The Russian Situation

Mr. President and Gentlemen,--It is relatively simple to describe a trip into Russia, and the impressions you get here and there on your trip, and it is also entirely misleading. You can get such a description much better done in the magazines and the newspapers than I can do it, and it will only reflect the conditions where the people go. In that respect it is entirely misleading, because conditions in the various parts of Russia, so far as I have had opportunity to see them, vary as pole to pole. For instance, if I had gone to Petrograd and only had business there I would have come back and condemned the Soviet Regime for the destruction of a beautiful city.

Or if I had gone only into Moscow I would have told you that the Communist Government was the best Government in the world; that there was a

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Mr. Marshall is a member of the firm of Rearick, Dorr, Travis and Marshall, Attorneys, New York City. When he addressed the Empire Club, he had but recently returned from a trip to Russia to obtain original documents and other evidences of title to certain funds in New Banks which had been sent there for safe-keeping by Russian corporations before or during the Revolution. His mission brought him into close contact with bankers and business men in Moscow and afforded him an insight into actual business conditions in Russia.

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city that ordinarily held 2,250,000 people, with 3,500,000 people crowded into it, with streets full of light, Opera, Ballet and night life in the cafes, with more traffic policemen to handle the dense traffic on the Avenues, almost, than we have in New York; with great stores, both wholesale and retail--some of the best and most beautiful stores I ever saw. It is very hard to buy anything there, because you have to change your money three times in three different ways before you can get goods, unless you happen to have the exact change.

I would have given you a false impression both ways. In the first place I would not have told you that Petrograd had no business existing economically or commercially, except as the Capital of Russia, and that while it was the Capital, at least four-fifths of its population were solely engaged in the business either of attending to the affairs of the Government or were people tributary to those who did so, and that when the Capital was moved from Petrograd to Moscow Petrograd died, and it is absolutely dead at the present time. I do not think you can entirely blame the Communist Government for that; and it is equally unfair to say that the prosperity of Moscow is today due to Communism, because most of it is due to the concentration of Government activities in Moscow. So it is very difficult to get an accurate picture of Russia from a superficial view of a few localities.

Our party was quite a large one. We had a lawyer from the United States War Department, which was interested in the case, and a man from one of the large New York banks which was also interested in it, and a special commissioner to authenticate documents so that they would be evidence in the United States, whom I had to take with me because we have no consuls in Russia, my wife and myself. There are no hotels there; you are assigned rooms in a guesthouse, the theory of the Government being that you are the paying guests of the Government. Actually they want to know what you are doing, and the guest-house has, in addition to its hotel staff, a complete equipment of agents of the secret service of the Russian Government, and they know everybody who comes in and goes out, and everybody you telephone to.

We sat there. We were in an anticipatory mood. We were not apprehensive. The first thing that happened to us was a visit from a very polite gentleman who came up to us and said, "I want, with the compliments of the Commissaire of Education, to present you a season ticket for the Opera and Ballet, for a box, while you are here." I protested that I was not on a political mission, and there was no reason for the great compliment from the Commissaire, but I was very glad to accept it. He said, "There is no political significance to this; we are extremely grateful to the whole North American Continent for having saved our country from disintegration and famine, and we are willing and anxious to do anything, even in such a small way as this to show our appreciation." Well, that was very nice. While all that was going on, another member of the party had been telephoning the Swedish Mission to get in touch with some friends of his who happened to be there; and as soon as he put down the telephone another polite gentleman came up and said, "Would you mind telling me the name of the gentleman who telephoned to the Swedish Mission?" We told him the name, and the man put it down in his book. Whenever we telephoned after that we would say, "There's a poor fellow listening in on this line downstairs" (laughter) and we would hear Ivan snort at the switchboard. That suspicion of everything that is going on is rather typical of Russian trade. They are suspicious of themselves and of everybody else, and they carry it to a childish degree that is sometimes very amusing.

