NOTEBOOK “β” (“BETA”)

E. AGAHD, BIG BANKS AND THE WORLD MARKET

E. Agahd —St. Petersburg. Big Banks and the World Market .

“The economic and political significance of the big banks in the world
market from the standpoint of their influence on Russia’s national economy
and German-Russian relations.” Berlin, 1914. Preface dated: May 1914 .

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| | Reviewed by Spectator (author is often naïve and “exaggerates the importance of the big banks”, etc.) in Die Neue Zeit , 1915, 1 (33rd publication year), p. 61 et seq. | |
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| ⎧ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎨ ⎪ ⎪ ⎪ ⎪ ⎪ ⎩ | The author spent fifteen years in Russia as inspector of the Russo-Chinese Bank. There is much of the offend- ed vanity of the unrecognised financial expert, much chatter (a host of phrases against “dilettantes” and “amateurs”, etc.). One can and should take Agahd’s figures and facts, but not his arguments in favour of the British banking system (separation of deposit banks provid- ing short-term commercial and industrial credits from speculative banks), nor his arguments against protectionism, etc., etc. The author wants an “honest”, moderate and genteel capitalism, without monopo- lies, without speculation, without promotion of bubble companies, without “links” between the banks and the government, etc., etc. | ⎫ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎬ ⎪ ⎪ ⎪ ⎪ ⎪ ⎭ |

| ⎧ ⎨ ⎩ | α) Société Générale, etc. β) Banque de Paris et des Pays Bas (popularly called “Paribas”) γ) Banque de l’Union parisienne.... | “The Paris banking trio, with assets of several thousand million francs, and with Russia as its chief market, controls the following Russian banks: (1) the Russo-Asiatic Bank, (2) the St. Petersburg Private Bank, (3) the Union Bank, and has introduced on the Paris stock exchange the shares of some industrial concerns that are closely connected with these banks” (55).... [1]

| N.B. | | | Here, too, quantity passes into quality: banking manipulation and narrow banking specialisation become an effort to assess broad, mass, national and world-wide mutual relationships and con- nections (Zusammenhänge)—simply because billions of rubles (in contrast to thousands ) lead to this, depend on this. |
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| N.B. | | | “In 1905-06, large sums of Russian capital were transferred to European, especially Berlin, banks; but great as was the panic effect of the brief rule of the masses in revolt against private ownership, the latter rapidly recovered its calm and reaction was back in the saddle with renewed strength. |
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“In 1907-08 we already see Russian capital flowing back, bringing with it new international capital” (59).

| | p. 59 Deposits, (million rubles) | ⎧ ⎨ ⎪ ⎩ | ✕ Siberian Commercial; Russian; International; Discount; Azov- Don; Private; “Petropari”?? (=St. Petersburg-Paris?); Vol- ga-Kama; Northern and State . |
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| ✕ | 1906 | 1908 |
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| in ten Russian banks | 614 | 875 |
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| | “The above-mentioned figures, it should be noted, illustrate only a difference of 261 million rubles in St. Petersburg bank deposits during the two years when business was completely stagnant .” (Agahd’s italics.) “If one adds the Moscow and provincial banks, and further the Crédit Lyonnais and private bankers, and undeposited money, the figure could well be doubled, and it would not be too high to estimate that about 500 milli- on rubles of ‘ panic-struck capital ’ [Agahd’s italics] flowed abroad and back into the Russian banks in the form of cash”... (59). |
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“However, the total amount of ‘ panic-struck capital ’ must have been much larger.

“The current rate of Russian 4 per cent Consols was quoted as follows:

| | 1905— | 65% |
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| January | 1907— | 73.5 |
| October | 1907— | 67 |
| | 1908-09— | 88 |
| | 1910-11— | 95 |
| | 1912-13— | 92.5 | and, according to data of the Credit Office, dividend payments changed as follows:

| | Million rubles |
| --- | --- |
| abroad | | in Russia |
| 1908 | 202 | — | 195 |
| 1910 | 175 | — | 233 | “These figures, of course, do not allow of an absolutely certain conclusion because current security prices varied considerably and ruble encashment in Russia could often have been advantageous.

