Saturday, June 21, 2014

6 A.Goulevitch Czarism and revolution



which would demand the attention of both Russian and foreign workshops for many years to come.
  For centuries the only means of long distant transport were the natural waterways which flow across the Russia plain from the Carpathian mountains in the west to the Ural range in the east. These great rivers largely influenced Russian history in the past and many of our great cities gained predominance and flourished, thanks to the busy traffic that flowed through them, like Novgorod and Kiev which lay along the great route followed by the Scandinavians to Byzantium.
  Before the Revolution, the length of these waterways (rivers and canals) totalled 240,565 miles and of these 181,485 miles were navigable (180,011 miles, rivers, and 1474 miles, canals).
  Even before the advent of the Soviet Government, which by utilizing forced labour on a grandiose scale, has greatly extended the system linking the various rivers and seas, it was possible to travel by water from Astrakhan on the Caspian to St. Petersburg (2652 miles); from Archangel to Astrakhan (3060 miles); Ekaterinoslav to Riga (1061 miles); Irbit, in the Urals, to Kiachta on the Chinese border (3978 miles), etc. It is not therefore surprising that Russia owned the largest river fleet in the world.
Russian river fleet  (European Russia)  in  1900 11,330,000 tons
United States River fleet 1900 4,338,000 tons
German river fleet 1897 3,427,000 tons
French river fleet 1892 2,966,000 tons
Comparative figures of merchant navies of other countries


1900 1892 1897

10,750,000 tons
1,737,000 tons
970,000 tons

  The following figures, giving details of the Russian river fleet are taken from the register of the Ministry of Communications for the years 1884, 1900, 1906 and 1912 and refer to European and Asiatic Russia.



European Russia
Steamers: Units

Steamers HP.

Steamers Value in Mil. Roubles    48.9
Other   craft:    Units

Value in

Mil. Roubles
Total value of fleet

in Mil. Roubles

Asistic Russia

Steamers Units


Steamers HP.


Steamers:  Value in

Mil. Roubles

Other  craft:   Units


Value in

Mil. Roubles


Total value of fleet in Mil.

  The extensive mileage of the waterways, abundance of craft and low cost of carriage could not, however, compete with the facilities offered by the railways which, in 1913, carried 210,220,670 tons of goods against 49,034,000 tons transported by water, while between 1892 and 1912 the railways increased the volume of the goods they carried by 202% and the waterways by 195%.
  Government interest in developing transport by water is shown by progressively increased yearly allocations averaging 12.188 million roubles between 1900 and 1905; 14.266 million roubles 1906-1910; and 18.976 million roubles and 21.889 million roubles in 1911 and 1912 respectively.
  Archangel, on the White Sea, visited by Chanceller in 1553, on his trade mission to Moscow, was the only harbor owned by Russia before the reign of Peter the Great. Under him and his successors, Russia gradually acquired the costs of the Baltic and Black Seas and finally of the Pacific Ocean, and reached her natural maritime boundaries. How essential was the possession of suitable harbors may be judged from the fact that
over two-thirds of our foreign trade went by water. Between 1903 and 1913, the tonnage of shipping rose by 64.6% (18,163,000 to 29,834,000 gross tons). Vessels flying foreign ensigns were in the majority, though the Russian share rose by 111% within the same period and by 1914 our mercantile marine consisted of 3700 ships. The whole question of an adequate merchant navy was much to the fore in the last decade of the Czarist regime; public collections and subscriptions were launched toward the building of a fleet of large ocean going ships, while the Government lent its support by direct financial aid for the purchase of ships, grants and subsidies to shipping companies with fixed operational schedules and a variety of other means.
  In 1913 a plan, estimated to cost 217 million roubles, was drawn up for an extensive program of harbor works which included the building and equipment of new ports and the modernization of existing installations.
(1) In 1913 the total length of Russian roads is given as 495,261 miles of
which only 31,161 were metalled. The balance of 464,100 miles was made
up of plain earth roads, and sometimes well worn trails, which were unusable
in the spring and autumn.
(2) The longest railway in the world,  the  Trans-Siberian,  was  the  most
important line in Asiatic Russia. The first plate was laid on May 19,  1891,
and the whole completed on January 1,  1906. The annual rate of progress
established a record in railway construction, averaging 376.5 miles per annum.
The nearest approach was achieved by the great Canadian trunk line com
pleted in ten years at an average annual rate of 322 miles. Though this line
runs through 40 tunnels  and over 5  great bridges,  the  Trans-Siberian  can
boast of 33 tunnels around the southern end of Lake Baikal alone and 29.5
miles of bridges spanning some of the biggest rivers in the world, like the
Lena, the Yenisey, the Irtysh and the Ob. The 126 miles section round the
tip of Lake Baikal was the most expensive to build of the whole line and cost
an average of 323,000 roubles per mile, while the average for the entire railway
was 102,594 roubles.
  The whole railway, the Eastern Chinese branch excluded, is 3785 miles long and is divided into the following sections: the Siberian, 2081 miles; the
Trans-Baikal, 1114 miles; and the Ussuri, 590 miles. After the completion of the railway it was possible to travel by rail direct from Moscow to Vladivostok, a distance of 5363 miles, and the heart of Russia was permanently linked to her distant outposts on the Pacific.
  The influence exercised by the line on life in Siberia and its effects on immigration were truly remarkable. For proof one need only consider the growth of the population in some of the Siberian towns between 1897 and 1910:

