250 THE IMMEDIATE FUTURE IN RELATION
of production in the output of international goods. But the real
income may be proportionately affected over long periods by
net borrowings abroad, and affected detrimentally if there has
been uneconomic and wasteful application of capital to export
industries. If the hire of the capital applied is not balanced by
the gold value of the increased output from those industries, the
need for exports will be correspondingly increased. Classical
economists find the ‘real ratio’ of international exchange in
‘labour costs’, and by this the comparative advantage in international
 trade is to be measured under ordinary circumstances.
But it will not explain why a country must persist in exporting
greater quantities of international goods produced at increasing
costs, and at a corresponding disadvantage in international
trade. The only fact which will explain this phenomenon in the
case of debtor countries is the real fact of over-borrowing, i.e.
of having the farm over-encumbered with mortgages.
Relative to the loan situation, even more important are the
trends to be noticed in the domestic sphere as between industries
producing home-trade and those producing foreign-trade commodities.
 Heavy interest payments abroad must depend upon
a sufficiency of export commodities to provide the necessary
credit instruments. This compulsory premium upon exports
forces on an undue expansion of all industries producing foreigntrade
 as compared with those producing home-trade commodities.
 The fundamental economic effects of such a situation
arise from the excessive concentration of national effort and
capital, and especially of loan capital, upon the production of
international goods ; and, despite current opinion to the contrary,
it is extremely doubtful whether these industries share the
national burden of external indebtedness to a proportionate
degree. Thus, the ease with which capital has been borrowed
in the past, the partial unloading of the interest charge for
borrowed capital upon industries not employing the capital
borrowed, and the political tendency in economic matters to
take the line of least resistance, have all helped to attain the
uneconomic situation outlined in the last chapter.
Every consideration of the consequences to be expected from
an abrupt termination of overseas borrowing shows the very
real difficulties which lie in the way of such a consummation ;
and it would be a disservice to belittle the risks involved in such