| “Nevertheless, it can be assumed that a conside- rable part of the cash sent abroad returned in the form of Russian annuities. Even if one puts this at only 500 million rubles, the amount of ‘ panic- struck capital ’ rises to about a thousand million rubles” (60). ...“The danger of a fall in the value of the ruble, and a financial crisis, which was developing at the close of 1905, were averted when the Russian syn- dicate in Paris, with the participation of the Brit- ish money market, took up the 5 per cent loan in the spring of 1906. “The government treasury thus received almost one thousand million rubles in cash. In the following quiet years of 1907-08 the banks and the state treas- ury were in a very favourable position, that is to say, cash was freely available, the force of facts had powerfully stimulated thinking, and something sensible could be created on a realistic basis,—if desired. | |
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| N.B. “as well” N.B. | | | | “These two years had a beneficial effect on trade and industry as well, and led to improvement and reconstruction. Private industry, i.e., industry not dependent on government orders (oil, sugar, textiles, paper, timber), remained thoroughly healthy, and it was only the labour question that as- sumed quite a different, i.e., a political, character” (61).... “The years of change, 1905-08, caused many Russian capitalists to deposit their liquid money in German banks”... (see above). “Things went so far that one of the most con- servative (and most independent) Russian banks bought Prussian Consols as a reserve against un- foreseen developments. “At that time (1906) the Russian banks were not par- ticularly rich in cash.—The intense peasant movement had caused much damage in the villages; the workers in the towns, however, had left trade and industry comparatively unharmed. The fact is well known that, in spite of the numerous strikes, there were only a few acts of sabotage against private prop- erty and warehouses belonging to trade and indus- try (the sabotage in Baku should be attributed to Armenians and Tatars) (apart from the gross disorders on the railways, which, however, should not be ascribed to the free workers).” |
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| sic!! | | |
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N.B. The author, of course, is an arch-bourgeois and nationalist in his political sympathies!

“In fact, the number of bills protested at that time rose only slightly, which caused the more surprise in financial circles of the continent, the less the contemporary (peasant) movement was understood” (66).

Bills of Russian banks protested, according to balance-sheets of November 1, 1905 and following years (p. 66):

| | Million rubles |
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| | 1905 | | 1908 | | 1907 | | 1908 | | 1909 | | 1910 | | 1911 |
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| | State Bank 8 St. Peters- burg commer- cial banks | ⎧ ⎨ ⎪ ⎩ ⎧ ⎪ ⎨ ⎪ ⎩ | Bills discount- ed, of which protested Bills discount- ed, of which protested | |
| N.B. | | | 188.8 | 171.4 | 215.7 | 194.8 | 211.8 | 243.8 |
| 3.9 | 1.5 | 1.6 | 2.1 | 2.6 | 1.1 |
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| | 352.0 | 376.0 | 345.0 | 523.0 | 677.0 | 788.0 |
| | | 4.9 | 2.2 | 2.6 | 5.2 | 2.9 | 4.1 |

| “Berlin financial circles particularly weakened their relations with Russian private industry in 1905-06, that is, precisely when there was a large flow of cash from all parts of Russia. Until then the Lodz weaving and spinning mills (mostly Ger- man-owned) had depended mainly on the Berlin financial market and had always been good clients; nevertheless the Berlin banks deprived these firms of considerable credits, forcing many of them not only substantially to reduce production, but even send a consortium of very wealthy Lodz textile industrialists to the Caucasus to take part in mining enterprises there and seek contacts with the London and even the New York market. Contacts were not established chiefly due to the pogroms which took place at that time” (67).... | |
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| ...“It should be borne in mind, that Russia’s losses in the Japanese war, including Port Arthur, Dalny and the southern part of the Chinese-Eastern railway, amounted to approximately 4,500 million rubles, i.e., half of the national debt, on which, consequent- ly, the Russian peasants have to pay interest and amortisation, without receiving any of the capital” (72). | |
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| From Chapter V: “Participation of the German big banks in the St. Petersburg banks, etc.” | | | N.B. |

How does the Deutsche Bank place shares of the Siberian Commercial Bank in Berlin?

| | ...“The Deutsche Bank keeps new foreign shares in its portfolio for a year and then sells them on the Berlin Stock Exchange with a 50 per cent middle- man’s profit. The public pays at the rate of 193 for 100”... (74) [2] |
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| N.B. !!! | | |