  It is a matter of great regret that the epic story of the Trans-Siberian has never been properly told. Most of us are acquainted with the fascinating history of the main trans-continental lines of the Western hemisphere. Red Indians, prairies, the battle of man against nature, have come down to us in legend and literature and been recreated on the screen. We know next to nothing about the trials, the hardships and setbacks, the poetry and final grandeur of the mightiest civilizing link in the world. Even the Russian people know very little about one of their main life lines and certainly the present day rulers of Russia will do nothing to dwell on this magnificent achievement of the former regime.
  The economic development of Russia during the 19th century brought about the monetary reform of 1897, which finally stabilized Russian currency. In 1894, as a preliminary step designed to regulate the circulation of currency, the charter of the State Bank was totally revised. Under this charter, Russian economy enjoyed a prolonged period of uninterrupted development till the general disruption of all ordered life in 1917.
  Prior to the reform and ever since the Crimean War a compulsory rate of exchange of currency notes into gold had been in force. One of the main reasons why the reform was so successful lay in the fact that currency transactions could at last be conducted under healthy conditions guaranteed by a considerable gold reserve. The rates, hitherto artificially maintained, had fluctuated according to the amount of gold in reserve, and other financial and economic factors. The government, however, never lost sight of its original intention to accumulate an adequate reserve of gold and by 1890 470 million roubles worth of gold had been accumulated in the form of bullion held by the State Bank (including credit balances abroad) and gold in circulation. These reserves mounted steadily: at the date of the reform they stood at 1,095 million roubles and in 1914, on the eve of war, totalled 2,257.8 million. By a wise and farsighted financial policy, the Czarist Government succeeded in increasing the national gold reserve by 380% in the space of some twenty odd years.(a)
  (a) The depletion of these reserves is described in my article published by "The Economist," London, May 30, 1925.

