ritualistic religion will have no demand for these articles. Favorable political and economic conditions may cause an increase of enterprise, and therefore an increased demand for means of production, for articles of luxury. Unfavorable political conditions may lead to an extraordinary temporary demand for arms and armaments, for goods needed in the restoration of property destroyed in the war. An important element is the degree in which the broad masses of population participate in the culture of the wealthy classes-China, Japan, Russia may illustrate this point. Lively intercourse with culturally higher developed nations popularizes their manner of life and creates a demand for articles currently used by them. Missionaries have been frequently the first to acquaint natives in various fields with the most elementary requirements of civilized life, leading up to a demand for refinements and luxuries. These conditions affect not only the degree but also the character of the demand in importing countries for foreign goods. And in this connection the tastes, the customs, the religion, the natural inclinations, the historic traditions, as well as the topographic and climatic conditions affect this demand, particularly in such matters as foodstuffs, clothing and household goods. To the extent that the economic satisfaction of an existing need through the domestic production is unattainable, there exists in a given market a demand for importation. This may mean that in spite of the existing demand the domestic production is unequal to the task of covering it fully. Foreign goods of the same quality may be imported to fill the gap. Or the domestic production may fill the need existing for a low quality of products, without being able to supply the higher quality for which a demand exists. And finally, the domestic production may meet the domestic demand for a high quality product, but not the demand for a cheaper and inferior product. And in the matter of taste, a foreign importation may meet demands which cannot be satisfied at home, as for instance French millinery and ladies' apparel, American shoes, so-called Panama hats, etc. The importability of an article need not necessarily be limited to the existing demand. The existing demand for importation merely assures a market for a foreign article, provided the imported article can meet the demand. But by competition with the domestic product a foreign article may even conquer a portion of the custom which the domestic product might legitimately claim. The exporting merchant must therefore be acquainted not only with the actual demand for importation, but with the entire potential demand in a given market for a given article. He will therefore not content himself with drawing conclusions from existing conditions as illustrated in the import and export statistics, but will endeavor to study for himself the degree of the general demand for an article and the possibilities of either increasing it or perhaps even of awakening it. And here the enterprising merchant will find his most promising and most difficult prospects. In order to attain success here he must study all of the factors mentioned above as affecting demand. The introduction and the stimulation of the demand for illuminating oils and lamps, of certain textiles, of sewing machines, typewriters, automobiles, etc., bristles with the romance of either awakening new needs or of successfully catering to existing needs in difficult markets. The buying of foreign goods to satisfy local demand presupposes the ability and the willingness to purchase, in other words a purchasing power, the power to pay to the foreign exporter the price which he desires for his goods. For this reason the actual importations into a country do not only depend upon its need of importations, but also upon its purchasing power. Here considerable variations are possible. There are densely populated countries with a very inferior purchasing power per capita, like India and China, and countries with a slim population and with a tremendous purchasing power per capita, like Australia. Purchasing power must be considered as average purchasing power per capita, and as purchasing power in individual social strata. It is the latter which is of particular significance as a criterion of possibility of importation. The more the purchasing power is distributed among the wide strata of the population, the better chances there are for increasing imports. The concentration of the purchasing power in narrow circles will seldom recompense even by the increased average per capita purchases within these narrow circles, or by the increased average of value and quality, for the lacking demand in the broader strata. The more evenly distributed in the population is the purchasing power, the more will the predominating quality of the imported goods depend upon the average per capita purchasing power of the country. Given a concentration of the purchasing power in a narrow section of the population, in spite of the average great wealth of a country, there will be only a small importation of high quality goods, and the bulk of importation will be in goods of the lowest quality. The purchasing power of a country as towards other countries depends upon its economic wealth, upon its income earning conditions and upon the exchange value of its money. The economic wealth of a country forms the basis of its purchasing power. It does not coincide with the natural wealth of the country, that is with the wealth of the country in natural resources