“so that a ‘German’ big bank comfortably and rapidly makes a profit (on the market price)”... (74).

| | ...“Since, however, the Deutsche Bank has placed the shares among the Berlin public at 195 per cent, and subsequently still dearer (at present the market price is 230 with a 15 per cent dividend—the rate of interest is therefore 6 1/2 per cent), the primary concern of the bank’s board in St. Petersburg must be to ensure that dividends remain at the same level. This is a categorical demand of the foreign bank . It is the only demand it makes.—How it is done is a matter of complete indifference to it, and the result is wild speculation on the Stock and speculative share-promoting into which the St. Petersburg banks are directly forced by the ‘holdings system’” (77). |
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“Statistically, from the German standpoint, the operation appears as follows:

“Increase of capital since 1906-07:

| | 10,000,000 | — from issues on reserve accounts |
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| 26,000,000 | — in all |
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| 32,000,000 | — actual capital at 200 |
| 6 million rubles | | | | |
| 6,000,000 | rubles—difference—middleman’s prof- |
| it in favour of the Deutsche Bank and its clients” (78).... [3] |

| | ...“The Deutsche Bank thus offered the German public about 32,000,000 rubles of shares with the sole aim that it, the Deutsche Bank, should pocket the Judas reward of several millions in market price difference” (78). |
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| At a general meeting of Siberian Commercial Bank shareholders on March 23, 1913, a small group of shareholders headed by a barrister, Bibikov , protested against the decisions of this general meet- ing. ( Birzheviye Vedomosti No. 14017, February 21, 1914; S. Peterburgskaya Gazeta No. 51, February 22, 1914; S. Peterburgskaya Gazeta No. 54, Feb- ruary 23, 1914.) The protesters proved ... “that the bank’s director-general (a certain Soloveichik, con- nected by family ties with one of the Deutsche Bank directors) had put to his own private account seven million rubles of government subsidies and had used the money to buy shares of his own bank and thus acquire the majority of votes needed for his re-election” (79)... “If it is borne in mind that Ger- man capital operates here, and that such business methods are encouraged by the famous Deutsche Bank, increased importance attaches to the conclu- sion which I am endeavouring to prove in this book, viz., that the ‘holdings system’ prevents even a seri- ous Russian side from ensuring a sound and orderly management of the credit institutions that are so important to Russia. The Deutsche Bank is, of course, in a position to procure for itself a majority of votes, but the Russian shareholders, who also participate in the bank, will never be able to secure a majority sufficient to put into practice their just wishes and reasonable views” (80). | |
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| ...“Since 1906 there has been still further and greater German participation in the Russian Bank for Foreign Trade, known as the Russian Bank , and the St. Petersburg International Commercial Bank, known as the International ; the former belongs to the Deutsche Bank concern, the latter to the Discontogesellschaft in Berlin. Both these Russian banks employ three—fourths German money (share capital). [4] The Russian Bank and the International are the two most important Russian banks. Both are strongly speculative”... (82). | |
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Increase of Capital, million rubles (p. 84)

| | Capital | | Reserves |
| --- | --- | --- | --- |
| | 1906 | | 1912 | | 1906 | | 1912 |
| Russian Bank | 20 | — | 50 | (+30) | | 3 | — | 15 | (+12) |
| International | 24 | — | 48 | (+24) | | 12 | — | 24 | (+12) |
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| | 44 | | 98 | +54 | | 15 | | 39 | +24 [5] | |
| ΣΣ = 78 + 32 (Siberian Bank) = 110 |

| These banks have “obtained since 1906 a total share capital of 110 million rubles, whereby a middle- man’s profit of several million rubles passed into the exchequer of the promoters” (84).... p. 97... “for that ( The Times Russian Supplement ) at any rate subsidies are paid from the Russian Ministry of Finance”.... Chapter 8: “Total Amount of St. Petersburg Banks Operating with Foreign Participation and Some Com- ments on the Figures.” | | |
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| 000 million rubles |
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| a | 1) | 0.4 | + | 0.8 | = | 1.2 | | 1.3 | + | 1.7 | = | 3.0 |
| a | 2) | 0.2 | + | 0.2 | = | 0.4 | b) | 0.5 | + | 0.4 | = | 0.9 |
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| a | 3) | 0.7 | + | 0.7 | = | 1.4 | | 1.8 | + | 2.1 | = | 3.9 |
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“At that time (1911) the Russian Credit Office [N.B.: in other passages: its director Davydov ] gave the Russian banks, for stock-exchange operations in Paris and Peters burg, first 120 million francs and later a further loan, altogether about 100 million rubles, to subsidise the wild banking speculations which had reached a deadlock (the official designation was: for stabilising the market price of Russian state securities)”... (86).

p. 121: ...in 1912 the Russian commercial banks altogether had 548 branches....

