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IV. Dollar Diplomacy in Default: The Economics of Russian-American Relations, 1910–1917

Published online by Cambridge University Press:  11 February 2009

Gail L. Owen
Missoula, Montana


The history of modern or transoceanic American imperialism began midway through the nineteenth century with the achievement of definitive continental boundaries for the United States. At that juncture, the focus of the country's expansionist impulses shifted to Latin America and the Pacific Ocean area, and the quest for territorial possessions and spheres of influence in both regions began. By the turn of the century, thanks to a liberal use of armed force, it had been successfully terminated, completing the first and most robust phase of American empire building abroad.

Copyright © Cambridge University Press 1970

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1 For the official policy which guided the effort in its formative stage see: F. W. Huntington-Wilson [U.S. Undersecretary of State] to Bancroft [State Department official], 26 Mar. 1910, as quoted in Kohlenberg, G.C., ‘Russian-American Economic Relations, 1906–1917' (unpublished Ph.D. dissertation, University of Illinois, 1951), pp. 197–9;Google Scholar [Anon.], ‘State Department Memorandum’, Dec. [n.d.] 1910, in Records of the Department of State Relating to Political Relations between the United States and Russia and the Soviet Union, 1910–1929 (‘National Archives’, Microcopy 333; Washington: National Archives and Record Service, 1960),Google Scholar decimal file number 711.612.18 [archives material on microfilm will be cited hereafter by decimal file number only]; P C. Knox [U.S. Secretary of State] to Taft, 14 Dec. 1910, ibid.; and W. MacMurray [State Department official], ‘Memorandum on Relations with Russia’, 3 June 1911, as quoted in Williams, W.A., American-Russian Relations, 1781–1947 (New York: Rinehart, 1952), p. 75.Google Scholar

2 The basic work on dollar diplomacy as it was applied in this quarter is: Zabriskie, E.H., American-Russian Rivalry in the Far East: A Study in Diplomacy and Power Politics, 1895–1914 (Philadelphia: University of Pennsylvania Press, 1946), pp. 134–70.CrossRefGoogle Scholar Also see: Munro, D.C., ‘American Commercial Interests in Manchuria’, Annals of the American Academy of Political and Social Sciences, XXXIX (1912), 154–68;CrossRefGoogle ScholarTang, P.S.H., Russian and Soviet Policy in Manchuria and Outer Mongolia, 1911–1931 (Durham, N.C.: Duke University Press, 1959),. pp. 152Google Scholarpassim; and Vevier, C., The United States and China, 1906–1913: A Study of Finance and Diplomacy (New Brunswick, N.J.: Rutgers University Press, 1955),Google Scholarpassim.

3 The head of the American mission has given his account of these events in: Shuster, W.M., The Strangling of Persia (New York: Century, 1912),Google Scholarpassim. Contemporary Russian documents may be found in: DeSiebert, B. and Schreiner, G.A. (eds.), Entente Diplomacy and the World War: Matrix of the History of Europe, 1909–1914 (New York: Putnam's, 1921), pp. 95141.Google Scholar The British role is traced in: [Sir] Buchanan, G. [British Ambassador to Russia, 1910–18], My Mission to Russia and Other Diplomatic Memories (London: Cassell, 1923), I, 98101, 109–18.Google Scholar A modern account based on U.S. and Persian documents is: Yeselson, A., United States-Persian Diplomatic Relations, 1883–1921 (New Brunswick, N.J.: Rutgers University Press, 1956), pp. 105–29.Google Scholar

4 The figures on trade and investment are based on Tables 1 and 3 below in the text, and those for profit on assumed earning rates for the years 1910–14 (average), 1916, and 1918 of: trade—20, 50 and 30% of goods' value; shipping—2, 5 and 3% of goods' value; loans—7% of principal; and investments—30, 10 and nil % of capital.

5 Russian economic policy toward the United States in 1910–11 rested on formulations periodically enunciated across the preceding decade or so, e.g.: [Count] M. N. Muraviev [Russian Foreign Minister] to [Count] A. Cassini [Russian Ambassador to U.S.],‘ Instructions’ 10 Feb. 1898, in Severo-Amerikanskie Soedinennie Shtat; i Tsarskaya Rossiya v 90-kh gg. XIXv [The United States of America and Tsarist Russia in the 1890s], Krasny Arkhiv, LII, 137, as quoted in Zabriskie, App. I, p. 200; and V. N. Kokovtsev [Russian Finance Minister], to J. P. Morgan [U.S. financier], 31 Oct. 1905, as quoted in B.A Romanov, Russia in Manchuria, 1892–1906, trans. S.W. Jones (Ann Arbor, Mich.: Edwards, J.W. for the American Council of Learned Societies, 1952), p. 363.Google Scholar

