International Finance - Finance, Banking, Money Markets, Finance FAQs

Section V

THE BENEFITS OF INTERNATIONAL FINANCE

When once we have recognized how close is the connection between finance
and trade, we have gone a long way towards seeing the greatness of the
service that finance renders to mankind, whether it works at home or
abroad. At home we owe our factories and our railways and all the
marvellous equipment of our power to make things that are wanted, to the
quiet, prosaic, and often rather mean and timorous people who have saved
money for a rainy day, and put it into industry instead of into
satisfying their immediate wants and cravings for comfort and enjoyment
It is equally, perhaps still more, true, that we owe them to the brains
and energy of those who have planned and organized the equipment of
industry, and the thews and sinews of those who have done the heavy
work. But brain and muscle would have been alike powerless if there had
not been saving folk who lent them raw material, and provided them with
the means of livelihood in the interval between the beginning of an
industry and the day when its product is sold and paid for.

Abroad, the work of finance has been even more advantageous to mankind,
for since it has been shown that international finance is a necessary
part of the machinery of international trade, it follows that all the
benefits, economic and other, which international trade has wrought for
us, are inseparably and inevitably bound up with the progress of
international finance. If we had never fertilized the uttermost parts of
the earth by lending them money and sending them goods in payment of the
sums lent, we never could have enjoyed the stream that pours in from
them of raw material and cheap food which has sustained our industry,
fed our population, and given us a standard of general comfort such as
our forefathers could never have imagined. It is true that at the same
time we have benefited others, besides our own customers and debtors.
We have opened up the world to trade and other countries reap an
advantage by being able to use the openings that we have made. It is
sometimes argued that we have in fact merely made the paths of our
competitors straight, and that by covering Argentina with a network of
railways and so enormously increasing its power to grow things and so to
buy things, we have been making an opportunity for German shipbuilders
to send liners to the Plate and for German manufacturers to undersell
ours with cheap hardware and cotton goods. This is, undoubtedly, true.
The great industrial expansion of Germany between 1871 and 1914, has
certainly been helped by the paths opened for it all over the world by
English trade and finance; and America, our lusty young rival, that is
gaining so much strength from the war in which Europe is weakening
itself industrially and financially, will owe much of the ease of her
prospective expansion to spade-work done by the sleepy Britishers. It
may almost be said that we and France as the great providers of capital
to other countries have made a world-wide trade possible on its present
scale. The work we have done for our own benefit has certainly helped
others, but it does not, therefore, follow that it has damaged us.

Looking at the matter from a purely business point of view, we see that
the great forward movement in trade and finance that we have led and
fostered, has helped us even by helping our rivals. In the first place,
it gives us a direct benefit as the owners of the mightiest fleet of
merchant ships that the world has seen. We do nearly half the world's
carrying trade, and so have reason to rejoice when other nations send
goods to the ports that we have opened. By our eminence in finance and
the prestige of a bill of exchange drawn on London, we have also
supplied the credit by which goods have been paid for in the country of
their origin, and nursed until they have come to the land in which they
are wanted, and even until the day when they have been turned into a
finished product and passed into the hands of the final consumer. But
there is also the indirect advantage that we gain, as a nation of
producers and financiers, from the growing wealth of other nations. The
more wealthy they grow, the more goods they produce want to sell to us,
and they cannot sell to us unless they likewise buy from us. If we
helped Germany to grow rich, we also helped her to become one of our
best customers and so to help us to grow rich. Trade is nothing but an
exchange of goods and services. Other countries are not so philanthropic
as to kill our trade by making us presents of their products and from
the strictly economic point of view, it pays us to see all the world,
which is our market, a thriving hive of industry eager to sell us as as
it can. It may be that as other countries, with the help of our capital
and example, develop industries in which we have been pre-eminent, they
may force us to supply them with services of which we are less proud to
be the producers. If, for example, the Americans were to drive us out of
the neutral markets with their cotton goods, and then spent their
profits by revelling in our hotels and thronging out theatres and
shooting in Highland deer forests, and buying positions in English
society for their daughters we should feel that the course of industry
might still be profitable to us, but that it was less satisfactory. On
the other hand, it would be absurd for us to expect the rest of the
world to stand still industrially in order that we may make profits from
producing things for it that it is quite able to make for itself.