E. AGAHD, BIG BANKS AND THE WORLD MARKET (original) (raw)
Vladimir Ilyich Lenin
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.
| | | | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | | Reviewed by Spectator (author is often naïveand “exaggerates the importance of the big banks”, etc.)in Die Neue Zeit, 1915, 1 (33rd publication year), p. 61et seq. | | | | |
| ⎧⎪⎪⎪⎪⎪⎪⎨⎪⎪⎪⎪⎪⎩ | The author spent fifteen years in Russia as inspectorof the Russo-Chinese Bank. There is much of the offend-ed vanity of the unrecognised financial expert, muchchatter (a host of phrases against “dilettantes” and“amateurs”, etc.).One can and should take Agahd’s figures andfacts, but not his arguments in favour of the Britishbanking system (separation of deposit banks provid-ing short-term commercial and industrial creditsfrom speculative banks), nor his arguments againstprotectionism, etc., etc. The author wants an “honest”,moderate and genteel capitalism, without monopo-lies, without speculation, without promotion ofbubble companies, without “links” between the banksand 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: bankingmanipulation and narrow banking specialisation become an effort to assess broad, mass, national and world-wide mutual relationships and con-nections (Zusammenhänge)—simply because billionsof rubles (in contrast to thousands) lead to this,depend on this. | | ---- | | | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | | | |
| N.B. | | | “In 1905-06, large sums of Russian capital weretransferred to European, especially Berlin, banks;but great as was the panic effect of the brief ruleof the masses in revolt against private ownership,the latter rapidly recovered its calm and reactionwas back in the saddle with renewed strength. | | ---- | | | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | | | | | | | | |
“In 1907-08 we already see Russian capital flowing back, bringing with it new international capital” (59).
| | p. 59Deposits,(millionrubles) | ⎧⎨⎪⎩ | ✕ Siberian Commercial; Russian;International; Discount; Azov-Don; Private; “Petropari”??(=St. Petersburg-Paris?); Vol-ga-Kama; Northern and State. | | -------------------------------- | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------ | | ✕ | 1906 | 1908 | | | | | | | in ten Russianbanks | 614 | 875 | | | | |
| | “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 whenbusiness was completely stagnant.” (Agahd’s italics.)“If one adds the Moscow and provincial banks, andfurther the Crédit Lyonnais and private bankers, andundeposited money, the figure could well be doubled, andit 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 theform of cash”... (59). | | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | | | | | | | | |
“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% | |
|---|---|---|
| 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 theform of Russian annuities. Even if one puts thisat only 500 million rubles, the amount of ‘_panic-struck capital_’ rises to about a thousand millionrubles” (60)....“The danger of a fall in the value of the ruble,and a financial crisis, which was developing at theclose 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 inthe spring of 1906.“The government treasury thus received almostone thousand million rubles in cash. In the followingquiet years of 1907-08 the banks and the state treas-ury were in a very favourable position, that isto say, cash was freely available, the force of factshad powerfully stimulated thinking, and somethingsensible could be created on a realistic basis,—ifdesired. | ||
|---|---|---|
| N.B. | ||
| N.B.“aswell”N.B. | | | | “These two years had a beneficial effect on tradeand industry as well, and led to improvementand reconstruction. Private industry, i.e., industrynot dependent on government orders (oil, sugar,textiles, paper, timber), remained thoroughlyhealthy, 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 manyRussian capitalists to deposit their liquid moneyin German banks”... (see above).“Things went so far that one of the most con-servative (and most independent) Russian banksbought 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 movementhad caused much damage in the villages; the workersin the towns, however, had left trade and industrycomparatively unharmed. The fact is well knownthat, in spite of the numerous strikes, there wereonly a few acts of sabotage against private prop-erty and warehouses belonging to trade and indus-try (the sabotage in Baku should be attributedto Armenians and Tatars) (apart from the grossdisorders on the railways, which, however, shouldnot be ascribed to the free workers).” | | ---------------- | | | | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | | | | | | | | | | | | | | | | | | | sic!! | | | | | | | | | | | | N.B. | | | | | | | | | | |