These same formulations were given regular semi-official restatement in the Russian press in 1910–11, e.g.: [Anon.], ‘Foreigners and Concessions’, Utro Rossii, 17 July 1911, in Records of the Department of State Relating to Internal Affairs of Russia and the Soviet Union, 1910–1929 (‘National Archives’, Microcopy 316; Washington: National Archives and Record Service, 1960),861–9111/5;Google Scholar and State Department correspondence, [n.d.], encl. Russkoye Slovo, 1 June, 27 July 1911, 861 9111/8, 4.

6 Nicholas II to J. H. Hammond [U.S. millionaire], 14 Jan. 1911, in an interview, as quoted in The Autobiography of John Hayes Hammond (New York: Farrar & Rinehart, 1935), II, 471–2;Google Scholar MacMurray, ‘Memorandum’, 3 June 1911, as quoted in Williams, Relations, p. 75; Hammond to N. Harris [a friend], 4 Feb. 1924 [referring to 1911], as quoted in ibid. p. 74; ibid. pp. 53–4, 61; and Varg, P.A., Open Door Diplomat: The Life of W. W. Rockhill (Illinois Studies in the Social Sciences, XXXIII, no. 4; Urbana: University of Illinois Press, 1952), pp. 7980.Google Scholar Rockhill was U.S. Ambassador to Russia from 1909 to 1911.

7 Adler, C., Jacob Schiff: His Life and Letters (Garden City, N.Y.: Doubleday Doran, 1928), I, 217–18,Google Scholar 230; 11, 114–50, esp. pp. 122, 128–36; Bailey, T.A., America Faces Russia: Russian-American Relations from Earliest Times to Our Day (Ithaca, N.Y.: Cornell University Press, 1950), pp. 205–20;Google ScholarGreenberg, L., The Jews in Russia, 11: The Struggle for Emancipation, 1881–1819, ed. Wischnitzer, M. (Yale Historical Publications, No. LIV; New Haven: Yale University Press, 1951),Google Scholarpassim, esp. pp. 138–59; Laserson, M.M., The American Impact on Russia—Diplomatic and Ideological, 1784–1917 (New York: Macmillan, 1949), pp. 293320;Google ScholarLearsi, R., The Jews in America: A History (Cleveland: World Publ 1954), pp. 200–30Google Scholarpassim; Straus, O.S., Under Four Administrations: From Cleveland to Taft (Boston: Houghton Mifflin, 1922), pp. 168–90Google Scholarpassim; and Zabriskie, pp. 109 n. 41; 149–50, 165–6 n. 23.

8 Adler, II, 144–5; Laserson, pp. 355–6; Knox to Parsons [State Department official], 8 Aug. 1911, 711–612/44; and C. Guild [U.S. Ambassador to Russia] to Knox, 14 Dec. 1911, 711–612/78.

In addition to their other reservations, U.S. officials knew that legal opinion at the time held that, under the crucial Article 1 of the treaty, which provided for reciprocal freedom of entry, residence, and travel for citizens of each country within the other ‘on condition of their submitting to the laws and ordinances there prevailing’ (as quoted in Zabriskie, p. 18 n. 102), the Russians were justified in applying their anti-Semitic measures within their own borders even to American citizens, to say nothing of their own nationals. See, e.g.: [Anon.], The Passport Question between the United States and Russia’, American Journal of International Law, VI (1912), 186–91.Google Scholar

9 [Anon.], ‘State Department Memorandum', Dec. [n.d.] 1910, 711–612/18; Knox to Taft, 14 Dec. 1910, ibid.; Rockhill to Knox, 21, 30 Jan. 1911, 711–612/31, 22; Learsi, p. 228; Guild to Knox, 5 Dec. 1911, 861111/116; and the President's annual message to Congress on foreign affairs, 7 Dec. 1911, in Papers Relating to the Foreign Relations of the United States, 1911 [cited hereafter as For. Rel. 1911/] (Washington: G.P.O. 1916), pp. xxixxii.Google Scholar

10 The resolution passed the House 301 to 1. For the debate and vote see: U.S. Congressional Record, 62nd Cong., 2nd Sess. 1911, XLVIII, part 1, pp. 311–57. On the agitation leading up to the House action, see ibid. 1st Sess. 1911, XLVII, parts 1–4 passim—e.g. pp. 28, 2000, 3858 [21 petitions and resolutions in all]; Adler, 11, 136–50; Bailey, pp. 214–17; Laserson, pp. 353–71; Learsi, pp. 109–29; and Straus, pp. 106–8, 169–73, 185.