There was a poor fellow there, an Englishman who, while not actually in jail, was heavily chaperoned by the cheka--the Secret Service. His idea was that it would be profitable to raise Airedale dogs and sell them, and he was much embarrassed to find that they did not have any Airedale dogs in Russia, so he wrote to an English kennel to send him a pair, and to telegraph him so that he could meet them at Riga. The telegram came saying, "The Prince and Countess left yesterday," and on that wire he was put in jail. (Laughter) His explanations were unavailing except that they released him from jail but watched him. The Prince and Countess arrived, and the police saw that they were dogs instead of counter-revolutionary dignitaries, so they made him change their names, and then let them in. Then there was another Englishman, and he had a very lucrative contracting company going on there, and he helped build the Moscow fair grounds last year. He is also a racing enthusiast, and he had many bets up on the races preceding the English Derby, and he sent a message asking his firm in London to telegraph him the names of the first three horses in each race. The names came, with the result of the races, by telegraph, but he did not receive his wire. Being of a curious disposition he inquired and discovered that this telegram had gone to the cipher department of the cheka. They had no idea of what the horses' names meant, as the race horse names are quite foreign to them, but they had actually worked out a key to these names and got a cipher message out of it. (Laughter) Those are little incidents of Russian life that make it rather fascinating. (Laughter)

I think, in fairness to the Communistic Government, you have to give them credit for a good many things. They put their finger first on the most important defect of Russian life, that is the fact that certainly 85 percent of the population are completely and entirely uneducated and out of touch with each other and with conditions in their own country and in the world. Within the limits of their possibilities, which are not very large because of the lack of trained material, they have established compulsory schools everywhere. They cannot teach all the grown-up population, but they have gotten nearly 100 percent of the children in the schools, where they teach them fundamental education, and also teach the principles of Communism, and also, I am sorry to say, teach them the fact that there is no religion. Thereby hangs a tale. About six or eight months ago, after the Communistic Government had become thoroughly established, it made a drive at religion because it was afraid of the Church, which was strongly organized in Russia and had a great hold on the people, and in their minds was probably a breeding ground for counterrevolutionary activities. It is the only institution they knew of that could organize the peasants. But they immediately stubbed their toe. They created a terrific disturbance, and they dropped it like hot cakes. Characteristically they went to work and started on the children, leaving the old ones alone. What the effect of their teaching is going to be as against the home influence on those children I do not know.

Then in their army they draft a great many peasants and give them some army training, and teach them reading and writing, and also the Communistic doctrines. They teach them a great deal of practical farming, which the European Russian knows very little about in many sections. They are doing pretty good work along that line. They have kept up the standard of their opera and of their ballets. It is just as good now as it ever was, and in Moscow you can go to an opera that we could not put on in New York because we have not got the talent; but they have the old casts, the old principals, they subsidize them heavily and give them preference in housing accommodations, which are so limited that all of them are commandeered in Moscow, and people are confined to so many cubic feet space, while the artistic people get the preference.

Business is an extraordinary thing. I don't remember suffering more in my life than I did in doing business. I was greatly handicapped all the time by the fact that I had a month or six weeks to do about two week's business, and that is a very difficult assignment in Russia. Their besetting sin is conversation. A letter I would give to my secretary and say, "Write a letter to so-and-so"--without dictating it--would be analysed, examined, commas changed, and the whole thing psychologically dissected and discussed for days before it goes out; and in every detail business is thoroughly discussed and theorized over before the Russian is satisfied. He is through then; the fact that the business then has to be done does not interest him; he has settled the theory, and the actual doing of it does not mean anything in the world to him.

I had a young lawyer assigned to me, and they told me the reason he was assigned to me was that his nickname was Quicksilver, and that he was very fast. I worked him five hours a day and did not let him talk and he nearly broke down; so I had to get five or six, and let them work two hours a day and talk the rest of the time; in which way I got finally what I wanted to get through, but it was a very, very difficult situation.

Business in Russia today is going on in a very extraordinary way. You have communistic government with the distinctive principle that there is no such thing as private enterprise, and you have business going on practically illegally, and almost entirely along the lines that it went on before. That is the extraordinary thing. But Russia is as it is today, and it is not what you or I might want it to be, and according to most observers who have been there it is not going to change by force from without, because the characteristic of the Russian people that impresses itself more thoroughly than any other on a visitor is their intense nationalism and intense patriotism. No matter how they disagree among themselves--and they disagree fundamentally and bitterly at times--they would be entirely united to the extent of repelling any outside force that. would seek to change their Government. But a change is coming, and undoubtedly has come already to some extent through the pressure of internal circumstances and the pressure of economic facts against theories, and modification of laws that has resulted from it.

Russia is an interesting country to us for two or three reasons. In the first place, it can produce more farming products at less cost potentially than any other nation in the world. While I was there the Russian-British Grain Syndicate was formed to finance the export of the surplus of the Russian wheat crop, which was very large this year, and it moved out at a cost to the Board in Russia that is ridiculous compared with our standards of production costs. A great deal was moved into Germany, and a great deal into England and Italy, and was still moving when I left.

