196 STUDIES, SCIENTIFIC AND SOCIAL chap. 



• 

 all events, the actual result — was, that a large part of 

 this money was spent with us. Whether it was war 

 material or new railw^ays that were wanted, or jewellery or 

 furniture or other luxuries required by the kings and 

 despots who got the loans, a large part of it was spent 

 with us. The consequence was that for a time everything 

 seemed flourishing. Our trade went on increasing, as Mr. 

 Gladstone said, " by leaps and bounds," and culminated 

 in that wonderful period of apparent prosperity in the two 

 years 1872 and 1873. About that time the money was 

 nearly all spent. What happened then ? Not only was 

 there a sudden diminution in the demand — that was natural 

 — but what was worse, there was a great diminution in the 

 normal demand which had previously existed in those 

 countries whose kings or despots had obtained these loans, 

 for this reason, that up to that time the interest on the 

 loans was paid out of capital, but when the money was 

 all gone the interest had to be paid out of taxation ; and 

 from that moment, by the increasing taxation and 

 oppression of these people whose governments had 

 obtained these enormous loans, they were all impoverished 

 to that extent, and therefore became worse customers to 

 us and to every other country. 



Now this is a real, an important, an inevitable cause. 

 Perhaps some readers will understand it better, however, 

 if I illustrate it by supposing a simpler case. Let us 

 suppose, for instance, that there is a country town in 

 which the people are fairly well off, and where trade is 

 tolerably flourishing. There comes into this country town 

 a body of money-lenders, and they offer everybody loans, 

 on easy terms. Not only do traders and farmers and 

 others get these loans, but all kinds of spendthrifts and 

 idlers. Of course they spend the money they borrow, and 

 during the few years they are spending there is an 

 enormous amount of trade done in the place. Shopkeepers 

 think there is a kind of millennium coming, and increase 

 their stocks and expect to make fortunes. But after two 

 or three years the lenders see that no more money can be 

 safely lent, so they stop the supplies and immediately come 

 down upon those who had the money for their interest. 