11 Knox to Guild, 15 Dec. 1911, 711–612/62 A, 62 B.

12 State Department correspondence, 711–612/63–90p passim; Hammond, 11, 475; Laserson, pp 359–7 esp pp 365–6, quoting S. Sazonov [Russian Foreign Minister] to the Duma, 26 Apr. 1912, in Stenografichesky Otchot Gos. Dumy [Stenographic Record of the State Duma], 3rd Duma, 5th Sess. pp. 2172–3; and C. Wilson [U.S. Charge d'Affaires at St Petersburg] to Knox, 29 May 1912, 861–34/12.

13 Hammond, II, 600–6; Kohlenberg, p. 81; Knox to G. Bakhmetev [Russian Ambassador to U.S.], June [n.d.] 1912, 711–612/129; Bakhmetev to Knox, [n.d.], ibid.; Guild to Knox, 23 June 1912, ibid.; Moore to Smith, 10 June 1913 [State Department letter reviewing search for modus in summer 1912], 711 612/213; Knox to Bakhmetev, 15 Nov. 1912, 711 612/180 A; Guild to Knox, 23 Dec. 1912, 861 III/193; and Bakhmetev to Knox, 24 Dec. 1912, 711 612/185.

14 Bailey, pp. 222–3; Laserson, pp. 360–1; Whelpley, J.D., ‘ The Trade of Russia (“ Trade of the World” Papers)’, Century Magazine, n.s. LXIII (19121913), 296310;Google Scholar and C. Wilson to W. J. Bryan [U.S. Secretary of State], 17 Oct. 1913, as paraphrased in Kohlenberg, pp. 75–6.

15 The indifference of U.S. officials at the time is reflected today by the dearth of surviving information concerning any knowledge of or thinking about Russia on their part, in particular by the scarcity of official documents—e.g. the lack of a single entry on Russia in For. Rel. I913.

16 [Anon.], ‘The Case of Brother Pindell’, North American Review, XCVIII (1913), 752–8Google Scholar [which reprints the correspondence involved]; Link, A.S., Wilson: The New Freedom (Princeton: Princeton University Press, 1956), p. 102Google Scholar n. 28, quoting Wilson to C. R. Crane [millionaire Progressive], 30 Oct. 1913; and ibid. p. 103, quoting Wilson to Bryan, 7 Dec. 1913.

17 Wilson, W., ‘The Rights of the Jews’, speech delivered at Carnegie Hall, New York City, 6 12 1911,Google Scholar reprinted in R. S. Baker and W. E. Dodd (eds.), The Public Papers of Woodrow Wilson, II [in 2 vols.]: College and State: Educational, Literary and Political Papers (1875–1913) (auth. ed.; New York: Harper, 1925), pp. 318–22;Google ScholarLink, A.S., Wilson: The Road to the White House (Princeton: Princeton University Press, 1947), pp. 338,Google Scholar 381–8, 402–4, 485, 499–500; Notter, H., The Origins of the Foreign Policy of Woodrow Wilson (Baltimore: Johns Hopkins University Press, 1937), p. 191;Google Scholar Adler, II, 302, 311–13; and Wilson to Guild, 27 Nov. 1912, in Baker, R.S., Woodrow Wilson: Life and Letters (New York: Doubleday Doran, 1931), III, 417.Google Scholar

18 Diamond, W., The Economic Thought of Woodrow Wilson (The Johns Hopkins University Studies in Historical and Political Sciences, Series LXI, No. 4; Baltimore: Johns Hopkins University Press, 1943), pp. 131–9.Google Scholar

19 Wilson tried to convey the impression that he had repudiated dollar diplomacy so as to disaffiliate his administration from the unsavoury reputation that policy had inherited from overseas American imperialism's forceful debut in Latin America and the Pacific area before 1900; but close examination and comparison of the pronouncements and acts of his administration and Taft's in economic foreign policy show more continuity than divergence.