  The confidence of the general public, business and industry, in the financial policy of the government, and the soundness of our currency were particularly manifest during the Russo-Japanese War in 1904-1906 and the internal disturbances by which it was followed: there was no panic, no run on the banks, while paper money remained convertible on call into specie at face value throughout the Empire. I believe that I am correct in saying that this is a fact unique in the annals of state finance, other countries being invariably compelled to introduce an enforced rate of exchange and to suppress the convertability of paper currency into gold during periods of national crises or prolonged wars.
Coverage in gold of notes in circulation. Russia and other countries. (1st January, 1913. In millions of roubles)  (a)
Gold Notes
Russian State Bank 1,550 1,494
Bank of France 1,193 2,196
Bank of the German Reich        411 930
Bank of England 331 263
  As regards the total amount of currency in circulation, both in coin and notes, there was a difference of 100% between 1897 and 1913. In 1897 the total equalled 1,133.8 million roubles of which 36 million roubles were in gold; 29.9 million roubles, in silver; and 1,067 million roubles, in notes. In 1913 it amounted to 2,244.8 million roubles of which 628.7 million roubles in gold; 120.5 million, in silver; and 1,494.8 million, in notes.
  It may, perhaps, be argued that a larger increase would have been reasonably justified as a result or the economic expansion that had taken place during the same period. In view, however, of the increased facilities that had gradually come to the aid of business, such as an extension in the volume of banking operations, a more widespread use of cheques and the activities of an increasing number of clearing houses, it was adequate.
  (a)  The rouble quoted is the golden rouble equivalent to one-tenth of the golden sovereign.
  Regarding the latter it is worth noting that in 1906 there were only five clearing houses in the whole country, with a turnover of 12,000 million roubles. In 1912 there were 32, handling a total of 31,000 million roubles, thus practically eliminating any considerable displacement of currency.
  Among the measures introduced by the Czarist Government to raise the standard of living of the peasants, agricultural credit, the manner in which it operated and its beneficial effects were described in an earlier chapter. A very similar influence on the commercial and business life of the country was gradually being exerted by the rapidly developing activities of our commercial banks. On January 1st, 1908, these banks, including their branches, numbered 374. On the same date in 1914, there were 790, while other banks, operating on somewhat similar lines but serving customers of a lower income bracket, like the Mutual Credit Societies, increased in number from 304 to 1108. A new type of bank, known as "Municipal Bank," was also made available to the public. The first of these banks was opened in 1909 and by 1914 319 were established.
  By comparing the figures presented in the following table, showing the capital and reserves of Russian credit institutions on January 1st, 1908 and 1914, a general idea of the increase in the volume of their operations will be obtained.
  Capital and Reserves of Russian Credit Establishments (In Millions of Roubles)

Joint Stock Banks
Mutual Credit Societies
Municipal Banks
  Both industry and commerce, expanding year by year, called for larger credits from the banks. In 1908 the State Bank and other banking establishments had granted 1,983 million roubles. In 1914 the total rose to 5,191 million roubles, an increase of 161.7%
  The banks were also called upon to serve many more clients and private bank deposits rose sharply: in 1907 they totalled 818 million roubles; by 1913 they had risen to 2,539 million roubles, while the overall total of deposits in all our banking establishments, the oldest founded barely fifty years ago, State and private, on the eve of the Revolution amounted to 4,280 million roubles.
  It must be conceded that an increase in deposits in the State and private banks does not necessarily indicate an increase in the prosperity of the middle and lower classes. Savings, securely deposited in Savings Banks, are on the other hand a fair indication of an improvement in the living standards of these classes, as they represent the tangible financial assets of the broad masses and are set aside only in times of sustained economic expansion and stability.
  Between 1900 and 1914 the number of branches of the State Savings Banks increased from 4,781 to 8,533, and the number of certificate holders from 3 to 9.5 million of which 70% were peasants, laborers, domestic servants and sundry employees; and 30% either small merchants or cooperative societies.
   Balances due to Holders of Savings Banks Certificates on 31st Dec. of the following years. (In millions of Roubles)