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 | | | | | | | | | | | | | | --------------------------------------------- | --------- | -------------------------------------------------------------------- | ----- | ----- | ----- | ----- | ----- | ----- | | ---- | | ---- | | | 1905 | | 1908 | | 1907 | | 1908 | | 1909 | | 1910 | | 1911 | | | | | | | | | | | | | | | | | | StateBank8 St.Peters-burg commer-cialbanks | ⎧⎨⎪⎩⎧⎪⎨⎪⎩ | Billsdiscount-ed,of whichprotestedBillsdiscount-ed,of whichprotested | | | | | | | | | | | | 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 | | | | | | | | | | | | | | | | | | | | | | | | 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 weakenedtheir relations with Russian private industry in1905-06, that is, precisely when there was a largeflow of cash from all parts of Russia. Until thenthe Lodz weaving and spinning mills (mostly Ger-man-owned) had depended mainly on the Berlinfinancial market and had always been good clients;nevertheless the Berlin banks deprived these firmsof considerable credits, forcing many of them notonly substantially to reduce production, but evensend a consortium of very wealthy Lodz textileindustrialists to the Caucasus to take part in miningenterprises there and seek contacts with the Londonand even the New York market. Contacts werenot established chiefly due to the pogroms whichtook place at that time” (67).... | |
|---|---|
| ...“It should be borne in mind, that Russia’s lossesin the Japanese war, including Port Arthur, Dalnyand 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 andamortisation, without receiving any of the capital”(72). | |
|---|---|
| From Chapter V: “Participation of the Germanbig 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 sharesin its portfolio for a year and then sells them onthe Berlin Stock Exchange with a 50 per cent middle-man’s profit. The public pays at the rate of 193for 100”... (74)[2] | | | | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | | 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 placedthe shares among the Berlin public at 195 per cent,and subsequently still dearer (at present the marketprice is 230 with a 15 per cent dividend—the rateof interest is therefore 6 1/2 per cent), the primaryconcern of the bank’s board in St. Petersburg mustbe 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 isa matter of complete indifference to it, and theresult is wild speculation on the Stock and speculative share-promoting into which theSt. Petersburg banks are directly forced by the‘holdings system’” (77). | | | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | N.B. | |
“Statistically, from the German standpoint, the operation appears as follows:
“Increase of capital since 1906-07:
| | 10,000,000 | — from issues on reserve accounts | | | | | --------------------------------------------------------------------------------- | ----------------------------------- | | | | | | | | | | | 26,000,000 | — in all | | | | | | | | | | | 32,000,000 | — actual capital at 200 | | | | | 6millionrubles | | | | | | 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 Germanpublic about 32,000,000 rubles of shares with the soleaim that it, the Deutsche Bank, should pocket theJudas reward of several millions in market pricedifference” (78). | | | | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | | | | ! | | |
| At a general meeting of Siberian CommercialBank shareholders on March 23, 1913, a small groupof 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, February22, 1914; S. Peterburgskaya Gazeta No. 54, Feb-ruary 23, 1914.) The protesters proved ... “that thebank’s director-general (a certain Soloveichik, con-nected by family ties with one of the Deutsche Bankdirectors) had put to his own private account sevenmillion rubles of government subsidies and hadused the money to buy shares of his own bank andthus acquire the majority of votes needed for hisre-election” (79)... “If it is borne in mind that Ger-man capital operates here, and that such businessmethods are encouraged by the famous DeutscheBank, 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 orderlymanagement of the credit institutions that are soimportant to Russia. The Deutsche Bank is, ofcourse, in a position to procure for itself a majorityof votes, but the Russian shareholders, who alsoparticipate in the bank, will never be able to securea majority sufficient to put into practice their justwishes and reasonable views” (80). | |
|---|---|
| ...“Since 1906 there has been still further andgreater German participation in the Russian Bankfor Foreign Trade, known as the Russian Bank,and the St. Petersburg International CommercialBank, known as the International; the former belongsto the Deutsche Bank concern, the latter to theDiscontogesellschaft in Berlin. Both these Russianbanks employ three—fourths German money (sharecapital).[4] The Russian Bank and the Internationalare the two most important Russian banks. Both arestrongly speculative”... (82). | | | | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | ---- | | | | | N.B. | | | | | | | | | |
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) | | | | | | | | | | | | | | | 44 | | 98 | +54 | | 15 | | 39 | +24 [5] | | | ΣΣ = 78 + 32 (Siberian Bank) = 110 | | | | | | | | | |
| These banks have “obtained since 1906 a totalshare 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 RussianMinistry of Finance”....Chapter 8: “Total Amount of St. Petersburg BanksOperating with Foreign Participation and Some Com-ments on the Figures.” | | | | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | | | | | | | | | | | | | | | |
| 000 million rubles | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 |
| a | 3) | 0.7 | + | 0.7 | = | 1.4 | 1.8 | + | 2.1 | = | 3.9 |
“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....
