the loan has not been used to increase its power of turning out goods
and services, it is inevitably in the same position as a spendthrift
individual who has pledged his income for an advance and spent it on
riotous living.

One of the great benefits that the present war is working is that it is
teaching young countries to do without continual drafts of fresh capital
from the older ones. Instead of being able to finance themselves by
fresh borrowing, they have had to close their capital accounts for the
time being, and develop themselves out of their own resources. It is a
very useful experience for them, and is teaching them lessons that will
stand them in good stead for some time to come. For the old countries,
when the war is over, will have problems of their own to face at home,
and will not be able at once to go back to the old system of placing
money abroad, even if they should decide that the experiences of war
have raised no objections to their doing so with the old indiscriminate
freedom.

It is easy, however, to exaggerate the effect of the war on our power to
finance other peoples. Pessimistic observers, with a pacifist turn of
mind, who regard all war as a hideous barbarism and refuse to see that
anything good can come out of it, are apt in these days to make our
flesh creep by telling us that war will inevitably leave Europe so
exhausted and impoverished that its financial future is a prospect of
unmitigated gloom. They talk of the whole cost of the war as so much
destruction of capital, and maintain that by this destruction we shall
be for some generations in a state of comparative destitution. These
gloomy forecasts may be right, but I hope and believe that they will be
found to have been nightmares, evolved by depressed and prejudiced
imaginations. War destroys capital when and where actual destruction of