Deposits in Currency
Stocks in Shares
  The significance of a rise of over one thousand five hundred million roubles, or 228.8%, in fifteen years is underlined by the fact that during the same period the population increased by 35% and therefore it is fully attributable to a general improvement of economic and social conditions. I have already outlined the steps by which it was brought about. At the time
under examination there was, in fact, no other country in the world under any form of government where the general prosperity of the broad working masses was improving more rapidly than in Czarist Russia. (1)
  In contrast to those days, the Russian nation has now endured forty years of the greatest form of oppression and collective slavery that the world has ever known. Millions of killed, tens of millions dead of famine, epidemics and disease, were sacrificed to establish this barbaric system which poses as the protector of the world proletariat. Is there anyone who can conscientiously say that this dreadful holocaust was either necessary or justified? No, not even the bitterest critics of Czarism, or the supporters of the present regime in Russia, irrespective of the arguments by which they seek to justify the Revolution, or to defame the source of the historical power in Russia.
  It is generally conceded that the administration of the Empire's finances was one of the brightest aspects of the Czarist regime. This admission is explained by the fact that any financial policy, be it good or bad, is rapidly translated into tangible results, whereas the reasons and purport of a long term policy in other domains of government may remain obscure and its results imponderable for a considerable period and often difficult to assess correctly.
  In the course of the 19th century Russia waged three wars: the Napoleonic campaigns, the Crimean War and the Balkan War of Liberation of 1877-78. These cost the nation 600, U06 and 1076 million roubles respectively. (2) Notwithstanding this, our financial position at the beginning of the 20th century was excellent; in 1903 the Treasury wound up the financial year with a surplus of 149 million roubles (revenue 2032 million, expenditure 1883 million) and in 1904 had in hand 331 million roubles, consisting of the yearly surplus and those of preceding budgets.
  This satisfactory situation was undermined by the Japanese War of 1904-1905 and the first onslaught, by far more terrify-
ing, of Bolshevism. Omitting the losses inflicted by the abortive revolution and the subsequent economic depression, the war alone cost the nation 2,500 million roubles. In order to meet this heavy charge, the Government was compelled to deplete the exchequer, increase taxation and resort to borrowing. All nonessential expenditure was curtailed and credits restricted. Thanks to the general economic expansion of the nation previously described, by 1913 not only was full stability restored but the finances of the country had reached a level of prosperity never before attained. The Treasury drained to the last rouble only a few years previously, now had a record surplus in hand of 512.2 million roubles, (subsequently utilized to cover the tremendous cost of the first months of the First World War). The progressive rate of increase from year to year between 1903 and 1913 compels attention in an analysis of Russian State revenue and is illustrated below.

In millions
of roubles

Revenue collected
Increase within five years
Per  cent
  If a longer period, 1867-1913, is examined, this fact is brought into greater relief, as thirty years elapsed before an increase in revenue of 1,000 million roubles was registered; eleven, between the first and the second thousand million; and five, between the second and the third.
In millions of roubles
1867 415
1897 1,410
1908 2,418
1913 3,417
  There were, of course, two factors which contributed to the increase in the rate of revenue between 1897 and 1913; receipts from the State-owned railways and the yield from the government monopoly in the sale of spirits; however, in the
aggregate it was principally due to the general expansion of our national economy.
  If we now turn to examine State expenditure, we witness a parallel rise, but one which was controlled and never allowed to exceed revenue. For instance, in the last decade before the First World War, 1904-1913, there was never an exception to this rule and the cumulative surplus during this period totalled 2,122 million roubles. Together with another 270 million from the preceding decade, the Treasury thus had at its disposal a total excess of 2,392 million roubles. Much of this money was utilized in investments of a capital nature, such as 763 million roubles on the construction of new railways, 18 million roubles on improvements to the existing railway network and 73 million roubles in advances to concessionary railway companies. 445 million roubles were spent on national defense. All in all, a sum of 1,879.8 million roubles was devoted to extra-budgetary State expenditure and, on the eve of war, the actual surplus held by the Treasury amounted to 512.2 million roubles, as previously stated.
  A point which is important and which I wish to stress is the fact that the entire naval reconstruction program, launched in 1908, was financed out of excess revenue and not by loans or increased taxation.
  A description of the highly satisfactory, even brilliant, state of the Russian pre-Revolutionary financial situation would not be complete without a reference to the reduction in the public debt which in 1909 stood at 9,083 million roubles and by the end of 1913, at 8,824 million roubles.
  I draw the attention of my readers to the budgetary crises of England, France and Germany in the years preceding the Great World War and remind them that these countries were free from financial burdens similar to the one imposed on Russia by the aftermath of events in 1904, 1905 and 1906.
  A very striking feature of sustained improvement, stabilization and the finally superb condition of our finances is the relatively negligible increase in the level of taxation, and the
fact that among the principal European states taxation per head of population was lowest in Czarist Russia. The official Journal of the Russian Ministry of Finance gives us the following details for 1912:

