. The merchandise movements and the mer-
chandise balance of trade are affected at once. Merchandise
exports from the lending country exceed merchandise imports,
without any intermediate stage of disturbance of the foreion ex-