Taft, for example, defined dollar diplomacy thus in his message to Congress on 3 Dec. 1912: ‘It is an effort frankly directed to the increase of American trade upon the axiomatic principle that the Government of the United States shall extend all proper support to every legitimate and beneficial American enterprise abroad.’ For. Rel. 1912, p. 4. Wilson defined his alternative as follows in his reply to American bankers on 18 Mar. 1913: ‘The present administration will urge and support the legislative measures necessary to give American merchants, manufacturers, contractors, and engineers the banking and other financial facilities which they now lack and without which they are at a serious disadvantage as compared with their industrial and commercial rivals.’ For. Rel. 1913, pp. 170–1. For additional comparisons see, on Taft's dollar diplomacy: Huntington-Wilson, F.W., ‘The Relations of Government to Foreign Investments’, Annals of the American Academy of Political and Social Sciences, LXVIII (1916), 298311;CrossRefGoogle Scholar and the documents cited in n. I above. On Wilson's dollar diplomacy see Notter, pp. 216–17, and the documents and sources cited in n. 57 below.

20 These deficiencies became manifest when, at year's end 1914, after a few months' fighting, Russia's armies began running out of supplies (see n. 31 below) and its running war costs began to exceed the portion of its national income available to cover same—about 50% of the total national income in so backward a country. See: Michelson, A.A. et al. Russian Public Finance during the War (‘Economic and Social History of the World War: Russian Series’; New Haven: Yale University Press for the Carnegie Endowment for International Peace, 1930), pp. 215–20, 322–6, 379;Google Scholar and Seligman, E.R.A., ‘The Cost of the War and How It Was Met’, in Essays in Taxation (9th ed. rev.; New York: Macmillan, 1923), pp. 748–82Google Scholarpassim.

21 Entente unpreparedness is best discussed in various volumes of: Shotwell, J.T. (ed.), Economic and Social History of the World War (various publishers for the Carnegie Endowment for International Peace, 1921 ff.),Google Scholar esp.: Hirst, F.W., The Consequences of the War to Great Britain (‘British Series’; London, 1934);Google ScholarFontaine, A., French Industry during the War (‘French Series’; Paris, 1926);Google Scholar and Zagorsky, S.O., State Control of Russian Industry during the War (‘Russian Series’; New Haven, 1928)Google Scholar—all passim.

22 The United States' industrial output from 1914 to 1917 was $30 billion, twice that of all other neutral countries combined, and sufficiently in excess of domestic American demand to meet the Allies' need for $6 billion worth of supplies from abroad without difficulty. The same was true of American financial resources at the time.

23 Initial Russian attempts along these lines are traced in: U.S. Consul-General at London to Bryan, 12 Sept. 1914, 861–51/56; C. Wilson to Bryan, 16 Oct. 1914, 861 51/78; R. Lansing [State Department counsellor, later Secretary of State] to Wilson, 16 Oct. 1914, encl. Bakhmetev to Lansing, [n.d.], 861 51/734; and C. Wilson to Bryan, [n.d.], 861 51/79.

24 Kohlenberg, pp. 62–9, 84, 142; J. Snodgrass [U.S. Consul-General at Moscow] to State Department, 8 Sept. 1910, encl. E. Hawtrey [U.S. businessman operating in Russia] to Snodgrass, 7 Sept. 1910; and Staley, E., War and the Private Investor: A Study in the Relations of International Politics and International Private Investment (New York: Doubleday, 1935), p. 537.Google Scholar

25 Extending its boycott at the start of the war to include advances to Britain and France lest funds so obtained be passed on to Russia, the Schiff group persisted in this policy until the spring of 1917, when revolution in Russia overthrew official anti-Semitism there. See: Adler, II, 250–7, 295–305; Bailey, p. 229; Learsi, p. 242; and Straus, pp. 375–7.

26 Bryan to J. P. Morgan and Co., For. Rel. 1914, Suppl. p. 580. Also see: Bryan to Wilson, 10 Aug. 1914, For. Rel., Lansing Papers [cited hereafter as L.P.], I, 131–2.

The ban apparently was born of Wilson's zeal for strict neutrality rather than any of the economic considerations which soon were to figure so prominently in its removal (see nn. 28 and 63 below).

27 The recession in the autumn of 1914 was in fact probably due more to domestic conditions of overproduction and economic readjustment in the American economy than to temporary restriction of commerce with Europe because of the ban on loans.

