IMPORTATION OF CAPITAL INTO AUSTRALIA 73
employed that the increased productiveness of the community
does not counterbalance the additional burden of interest consequent
 upon the importation.
The distinction between the effective use of new capital and
its mere expenditure on luxury is an exceedingly difficult one
to draw; and any conclusion may be profoundly modified by
8 change in economic conditions which could not be foreseen
at the time of borrowing. Fluctuations in price-level, credit
constriction due to nervousness among investors, that psychological
 vacillation between optimism and pessimism which is
utterly unpredictable, destruction of capital through war or
waste, rising labour costs, diminished managerial efficiency in
industry and other factors which need not be specified, may so
affect the situation as to change economic advantage to serious
disadvantage, even though the original estimate of efficiency
was sound in the circumstances under which it was made. Most
of the ‘new’ countries are turning to the economist with a
demand for a criterion by which the economic consequences of
capital investment in the mass can be measured ; and it has to
be confessed that the reply must, in the nature of the case and
for the reasons just stated, fail to give complete satisfaction.
But, even though the economist is not prepared to mark a clear
line beyond which borrowing becomes dangerous, the results
of the uneconomic use of new capital in relatively large masses
is so plainly to be read that any access of caution induced in
borrower or lender as a result of his researches is a decided gain.
Edward Pulsford complained in 1892 that the intimate connexion
 between times of exuberant prosperity and large capital
importations had never been studied.! ‘The public’, he affirmed,
‘do not fully realize that it is an absolute impossibility to borrow
in excess without bringing about a time of suffering more or less
severe.” While we may plead some greater measure of public
enlightenment in these days, the position is, in all essentials,
unchanged. In vain will the voice of the academic prophet be
raised in the financial wilderness while the volume of public
indebtedness is determined by the sanguine expectations of
politicians rather than by the prospects for the effective use of
capital.
The detection of capital movements in the mature communities
1 Notes on Capital and Finance in Australia, 1892,

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