Front Page Titles (by Subject) CHAPTER IX.: THE DEBT AND FINANCES OF RUSSIA. - A History of Banking in all the Leading Nations, vol. 2 (Great Britain, Russian Empire, Savings-Banks in the U.S.)
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CHAPTER IX.: THE DEBT AND FINANCES OF RUSSIA. - Editor of the Journal of Commerce and Commercial Bulletin, A History of Banking in all the Leading Nations, vol. 2 (Great Britain, Russian Empire, Savings-Banks in the U.S.) 
A History of Banking in all the Leading Nations; comprising the United States; Great Britain; Germany; Austro-Hungary; France; Italy; Belgium; Spain; Switzerland; Portugal; Roumania; Russia; Holland; The Scandinavian Nations; Canada; China; Japan; compiled by thirteen authors. Edited by the Editor of the Journal of Commerce and Commercial Bulletin. In Four Volumes. (New York: The Journal of Commerce and Commercial Bulletin, 1896). Vol. 2 A History of Banking in Great Britain, the Russian Empire, and Savings-Banks in the U.S.
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THE DEBT AND FINANCES OF RUSSIA.
ON January 1, 1870, the “Annuaire des Finances Russes” estimated Russia’s public debt at R. 1,854,475,793.29. This sum comprised all the interest-bearing debt, foreign and domestic, including R. 216,000,000 of exchequer bills (seventy-two series of R. 3,000,000 each, in denominations of R. 50, bearing interest at 4.32 per cent. per annum), and including also of the fiduciary circulation of R. 721,788,189 the unsecured part, amounting to R. 567,972,166.30. In this total, the specie debt was estimated at the rate of 29⅝d. per rouble, the rate prevailing on December 31, 1869.
Twenty-five years later, on January 1, 1895, another official publication shows the same debt to have reached the total, in credit-roubles, of R. 5,776,828,440; that is, R. 1,882,872,438 payable in specie (estimated at the rate prevailing during the last few years, 160 copecks, paper, for R. 1 of specie, making R. 3,012,600,000 credit-roubles), and R. 2,764,627,539 payable in paper. Nominally, then, the debt has more than trebled during the quarter-century, having increased from R. 1,854,500,000 to R. 5,776,800,000. Have the expenses of the Government increased in the same proportion? In the budget of 1870, we find under the heading of “interest on the public debt,” in credit-roubles, R. 78,375,496. That we may not have to return to this subject, let us say at once that, in addition to this amount, there was R. 6,500,000 representing a charge upon guaranteed railroad debts. For 1895, we find the interest charge to be R. 74,094,913, upon the specie debt (or, in credit-roubles, R. 118,551,861), and R. 129,647,261 on the debt payable in paper money, a total of R. 248,199,122 in credit-roubles. If we take account of the fact that this sum includes interest due on the bonds of railroads purchased by the State, we find, in the first place, that while the debt has increased more than threefold, the annual interest charge, which for 1870 was R. 85,000,000 (including the R. 6,500,000 upon guaranteed debts), has not increased in the same proportion. This relative lightening of the burden has resulted evidently from a saving of interest by refunding operations. At this point, it is worth while to examine in some detail the various items composing the public debt. Thus we shall find that the formidable increase between 1870 and 1895 has not arisen entirely out of so-called unproductive outlays—that is, outlays made necessary by wars and by the maintenance of large armies in time of peace; though these, in Russia as elsewhere, make up, unfortunately, a heavy total in the annual expense account. It is often difficult to distinguish clearly between loans which are for a productive use and those which are not, because any given loan may have been made entirely or mainly for the construction of railroads, for example; then as the State bought in the roads it issued rentes against them, and these in the public debt statement are indistinguishable from loans made purely for administrative purposes. Nevertheless, from the large total of the public debt payable in specie (R. 1,882,900,000), we can separate the following items:
This gives us a sum of R. 326,000,000 devoted directly to railroads. But there remain also the large total of R. 560,300,000 of four per cent. consolidated bonds and a four per cent. gold loan of R. 455,500,000, a large part of which were used by the State in the purchase of railways. We are certainly justified in placing at least half of these two sums (or more than R. 500,000,000) in the railway account; and this, together with the R. 326,000,000 named above, leaves but little more than R. 1,000,000,000 under the heading of unproductive expenses, or of expenses which can in any sense be so called.