Direct Taxation

(In roubles per inhabitant)

State Taxes
Local Taxes

(as per budget)
(Approx. figures)

Great Britain


(In roubles per inhabitant)

Custom & Excise
Local Taxes
Great Britain
  The prohibition of the sale of spirits at the outbreak of hostilities in 1914, imposed by Imperial decree, temporarily threw the budget out of balance. In 1913 the monopoly yielded a gross income of 899.3 million roubles, or, if administrative and other expenses are deducted, a net sum of 664.3 million roubles. The Minister of Finance was thus faced at the outbreak of the War with two problems: one, common to all the belligerents, of procuring the necessary means for the prosecution of the War, and seocnd, particular to Russia, how to eliminate the deficit caused by the abolition of the monopoly. The solution adopted, and one which had the desired effect, was the imposition of new taxes and an increase in existing taxation. During the first two years of hostilities, the deficit was gradually reduced and in the third year revenue exceeded expenditure. In 1914-1915 this debit balance amounted to 1,105
million roubles, of which 801 million were due to the abolition of the monopoly. In 1915-16, the total adverse balance had fallen to 227 million roubles, thus practically wiping out in the space of two years the fall in revenue due to the abolition of the monopoly, while the estimated overall increase in revenue for 1916-17 was placed at 966.5 million roubles. This sum exceeded by 581 million the revenue of the 1913 budget and not only covered the deficts of the first two years of the war but was also used mostly to defray the increased changes of the war debt, entered in the ordinary budget.
  After the termination of hostilities, Great Britain was the first among the European nations to restore the equilibrium of her finances. From what we have just read, it is obvious that the financial position of Russia was not unduly affected by the War and it is certain that after joint victory with her Allies, Russia would have recovered as quickly had not the Revolution dealt a death blow to the whole structure of Russian life, (a)
  A remarkable feature of Russian financial policy, and one to
which attention has often been drawn by economists, is the
way in which a considerable portion of extraordinary expendi
ture was met out of current revenue. (b) The desire and effort 1|
to do so were more pronounced in Russia than in other coun
tries, while some economists have reproached the Government
for not having greater recourse to loans, especially in the sec
ond half of the 19th century, in order to develop more rapidly
the natural resources of the country,—a debatable, but none
theless tenable, point of view. Indeed, the total sum borrowed
  (a) See my article "Russian Finances in the Past and Present," "Revue
Economique et Internationale/' Brussels, March 1928.
  (b) For foreign literature on the subject see: A. Raffalovitch "Russia, Its
Trade and Commerce," as above pp. 342-3; G. Pavlovsky "The Russian Na
tional Debt," in "Russian Economist," Sept. Oct. pp. 40-50, London,  1920;
"Report and Documents on Russian Economic Problems," published by the
"Committee   of   Representatives   of   Russian   Banks   in   Paris,"   pp.   85-99,
Paris, 1921.
by the Imperial Government, both internally and abroad amounted only to 15,000 million roubles between 1769, under Catharine the Great, when a Russian loan was floated in Amsterdam, and 1914, before the outbreak of war.
  In 1914, the Russian public debt amounted to 8,825 million roubles. The major portion of this debt was contracted in Russia, as witnessed by the fact that out of total annual interest of 398 million, only 172 million roubles were due abroad. Our chief foreign creditor was France, an ally since 1892. England was at the time engaged in supplying large credits to America, while Germany did everything in her power to weaken Russian credit and so disrupt the Franco-Russian Alliance, while Bis-mark personally opposed any loans to Russia by a vigorous campaign, both open and secret, among the leading financiers of Europe.