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| St. Petersburg deposit banks [6] | External invest- ments (assets) | | | | Million rubles Liabilities (debits) |
| | Marked in pencil are my columns and my totals | |
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| Produc- tive (trade and in- dustry | | | Specula- tive (Stock Exchange and finances) | | | Mil- lion rubles | | | Capital and reserves | | Depos- its | | Debts at other banks and re- discounts | Ac- cep- tance |
| a ) Under the “ holdings system ” |
| | | | 1) German holdings (4 banks: Siberian Commercial, Rus- sian, International and Discount Bank) | 413.7 | 859.1 | 1,272.8 | 207.1 | 658.8 | 429.0 | 48.6 |
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| | | | 2) British holdings (2 banks: Russian Commercial and In- dustrial; Russo-British) | 239.3 | 169.1 | 408.4 | 55.2 | 204.8 | 111.5 | 16.2 |
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| | | | 3) French holdings (5 banks: Russo-Asiatic, St. Peters- burg Private; Azov-Don,; Union Mos- cow; Russo-French Commercial | 711.8 | 661.2 | 1,373.0 | 234.9 | 736.4 | 308.0 | 29.5 |
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| | 1,364.8 | | 1,689.4 | | | 3,054.2 | | | 497.2 | | 1600.0 | | 848.5 | | 94.3 |
| b ) Independent Russian banks ( St. Petersburg and Moscow ) |
| (8 banks: Moscow Merchants, Volga- Kama, Junker and Co., St. Petersburg Commercial (formerly Wawelberg), Bank of Moscow (formerly Ryabushin- sky), Moscow Discount, Moscow Com- mercial, Moscow Private) | 504.2 | 391.1 | 895.3 | 169.0 | 599.6 | 127.0 | — |
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| Total . . . . . | 1,869.0 | | 2,080.5 | | | 3,949.5 | | | 666.2 | | 2,199.6 | | 975.5 | | 94.3 |
| | ⎯⎯⎯⎯⎯⎯⎯⌵⎯⎯⎯⎯⎯⎯⎯ | | ⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⌵⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯ |
| | 3,949.5 | | 3,935.6 |
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The growth of “mutual credit societies” (p. 122)

| | (according to Credit Office figures) million rubles |
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| Number | Members | Capital | Total assets | Deposits | Accounts |
| 1907 | 261 | 158,000 | 39 | 319 | 203 | 246 |
| 1912 | 776 | 502,000 | 99 | 899 | 487 | 687 |

| N.B. N.B. | | | (136 and others.) Russian Ministers of Finance appoint bank directors (often from government officials), give the banks millions in subsidies through the “Credit Office”, etc. “This gives the key to the activity of those St. Petersburg banks—‘Russian’ in their exter- nal appearance, ‘foreign’ in the sources of their funds, ‘dilettante’ in their conduct of business, and ‘ministerial’ in the risks they take—which have grown into parasites of Russian economic life.— And this precedent [reference is to the Siberian Bank, etc.] has now become a principle of organisation for the St. Petersburg banks . The Berlin and Paris directors of the big banks believe that the following guarantee their interests “1) the direct Credit Office subsidies to St. Petersburg banks, “2) the credit balance of the Russian Finance Ministry (of which about 60 per cent is in Paris and 40 per cent in Berlin)” (137).... “The Finance Ministry authorised the Russo- Chinese Bank [in which the author served!!] to issue a series of state-guaranteed securities to provide it with the necessary cash resources, without being concerned as to how these were used. Thus, for example, it handed over to the bank the issue of state-guaranteed railway shares in European Russia, and the income went directly into the bank’s coffers. The rail- ways would need the money gradually, in the course of 4-5 years (during their construction), and in the meantime the bank could freely dispose of the money and, in addition, earn profit from the issue of the shares. This became an established procedure, for it was repeated several times each year” (149). (The shares of four railways total £ 12,800,000 = about 120 million rubles.) “The director (who is also the president) of the bank is a board member of a number of big railway and industrial companies (at present about 20), which likewise have to keep their free cash on current account in the bank, knowing that the Finance Minis- try is greatly interested in the bank and supports it” (149). |
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| well put! | | |
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| N.B. !! | | |
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| | | | | 20 compa- nies |
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| | That is how “business” is done.... | |
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This in Chapter 11: “The Merger of the Russo-Chinese Bank with the Northern Bank (Russo-Asiatic Bank) and the Protest against This at the 1910 General Meeting” (p. 147):

