own favour, and they will at the same time sacrifice points of comparatively minor importance to themselves by leaving them unchallenged for the more important object of placing their British competitors at a still greater disadvantage under the higher rates to be imposed on seaborne goods under the general tariff."1 "La Russie à la Fin du 19me Siècle," pp. 701-18. "Foreign Office Reports," Nos. 555, pp. 29, 43; 2343, pp. 5, 7, 52, 53; 2904, pp. 24-8; 2860, p. 9; 3062, pp. 14-16. "Statesman's Year-book," 1901, p. 1008; 1903, p. 1039. Weekly Times, December 13th, 1901. See also Appendix 8. CHAPTER V FINANCE 1. Recent History of Finance: (a) Currency; (b) Banks; (c) Bank of Russia; (d) National Debt.-2. Analysis of the Budget: (a) Budget of 1903; (b) Revenue; (c) Expenditure; (d) Extraordinary Revenue.-3. Railways : (a) Development of Railway System; (b) Criticisms of Railway Finance; (c) General Railway Policy.-4. Spirits Monopoly: (a) Previous Systems: (b) Present System; (c) Results.-5. General Criticisms of Budget, etc.; (a) Difficulty of Analysing Budgets; (b) Errors of Statement.-6. General Financial Policy: (a) Indirect Taxation; (b) Effect on Trade and Agriculture. 1. RECENT HISTORY OF FINANCE UNTIL quite recent years the currency laws in Russia rested upon the foundation laid by the Ukase of 1810, which made the silver rouble the true unit of monetary value. Paper money, which had first been introduced into Russia in 1769, was at that time circulating in large quantities, but at a greatly depreciated value. An attempt was now made to limit the issue of paper money, and a Ukase in 1812 fixed a rate of exchange considerably below the face value of the notes. Fresh issues of paper money were, however, rendered necessary by the drain upon the country of successive wars, and the amount in circulation in 1817 was larger than ever before. During the peace which followed a considerable portion of this was gradually withdrawn, but the paper currency was so much depreciated that, when the Finance Minister, Count Kankrin, fixed the legal rate of exchange in 1839, he made one silver rouble equal 3 paper roubles. At the same time, he substituted for the old assignats credit notes, which were exchangeable for coin. From 1843 to 1856 the silver rouble was both actually and nominally the unit of monetary value and the only form of legal tender, for which the holders of credit notes could claim to have them exchanged. During the Crimean War, however, the convertibility of paper money into coin ceased, and was not again resumed, and the credit rouble became the actual monetary unit, although the silver rouble remained the nominal one. Owing to the depreciation of silver upon the international market between 1870 and 1880, the exchange value in gold of the silver rouble fell even lower than that of the credit rouble, and in consequence the Russian Government was obliged to limit the issue of silver coin, and silver ceased to be of financial importance. The gold rouble had never been more than token money, although the Government had from time to time regulated its intrinsic value with the view of bringing it into correlation with international values. The value of gold was, however, considerably under-estimated until the law of 1885, which fixed the weight and fineness of the half-imperial in such a way that its exchange value in the international market was almost identical with that of the 20-franc piece. Meanwhile the country suffered from all the inconveniences of a paper currency, the inevitable fluctuations in value of which were intensified to an extraordinary degree by the action of speculators, especially on the Berlin Bourse. "In February 1888 the rouble was quoted in London at 19 pence, in September 1890 it sprang suddenly to 31 pence, and by December 1891 it had again fallen to 21 pence. Between 1877 and 1896 the highest and lowest rates in London and New York respectively were," as Mr. Henry Norman tells us, "2s. 9d. and 1s. 7d., and 67 cents and 38 cents." It was evident that, in order to establish the Russian financial system upon a firm basis, two reforms were necessary to secure the stability of the rouble and to introduce a gold standard, and both of these were carried out by M. de Witte soon after he entered upon the office of Minister of Finance in 1893. The preparatory steps necessary for these reforms had, however, been taken by his predecessor, M. Vishnigradski, who from 1886 onwards had directed his policy to forming large reserves of gold within the country. With this object he exercised great economy in the administration of the Government without diminishing the amount of taxation, so that the budget for nearly every year showed a surplus, which was paid into the State Bank, and at the same time loans from abroad were made as far as possible in gold. He succeeded so well that, whilst at the end of 1886 there were 55,733,004 gold roubles at the disposal of the Imperial Treasury, at the end of 1893 there were 236,248,745. This large reserve did not depend upon an increased issue of paper money, for this had been actually diminished since the TurcoRussian War; so that the credit notes in circulation in 1895 amounted to 1,121,000,000 roubles, whilst in 1880 they had amounted to 1,162,000,000. The gold rouble and the paper rouble had no direct correlation with one another, for the paper rouble still nominally represented the silver rouble (though in reality its value was a constantly varying one, reckoned in gold upon the international market), whilst the gold rouble maintained a constant value of 324 German Reichs pfennige. Apart from fluctuations, however, the average value of the paper rouble between 1884 and 1895 was about 216 German Reichspfennige, and the Finance Committee which sat in 1887 laid down the ratio of 1 to 1 as the relative value of paper and gold roubles, but failed to secure its legal adoption. M. de Witte's first act on taking office was to deal with speculation in the value of the rouble upon the Berlin Bourse. With this object a circular was first addressed in January 1893 to Russian bankers forbidding them to facilitate such speculation by the sale of credit roubles to foreign firms or in any other way, and in March of the same year a duty was imposed upon the export of credit roubles, which made their export practically impossible. Meanwhile the bankinghouse of Mendelssohn in Berlin had been steadily buying up credit roubles there on behalf of the Russian Minister of Finance, and when the time for delivery came, in October 1894, the sellers were unable to meet their liabilities, and were obliged to appeal to M. de Witte to allow them to import credit roubles from Russia. This he permitted to the extent of 3,000,000 credit roubles, but at the rate of 234, whilst the unfortunate speculators had sold them at the rate of 220 Reichspfennige. This blow put an entire stop to speculation in roubles at Berlin. After 1894 the value of the credit rouble remained practically constant, and in 1895 sanction was given for transactions to be effected at the exchange rate of 1 credit roubles for 1 gold rouble, and for payments to be made to the Treasury in gold. At the same time, the Imperial Bank was given permission to buy and sell gold coin at the same rate. In 1897 the currency reform was completed by the adoption of a gold rouble as the monetary unit. This rouble was, however, equal in exchange value to the credit rouble, not to the old gold rouble, and the former imperial of 10 roubles gold was replaced by a new imperial of equal intrinsic value, but of 15 roubles. Gold coins of the value of 10, 7, and 5 roubles were struck, and the exchange value of the credit rouble declared equal, rouble for rouble, to that of the gold coinage. The new gold rouble possesses all the essential characteristics of a true unit of monetary value; it is legal tender for payments of any amount, and its issue is unrestricted, the Imperial Bank receiving any foreign gold coins or unminted gold that may be brought to it, and giving in return its value in Russian gold coinage minus a small commission for the expense of minting. Silver coins are still retained as an auxiliary to the gold coinage, but are token money only. The number issued is regu |