A reader asks us to explain what is meant by the statement that capital is leaving the country. Does it mean “gold and copper coins, or war-bonds or factories and machinery, or what?”
The cry, “Capital is leaving the country,” is intended to signify that capital is being withdrawn from industry here and sent abroad. Capital is money invested for the purpose of profit, and it is invested by the buying of shares in a company. If a capitalist wishes to withdraw his capital from an undertaking he must sell his shares to realise their value. As he must sell his shares to another capitalist, which is all he can do, then capital has not been withdrawn. The only change that has taken place is one capitalist has been replaced by another in a given industry. As shares are constantly changing from one hand to another capitalists are constantly changing from one industry to another, or the amounts of capital they have invested varies in different industries at different times. At one time a given capitalist might own twenty shares in an oil company and ten in a soap company; at another time he might own ten in the oil company and twenty in the soap company.
To grasp the matter clearly it is only necessary to ask oneself the following question: If the bulk of the capitalists in this country decided to withdraw their capital, or, what comes to the same thing, sell their shares for cash, to whom would they sell them? It will then be seen how absurd is the claim that the capital which is sent abroad is being withdrawn from industry.
Capital, however, does go abroad, and it also comes from abroad. Briefly the position is as follows, leaving technicalities out.
The exports of a country are paid for by the imports either in goods only or in goods and services. For instance if the total exports of a country amount to £1,000, then payment is made by an import of the equivalent value of goods only or of goods and services. In the days when England was the carrying nation of the world, payment for services rendered to foreign merchants by carrying their goods was accomplished by the import into England of goods to the value of these services. When ordinary merchandise imported or exported is not sufficient to balance accounts between nations then the balance against one or the other nation has to be made up by the export of gold.
If a capitalist in England has accumulated dividends to such an extent above his spending power that he has a large balance at the bank and decides he will invest a portion of it in a company in Brazil, then he must proceed in one of the following principal ways:
(1) Buy gold and have it transported to Brazil.
(2) Buy merchandise and send it out to be sold in Brazil to realise the amount of his proposed investment.
(3) Pay a Brazilian debt in England and have the amount credited to him in Brazil.
(4) Get a bank to arrange the matter. This they would do by the mutual cancellation of debts or mutual exchange of capital between England and Brazil, or, the same thing at bottom, by a roundabout exchange or cancellation through other countries.
Each and all of these methods involves at bottom the mutual exchange of goods or goods and services. Fundamentally it is the exchange of the work of the working class of one country for the work of the working class of another, as far as the principal countries of the world are concerned. So that all that happens is, for instance, some Brazilian exploiters draw some of their unearned incomes from England and some English exploiters draw some of their unearned incomes from Brazil.
The answer to the question, therefore, is that when capital goes out of the country capital comes in; capital goes out in the form of goods and services and capital comes in in the form of goods and services in exchange for what has gone out. It being understood, of course, that it is only when goods are sold and the money realised is invested in an enterprise with the object of deriving profit from it that such money has become capital. It is not the thing, money, but the use it is put to that makes it capital, for capital is only one way of using money, and money is only the name applied to gold or representatives of gold used in a certain way.
Gilmac
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