(the protest was moved by the author himself)

| “Most of those present at the general meeting of the Russo-Chinese Bank, which was intended to confirm the merger, were State Bank and Credit Office officials holding proxy votes”... (153). | | | N.B.!! |

The author registered a “dissenting opinion“, entered in the minutes of the meeting of March 30, 1910 (p. 154).

“The holdings system is nonsense”—the author argued in his protest... (p. 154).

A “merger” was carried out by the French banks (Banque de Paris et des Pays Bas + Société Générale) which were “interested” in the Russo-Chinese Bank, saw its affairs were in a bad state, wanted to “extricate” themselves and hoped

| “by the merger [of the two banks into one— the Russo-Asiatic], to create such a big ‘Russian’ institution that the Russian government would be compelled to ‘uphold’ the merged bank under all circumstances” (p. 151). | | | N.B. !! |

| | “When the merger took place, the share capital was reduced by 33 per cent and these sums were put to reserve account. This gave the bank the appear- ance of having created this reserve capital as a result of good business management, while at the same time enabling the new administration in the future to distribute the entire profit (!) on a diminished capital at a higher rate of interest, because the reserve capital had, at one stroke, reached the legal maximum and no interest had to be paid on it. The shareholders were helpless even against this manipulation, for they were in France, while the general meetings took place in St. Petersburg”... (152). |
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| | ...“When the Russo-Asiatic Bank states that its share capital is 45 million rubles and reserve capital 23.3 million rubles, every unprejudiced person will assume that the reserve has been derived from earned money, i.e., is the result of good business management. In reality, however, it comes out of share capital, and is the result of bad business management. Neither bank had reserves prior to the merger” (153).... |
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| | And, in fact, this bank, with 120 branches (!!), has too little capital (a balance-sheet of 785 million rubles with a capital of 73 1/2 million + reserves—October 1, 1913)—“the risk of this overloading has to be borne by the Credit Office” (153). |
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| | ...“Furthermore, it is quite clear that under the ‘holdings system’, which prevents the share- owners from passing judgement on the management of the company, because between them and the company stand the all—powerful big (foreign) banks, which can use more or less ‘masked combinations’ to rob both sides, directors are appointed arbitra- rily and according to private interests, so that, in the end, any dilettante can become a bank direc- tor” (156-57). |
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| ha-ha! | | | |

| sic!! | | | The board of the Russo-Asiatic Bank consists of “a former Russian bureaucrat (as Director-Gener- al and President of the bank), a former Russian Governor, a former French diplomat, and a former French lawyer” (158). |

| All this criticism is stated to have been written in the autumn of 1913 and to have “become obsolete” owing to the Imperial rescript of January 30, 1914. | ⌇⌇ ⌇⌇ ⌇⌇ | ? |

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| | diplomacy? | |
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The union of deposit and speculative banks is harmful because it (1) “ties up” the country’s productive means (2) leads to a rise in prices, syndicates, etc.

| “If clarity and order were established in banking conditions, I should indeed like to see whether there could be trusts, monopolies and syndicates” (179).... | | | ha-ha! that what it comes to!! |

| “Let it be legally laid down that firms concluding agreements which militate against the consumer by eliminating com- petition (by dishonest competition) will not be granted official bank credits and, there- fore, will not be allowed to issue securities, and then monopolies and syndicates might very soon be dissolved” (180). | | | ha-ha!! simple!! |

| Subsidies of the Credit Office (pp. 202 and 204) to the St. Petersburg banks amount to 800-1,000 million rubles [7] . | | | !! |
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The Credit Office... “is the keyboard controlling all credit activity in the Empire”. “It is a bureaucratic apparatus without a statute and without public control” (200).