  Let us pause to consider some of the reasons which had, nevertheless, compelled the Government to resort to borrowing. Chief among them in the second half of the 19th century were the advances made to the peasants after the abolition of serfdom in order to enable them to compensate the landowners for the land of which the latter had been dispossessed in their favor. The total of these credits amounted to over one thousand million roubles. Next in importance were the sums needed for the construction of new railway systems and for compensating private interests in pursuance of the policy of nationalizing the railway network. At the outbreak of war in 1914, the amounts borrowed by the Government under this heading totalled 3,000 million roubles and were responsible for 35% of the public debt. We must bear in mind that by the same year, 1914, the amount paid toward the establishment of State owned railways amounted to 5,400 million roubles. I make this point once again to emphasize the manner in which extraordinary items of state capital investment were met by budgeted revenue. Lastly, part of the national debt was incurred to pay for our wars. The Balkan War of 1877-78 and the Japanese War of 1904-05 cost the nation 3,900 million roubles.
  The Japanese War alone accounted for two thousand million of the public debt, the balance having been met by Treasury holdings and a budget surplus. Examination of other headings under which money had been borrowed, such as "General Requirements of the State," reveals that in the majority of cases the purposes of these loans were productive. I refer in particular to the funds used to increase the Government's reserve of gold, required at the time of the currency reform with all the beneficial results it exerted upon our national economy, the assistance it rendered in developing external trade and in attracting foreign capital to Russian industry. This portion of the public debt also included government borrowing to pay for the development of railways, port and harbor works, etc., when there was no budget surplus as well as considerable sums, always lavishly assessed and paid to the peasants in times of poor harvests.
  Immediately after the liquidation of the costs of the Japanese War, it was found possible annually to reduce the capital figure of the public debt, as shown below:
1910—9,055 million roubles 1911—9,030 million roubles 1912—8,957 million roubles 1913—8,858 million roubles 1914—8,825 million roubles
  Great Britain, which at the time was considered a model of financial administration, is the only other European country which pursued a comparable policy of vigorous amortization of the public debt.
  The reductions shown above were accompanied by a corresponding reduction per head of population in the public debt, a remarkable feature when considered in relation to Russia's high birth-rate. The following details are taken from the explanatory report on the 1915 budget.
January 1st                  Capital outstanding Annual Interest Total
of Nat'l Debt           Paid on the Debt
(In Roubles)
1910 per capita                           56.34 2.53 58.87
1911 per capita                           55.10 2.48 57.58
1912 per capita                           53.35 2.41 55.76
1913 per capita                           51.83 2.36 54.19
1914 per capita                           50.72 2.31 53.03
  A comparison between the figures representing the share per head of population in the total of the public debt in Russia and a few other countries yields interesting information. The figures are given by S. Krulev in "Russian Finances" and relate to 1908.
National Debt per capita in roubles

