Allocation of Public External Loans

Abstract

Foreign loans can be “productive” even when they do not partake in revenue-producing enterprises. Thus, investments in what we usually call “social overhead” are productive since they enhance the efficiency of production and distribution throughout the economy. From the standpoint of production, the benefits derived in the form of external economies are obvious even though no firm accounts or pays for them. Bearing in mind this broad notion of “productivity,” let us consider the external public indebtedness of East European countries at the threshold of the Great Depression.