...“In 1910 it was ... reformed and since then its task has been to ‘co-ordinate’ the activities of all the credit institutions of the country, [8] and ‘ it is the connecting link between these and the Stock Exchanges ’”.... The St. Petersburg banks report to it every eight to fourteen days, and in more detail every three months (201).

Four “modes” of these subsidies [9] :

| | Million rubles |
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| (1) | Direct cash payments (to the banks) from assistance funds, up to . . . . . . . . | | 150 |
| (2) | Assets in foreign banks (as concealed cover) | 450 |
| (3) | “Assignment of state-guaranteed stock issues” | 150 |
| (4) | “Discounting of financial bills (accommodation bills) with or without the endorsement of a foreign bank” . . . . . . . . . . . . . . . . . . . . . . about | 50 |
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| Σ | = 800 |

| “Deposits—1,648 million rubles, plus 800 in subsidies— |
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| N.B. | | | | | amount to 2,448 million against 5,000 million, the total amount of free working cash in the country, according to data of Mr. Davydov (Credit Office), i.e., ...half the free working cash in the Russian Empire is tied up in international speculative banks, by the system of holdings. Years may elapse before this money is gathered in again (and put back in circulation)”... (204). |
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| | Chapter 15 (p. 210): “ Relative Strength of the In- ternational Bank Trusts in the Russian Market”.... |
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| N.B. | | |

“Balance-sheet showing strength of the St. Petersburg banks (system of holdings)” (p. 211).

| Million rubles |
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| Assets | | Liabilities |
| Control of Trade and Transport | | Working Capital of the Banks |
| a) | Industrial credits . . | 1,350 | | a) | Own funds . . . . . | 497 |
| b) | Shipping and private | | | b) | Deposits (Russia) . . | 1,600 |
| | railways . . . . . . | 1,509 | | c) | Credits . . . . . . . | 942 |
| | |
| c) | Control of Russian | | | | 3,039 |
| | private holdings . . | 1,689 |
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| | 4,548 |

| Control of Production and Industry | | Security Issues, 1908-12 (exclusive of government issues) |
| --- | --- | --- |
| a) | Syndicates in | coal (Prod- ugol) | a) | In Russia . . . . . . . . . | 3,687 |
| b) | Abroad . . . . . . . . . | 1,509 |
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| b) | ”   ” | iron (Prod- amet) | | 5,196 |
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| c) | ”   ” | oil (General Oil, etc.) | | 8,235 |
| d) | ”   ” | metallurgy (various) |
| e) | ”   ” | cement build- ing (various) | 3,687 |
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| | 8,235 |

{Table in full on pp. 211-12.} “The strength relation of the three foreign groups of banks is:

| ⎧ ⎪ ⎪ ⎨ ⎪ ⎪ ⎩ | (1) | French bank trio plus 5 St. Petersburg banks | 55 per cent | | | N.B. (p. 212) |
| --- | --- | --- | --- | --- | --- | --- |
| (2) | German-Berlin “D” banks plus 4 St. Pe- tersburg banks . . . . | 35 per cent |
| (3) | British-London syndi- cates plus 2 St. Peters- burg banks . . . . . | 10 per cent” [10] |

...“On the other hand, the division of material liabilities (all in nominal values) is:

| a) Abroad | (Million rubles) |
| --- | --- |
| Security issues . . . . . . . . . . | 1,509 |
| Bank demands (excluding counterdemands of the Credit Office) about
. . . | 300 |
| Holdings in bank shares . . . . . . . . . . | 295 |
| Other share holdings . . . . . . . . . . | 500 |
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| | 2,604 | | |

| b) Russia |
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| Security issues, deposits and miscellaneous . . | 4,831 |
| Credit Office (without last railway loan) . . . | 800 |
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| | 5,631 | | |
| Σ= | 8,235” |

