CAPITAL AND INTEREST 
TAA 
63 
Suppose the rate to be twice as high in the United States as in 
Germany. The interest charge (not the same thing, of course, 
as the rate of interest) to be added to the expenses of produc- 
tion then becomes twice as high. Suppose the interest charge 
be 50 per cent of the wages bill in the United States, 25 per cent 
in Germany ; then we have: 
Wa 
Re 
$2.00 
$2.00 
$1.33 
$1.33 
Domestic 
Probpuce SuppLy 
Price 
£1.00 
$2.00 
$0.83 
$1.66 
50% on $20 = $10 
50% on $20 = $10 
25% on $13.33 = $ 3.33 
25% on $13.33 = $ 3.33 
$30 
830 
$16.66 
$16.66 
Both copper and linen are lower in price in Germany; both 
move to the United States; specie flows from the United States to 
Germany. Prices and money wages will fall in the United States, 
rise in Germany. Copper will rise in price in Germany until it is 
at the same price as in the United States; linen will rise similarly. 
After the redistribution of specie, the price of each article will be 
the same in the two countries, tho at a level somewhat higher all 
around than in the bare and simple situation first considered. 
Money wages will be readjusted, at rates somewhat lower than 
before in the United States, somewhat higher in Germany. The 
change in money wages signifies that with the higher interest charge 
in the United States the share of total national income which goes 
to the laborers is smaller there than in Germany. So far as con- 
cerns international trade, nothing happens except the temporary 
movement of goods one way and the redistribution of specie. 
Once this much is accomplished, the two countries have no trade 
connection ; each goes its independent way. The mere fact that 
the interest charge is lower in the one than in the other does not 
cause the conditions for international trade to be different from 
what they were before. 
Now change the situation in still another way. Assume that 
one of the articles is produced with much capital, the other with 
little. Make the case extreme : suppose that one of them (copper) 
! On the manner of constructing these figures, on some pertinent criticisms, and 
on the grounds for putting them together as is done in the text, see the note at the 
close of this chapter.