In the years leading up to World War 1, and then the Russian Revolution in 1917, Russia had become the world’s largest net international debtor. It was borrowing heavily to finance industrialisation (railroads, oil, iron and cotton production) and as its population grew it saw rapid economic growth. WW1, and the earlier 1905 conflict with Japan had also resulted in rising debt. At the same time there was a globalisation of international finance, and French investors in particular were eager to lend to Tsarist Russia (Russian bonds are recommended investments, alongside British Consols, by a character in Proust’s Remembrance of Things Past, a book which, like me, you own but have not read).
Despite the rise of revolutionary pressures within Russia (Lenin had explicitly written that he’d repudiate the debt) and rising debt burdens that might have necessitated a restructuring even if there’d been no revolution, the money kept flooding in. An American bank (an ancestor of Citi) even opened a branch in Russia after the events of October 1917.
In 1918 the Soviets defaulted on the debts – in real terms this was a bigger loss for investors than suffered in Argentina in 2001, or Greece in 2012. Small investors in France suffered huge losses, and finance in post-revolutionary Russia came to depend on the “machine-gun of the People’s Commissariat of Finance”, aka the printing press.
In this short video I interview Hassan Malik, the author of Bankers & Bolsheviks, about this fascinating moment in economic history. You can also win a copy of his book by answering the question below.
Competition question: What was Leningrad known as at the time of the 1917 Russian Revolution?
Closing date is 5pm GMT on Thursday 14 February 2019.
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