Russia

Foreign capitalists responded warmly to the call. Crowds of concession-hunters, projectors, company promoters, et hoc genus omne, collected in St. Petersburg, offering their services on the most tempting terms; and all of them who could make out a plausible case were well received at the Ministry of Finance. It was there explained to them that in many branches of industry, such as the manufacture of textile fabrics, there was little or no room for newcomers, but that in others the prospects were most brilliant. Take, for example, the iron industries of Southern Russia. The boundless mineral wealth of that region was still almost intact, and the few works which had been there established were paying very large dividends. The works founded by John Hughes, for example, had repeatedly divided considerably over twenty per cent., and there was little fear for the future, because the Government had embarked on a great scheme of railway extension, requiring an unlimited amount of rails and rolling-stock. What better opening could be desired? Certainly the opening seemed most attractive, and into it rushed the crowd of company promoters, followed by stock-jobbers and brokers, playing lively pieces of what the Germans call Zukunftsmusik. An unwary and confiding public, especially in Belgium and France, listened to the enchanting strains of the financial syrens, and invested largely. Quickly the number of completed ironworks in that region rose from nine to seventeen, and in the short space of three years the output of pig-iron was nearly doubled. In 1900 there were 44 blast furnaces in working order, and ten more were in course of construction. And all this time the Imperial revenue increased by leaps and bounds, so that the introduction of the gold currency was effected without difficulty. M. Witte was declared to be the greatest minister of his time—a Russian Colbert or Turgot, or perhaps the two rolled into one.

Then came a change. Competition and over-production led naturally to a fall in prices, and at the same time the demand decreased, because the railway-building activity of the Government slackened. Alarmed at this state of things, the banks which had helped to start and foster the huge and costly enterprises contracted their credits. By the end of 1899 the disenchantment was general and widespread. Some of the companies were so weighted by the preliminary financial obligations, and had conducted their affairs in such careless, reckless fashion, that they had soon to shut down their mines and close their works. Even solid undertakings suffered. The shares of the Briansk works, for example, which had given dividends as high as 30 per cent., fell from 500 to 230. The Mamontof companies—supposed to be one of the strongest financial groups in the country—had to suspend payment, and numerous other failures occurred. Nearly all the commercial banks, having directly participated in the industrial concerns, were rudely shaken. M. Witte, who had been for a time the idol of a certain section of the financial world, became very unpopular, and was accused of misleading the investing public. Among the accusations brought against him some at least could easily be refuted. He may have made mistakes in his policy, and may have been himself over-sanguine, but surely, as he subsequently replied to his accusers, it was no part of his duty to warn company promoters and directors that they should refrain from over-production, and that their enterprises might not be as remunerative as they expected. As to whether there is any truth in the assertion that he held out prospects of larger Government orders than he actually gave, I cannot say. That he cut down prices, and showed himself a hard man to deal with, there seems no doubt.

The reader may naturally be inclined to jump to the conclusion that the commercial crisis just referred to was the cause of M. Witte's fall. Such a conclusion would be entirely erroneous. The crisis happened in the winter of 1899-1900, and M. Witte remained Finance Minister until the autumn of 1903. His fall was the result of causes of a totally different kind, and these I propose now to explain, because the explanation will throw light on certain very curious and characteristic conceptions at present current in the Russian educated classes.