28 Lansing Memorandum, 23 Oct. 1914, ibid. p. 140. Also see State Department press release, 31 Mar. 1915, ibid. p. 146.

The obscure background of the decision to lift the ban is discussed in:Beard, C.A., ‘New Light on Bryan and War Policies’, New Republic, 17 06 1936, pp. 177–8;Google ScholarBuehrig, E.H., Woodrow Wilson and the Balance of Power (Bloomington: Indiana University Press, 1959), pp. 91105;Google Scholar Diamond, pp. 138–9, 155–8; May, E.R., The World War and American Isolation (Cambridge: Harvard University Press, 1959), pp. 4553;Google ScholarMorrissey, A.M., The American Defense of Neutral Rights, 1914–1917 (Cambridge: Harvard University Press, 1939), pp. xxi,Google Scholar 196–7; and Seymour, C., ‘Influences of Trade with the Allies on American Diplomacy, 1914–1917’, in American Neutrality, 1914–1917: Essays on the Causes of American Intervention in the World War (New Haven: Yale University Press, 1935), pp. 110–38.Google Scholar

29 Kohlenberg, pp. 227–38.

30 Tsarist agents and officials tried to borrow roughly $ billion in the United States from August 1914 to June 1915, but actually obtained only $60 million directly—and $10 million of that was an extension of an earlier credit. See the sources cited in nn. 23 and 52.

31 By early December 1914, Russia's field armies were running short of such basic necessities as ammunition, rifles, and boots. Indeed, munitions stocks, the first to be depleted, had begun running out in November. See Golder, F.A. (ed.), Documents of Russian History, 1914–1917, trans. Aronsberg, E. (New York: Century, 1927), p. 194;Google Scholar and Tsar Nicholas II to Alexandra [his wife], 2 Dec. 1914, in Romanov, N., The Letters of the Tsar to the Tsaritsa, 1914–1917, trans. Hymes, A.L. (London: The Bodley Head, 1929), p. 14.Google Scholar

32 D. R. Francis [U.S. Ambassador to Russia] to Lansing, c. 1 May 1916 [reporting Sazonov's account of his dealings with Marye], For. Rel., L.P. 11, 309

33 Ibid.; Marye, G.T., Nearing the End in Imperial Russia (London: Selwyn & Blount, 1928), passim, esp. pp. 1522, 40–1, 190–1;Google Scholar Lansing to Marye, 19 June 1915, 711–612/240 A; and Marye to Lansing, 13 Oct. 1915, 86100/258.

34 More exactly, $5–4 billion worth in 1914, a figure based, like the other estimates of the kind offered below without supporting citation, on a study of the British, French, Russian, and American economies from 1914 to 1917 too long to present or digest here. That study in turn was based primarily on: Feis, H., Europe: The World's Banker, 1870–1914: An Account of… the Connection of World Finance with Diplomacy before the War (New Haven: Yale University Press, 1930);Google ScholarBritain, Great, Historical Section of the Foreign Office, Peace Handbooks, IX: The Russian Empire (London: H.M.S.O. 1920);Google ScholarIngalls, W.R., Wealth and Income of the American People (York, Pa.: C.H. Merlin, 1922);Google ScholarLyaschenko, P.I., History of the National Economy of Russia to the 1917 Revolution, trans. Herman, L.M. (New York: Macmillan, 1949);Google ScholarMoulton, H.G. and Pasvolsky, L., War Debts and World Prosperity (New York: Appleton-Century for the Brookings Institution, 1932);Google ScholarStaley, , War and the Private Investor; and The Statistical History of the United States from Colonial Times to the Present [cited hereafter as Stat. Hist.] (Stamford, Conn.: Fairfield Publ., 1965Google Scholar [reprint of two U.S. Bureau of Census studies]).

35 Not for lack of the means to do so, however, since from 1914 to 1917 Allied ability to pay for American supplies was more than adequate to meet their needs and Russia's too. Britain and France entered World War I with over $30 billion in precious metals and foreign investments ($54 billion worth in the United States) and emerged from it with about four-fifths of such assets still in hand (at least $3'5 billion worth in the United States) having spent the remainder to purchase supplies and services abroad (over 80 % of them in the United States).

36 In all, the Tsarist government exported about $700 million in precious metals and trade goods (mostly the former) to the United States and Britain from 1914 to 1917 to cover its procurement operations in America; and a large part of that sum was exported during the first six months of 1915. About half the total amount derived from the sale of Russian holdings in Persia and Manchuria, most of the remainder from the Russian treasury's stock of bullion. Approximately $400 million of the total was shipped to London, the remainder to New York.

The extet to which Russia's supply needs exceeded these available means is suggested by the fact that, from 1914 to 1917, with the 8700 million in purchasing power they provided, Tsarist agents ordered over $2–6 billion worth of goods and services in the United States, using Anglo-French credit to enable what their own means would not.

