Basic significance of international capital movements

turn now to the nature of capital movements . if political problems of nationalism and domestic problems of unemployment did not enter the picture ,the fundamentals of international lending would be easy to understand .we could cut through the fog of money and finance to concentrate on the real aspects in terms of goods and resources. How does capital grow within a country ? by our diverting labor , land ,machinery ,and other resources away from the production of current consumption goods . instead , we plant trees ,drain rivers,or build new machinery and buildings .All these add to our future income and consumption .
we are postponing present consumption for future consumption-for an even greater amount of future consumption .where does the increase in future consumption come from ?
Different parts of the world have different amounts of resources :labor , minerals ,climate ,Know-how . were it not for ignorance or political boundaries ,no one would push investment in north America down to the point of 5 per cent returns if elsewhere there still existed 10 per cent opportunities . Some capital would certainly be invested abroad . This would give foreign labor higher wages ,because now the foreign worker has more and better tools to work with .it would increase foreign production . By how much ? Not only by enough to pay for the constant replacement of used up capital goods but , in addition , by enough to pay us an interest or dividend return on our investment .this interest return would take the from of goods and services which we receive from abroad and which add to our standard of living . An all-wise scientist would probably approve of the process. it would make sense to him because capital is going into the regions where its productivity is highest.
when would we be repaid our principle ? so long as we are earning a good return, there is no reason why we should ever wish to have it repaid . however, the once-backward country may finally become rather prosperous . It may wish to pull in its belt as far as consumption is concerned and to use its savings to buy out our ownership in its factories, farms,and mines.but suppose that we are rich ,with plenty of savings and with so much capital at home that our rate of interest is low. we might not particularly wish to sell out or be repaid . we might raises the selling prices of our farm and factory holdings abroad . in other words ,we might be content with a smaller percentage interest return .thus,there is no necessary reason why a country should ever be paid off for its past lending, unless it has become relatively poorer