In Buenos Ayres, the producer or collector of export articles required the price to be paid usually a long time in advance (habilitacion), a very bold but necessary procedure, on account of his poverty. (Robertson, Letters on S. America, I, 174 ff.) In the corn trade in South Russia, at least one-half of the purchase money was required to be paid in advance, and even before shipment, the other half as soon as the corn arrived in the harbor, and, hence, sometimes, long before it was put on board. (W. Jacob, On the Corn Trade of the Black Sea, 23.) Compare Tooke, View of the Russian Empire, I, 339, Richesse de Hollande, II, 43, Storch, Handbuch, II, 61 seq. Russia was, about 1770, a credit-giving nation to the still poorer Persians. (Gmelin, Reise, III, 413.) The Spaniards also, in their American colonies, had always an expedition ready and waiting, the payment for which was made on the arrival of the second. (Depons, Voyage dans la Terre Firme, II, 368.) Moreover, active commerce simply, especially when circuitous, may be considered as in some way an international loan; and thus it is that the favorable "balance," by means of which claim-rights are obtained in foreign countries, is secured.
[187-8] Notwithstanding the gratitude of the United States towards France, and spite of all the French ambassador could do, the English immediately after the conclusion of peace, attracted the greatest part of American trade to themselves. (Chaptal, de l'Industrie Fr., I, 103.) Countries with a low rate of interest have an advantage in this respect, which grows after the manner of compound interest, when the duration of the advance of capital is prolonged. (Senior, Outlines, 195.)
[187-9] How capitalists may, by the giving of international credit, fall into an injurious habit, is shown by the late and troublesome building up of the Dutch railway system, while so many foreign railway enterprises were provided with Dutch capital.
HISTORY OF THE RATE OF INTEREST.—EFFECT OF A LOW RATE ON STATIONARY NATIONS.
Beneficial as the spur of a low rate of interest is for countries capable of development, it is a heavy drag on a stationary people, and more so on those who have lost a portion of the field for the investment of their capital by the competition of too powerful rivals.[188-1] A real superabundance of capital is attended with cares and temptations for the middle classes very similar to those caused by a so-called over-population, especially to dishonesty and extravagance.[188-2] When capital, population and the skillfulness of labor remaining the same, continues to increase, the enlarged capital may very readily have every succeeding year only the same return to divide among its owners, that the smaller had in previous years.[188-3] Hence additional saving here would produce no real enrichment of the people; and it might even happen that the instinct to accumulate capital might in the future become torpid to a greater degree than the capital itself had increased. In any case, however, the decline of the rate of interest can continue only to a certain point. There are numberless persons who would rather consume their capital, or invest it in hazardous speculations than put it out at interest at one per cent. a year.[188-4] At least, the tendency of a decline in the rate of interest is, in the case of the richer, to increase the amount of capital consumed as compared with productive capital. The more moderate, sober and provident a people are, the lower may the rate of interest decline without producing this effect. And so, the more the capital of a nation is concentrated in the hands of a few; because then the owners of capital are all the later forced to break in upon it, for the sake of subsistence.[188-5] [188-6]
Among nations which have totally declined, the rate of interest is wont to reach a high point once more; the natural result of great losses of capital and men, while, at the same time, the freedom of the lower classes and the security of property have been either curtailed or lost. The weakness of age is, in many respects, even in the case of nations, a second childhood.[188-7]
[188-1] Temple, Works I, 102, assures us that the Dutch in his time considered the payment of the principal of a public debt a real misfortune: "they receive it with tears, not knowing how to dispose of it to interest with such safety and ease." On Italy, see Bandini (ob. 1760), Sopra le Maremme Sienese, 154 seq.; earlier Montanari, Della Moneta, 57. In the England of the present time, small capitalists especially belong to the so-called "uneasy" classes.
[188-2] Numberless bankrupts and unbounded extravagance in Holland. (Richesse de Hollande, II, 168.) In England, the hazardous enterprises of 1825 were very much promoted by the action of the government which a short time before reduced the interest on its state debt. (Tooke, History of Prices, II, 148 ff.)
[188-3] J. S. Mill, IV, ch. 4, 4. When Ricardo, ch. 6, says that every increase of productive capital must enhance the value in use, and still more the value in exchange, of a nation's property, but under such circumstances only to the advantage of the working class, and still more of the land owning class, he at least apparently presupposes an improvement, or increase of labor.