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Antoine Clarke on the boom and bust in French private investment in pre-revolutionary Russia

About a month ago, I was at the Institute of Economic Affairs to hear a talk given by Antoine Clarke to the End of the World Club. The audience was larger than usual, and of a very high quality. It listened, fascinated and engrossed, and with some rueful laughter at the intense relevance of a seemingly rather obscure slice of history to our own times.

The talk was about French investment, private but egged on by French politicians for their own foreign policy reasons, in pre-revolutionary Russia. This investment was huge, and for a while it provided a healthy income to French savers, by French standards. But then, because of events which the French media of the time somehow neglected to inform their readers about, it all started to go wrong, and wronger and wronger, and then of course very wrong indeed. Collusion and corruption on a huge scale among and between politicians, bankers and journalists is not, said Antoine, anything new.

Antoine has now gathered his spoken thoughts from that night into a blog posting at the Cobden Centre.


The first Russian bonds sold in France were in 1867 to finance a railroad. Others followed, notably in 1888. At this point the French government decided on a policy of alliance with Russia and the encouragement of French savers to invest in Russian infrastructure. From 1887 to 1913, 3.5% of the French Gross National Product is invested in Russia alone. This amounted to a quarter of all foreign investment by French private citizens. That’s a savings ratio (14% in external investment alone) we wouldn’t mind seeing in the UK today!

A massive media campaign promoting Russia as a future economic giant (a bit like China in recent years) was pushed by politicians. Meanwhile French banks found they could make enormous amounts of commission from Russian bonds: in this period, the Credit Lyonnais makes 30% of its profits from its commission for selling the bonds.

In 1897, the ruble is linked to gold. The French government guarantees its citizens against any default. The Paris Stock Exchange takes listings for, among others: Banque russo-asiatique, la Banque de commerce de Sibérie, les usines Stoll, les Wagons de Petrograd.

The first signs of trouble come in 1905, with the post-Russo-Japanese War revolution. A provisional government announced a default of foreign bonds, but this isn’t reported in the French mainstream media or the French banks that continue to sell (mis-sell?).

During the First World War, the French government issued zero interest bonds to cover the Russian government’s loan repayment, with an agreement to sort out the problem after the war. However, in December 1917, Lenin announced the repudiation of Tsarist debts.

Boom, bust. And surprise surprise, French governments of the twentieth century were neither willing nor able to provide anything like the kind of compensation for disappointed French savers that had earlier been promised.

Antoine Clarke is fluently English thanks to his English father and fluently French thanks to his French mother, and he has lived and worked in both countries. As long as I have known him I have urged him to make maximum use of this bilingualism, in connecting us Anglo libertarians to French stories and writings, and vice versa. This talk and his subsequent written version of it is a perfect example of the sort of thing I had in mind, and I thank and congratulate him for it. How many non-French libertarians already knew this story? Some, certainly, a bit, but certainly not me.

8 comments to Antoine Clarke on the boom and bust in French private investment in pre-revolutionary Russia

  • Regional

    Wasn’t Germany so concerned about Russia overtaking it as an industrial power it went to war, no wonder they gave Lenin a sealed train to cross Germany as they didn’t want him fermenting revolution in Germany only Russia.

  • J.M. Heinrichs

    One of the characters in D.L. Sayers’ “Clouds of Witness” lost rather heavily in the collapse of his Russian investments. He also had a French mistress who left him for better digs in New York City.


  • Paul Marks

    The Russian government policy of state “investment” (in railways and so on) of S. Witte and others, was inspired by the (totally false) economic theories of the German economist Fred List (a very influential early 19th century economist – his demented theories even influenced policy as late as the 1930s in Ireland).

    So one could argue that the de facto looting of French savers by “investing” in government projects in Russia was the fault-of-the-Germans.

    However, there was also real (i.e. private) economic development.

    Russia had the highest industrial growth rate of any European country before the First World War – including (for example)a successful oil industry.

    So (had it not been for war and revolution) French investment in the private side of the Russian economy made some sense.

    By the way……

    The economic growth rate of Russia was one of the reasons why the German government was desperately searching for excuses to declare war (upon both Russia and France).

    In many industries (including the most modern industries) France was also doing better than Germany before 1914.

    People (such as Max Hastings) who claim that Germany would have dominated Europe economically had it not been for the First World War are just WRONG.

    The German government (and the political-academic elite generally) were not fools.

    They knew that to have any chance of dominating Europe (and the world – their long term intention) they had to ATTACK – and they had to attack NOW.

    The policy of war was rational – as long as one accepts the aim (power – unlimited power) of the policy.

    Indeed had Germany managed to take Paris in 1914 – the policy might well have succeeded.

    Northern France (and so on) would have been kept under German control – and Russia reduced to a slave economy.

    Fred List’s (and Fichte’s) dream of a German dominated Europe.

  • Regional

    Paul Marks,
    Time Tables for Germany’s wars was their undoing and National Socialism has always been a strong undercurrent in German thinking.

  • CaptDMO

    So…All the US National Debt “instruments”, delivered unto Chinese and Russian hands are defaultable “bonds”, RIGHT?
    I mean, there’s no collateral, illegally put up, with “international” banking interests, right?

  • Rich Rostrom

    The 1905 event (default announced by a “provisional” government) had no effect. Interest on all the bonds was paid right up to World War I.

    As to what occurred then – shit happens. Sometimes it can be anticipated, and sometimes not. The Russian default was hardly the worst misfortune for France in 1914-1918.

    Here’s a thought: without French investments in 1868-1914 to build up transport and industry, would Russia have been able to fight at all in 1914? While Imperial Russia “punched below its weight”, it still hit pretty hard at times, and absorbed a large share of German military effort. A weaker Russia, which folded up in 1915, or could not even withstand Austria-Hungary, could leave Germany free to overwhelm France.

    So it may be that even with the eventual write-off, those Russian investments saved France from a greater injury.

  • Nick (Blame The French) Gray

    So, is this something else for which we can Blame The French?