“The clear meaning of these statistics of proportions is that the one-third minority of capital-exporting countries dominates the two-thirds majority of Russia as a capital-importing country (p. 213), and, moreover, in such forms (subsidies, syndicates, cartels, etc.) that this minority can protect neither its own interests nor those of others. In consequence of this, last but not least, [11] the private interests of a few boards of big banks dominate, not officially but secretly, and in such a way that all concerned suffer.”

| ⎧ ⎨ ⎩ | In this the author sees the cause of the rise of prices, even giving (p. 213) an approximate percentage rise of prices in 1908-13, but this cannot be taken seriously, it is not a proof, simply an unnecessary illustration.... | ⎫ ⎬ ⎭ |

On p. 214 he gives the following official statistics from the Torgovo-Promyshlennaya Gazeta :

| | Million rubles |
| --- | --- |
| N.B. | | | Total amount of share capital (beginning of 1914) . . . . . . . . . . . . | 3,600 |
| Plus industrial (stock) . . . . . . . . . . . . | 400 |
| ”   railway shares . . . . . . . . . . . . | 140 |
| | |
| | |
| | 4,140 |
| |
| Plus state loans and guaranteed railway stock in Russian bands. . . . . . . . | 6,072 |
| ”   private mortgages . . . . . . . . . . . . | 2,956 |
| | |
| | 13,168 |

| | The St. Petersburg banks, he says, are “artificially [?] created international money trusts” (215). | |

| ...“the programme of a modern big bank director is quite clear and obvious; it reads: “ If we, the big banks, succeed in ruling over producers and consumers (through stock issues, credit and customs duties), then the profits will flow into our pockets and we become masters of the situation ” (Agahd’s italics) (218). | | | “if” is amusing (“a Narodnik”!) |

| | | | | |
| --- | --- | --- | --- | --- |
| | | | | |
| | | |
| | Agahd “forgot” a trifle: capitalism and the capitalist class!! | |
| | | |
| | | |
| | | |

| The consequence of this, he says, may be “excessive raising of customs duties” and because of that “open hostility in the world market, which could even lead to war, what may also suit the big bank monopolists, because with the force majeure of war they can purge their balance-sheets without being held personally responsible for the losses” (220).... | | | | “even” to war |
| --- | --- | --- | --- | --- |
| | | | one of the motives for war |

| On p. 234 the author quotes S. Prokopovich | ⎞ ⎟ ⎟ ⎟ ⎟ ⎟ ⎠ |
| --- | --- |
| (on the conditions of Russia’s industrial de- velopment)— Capital of Russian origin 447.2 mill. rubles = 21.1% Capital of foreign origin 762.4 mill. rubles = 35.9% Capital “from sale of stock” 915.6 mill. rubles = 43.1% | |

| |
| --- |
| | Σ is 100.1% | |
| |

| Here, says Agahd “the bank question, with which the author (Prokopovich) is not familiar”, plays the biggest role. | |

On the question of Russia’s balance of trade , the author writes that the excess of the credit over the debit side was

| 1909 | — | 570 | mill, rubles (p. 238) |
| --- | --- | --- | --- |
| 1910 | — | 511 |
| 1911 | — | 430 |
| | |
| | 1,371 | [12] |
| — | 600 | —minus coupon payments abroad of 200 million rubles per annum |
| | |
| | 771 | —“total excess in 3 years”. | “Concerning this sum, therefore, it can be said that it has in part (I put it at 500 million rubles) more than normally enriched the country in cash resources thanks to especially good harvests. But this figure proves, plainly and obviously, that the apparently gigantic upswing in Russia was by no means due only to favourable harvests.

“To this must be added the import of capital under guaranteed and private stock issues of about 1,509 million rubles, of which, however, only a negligible amount was put on the market in the form of cash (most of it went into special undertakings).

| | | | “The director of the Credit Office (Davydov) gives the following estimate of the growth of the country’s free working capital (by which he means private deposits in all the banks, savings-banks deposits (an increase of 576 million in cash and securities), current accounts of government agencies in the State Bank, excluding, however, current accounts of the Credit Office with foreign bankers and the debts of Russian banks abroad): 1906—2,592 million rubles 1912—5,000 million rubles” (p. 238). |
| --- | --- | --- | --- |
| |
| N.B. | |

The growth, he says = about 2,500 million rubles, and import of capital about 1,600 + 771 (inflow due to good harvests) = 2,371 million rubles (p. 239)—“they approximately balance”....

