but since the advantage to be derived from this expedient ia a competitive advantage only, the universality of the practice results in but a slight, if any, increase of the aggregate earnings of the business coramunity. Borrowed funds afford any given busLness concern a differential advantage aa against other competitors ; but it is, in the main, a differential advantage only. The competitive use of auch funds in extending business operationa may, incidentally, throw the management of some portion of the industrial process into more competent or less competent hands. So far as this happens, the credit operationa in question and the use of the borrowed funds may increase or diminish the output of industry at large, and so may affect the aggregate earnings of the business community. But, apart from such incidental shifting of the management of industry to more competent {or less competent) hands, this competitive use of borrowed funds has no aggregate effect upon earninga or upon the industrial output.
The current or reasonable rate of profits ia, roughly, the rate of profits at which business men are content to employ the actual capital which tbey have in hand.' A general resort to credit extension as an auxihary to the capital in hand results, on the whole, in a competitive lowering I of the rate of profits, computed on capital plus 1 See Mmliall, m nboTe.