Capital III, Chapter 35 - Part 14

Where Britain takes in imports, they must be either covered by exports or by tribute, and these imports can be consumed productively or unproductively. But, whether it is consumed productively or unproductively has no effect on the exchange rate. It may, however, have an effect on the scale of production, because imported commodities that are consumed unproductively, thereby absorb revenue that may have been used for the purchase of domestic production, and imported commodities, consumed productively imply expanded production.

Newmarch also distinguishes between the export of money-capital and other forms of capital, when questioned by Wood about Crimean war supplies, and the exchange rate with Turkey.

Newmarch says,

"I do not see that the mere transmission of warlike stores would necessarily affect the exchange, but certainly the transmission of treasure would affect the exchange." (p 583)

Wilson responds,

“If you make an export of any article to a great extent, for which there is to be no corresponding import, and therefore you must by that transaction affect the exchanges by not discharging the foreign debt, by reason of your export having no corresponding imports? — That is true as regards countries generally." (p 584)

Engels points out, however, that there are lots of imports whose value is covered by the export of “good government”, by Britain, or by the payment of dividends etc. on previous British investments overseas. There are also similar imports used in exchange for US commodities, which are subsequently exported.

“This lecture by Wilson amounts to saying that every export with no corresponding import is simultaneously an import with no corresponding export, because foreign, i.e., imported, commodities enter into the production of the exported article. The assumption is that every export of this kind is based on, or creates, an unpaid import and thus presupposes a debt abroad. This is wrong, even when the following two circumstances are disregarded: 1) England receives certain imports free of charge for which it pays no equivalent, e.g., a portion of its Indian imports. It can exchange these for American imports and export the latter without importing in return; in any case, so far as the value is concerned, it has only exported something that has cost it nothing. 2) England may have paid for imports, for instance, American imports, which constitute additional capital; if it consumes these unproductively, for instance, as war materials, this does not constitute any debt towards America and does not affect the rate of exchange with America.” (p 584)

Newmarch's comment,

“That is true as regards countries generally.", contradicts the correct answer he gave previously to Wood, and Wood picked up on this saying,

"If no portion of the goods which are employed in the manufacture of the articles exported without return [war materials], came from the country to which those articles are sent, how is the exchange with that country affected; supposing the trade with Turkey to be in an ordinary state of equilibrium, how is the exchange between this country and Turkey affected by the export of warlike stores to the Crimea?" (p 584-5)

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