In addition to that, as far as we are concerned, Russia needs everything that we can make, and everything that everybody else makes. There is nothing there; and to some extent there is a trade that can be developed between the two countries at present by way of bartering our finished products for their unfinished products or raw material that we want. That is being done to some extent by the United States, and to a very large extent by the British. The place is full of British people, and they are all busy; they are very welcome. They and the Americans are practically the only really wealthy and unsuspected people in Russia today. The Russians are very glad to see them, very glad the Germans have gone out. It is an interesting fact that I did not see a German while I was there. (Applause) If I had been there a year before I would have seen a great many more Germans than any other nationality. The financial conditions of Germany were such that those people could no longer function, and they left. Whether they come back or not depends on the foothold other nations get in Russia. They will not come back certainly until Germany has some financial standing.

It is interesting to theorize about what is going to happen to Russia. To do that it is necessary to understand one fundamental thing--which nobody who had not been to Russia can understand--and that is, the importance of theory in the Russian mind. When the Russian gets a theory and has worked it out satisfactorily to himself, that theory is dominant. If the facts don't fit it, the facts are wrong, and the facts have to be legislated, even as human nature incidentally has to be legislated to become right. I don't know whether that is Asiatic, or what it, is but it is Russian, and when you get there you find the reason for much of the present confusion is that theory governs every one of their actions.

The Communists came into power in 1917 after everybody was out and gone who had been conducting business internally and externally. Their diplomatic contacts had been through people who were out of the country. The people who had been running their factories and doing their internal business had gone; and the Communists were faced with a situation that required them to re-establish theories that they had previously denied. They had not had much practical experience with finance, or the principles of it, nor with trade on a large scale, nor with diplomacy. What has been in Russia in the last three or four years has been the tremendous clash between the strongly held--fanatically and sincerely held-theories of Communistic rule, as against the hard facts of economics. The greatest distress of mind, disappointment and anger, has been caused by the fact that they could not change human nature and basic economic laws by legislation. It is the most ridiculous thing today to see Communistic legislation on the books, and to see the business being conducted on capitalistic principles. That is exactly what is happening. They do not pay very much attention to their laws, as you will see. I was interested in some of their old laws, historically, for my own case, and I went to get some of the decrees of 1920 and 1921, but at the Government printing office they said, "Why, we haven't anything of that sort; you will have to go to the museum to find those." (Laughter) In principle those decrees would be in force and effect, but there you can only find them in the museum; yet business goes on just the same. Russia has fed and clothed itself for four years, pretty nearly unaided, and that is a pretty big economic business--to feed and clothe 50,000,000 people.

Now, what is going to happen? Three years ago the Communists, in the face of a perfectly complete break-down; in the face of a famine, said in effect to Russia, when they adopted the so-called new economic policy--"You Russians, the rank and file, are not educated up to the beauties of Communism. We will give you a new economic policy. We will carry on, and you can do your business as you have been accustomed to do it until we succeed in educating you to a point where you can abandon it." That is what happened then. Their new economic policy went into effect, and now I think they are very near the parting of the ways; they have come to a crisis in their principles, in any event, through the recognition by England and other States.

I will take a moment to explain why. In 1913, according to publications, the volume of Russian exports and imports amounted to 3,000,000,000 gold roubles--the rouble being worth about 50 cents. According to the statements of the Russian Government published last year the volume of imports and exports in 1923 was 336,000,000 gold roubles--something like 12 percent of what had gone on in 1913. Their railroads in 1923, on the ton-mile basis, carried something like 29 percent of the traffic that was carried in 1913. Their factories were gone to the extent of 40 percent, and their machinery was broken down; there were only 333,000 workers in the textile industry in Russia--something under 40 percent of the pre-war record. And that is true along the line. They had lost, in Government operation of factories in 1923, 200,000,000 gold rubles. Now Russia is bare of finished goods that its population wants. Their great Siberian farms, which are analogous to ours, are largely run by tractors, and all kinds of automotive machinery is needed; they have not got it; their old machines are breaking down, and they have not the money or credit to buy new machines in large quantities. They want glass; they want shoe soles; they want everything that civilized people use, and they have not either the credit to get it or factories to make it.

Now, the first thing that happened when England recognized Russia was the immediate statement that Russia would expect great credits. What do they want them for? They want them to re-equip Russian industry along the lines of government ownership. They want to make finished products out of Russian raw material. The English, on the other hand, are extremely anxious to buy from Russia their raw material in order to put to work their unemployed population, and sell back to Russia the finished products they need so greatly.