We come now to the debt payable in paper roubles. In the total of R. 2,764,600,000 named above under this heading, we find also the bonds of some railroads that have been purchased by the State, namely:
These figures make a modest total of R. 44,300,000; but to this must be added two domestic (or non-metallic) railway loans, one of R. 74,600,000 made in 1890, and one of R. 74,800,000 made in 1892, and also two issues of five per cent. railway bonds, that of the Oural line, R. 10,200,000, and that of the Riga-Dvinsk line, R. 1,800,000. These four sums together amount to R. 161,400,000, which, added to the R. 44,300,000 above, makes a total of R. 205,700,000 of loans for productive purposes. Adding also the R. 100,000,000 of five per cent. rentes issued for the railway account, we have R. 305,700,000 to be deducted from the total of the debt payable in paper money, which leaves 8/9 (R. 2,459,000,000) of that sum as the amount devoted directly to State purposes.
It was between 1888 and 1894, as we have already learned, that very important conversions of Russian 6, 5½, and 5 per cent. loans into four per cents. were made, as well as a large number of purchases of railways, the result being an increase of budgetary expenses on the one hand, and on the other a decrease in the amount of interest guaranteed. The net result of these operations the official tables sum up thus: Upon loans payable in specie the interest charge was R. 61,881,281 in 1887, and R. 74,094,913 in 1895, an increase of R. 12,213,632; the interest on loans payable in paper was R. 122,514,658 in 1887, and R. 129,647,261 in 1895, an increase of R. 7,132,603. Altogether, therefore, the refunding operations and the purchase of railway lines added to the annual interest charge more than the equivalent of R. 26,000,000 in paper. But this amounts virtually to a decrease if we take into consideration the disappearance of a large amount of interest guaranteed by the State.
In an article recently published (September, 1895), the official organ of the Finance Department presents an estimate of the amount of the public debt on January 1, 1896, and of the interest charges. The totals are practically the same as those we have quoted for January 1, 1895. The addition of the 3½ per cent. gold loan of R. 100,000,000 made in 1894, and other small sums, brings the specie debt to R. 2,038,284,210. The debt payable in paper money will be increased from various causes by about R. 55,500,000, and will amount to R. 2,820,069,317. The two debts together will make a total, reckoned in paper, of R. 6,081,200,000, the metallic rouble being taken as the equivalent of R. 1.60 paper. We are told that the interest upon the specie debt for 1895, which we have estimated above at R. 74,094,913, amounted in fact to R. 74,274,913, and that the sinking fund for that debt required R. 9,268,561, making a total of R. 83,543,474; for 1896 the interest charge will be R. 79,817,708, and the sinking-fund requirement, R. 10,183,001, a total of R. 90,000,709 in specie. As for the debt payable in paper, the interest charge named above is also slightly increased and becomes R. 130,267,281; its sinking fund will demand R. 13,270,312, a total of R. 143,537,593. While the interest charge upon the specie debt is greater for 1896 than for 1895, there will be a reduction in the charge upon the debt payable in paper; interest on this part of the debt will be only R. 123,040,125, and the sinking-fund requirements, R. 11,087,761, a total of R. 134,127,886. To sum up: the requirements of 1895 are R. 83,543,474, specie (the equivalent of R. 133,669,000 in paper), and R. 143,537,593 payable in paper, making altogether an equivalent of R. 277,200,000, paper. For 1896 the specie requirement is R. 96,000,000 (the equivalent of R. 144,000,000 paper), and the paper requirement R. 134,000,000, or R. 278,000,000 in all. Thus the charges for each year are practically the same.
It is claimed that more than half of these expenses entailed by the public debt are met by revenues imposing no burden on the tax-payers. We present the figures upon which this theory is based, without intending to make ourselves responsible for the soundness of the theory itself.
Out of the gross revenue of R. 179,800,000 produced by the State railways, there is set apart under this heading the
There is more than one item in this table whose title to the character it assumes might be contested. For example, the payment of redemption money by the serfs is certainly felt by those who pay it, and so of the fast freight charges. On the other hand, we may be permitted to ask whether absolute dependence can be placed on all these sources of income. It is altogether possible, for instance, that the Bank of the Nobility may meet with some disappointment in its collections, or that some of the former serfs may allow their payments to fall into arrear, especially as they are somewhat accustomed to delays of this kind, like their former masters of a higher social grade. But let us not insist upon these points. We have seen above that the total public debt is estimated at R. 2,038,000,000 payable in specie, and R. 2,820,000,000 payable in paper. Is that the whole of it? It appears to us that the paper money issued by the State ought to have a place in this category. Inasmuch as these issues aggregate about R. 1,100,000,000, while the metallic reserve in the Treasury is nearly R. 600,000,000, which, at the usual rate (R. 1.60), represents R. 960,000,000 in paper, there remains only about R. 150,000,000 paper to be included among the debts. Then, on the other hand, we must take account of the State’s assets. Upon this point we have no official information corresponding to the dates for which we have stated the debt. We have not as yet the report of the Comptroller-General for the year 1894; it will not appear until the end of 1895. In his report for 1893, published in 1894, the various arrearages and credits of the State are reported thus, in millions and tenths of millions of roubles:
This, the report says, amounts to R. 3,683,800,000, estimating gold roubles at the current rate. Compared with the balance-sheet of 1893, this shows a decrease of R. 268,100,000, resulting principally from the abolition of the debts charged against the Orenburg, Moscow-Kursk, Baltic, and Donets railway lines purchased by the State, and against the Baltic shipyards, likewise purchased by the State. We may add that in 1894 and 1895 the State bought a number of railway lines, so that the sums named above as railroad credits, R. 303,700,000 specie and R. 929,000,000 paper, have been considerably diminished; but, on the other hand, the property of the State has been increased to a proportional extent. Properly speaking, there is no occasion to make a critical examination of the market value of the R. 3,683,800,000 of credits held by the State as an offset against its debts. The credit of a State is not to be estimated upon the basis of such claims, on the greater part of which it cannot realize, and least of all at a time when the public treasury is in need of funds. These are the statistics of an amateur; the future of a nation is in nowise involved in them.
