# Russia & The Struggle for Peace/Chapter 8

CHAPTER EIGHT
SPECULATION AND PROFITEERING
SO far I have indicated the main factors in the economic exhaustion of Russia caused by the war. But for a thorough understanding of the situation which led up to the Revolution it is necessary also to consider the lesser factors.
One of these lesser factors was the growth of speculation and profiteering immediately the war broke out. I have already referred to the crowd of speculators who flocked to Scandinavia and Roumania directly after the outbreak of war to obtain substitutes for goods previously imported from or through Germany. In spite of a certain rapaciousness in their methods and their real "war appetite," these speculators performed on the whole a useful economic function. They helped to increase the imports of goods at a time when those imports were a most vital need to the State, and no doubt the energy and enterprise of these men to a large extent helped to mitigate the crisis. Indeed, as I indicated in the third chapter, the restriction and the so-called "regulation" of the imports by the Government even worked to the detriment of the national economy.
But there were others, whose speculations had no conceivable positive economic value, since they did not increase the quantity of necessary goods in the country. Their number was enormous and their activity ruinous. Speculation became a matter of everyday life in Russia. Everybody speculated. The manufacturer, the banker, the merchant, the shop-keeper—all of them speculated. But so also did every clerk in the manufacturer's office, every clerk at the bank, the shop-assistants, the railway officials and the staff of transport companies. The stockbrokers speculated professionally, the middlemen ​for their living; newspaper reporters speculated for amusement and fashionable men and women for the sake of adventure. And above all these big and small speculators the Government officials assumed an honourable place as chief speculators.
I once saw in a Russian music-hall an amusing little scene in which two professional dancers made a deal on a consignment of "Hydroquinone"" during a performance of the "tango." The curious thing is that this is scarcely a caricature. It is a fact that deals were made during any time of the day between the most fashionable and the queerest people, in the most incredible articles whose very existence they had probably never heard of before. Speculations were made in cafés, banks, factories, railway stations, theatres, gambling houses, on the streets and in trains. There were speculations in land and grain, speculation in money and the rate of exchange—in fact, in every kind of goods. The speculation in goods-trucks I have already mentioned.
There is no need for me to-day to explain the detrimental economic effects of these transactions. Certainly, they have nowhere grown to such an enormous extent as in Russia, and nowhere else have they appeared in such monstrous and grotesque forms. But they exist in all belligerent countries in Europe. In all countries, people know what it means when a certain article suddenly disappears from the market and reappears after a certain time when the prices have risen considerably higher. By this time people everywhere know what to think of the merchants when the latter suddenly become very patriotic and refuse to sell their goods except in small quantities.
Such speculation is certainly not peculiar to Russia. ​It is a curse of the economic conditions of war-time. I consider it very important to emphasise that the difference between Russia and other belligerent countries—Allied or Enemy—in this respect is a difference in degree, not a difference in kind. In this country speculators are called profiteers. In Russia the profiteers are called "marauders in the rear."
The same difference is to be observed in the effects of speculation and profiteering upon the morale of the people in Russia and in other countries. The greater the curse, the more deplorable the moral effect. In Russia the speculations and the profiteering were so open and so mean that the eyes of the broad masses of the people were opened at a comparatively early stage of the war. In other countries profiteering and speculation in the war are milder and the people are still not fully aware of the part played by the profit-making supporters of the war in bringing about their misery.
I have mentioned that the actual want was felt in Russia, in Petrograd and Warsaw and other big towns at any rate, almost literally on the next day after war broke out. This is to be attributed to the activities of the speculators. They at once began to conceal their stocks and to buy and store goods. The broad masses of the town population saw at once that the war had opened two roads—the one leading to misery and destitution and the other to enormous and easy profits. This period was called the "bacchanalia of profits."
There was another vivid expression to characterise an economic phenomenon which, once more, while not peculiar to Russia, grew to the most appalling dimensions in that country. I mean "the mad race of paper millions." Indeed, it would be impossible to describe the situation better. Russia's war finance was thoroughly unhealthy. Never was the country poorer, and never were the very few richer than during this terrible war. It was really a mad race of profits. Fortunes of a legendary character were made actually out of nothing. Millions, thousands of millions flooded ​the country. And while more and more millions were being printed and distributed amongst the manufacturers, Government contractors, bankers and merchants; food, housing, fuel and clothing became dearer and scarcer every day, and the life of the masses became more difficult, the sacrifices of the workers and peasants more intolerable.
The contrast of profits and sacrifices is not peculiar to Russia, but certainly in no country has it become so hideous as in Russia, nor was this race of millions so mad in any other country as it was in Russia.
But in the series of phenomena which mark the economic ruin of Russia there is one which was typically Russian. I refer to the hoarding of money. In this country we are acquainted with many objectionable forms of hoarding, but there can be not the slightest doubt that the hoarding of money has been, so far, excluded. And the same probably applies to all the other belligerent countries. Apart from the ethical objections to this practice, the hoarding of money, and particularly of gold coin, is bound to have the most terrible effect on the finance and economy of the country. The withdrawal of money from circulation necessitates the issue of further supplies of paper money, and the hoarding of gold diminishes the "gold covering" of the paper money and leads to an even greater depreciation of the currency.
Nothing could reveal the unhealthy state of affairs in Russia during the war more clearly than this hoarding of money. In emphasising the corrupt nature of the Tsarist Government, people are apt to forget that this unhealthy state was not peculiar to the Government. The whole of the country was diseased. And if this phenomenon of hoarding alone had been better realised and understood in this country there would have been less surprise and less miscalculation during the war and after the Revolution.