Great Britain
  Furthermore, these figures taken by themselves do not fully portray the situation as they are related to factors difficult to assess and coordinate, such as the general standard of living, the overall burden of taxation, national wealth as a whole, potential economic development, etc. It would seem that a country industrially and economically young, like Russia, with a rising birth-rate and great natural resources, as yet hardly developed, might face the future more confidently than an ancient state whose wealth and resources have long crystallized into a definite pattern.
  We should also bear in mind that at the time the railways of France, Great Britain and the Netherlands were privately owned. If, in analyzing the Russian Public Debt, we deduct the appropriations reserved for the construction and repurchase of the privately owned railways, the average share per head of population is reduced by one third.
  On the other hand, as I have pointed out in the previous chapter, over four-fifths of the annual interest and amortization paid on the debt were covered by the net yield from the State owned railways.
  This fairly exhaustive analysis leads to the conclusion that even if the immense potential riches of the "Russian Continent" are not taken into account, compared with other countries, the public debt, as it stood before the Great World War, was relatively small and, on the whole, negligible for a country the size and wealth of Russia.
  The credit transactions to which the Government had recourse during the War altered the situation and brought the capital figure of the national debt from 8,825 to 32,579 million roubles. In actual fact, this figure is rather nominal as the operations to which it was due were never completed in full, comprising as they did the valuation of the pre-war internal and total external debts at the rate of gold.
  The external debt, as it now stood, comprising State-guaranteed loans, totalled 12,750 million roubles, of which 5,070 million represented pre-war State loans, or loans guaranteed by the State and 7,680 million credits opened to Russia by her allies for the requirements of the War. (a)
  The whole question of settling this external debt will, needless to say, remain closed for as long as the Soviet Government is in power. (3) If and when negotiations are opened, certain facts will, however, demand consideration. (4) It is obvious that any future, non-communist, regime in Russia will have to accept responsibility for the financial commitments of the Czarist Government, following the accepted international no-
  (a) Eighteen per cent (18%) of the Russian pre-war and 19% of the war external debts figure in France's claims on Russia. If France's capital investments in private and municipal undertakings are added, the total standing to her credit equals 14,712,998,691 gold francs. For particulars see my article in "The Economist," London, 27 December, 1925, reprinted in "La Vie Fi-nanciere," Paris 3rd January, 1926.
tion regarding the continuity of the State. A legal Russian Government will ipso facto recognize previously contracted debts and annul the Communist Government's decrees by which they were repudiated, treating it is an anti-national and hostile power, temporarily in control of the nation. (a)
  The economic rebirth of Russia, following the collapse of Bolshevism, will enable the future government to resume payments within a short time, though certain facilities will presumably be requested with proper regard to compensation for holders of Russian funds to cover the chaotic period of changeover. In the opinion of certain economists, to quote but Mr. H. G. Noulton, Director of the Institute of Economics of New York, this period should not be of long duration and he foresees a striking likeness within a brief space of time between the budgets of the Russia of yesterday and the one of tomorrow. (b)
  The extent of Russia's heritage, the wealth and abundance of her natural resources having been detailed, there seems little need to question her potential solvency.
  In closing this chapter, I present a table showing the prewar budgets of England, France and Russia and the approximate figures of their respective public debts after the 1914-1918 war. The Russian figure is necessarily a theoretical maximum, which takes the national public debt into account and one which should, no doubt, permit of considerable reduction.