without the human agent. There are countries of magnificent natural resources and of undeveloped purchasing power. It is the economic exploitation which transforms natural wealth into economic wealth. Since the individual uses a portion of his earned income for the satisfaction of his needs, not consuming his capital, it is the earning capacity and the income derived thereby which determines the purchasing power of a nation. Factors influencing this are periods of economic "booms" and depressions, as well social developments which sometimes transform the income conditions of entire strata of the population. Finally the exchange value of a country's money is an important factor affecting the purchasing power of a country for articles of import; this is indicated by the standing of the country's bills of exchange in the international exchange market, because the major portion of international debt balances is settled through bills of exchange and remittances to banks equalizing same, as we will see in due course. The international exchange value of a country's money may undergo general changes, or changes in relation to one particular foreign country. In the first instance the change will be due to alterations in the economic conditions (as having occurred or as being expected) in the country itself, in the second instance to alterations of economic conditions in the foreign country. If the international exchange value of a country's money increases, the purchasing power of the country in international commerce also increases, for then the same amount of domestic money can cover greater quantities of foreign currency. Commercially expressed: if the exchange value of the importing country's money increases, and the exporter quotes the same price for his goods, the importer procures his purchases at a smaller outlay of his domestic money. If the exporter quotes in the currency of the importing country, he can quote lower prices without suffering any loss in his profit, all other conditions remaining equal. The ability of a country to export rises when the international exchange value of its money sinks, and at the same time its purchasing power, or its capacity to import suffers, all other elements remaining equal. In view of the great importance of international exhange rates in all commercial possibilities, it is the business of every merchant interested in international commerce to familiarize himself with and to watch all those conditions which affect international exchange, such as trade balances, national credit, rates of interest, important international capital investments, international bill and bullion transfers, economic conditions which lead to an influx of funds from abroad, etc. Changes in the exchange market may temporarily aid or hinder international commerce in a certain direction, but the stability of the exchange is always an aid, and an instability of the exchange is always a hindrance. Exchange stability permits the merchant to calculate and plan his business transactions with a smaller risk margin, encouraging him to invest more liberally in extensive organization or in manufacturing plants which depend upon international commerce. Side by side with purchasing power, purchasing eagerness is an element of some importance. The factors determining the eagerness to purchase are: the demand for the foreign article, the amount of money which must be given up to procure itthe price, and the subjective valuation of the money thus given up. The greater the need, and the lower the price and the subjective valuation of money, the greater is the purchasing eager ness. 6. Commercial Laws and Usages as Factors in The development of international commerce is further affected by laws prevailing in the country where the purchaser is located, in the country where the seller is domiciled, and finally in countries through which the goods pass in transit. The facility of commercial intercourse between persons residing in various countries has brought about an international relationship between the laws of different countries relating to persons and obligations. In many countries outside of Great Britain and the United States the laws of commerce constitute a distinct branch of jurisprudence, and also a distinction is made between public law and private law. The public law of interest in international commercial relations includes regulations permitting aliens to settle and to do business, their right to purchase real estate, the right of foreign traveling salesmen to ply their occupation, the right of navigation under a foreign flag, taxation, customs tariffs, patent and trade-mark laws, regulations governing specified enterprises such as banking and insurance, regulations governing incorporation or the floating of stock companies, or commerce in specific articles such as provisions and liquors, weights, measures, etc. Commercial treaties between states frequently include detailed stipulations with regard to the rights of foreigners under such legislation. Private law, inasfar as it affects the development of international commerce, refers to special commercial regulations, including promissory notes, commercial usages, regulations of autonomous bodies such as exchanges, etc. In certain countries aliens are exempt from local jurisdiction and placed under consular jurisdiction, being subject to their national laws. Among these countries is China, Persia and Siam. Turkey until a short time before the war granted consular jurisdiction to foreigners. Japan abolished consular jurisdiction |