At the beginning of the war Russia, like all other belligerent countries, withdrew gold coins from circula​tion. As in all other belligerent countries, an appeal was made for the return of gold coin to the banks in exchange for paper money. In this country, as well as in France and in Germany, such appeals brought in many millions of gold money back to the State Banks. But in Russia gold coins were hoarded and all appeals for their return were useless. There was not even any attempt to conceal the hoarding.
But it was not only gold which disappeared. At the beginning of the retreat of the Russian Army from the Carpathians even silver money vanished from circulation. This led to veritable panic among the poor, and they too began to hoard money. But they had to be satisfied with copper. Thus the rapacious instincts of the rich, who stole the country's gold and silver from the people, led to a revenge by the poor, who proceeded to hoard the copper.
However, that was not yet the end. The propertied classes continued to hoard money, and when gold and silver was in safety they began to withdraw paper money—the more valuable notes of 1,000, 500 and 100 ​roubles. They preferred to be deprived of profits and interest on their money, if only they could have more money in safety.
The State tried reprisals. It was decided that for railway tickets it was necessary to pay in gold. But that led to riots; for the gold was hoarded by the rich, while the majority of the travellers were middle-class people, workers and peasants. In order to pay for their tickets they had to run everywhere for gold pieces and to pay exorbitant prices for them. After a short time the demand had to be withdrawn. Equally ineffective were the attempts to coerce the private banks and the private clients of the State Bank. Thus it came about that just before the Revolution and for some time afterwards the highest bank note in circulation was practically 25 roubles. And practically all payments had to be made in 10, 5, and 3 rouble notes. Imagine large sums amounting to thousands of roubles being paid in 3-rouble notes! This created an enormous economic difficulty, which was moreover considerably augmented owing to the very meagre development of the cheque system in Russia.
When all this is said, is there any need to dwell specially on the state of mind of the people and the soldiers? It was certainly very gloomy. The soldiers, being half-slaves, received nothing—a mere few pence per month. Their wives and children actually died of hunger and cold on the poor separation allowances made to soldiers' dependents. And the workers themselves received beggarly wages. Yet all the time the country was swamped with millions. Joint-stock companies and banks issued new stocks, doubling and trebling their capital. Rumours ran from end to end of the country, telling of legendary incomes and ​monstrous profits. The truth was fantastic enough, but rumour made it even more so. It spoke of stupendous salaries taken by bank and company directors—of salaries amounting to millions of roubles a year.
The situation was thoroughly unhealthy. Russia was in a state of disease. In the midst of the most terrible war and amid the general impoverishment, an unprecedented business was done in jewellery, expensive furs and other articles of luxury. It was the prevailing fashion—one might almost call it the prevailing sport—in the vast army of speculators, contractors and profiteers, to pay fabulous prices for champagne and foreign liqueurs, simply because their sale and consumption were prohibited by law.
The Court and Government conducted the war in the spirit and by the methods of a desperate gambler. Their mentality was poor and simple. They played to save their skins; they were in deadly terror of being overthrown, and their one thought was to consolidate their position. Indeed the spirit of the Court and of the Government was gloomy and dejected. Not so was the feeling of the propertied classes. They had no reason to be pessimistic. They bothered themselves very little about victory or defeat. The main thing for them was the continuance of the war, for there never were such fabulous profits in times of peace. The propertied classes lived in an unreal world of millions. They saw only millions, and ran after them.
Russia at that time, in fact, revived the mentality of another stormy period in history. The Court and Government of Russia repeated the principle of the French Government before the Great Revolution—"Après nous le déluge"; and the Russian bourgeoisie revived the watchword, "Enrichissez vous."
And down below there suffered and struggled for existence an obscure and hungry and despondent people. It dimly felt the approaching catastrophe; it saw the Government gambling to save their own skins: it saw the propertied classes poisoned and mad in their ​race for profits. And when the sufferings became too bitter and the catastrophe too near, the people rose at last to take control themselves. Is it any wonder that the people, in taking control, were not satisfied with the overthrow of the Government, but called the propertied classes to account as well?
* ↑ In his book "Russia in 1916," referred to above, Mr. Stephen Graham writes: "The people who have made money by the war are busy buying land and houses. This is reproachfully called 'land speculation,' but is in reality common-sense action on the part of those who wish to make fast their wealth." Page 101. (The italics are mine.)
* ↑ Mr. Stephen Graham writes: "There is reason to believe that there are a number of millions of gold coins being hoarded in the country. Friends have shown me their private supplies." (The italics are mine) "Russia in 1916," page 101. Holy Russia at that time obviously disregarded any considerations of national interests. The appeal to "higher national interest" was only put forward by them and their friends in this country when the Bolshevik State made an attempt to confiscate their "private supplies."
* ↑ Mr. Stephen Graham in the same book has some very interesting reflections. "Thorough Government action swiftly followed and paper tokens for all the small coins were intro-duced." … "Thoughtful people welcomed it (the paper money for 1, 2, 3, and 5 kopecks) as teaching the ignorant that money has no value in itself, but only as a token of exchange." . . . . "Perhaps, however, the war and the substitution of paper for coin has taught some people to care less for money." … These philosophical reflections, as usual, are wound up by a compliment to the Russian soul. "The Russian word (for money) is 'dengi,' which is really a Tartar word." (The italics are mine.) "Russia in 1916," pages 103, 104.
* ↑ The enormous rise in wages after the Revolution is to a great extent explained by the truly beggarly wages during the war. The excessive demands of the workers are made to appear still more stupendous by comparing them with the beggarly pre-revolutionary wages.