| St. Petersburg deposit banks[6] | Externalinvest-ments(assets) | _Million rubles_Liabilities(debits) | |||||||||||||
| Marked in pencilare my columnsand my totals | |||||||||||||||
| ↓ | |||||||||||||||
| Produc-tive (tradeand in-dustry | Specula-tive(StockExchangeandfinances) | Mil-lionrubles | Capitalandreserves | Depos-its | Debts atotherbanksand 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 | ||||||||
| 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 | ||||||||
| 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 | ||||||||
| 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 | — | ||||||||
| 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 | ||||||||||||||
The growth of “mutual credit societies” (p. 122)
| | (according to Credit Office figures)million rubles | | | | | | | | ----------------------------------------------------- | ------- | ------- | ----------- | -------- | -------- | --- | | Number | Members | Capital | Totalassets | 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 Financeappoint bank directors (often from governmentofficials), give the banks millions in subsidiesthrough the “Credit Office”, etc.“This gives the key to the activity of thoseSt. Petersburg banks—‘Russian’ in their exter-nal appearance, ‘foreign’ in the sources of theirfunds, ‘dilettante’ in their conduct of business,and ‘ministerial’ in the risks they take—whichhave grown into parasites of Russian economiclife.—And this precedent [reference is to theSiberian Bank, etc.] has now become a principleof organisation for the St. Petersburg banks. TheBerlin and Paris directors of the big banks believethat the following guarantee their interests“1) the direct Credit Office subsidies to St.Petersburg banks,“2) the credit balance of the Russian FinanceMinistry (of which about 60 per cent is in Parisand 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 securitiesto provide it with the necessary cash resources,without being concerned as to how these wereused. Thus, for example, it handed over to thebank the issue of state-guaranteed railwayshares in European Russia, and the incomewent directly into the bank’s coffers. The rail-ways would need the money gradually, in thecourse of 4-5 years (during their construction),and in the meantime the bank could freelydispose of the money and, in addition, earnprofit from the issue of the shares. This becamean established procedure, for it was repeatedseveral 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 numberof big railway and industrial companies(at present about 20), which likewise haveto keep their free cash on current accountin the bank, knowing that the Finance Minis-try is greatly interested in the bank andsupports it” (149). | | -------- | | | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | wellput! | | | | | | | | | | !!N.B. | | | | | | | | | | N.B.!! | | | | | | | | | | | | | | | | | | | | | | | | _20_compa-nies | | | | | | N.B.!! |
| | | | | ------------------------------------- | | | | That is how “business” is done.... | | | | | |
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 ofthe Russo-Chinese Bank, which was intended toconfirm the merger, were State Bank and CreditOffice 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 becompelled to ‘uphold’ the merged bank under allcircumstances” (p. 151). | | | N.B.!! | | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | ------ |
| | “When the merger took place, the share capitalwas reduced by 33 per cent and these sums were putto reserve account. This gave the bank the appear-ance of having created this reserve capital asa result of good business management, while atthe same time enabling the new administrationin the future to distribute the entire profit (!) ona diminished capital at a higher rate of interest,because the reserve capital had, at one stroke,reached the legal maximum and no interest hadto be paid on it. The shareholders were helplesseven against this manipulation, for they werein France, while the general meetings took placein St. Petersburg”... (152). | | | | | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | | | !! | | | | | | | | | | N.B. | | | | | | | | |
| | ...“When the Russo-Asiatic Bank states that itsshare capital is 45 million rubles and reserve capital23.3 million rubles, every unprejudiced person willassume that the reserve has been derived fromearned money, i.e., is the result of good businessmanagement. In reality, however, it comes outof share capital, and is the result of bad businessmanagement. Neither bank had reserves prior to themerger” (153).... | | | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | | | | | | | | !! | |
| | 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 thisoverloading has to be borne by the Credit Office” (153). | | | | | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | | | !! | | | |
| | ...“Furthermore, it is quite clear that underthe ‘holdings system’, which prevents the share-owners from passing judgement on the managementof the company, because between them and thecompany 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). | | | | | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | | | | | | | | | N.B. | | | | | | | | | | ha-ha! | | | |