The credit of a State depends upon an established financial policy and conscientious fidelity in meeting its obligations. As to Russia, its conduct toward foreign creditors has always been above reproach. Certain stock exchange rumors having been recently circulated concerning a series of proposed refunding operations alleged to be contrary to the express agreement of the Government, an official note was published on October 13 (25), 1895, denying these imputations. As it presents a clear exposition of the Imperial Government’s views upon the subject, we place it before the reader:
“Certain newspapers, Russian and foreign, have raised the question of the Russian Government’s right to anticipate the payment of the 5 per cent. (specie) loan of 1822, the 4 per cent. bonds of the Nicolas Railroad, the issue of 1867-9, and the 4 per cent. Consolidated Russian Railway loan of 1880.
“For this reason it has seemed advisable to the Bond Department of the Government to call the attention of the public to the fact that the answer to this question may be found in the imperial ukase of November 8, 1888, which orders:
“ ‘That steps shall be taken, as soon as the state of the money market will allow, to refund the public loans and the debts guaranteed by the State into new obligations at a lower rate of interest; provided always, that these three points be kept in mind:
“ ‘(a) The owners of outstanding bonds shall have the option of accepting payment at par in specie, or of exchanging their bonds for those of the new issue.
“ ‘(b) The following descriptions of bonds are not to be refunded: those which by the conditions of their issue were to be repaid at more than their par value, and those in respect to which the Government has ever waived, either temporarily or permanently, its right to refund them.
“ ‘(c) Three months at least shall always be allowed, after official publication of the intent to refund, during which the bonds may be presented for repayment, and interest upon the bonds so called in is to cease only at the expiration of this time.’
“Accordingly, there can be no conversion of loans payable with a premium, that is to say, above 100 per cent.; nor of lottery bonds, nor of bonds the anticipatory payment of which the Government has waived, even at the date of their issue.
“From the application of this law to the four classes of loans named above, it follows that—
“(a) The 5 per cent. loan of 1822 cannot be refunded, because the evidences of that loan carry upon their face this provision: ‘§ 25. No one can be compelled to accept, without his own consent, the whole or any part of the money invested in the permanent debt’ (that is, in the debt having no definite date of payment, not payable at a time fixed in advance).
“(b) The three other loans, namely, the 4 per cent. bonds of the Nicolas Railroad, the issues of 1867-9, and the 4 per cent. Consolidated Russian Railway loan of 1880, sixth series, the Government can refund or pay before their due date, because there is no stipulation upon these bonds denying its right to do so, and no prize or premium is secured upon their repayment.
“It is to be noted that during the conversions made between 1888 and 1891 of the 5 per cent. and 4½ per cent. loans, though these loans were in nowise distinguishable, except as to the rate of interest, from the 4 per cent. bonds of 1867, 1869, and 1880, the law quoted above gave rise to no question or misunderstanding, either in general or in any specific case.
“Up to the present moment the 4 per cent. bonds of 1867, 1869, and 1880 have never been quoted at the Bourse above other Russian 4 per cent. bonds, though frequently they have been quoted below them. This fact proves that neither the public in general nor those persons specially interested in bonds have ever supposed that either of those three issues enjoyed any special privilege arising from the fact that its payment could not be anticipated.
“We are justified, then, in supposing that the question raised with regard to this matter did not arise out of doubts honestly entertained by any bona fide holder of bonds.”
A History of Savings-Banks
THE UNITED STATES.
JOHN P. TOWNSEND, LL.D.,
president of the bowery savings bank, of new york.
HISTORY OF SAVINGS-BANKS IN THE UNITED STATES.