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* INTERNATIONAL TRADE
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ell ue
indefinitely, are indeed quite conceivable, just as marked differences
in the range between the wages of the several non-competing
groups of laborers are quite conceivable; and there might be
corresponding results of some quantitative moment in international
trade. But since, as a matter of fact, the differences in the interest
rate between countries are not considerable, we are justified in
concluding that this element in the economic situation, like the
element of persisting differences in wages to different workers,
does not lead to a radical modification of our first conclusions.
There is more to be said, however, concerning the way in which
the use of capital bears on international trade; there is another
point of view. Tho the rate of return on capital may have no such
marked influence as is often supposed, the fact that capital is
used, and is used with far-reaching effects on the effectiveness of
labor, has consequences in international trade which in turn
are far-reaching.
Capital and labor are often referred to as agents which compete
in production. This form of statement, useful for some purposes
tho it is, does not describe with accuracy what happens when
capital is made and used. Capital is itself made by labor; and
the use of capital simply means the application of labor in another
way — by an indirect and prolonged process. When a workman
uses a tool in making a given article, the total labor given to pro-
duce the article includes not only what is done directly by the tool-
user, but also a part of the labor of the tool-maker. If, for
example, a tool is made by one man, and lasts just a year; and if
another man then works with that tool during its year of life;
then the resulting articles are produced by the labor of two men
each working one year, or of one man working two years. Simi-
larly, if 100 men work with machinery made by another 100 men ;
and if the machinery lasts 5 years; then in any one of the five years,
the labor given to the resulting product is that of 120 men. This
much is a commonplace in economic theory. It was clearly
stated long ago by Ricardo,! and was explained, elaborated,
insisted on, by Bohm-Bawerk.
1 Ricardo’s Principles, Ch. I., Sections 4, 5.