| sic!! | | | The board of the Russo-Asiatic Bank consistsof “a former Russian bureaucrat (as Director-Gener-al and President of the bank), a former RussianGovernor, a former French diplomat, and a formerFrench lawyer” (158). | | ----- | | | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| All this criticism is stated to have been writtenin the autumn of 1913 and to have “become obsolete”owing to the Imperial rescript of January 30, 1914. | ⌇⌇ ⌇⌇ ⌇⌇ | ? |
|---|
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 establishedin banking conditions, I should indeedlike to see whether there could be trusts,monopolies and syndicates” (179).... | | | ha-ha!that what itcomes to!! | | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | | | ---------------------------- |
| “Let it be legally laid down that firmsconcluding agreements which militateagainst the consumer by eliminating com-petition (by dishonest competition) will notbe granted official bank credits and, there-fore, will not be allowed to issue securities,and then monopolies and syndicates mightvery soon be dissolved” (180). | | | ha-ha!!simple!! | | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | --------------- |
| Subsidies of the Credit Office(pp. 202 and 204) to the St. Petersburgbanks amount to 800-1,000 millionrubles[7]. | | | !! | | --------------------------------------------------------------------------------------------------------------------------------------- | | | -- | | | | | |
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]:
| | Millionrubles | | | | | ---------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------- | --- | --- | | (1) | Direct cash payments (to the banks) fromassistance 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 (accommodationbills) with or without the endorsement of aforeign bank” . . . . . . . . . . . . . . . . . . . . . . about | 50 | | | | | | | | | | | | | | | | | | | Σ | = 800 | | |
| “Deposits—1,648 million rubles, plus 800 in subsidies— | | | | | | | ------------------------------------------------------ | | | | | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | | 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 RussianEmpire is tied up in international speculativebanks, by the system of holdings. Years may elapsebefore this money is gathered in again (and putback in circulation)”... (204). | | | | | | | |
| | Chapter 15 (p. 210): “Relative Strength of the In-ternational Bank Trusts in the RussianMarket”.... | | | | ---------------------------------------------------------------------------------------------------------- | | | | N.B. | | |
“Balance-sheet showing strength of the St. Petersburg banks (system of holdings)” (p. 211).
| Million rubles | ||||||
|---|---|---|---|---|---|---|
| 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 | |||||
| 4,548 |
| Control of Productionand Industry | Security Issues, 1908-12(exclusive of governmentissues) | ||||
|---|---|---|---|---|---|
| a) | Syndicates in | coal (Prod-ugol) | a) | In Russia . . . . . . . . . | 3,687 |
| b) | Abroad . . . . . . . . . | 1,509 | |||
| b) | ” ” | iron (Prod-amet) | 5,196 | ||
| c) | ” ” | oil (GeneralOil, etc.) | 8,235 | ||
| d) | ” ” | metallurgy(various) | |||
| e) | ” ” | cement build-ing (various) | 3,687 | ||
| 8,235 |
{Table in full on pp. 211-12.}
“The strength relation of the three foreign groups of banks is:
| ⎧⎪⎪⎨⎪⎪⎩ | (1) | French bank trio plus5 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 |
| 2,604 |
| b) Russia | |
|---|---|
| Security issues, deposits and miscellaneous . . | 4,831 |
| Credit Office (without last railway loan) . . . | 800 |
| 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 riseof 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:
| | Millionrubles | | | | | | ---------------------------------------------------------------------------- | ----- | | ------------------------------------------------------------------------- | ----- | | 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 railwaystock 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 bankdirector is quite clear and obvious; itreads:“_If we, the big banks, succeed in rulingover producers and consumers (through stockissues, credit and customs duties), thenthe profits will flow into our pockets andwe become masters of the situation_” (Agahd’sitalics) (218). | | | “if”isamusing(“aNarodnik”!) | | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | --------------------------- |
| | | | | | | ---------------------------------------------------------------- | | | | | | | | | | | | | | | | | | Agahd “forgot” a trifle: capitalism and the capitalistclass!! | | | | | | | | | | | | | | | | | | | | | |
| The consequence of this, he says, may be“excessive raising of customs duties” andbecause of that “open hostility in the worldmarket, which could even lead to war, whatmay also suit the big bank monopolists,because with the force majeure of war theycan purge their balance-sheets without beingheld personally responsible for the losses”(220).... | | | | “even”to war | | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | ----------------------- | | ------------ | | | | | one ofthemotivesfor war | | |
