198 THE BALANCE OF INDEBTEDNESS, 1918-28
Two considerations arise here with reference to capital loans.
[t is widely assumed that such loans enter the borrowing
sountry mainly as capital goods. Viner found in the Canadian
investigation that it was impossible to determine what proportion
 of the imports was properly to be classed as capital and
what proportion as consumers’ goods. The problem is closely
allied to the old controversy as to the distinction between
necessities and luxuries. No hard and fast line can be drawn in
either case. But, after an attempt to group Canadian imports
into capital and consumption goods, he is forced to the conslusion
 that, while capital goods did enter to some extent as
direct purchases by the borrowing from the lending country,
the loans entered predominantly in the form of consumption
goods. Pursuing the same plan for the investigation of Australian
imports it is possible to summarize the inquiry in the form of
a statistical comparison.
Australian Imports
Group 1. Capital Goods.

1925-6
£m.
115 21-2 | 304
1-5 41 15:1
130 | 263 | 455
100-0 195-0 350-0

Metals and Machinery .
Vehicles and ships

Index " ' .
Increase, for Capital Goods, per cent. of 1908, 250.

Grove II. Consumption Goods.

1908
£m.

"1919-20 | 1925-6
£m. £m.
69-7 95-8
233-0 | 320-0

All commodities . r

29-9

Index . £
Increase, for Consumption Goods, per cent. of 1908, 220.
that the borrowings arrive partly in this form. Britain has then to settle with the
United States, herself a capital exporter. Now the U.S.A. requires very little of
Britain’s manufactures, but she does need wool, silk, and rubber. The export of
the first from Australia and of the second from Malaya partly satisfies the creditor.
The silk is purchased from Japan, and this is paid for in raw cotton from India.
[ndia takes payment for the raw cotton in cotton manufactures and heavy goods
of all kinds. In this way British capital may be exported to Australia in the form
of cotton piece-goods or motor-cars exported to Bombay.