I doubt very much if Russia is going to get anywhere money to rehabilitate its industries along present theories. I am not sure that, even under the present pressure, Russia is going to abandon completely, as far as the world in general is concerned, its communistic theories, and allow private enterprise to rebuild and operate its factories. Therefore they have today a great decision in front of them, and it is going to be very interesting to see how it is going to work out. If they will not take credit on the basis that credit can be given them they are undoubtedly going to become a farming nation, with their government solely and simply a commission merchant bartering the excess surplus of farm products for finished materials that they need in the country.

On the other hand, if conditions continue to develop in Russia as they had been developing up to last summer, when a reaction towards Communism again set in, then Russia is one of the greatest fields for development in the world. It is analogus to this continent in 1850, and it has available for its development all the experiences that we went through here from that time to this. It is a pioneer proposition for capital, with pioneer risks and pioneer profits, and it is an exceedingly interesting thing to see what is going to develop out of that mass of contradictory argument that just envelops you in a fog from which you cannot escape, and which you cannot make head or tail of, or any impression on, when you are in the country.

It is inconceivable, the argument that is going on in the public press in Russia at the present time between the wings of the Communistic Party, and it is inconceivable, the absolute indifference with which the Russian population takes that argument. They go ahead and they raise their food and make their clothing, so much as they can, and pay absolutely no attention to it. The argument is on the part of the small educated or semi-educated minority, and the work is on the part of the people, and it is an exceedingly interesting situation. It is without any parallel in any history that I have ever read, where the government has laws none of which that contain their basic principle are heeded to any great extent in business and commerce; and no man can do more than hazard a guess as to what is going to happen.

What it looks like is that Russia will compromise with the world the way it did with its own people in 1921. It will tell the world that it (the world) is not quite ready for Communism, and it will allow trade to be conducted with Russia and inside Russia on capitalistic principles until the great proletariat, as they please to call the workers in the different countries, will decide that their original ideas of the 1917 Revolution are correct.

Now, I do not mean to express the opinion that the Communists are bad. I think the majority of them are sincere. I had very interesting talks with several of the people, and one of my friends had a very interesting talk with an official of the Government on the subject of propaganda in this country which then formed the basis of quite a bitter exchange of views. This official said to my friend, "I see your Secretary of State looks under his bed every night to find a Communist there." He said, "I am not going to ask you any embarrassing questions; I am not going to ask you if you think we have any common sense, because that might embarrass you (laughter), but I am going to tell you what we know in this country. We know that nine-tenths of your working class either have their own houses or have substantial bank balances, or own an automobile. Now, do you think that if we had any money we would try to spend money making those people Communists. (Laughter) Then he went on to tell my friend that so far as Russia was concerned, that in the opinion, of the politician the only nations they had no suspicion of were England and America. He said, "You don't cross our track in any of your national ambitions. Then you are more efficient, and particularly the Americans have a greater sympathy with our problems because they represent space; you have space in your country." He said, "We have vast areas to open up, with tremendous railway problems. We must build roads because villages 20 miles apart cannot conveniently communicate with one another at present. We have got to spread popular education the way you have done. Now, we won't take advice from anybody as to sociological problems, but we admit frankly that we don't know one thing in the world about business; and when you get through seeing ghosts and looking under your bed for Communists every night there is nothing we want more than people from your continent to reorganize and revamp our business conditions and, in connection with our sociological life, to help us to work out our situation. You once saved us from a relapse into barbarism during the famine, and I think you will pull us up to a higher grade of civilization such as you have."

That is a very interesting thing, and very true. This official was not expressing his own opinion merely; he was expressing the opinion you hear all over Moscow--that it will well repay people in America, at this time, who are thinking of making unofficial surveys of conditions, or people in your country who might think of so doing, to go over and look at Russia as it is, bad economically though it may be from our standpoint, and see what may develop out of that situation to the mutual good of the two countries. As a matter of fact Russia covers about a fifth of the globe, and the world is getting too small now to absolutely eliminate from consideration what one-fifth of the globe is doing. (Applause)

The only way you are going to do anything with Russia, or that Russia is going to-do anything for itself, is to put into Russia education and prosperity. Those are the two best weapons against Communistic or Bolshevistic principles. You are not going to fight Communism, and beat it from the outside, but you are going to make normality come back into Russia in the proportion that their people become educated and you get individual prosperity. (Loud applause)

HON. WALLACE NESBITT conveyed the thanks of the Club to the speaker for his interesting address.