Volume of debt
Public Debt
over budget

(In million

  (a) See my article "Bolshevism, Russia and Europe," Nos. 44, 45 of "Vers
l'Unite" and, in particular the chapter on "The International  Character of
Bolshevism" reprinted by "L'Echo de Paris," Paris, 16 Aug. 1926.
  (b) "Russian Debts and Russian Reconstruction," Chapter on the future
budget, pp. 60-66.
  The extension of the Russian budget (under normal government) is, of course, a matter of the future, but it may confidently be predicted that within ten years of reconstruction the annual charges of her public debt will once again be reduced to the modest 13% of the budget in the distant pre-war days.
(1) This statement refers to progress during the period under examination,
i.e., 1900-1914. Since then, of course, the remarkable expansion of the whole
economic life and structure of the United States have brought about an improve
ment in the standards of living of its population which are unique and far
beyond anything that has occurred in other countries.  The prosperity  and
wealth of the United States are a subject of general admiration  (sometimes
tainted with envy): a salutary thought and one to keep in mind is the fact
that at the end of the last century the deficits in the annual American budgets
often exceeded 500 million gold francs.
(2) The costs of our wars and the manner in which they affected the na
tion's  finances  were  examined  by  General  Goulevitch  in   1898  in  a  work
entitled   "War  and   National   Economy."   His   conclusions   were   remarkably
prophetic in many respects and attracted the attention of Western readers.
The book was translated into French and reproduced the same year in "Bul
letin de la Presse de Bibliographie Militaire" of Brussels. It was referred to,
under the same title in  1917 by Mr.  Prokopovitch,  a well-known  Russian
economist, and has since been quoted by other political students in dealing
with contemporary problems which seemed far removed from actuality at the
(3) The policy of the USSR regarding the Russian public debt was exam
ined by me in an article, "The Finances of the USSR and the Public Debt"
which appeared in "Revue Politique et Parlementaire," Paris, March 1928. It
provoked an immediate reply by Prof. Lubimov, delegate of the Soviet Com
missariat of Finance. In reply, a second article was published by the same
review in August,  1928. In this I stressed the magnitude of the Soviet ex
penditure on Revolutionary propaganda in foreign countries, founded on state
ments made by such communist leaders as Kamenev and Sokolnikov. I then
pointed out that part, at least, of this money could be properly used to repay
Russian creditors.
(4) Concerning this  subject I  quote  below, four points  suggested  in  the
French edition of this book, at the same time stressing the importance and
contemporary relevance of point V.
  I. Pre-War debts, i.e., those contracted for internal requirements and pro
ductive undertakings. Repayment of this portion of the public debt, whether
to private interests or states, which assumed the responsibilities of the Rus
sian Government for repayment during hostilities, should have priority over
other claims.
  War debts, contracted during World War I, acquired the form of advances made by the Allies. Including the amounts allocated for repayment of the items mentioned above, relatively small, these advances were consented for the purpose of furthering aims common to the Allies and not for any particularly Russian needs. The Allies were rewarded by common victory and appreciable gains. Russia alone derived no benefits and was even compelled to cede great regions of her territories. There would appear to be a case of establishing a relation between these gains and Russia's commitments. Some form of compensation might be requested of the Allies, especially Great Britain, the latter having increased her territorial possessions as a result of victory and being Russia's principal creditor. England's war credits to Russia are valued at 5,375 million roubles and constitute 70% of the total debt.
  The Allies, have formally recognized Russia's right to share in reparations (Article 116, Treaty of Versailles; Article 37, Treaty of St. Germain; Article 27, Treaty of Trianon: Article 143, Treaty of Neuilly, etc.). Since the Russian State did not exist, it would be proper to deduct this share from the total amount owed by the future Russian Government.
  II. In accordance with historical precedent and the principles of Interna
tional  Law,  territories  separated  from  a   state  are  expected  to  assume   an
equitable share of the public debt of that state. Hence, those territories which
formed part of the Russian Empire, as defined by the frontiers of 1914, should
be responsible for a part of the Russian debt. Following the principles laid
down in Article 254 of the Treaty of Versailles and corresponding articles of
the other treaties terminating the war, a suggested basis for allocating this
share of the public debt might consist in establishing the difference between
the total taxation levied by the Empire over its entire territory and that levied
over the separated territories.
  III. In computing the total of the external debt advances made by the
Russian Treasury to some of the Allies would have to be taken into account.
The same would apply to expenses incurred by Russia for the defense of
territories incorporated into countries deemed to have taken part in the War
against the Central Powers, such as Poland and Rumania.
  IV. Russian gold to the value of 680 million roubles lent to England in
1915-16 should be repaid to the Russian Government in conformity with the
terms of the loan  (London Agreement);  likewise the gold handed over by
the Bolsheviks to Germany (120 million roubles) and remitted by the latter
to the Allies in compliance with the Treaty of Versailles and deposited in the

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