| | “The Russian Finance Ministry utilises here” (in reference to Russia’s excessive gold reserve) “its cash just as unscientifically, just as unsoundly from the economic stand- point, just as anti-nationally as most of the continental big banks in Berlin and Paris use their deposits. Russian government money serves to ensure the influence of some Berlin and Parisian big banks over the St. Petersburg banks (and their Russian deposits), while the country’s productive economic life is weakened precisely where it ought to be strengthened” (247). |
| --- | --- |
| | |
| | | is it not the reverse? “the influence” of the Parisian and Berlin banks compels?? |
| | | |
| | |

| The national income (the “national budg- et agricultural production, i.e., the grain harvest and all other products”) in Russia (1913) was only 9,000 million rubles (249). | | | | N.B. |

| | |
| --- | --- |
| | ...“Raising productivity and popular consumption is still the most profitable business” (265) (author’s italics). | | | | “Narodnik” |
| |

This is how the author criticises Witte’s financial policy:

“Then, too, they [Witte] went in for speculation and combinations and shifted the risk on to the Treasury, instead of properly organising things” (275)....

| |
| --- |
| | Speculation versus organisation!! Narodnik!! idem 281-82 and many more. | |
| |

| Author reproached Russian Finance Minis- try: “No bounds were set for international speculation, nor was proper status allowed loyally co-operating foreigners in recognition of their achievements” (276).... | | | | who is blaming whom? |
| --- | --- | --- | --- | --- |
| | | | “honest broker” |

| ... “good” banks ... | | ...“However, I again stress the difference between the speculating St. Petersburg banks (fiscal operations) and the productively em- ployed Russian banks (national economy). One cannot but recommend the Volga-Kama Bank, the Moscow Merchants Bank, the Knoop and Wogau banks as models in direct- ing banking business along lines that rule out speculation in deposit banks”... (280). |
| --- | --- | --- |
| |

| ha-ha! | | | “I have already expressed my regret that Russia is being involved in the ‘money market of the civilised world’” (283). |

| | “Every country passing over to a money economy must reckon with the power of the Jewish international organisation,” but (he intimates) the Jews are useful when they are subjected to the interests of the whole, as in Germany, where their talents are kept within the bounds of “reason and ethics” (284). |
| --- | --- |
| !! | | |

| well said! | | | | ...“One can say: Under present circum- stances the dividends of many big banks are paid out as if they were illegal payment for silence”... (286). |

That “my” (Agahd’s) “programme” should be “un-national”?? God forbid!! I am not a cosmopolitan, I am a nationalist (pp. 287 and 288 ), I am for the independence of every nation, for good banking, for successful “deals”.

| gem (a nation- alist) | | | | ...“If such a programme is not ‘national’, then please explain to me what is really meant by ‘national’. Or will I be told that the founding and efficient management of lastingly profitable businesses does not come under this concept?” (288). Author’s italics: “Reform of the continental big-banking business is therefore in general the first condition for an economic-political agree- ment in Europe, and this is wholly in accord with the interests of the nations” (290) |
| --- | --- | --- | --- | --- |
| |
| for “peace” and a (“United States of Europe”) | | | | and the last phrases in the book:

| “And my final propositions read as follows: If the European (continental) Great Powers continue unswervingly their hither- to ‘well-tried system’, a world war will compel them to alter it. Freedom of the money market and freedom of the world market—through war or prudence. Let them choose and bear, in mind that Europe’s ruling classes carry the entire responsi- bility.” | |
| --- | --- |
| | | | threat of “world war” |
| |

End

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Notes:
[1] See present edition, Vol. 22, p. 231.— Ed .

[2] See present edition, Vol. 22, p. 232.— Ed .

[3] Ibid., p. 232.— Ed .

[4] Ibid p. 232.— Ed .

[5] See present edition, Vol. 22, p. 232.— Ed .

[6] See present edition, Vol. 22. p. 231.— Ed .

[7] See present edition, Vol. 22, p. 238.— Ed .

[8] Ibid.— Ed .

[9] Subsidies of the credit office.— Ed .

[10] See present edition, Vol. 22, p. 232.— Ed .

[11] These four words are in English in the original.— Ed .

[12] So given by Agahd.— Ed .