WRITERS IN THE JULY FORUM.

PROF. FRIEDRICH HEINRICH GEFFCKEN (born in Hamburg, 1830) is professor emeritus of international law in the University of Strasburg and an Imperial Privy Councillor. He has taken an active part in German politics and journalism and is the author, among other books, of "State and Church; ""Socialism; ""The Question of the Danube;" and "The Papacy."

GEN. FRANCIS AMASA WALKER (born in Boston, 1840) fought in the civil war, gaining the brevet of brigadier-general. In 1870 and 1880 he was superintendent of the census. In 1881 he became president of the Massachusetts Institute of Technology.

PROF. HERBERT BAXTER ADAMS (born in Amherst, Mass., 1850) is professor of history in Johns Hopkins University and secretary of the American Economic Association. He has been active in the University Extension movement.

MR. ALDACE F. WALKER was formerly a member of the Interstate Commerce Commission, and is now one of the commissioners of the Western Traffic Association, at Chicago.

MR. OSWALD OttendorfER (born in Zwittau, Moravia, 1826) was educated in Vienna, participated in the revolutionary movements of 1848, and on their failure came to this country, where he became editor of the Staats-Zeitung and has been active as a reformer and philanthropist.

THE HON. CHARLES STEBBINS FAIRCHILD (born in Cazenovia, N. Y., 1842) graduated at Harvard in 1863, and entered the law. He was Secretary of the Treasury in Mr. Cleveland's cabinet, and is now president of the New York Security and Trust Company.

GEN. THOMAS JORDAN (born in Virginia, 1819) graduated at West Point in 1840, became a brigadier-general in the Confederate army, and after the war was commander-in-chief of the Cuban insurgents, in the attempted revolution of 1870. He is now editor of the New York “ Mining Record."

PHILIP GILBERT HAMERTON is an English artist and man of letters who has spent a large part of his life among the French people, whom he knows thoroughly. He lives at Autun, France.

MR. F. R. DALDY is secretary of the Copyright Association, the most influential body of the kind in Great Britain. He attended the Berne copyright convention by special invitation.

MR. DAVID M. STONE (born in Oxford, Conn., 1817) is the editor of the New York "Journal of Commerce."

MR. J. SELWIN TAIT was reared in English banking circles, and since coming to this country has written much on financial subjects.

The Forum.

AUGUST, 1891.

RUSSIAN FINANCE: A BAD INVESTMENT.

THE recent failure of the Russian loan-for such is its indefinite postponement has directed general attention to the condition of Russian finances, and it is but natural that it should do so. Prince Bismarck was much blamed when, some years ago, he undertook a financial campaign against Russia, forbidding the Imperial German Bank to make advances upon Russian bonds; and we think this blame was deserved, for the measure did not tend to protect German capitalists against losses arising from the possession of such securities, but on the contrary inflicted considerable losses upon many of them, who, being frightened by the chancellor's prohibition, sold their bonds at a heavy discount. It was evident that the action of Bismarck, who several years before had floated a Russian loan by a governmental institution of credit, the "Seehandlung," was prompted by merely political reasons. He wanted to show Russia, with whom he was discontented, that he was able to damage her credit; but even this purpose was not attained. The measure, indeed, caused much bitterness in Russia and stirred up the enmity of the Panslavists against Germany, but it did not make the Russian government more pliant; an empire of 100,000,000 inhabitants may be irritated by such "coups d'épingle," but it can be checkmated only by blows, attacking its vital forces.

Copyright, 1890, by the Forum Publishing Company.

The measure, therefore, dictated by rancor, was an unwise one, but the question whether the Russian finances are in a satisfactory condition is a very different one. It might be presumed that they are so, judging by the rise of the rate of exchange of the rouble and of Russian securities, and by the apparently successful conversion of Russian loans. I maintain, however, that to believe this would be a great error, and in order to prove my assertion I shall venture to give some idea of the economical position of the great eastern empire.

