532 THE WORK OF THE STOCK EXCHANGE
ties have been comparatively insignificant when compared to
our vast total foreign investments.
The test of successful investment, foreign as well as do-
mestic, is apt to consist in whether its purpose is productive.
Loans to foreign governments to be used in building up arma-
ments are not of course in this category, and for just this
reason may harm investors as well as hostile powers; the
great losses suffered during the war by French investors
largely arose from the fact that they had been financing both
sides of the irrepressible Balkan conflict. If foreign loans
are made for really productive purposes, their effect is to
increase the debtor’s wealth, to enable ready payment of
interest and repayment of principal, and to raise wages and
improve standards of living in the debtor nation. Dr. Schacht,
then President of the Reichsbank, was fundamentally right,
however, when he criticized certain German municipalities for
borrowing funds here at high rates of interest to build stadia
and war memorials. In the past, non-productive foreign loans
to new communities in Africa and South America have had a
more sinister outcome. Hobson even declares that “capital
has been employed in numerous instances to drain countries
of their resources, to weaken them economically, and to de-
grade them morally.” Certainly the record during the nine-
teenth century of foreign loans made by European nations
affords sufficient cases ewhere great burdens of public debt
have been thrust upon ignorant and impoverished peoples
through the irresponsible greed of their temporary political
leaders. In some cases, European underwriters must share blame
with the grafters who alone benefited from the proceeds of the
loans.
Finally, there is the danger that too many foreign invest-
ments may endanger the moral fibre of the creditor people by
encouraging them in laziness, vices, and luxurious expendi-
tures. Such fears, of course, apply almost as well to domestic
as to foreign investment, and belong as much in the sphere of
morals as of economics. It may be, of course, that America