| On p. 234 the author quotes S. Prokopovich | ⎞⎟⎟⎟⎟⎟⎠ |
|---|---|
| (on the conditions of Russia’s industrial de-velopment)— Capital of Russian origin447.2 mill. rubles = 21.1% Capital of foreign origin762.4 mill. rubles = 35.9% Capital “from sale of stock”915.6 mill. rubles = 43.1% |
| Here, says Agahd “the bank question,with which the author (Prokopovich) is notfamiliar”, 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) givesthe following estimate of the growth of the country’sfree working capital (by which he means privatedeposits in all the banks, savings-banks deposits(an increase of 576 million in cash and securities),current accounts of government agencies in theState Bank, excluding, however, current accountsof the Credit Office with foreign bankers and thedebts of Russian banks abroad):1906—2,592 million rubles1912—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 utiliseshere” (in reference to Russia’s excessive goldreserve) “its cash just as unscientifically,just as unsoundly from the economic stand-point, just as anti-nationally as most of thecontinental big banks in Berlin and Paris usetheir deposits. Russian government moneyserves to ensure the influence of some Berlinand Parisian big banks over the St. Petersburgbanks (and their Russian deposits), whilethe country’s productive economic life isweakened precisely where it ought to bestrengthened” (247). | | | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | | | | | | | | is it notthe reverse?“the influence” of theParisianand Berlinbankscompels?? | | | | | | | | |
| The national income (the “national budg-et agricultural production, i.e., the grainharvest and all other products”) in Russia(1913) was only 9,000 million rubles (249). | | | | N.B. | | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | | ---- |
| | | | | | | | ------------------------------------------------------------------------------------------------------------------ | | | | ---------- | | | ...“Raising productivity and popularconsumption is still the most profitablebusiness” (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!! idem281-82 and many more. | | | | |
| Author reproached Russian Finance Minis-try: “No bounds were set for internationalspeculation, nor was proper status allowedloyally co-operating foreigners in recognitionof their achievements” (276).... | | | | who isblamingwhom? | | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | -------------- | | ------------------ | | | | | “honestbroker” | | |
| ...“good”banks... | | ...“However, I again stress the differencebetween the speculating St. Petersburg banks(fiscal operations) and the productively em-ployed Russian banks (national economy).One cannot but recommend the Volga-KamaBank, the Moscow Merchants Bank, theKnoop and Wogau banks as models in direct-ing banking business along lines that ruleout speculation in deposit banks”... (280). | | ----------------- | | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | | | | |
| ha-ha! | | | “I have already expressed my _regret_that Russia is being involved in the ‘moneymarket of the civilised world’” (283). | | ------ | | | ---------------------------------------------------------------------------------------------------------------------- |
| | “Every country passing over to a moneyeconomy must reckon with the power of theJewish international organisation,” but (heintimates) the Jews are useful when they aresubjected to the interests of the whole, asin Germany, where their talents are keptwithin the bounds of “reason and ethics” (284). | | | | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | | !! | | |
| wellsaid! | | | | ...“One can say: Under present circum-stances the dividends of many big banks arepaid out as if they were illegal payment forsilence”... (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 reallymeant by ‘national’. Or will I be told thatthe founding and efficient managementof lastingly profitable businesses does notcome under this concept?” (288).Author’s italics:“Reform of the continental big-bankingbusiness is therefore in general the firstcondition for an economic-political agree-ment in Europe, and this is wholly inaccord with the interests of the nations”(290) | | ----------------------------------------- | | | | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | | | | | | | for “peace”and a(“UnitedStatesof Europe”) | | | | |
and the last phrases in the book:
| “And my final propositions read asfollows: If the European (continental) GreatPowers continue unswervingly their hither-to ‘well-tried system’, a world war willcompel them to alter it. Freedom of themoney market and freedom of the worldmarket—through war or prudence. Let themchoose and bear, in mind that Europe’sruling classes carry the entire responsi-bility.” | | | | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | -------------------- | | | | | threat of“world war” | | | | |
End
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.