From 1872 till 1882 Russia nearly doubled her debts, and the deficit, which in the preceding ten years was 110,000,000 roubles, has risen in the following decade to 240,000,000, the expenses being 40 per cent. larger than the income. This deficit was covered by increased taxation, by foreign loans to the amount of £164,500,000 sterling, by internal loans of about 2,600,000,000 roubles, and by the issue of 915,000,000 of inconvertible paper money. The five-per-cent. foreign loans were issued at the average rate of a little more than 82; the rate of interest was nominally 4.62 per cent., but in relation to the sum received in specie 5.66 per cent. Looking back a little further, we find that the foreign debt of Russia payable in gold was, in 1842, £6,000,000; in 1852, £12,000,000; in 1862, £41,000,000; in 1872, £105,000,000; and in 1882, £189,000,000. The internal debt had risen within this period from 230 million roubles to respectively 610, 990, 1,330, and 2,730 million roubles. Now it would be an error to assume that the larger part of these debts were incurred for internal purposes. The railways existing in 1882 cost 2,620 millions, of which the government paid half, so that it was in possession of 1,320 millions of shares and bonds and moreover paid 210 millions year to shareholders as a guarantee and 25 millions for telegraphs; the remainder was expended for unproductive purposes, mostly military ones. Since 1882 the debt has been continually increasing. In 1883 there were issued six-per-cent. gold rentes to the amount of 50,000,000 roubles; in 1884, 20,000,000 in gold and 84,000,000 in paper; in 1887, 96,000,000; and in 1889 a metallic loan of 125,000,000, besides 100,000,000 for railways, so that in the budget of 1890, amounting to 888,800,000 roubles, 266,146,192

were absorbed by the public debt, while the inconvertible paper money amounted to 1,044,295,384 roubles, of which only 211,472,495 were covered by a metallic reserve.

In that year the total of the public debt was:

Setting aside the above-mentioned 266 millions for interest and sinking fund for the debt, the army and navy absorb about 260 millions (an enormous burden for a country in which 92 per cent. belong to the poorer classes), and the budget of 1889 closed with a deficit of 40 millions. Besides, it must be observed that in the published preparatory budgets the finance minister always overrates the income-as, for instance, in 1885 a considerable increase was assumed from a tax on the tents of the Turkoman tribes, a very questionable item of revenue-and that he likewise underrates the expenses, which are swollen every year by large supplementary credits.

It is now said that the present finance minister, Vishnegradski, has effected a great amelioration, as is proved by the re-establishment of the equipoise in the budget, by the rise of the rate of exchange of the rouble and of Russian securities, and by the conversion of former loans. I admit that the minister has cut down the expenses so far as it was consistent with his staying in office, but as for the rest I maintain that the amelioration was purely illusory.

Let us first look at the conversion of loans, in regard to which the Russian and French press boast that the loan of 500,000,000 francs of December 22, 1888, was covered two and onehalf times; that of 700,000,000 francs of April 10, 1889, ten times; and that of 1,242,000,000, of June 5, 1889, eight times. Now, what is a conversion? It is simply an act by which the debtor gives to the creditor the alternative of being satisfied with a lower rate of interest or of taking back his capital. In this way Mr. Goschen converted the three-per-cent. consols into two-and-three-quarter per cents. and the German government its

four per cents. into three-and-one-half and three per cents. But it is a very different thing if the debtor, while reducing the rate of interest, enlarges the capital, or if he only extends the period of the sinking fund; and both have been done by Russia in her recent conversions. Take, for instance, that of 1888: The loan in question was a loan at five per cent. of 81,300,000 roubles, which required 5,688,000 roubles for interest and sinking fund, and which would have been paid back in 25 years. By the conversion at four per cent. the capital was increased from 81,300,000 to 97,250,000 and the period of the sinking fund was extended from 25 to 81 years. In the following loan a debt of 23,500,000 roubles at five per cent. was converted into a fourper-cent. loan of 27,834,000 roubles, to be extinguished only in 81 years. The total of such conversions shows that the capital of 508,500,000 roubles at five per cent. was exchanged for one of 582,644 000 roubles at four per cent.-an increase of 15 per cent. The reduction of interest is, in the first 25 years, 3,630,477 roubles annually-in all 90,761,925-while for the ensuing 56 years 448,689,169 roubles more will have to be paid, for it is only in 1970 that the four-per-cent. loans will be paid back. It is said that the shrewdest heads of Europe "put their money on Russia" and that the great Jewish financiers have not been frightened into refusing to float the newest loan because they disliked the security. But those financiers float a loan only in order to sell it to the public, who will be the ultimate losers, the devil taking the hindmost. It is very conceivable that French bankers were ready to conclude such loans, because they realized enormous profits by them, the commission which the Russian government paid being 1.573 per cent. for the first loan of 125,000,000, 2.85 per cent. for the second of 175,000,000, and 2.729 per cent. for the third of 310,498,000; but such conditions surely do not prove an amelioration of the Russian credit. On the contrary, a government which consents to such terms shows that it is living from hand to mouth and must have money at any price. The increase of the custom duties payable in gold is another proof of this; they have heavily damaged Russian commerce, exports falling from 667.500,000 roubles in 1882 to 450,000,000 in 1886, imports from 527,500,000 to 379,750,000.