37 See n. 35 above.

38 See the sources cited in nn. 28 and 57.

39 Lansing to Wilson, 6 Sept. 1915, For. Rel., L.P. 1, 144–6.

40 New York Times, 6 Oct. 1915.

41 I.e., the unsecured portion of the issue roughly equalled the Russian-incurred share of the extant Anglo-French short-term debt in America.

42 Only about $1–5 billion of the latter sum was backed by Anglo-French collateral, the remaining $500 million being in unsecured short-term debts.

43 The French ambassador to Russia, late in June, estimated that 800,000 Jews had been driven summarily from their homes in the western borderland Pale of that country toward the interior without the barest means of survival. Paleologue, M., An Ambassador's Memoirs, trans. Holt, F.A. (2nd ed.London: Hutchinson, 1924), 1, 315;Google Scholar 11, 41–2; III, 19. American observers confirmed the substance of his report. See Marye to Lansing, 5 July 1915, end. D. Jenkins [U.S. Consul at Riga] to Marye, 29 June 1915, 861–48/27; Snodgrass to Lansing, 25 Aug. 1915, 861–48/28; and Francis to Lansing, 16 June 1916, 711–612/249.

44 Marye, pp. 17–18, 463; Francis to Lansing, 27 Feb. 1917 [recounting the history of such anti-Americanism from 1915], 861–00/272; and State Department correspondence, 861–142/1–2; 861–48 A/I–II; and 861–48/1–260–all passim.

The much presented relief efforts of the official and various private American missions in Russia on behalf of perhaps one million Jewish refugees and as many more German and Austro-Hungarian prisoners-of-war and internees precipitated these outbursts. Similar aid rendered to even greater numbers of non-Jewish Russian refugees from the war zone at the same time did nothing to assuage the prejudices behind the demonstrations, prejudices which extended high into official Russian circles.

45 French ambassador Paleologue reported as early as mid–1915 that ‘America hardly ever enters into the calculations of the Imperial Government, or crosses the minds of Russian statesmen’ (Memoirs, II, III ), a view Russian Grand Duke Nikolai Mikhailovich confirmed almost a year later in a letter to Tsar Nicholas n, 11 May 1916 (as quoted in Golder, p. 65).

46 Marye, p. 460; J. Dearing [U.S. Chargé d'Affaires at Petrograd] to Lansing, 26 Apr. 1916, 861–48/125; and State Department correspondence, 861–00/207–82 passim.

Marye's resignation, however, was also linked to personal difficulties: his wife had just become involved in a slander suit in Petrograd, and his political enemies back in California were making trouble for him in some undisclosed manner.

47 Francis to Wilson, 8 Apr. 1916, in U.S. Congress, Senate, Munitions Industry: Report on Existing Legislation, Report No. 944, part 5, 74th Cong., 2nd Sess. 1936, pp. 134–6; Francis to Wilson, 10 Apr. 1916, Ibid.; and Francis to Lansing, 1, 2 May, 25 July 1916, For. Rel., L.P. 11 309–13, 319.

48 The Russians, well satisfied with the status quo once the House of Morgan, on behalf of its Anglo-French employers, began supplying them almost unlimited credit in the United States, offered Francis no encouragement. Nor did his superiors in the State Department, particularly after it became known to them that he possessed close ties with the National City Bank of New York, a Morgan rival trying to secure for itself a share of the lucrative profits to be had financing Russia. On Francis's plans, see: Francis to Wilson, 8 Apr. 1916, reporting talks between himself, J. P. Morgan, and F. V. Vanderlip [board chairman of National City Bank] on 4 Apr. prior to his departure for Russia, in Munitions Industry, p. 135; Francis to Lansing, 20 May 1916, 861–51/116; entry of 13 June 1916, Paleologue, 11, 28; Harper, S.N., The Russia I Believe In, 1902–1914 (Chicago: University of Chicago Press, 1945),Google Scholar quoting a letter to his mother touching on Francis, 17 Oct. 1916, p. 85; Francis to B. Jones [a business associate], c. 26 Oct. 1916, as quoted in Francis, D.R., Russia from the American Embassy: April, 1916–November, 1918 (New York: Scribner's, 1921), p. 25;Google Scholar and Francis to Lansing, 30 Oct. 1916, 861–51/124.

49 Florinsky, M.T., ‘The Breakdown of the Bureaucratic System’, in The End of the Russian Empire (‘Economic and Social History of the World War: Russian Series’ New Haven: Yale University Press for the Carnegie Endowment for International Peace, 1931), pp. 6985;Google ScholarPares, B., The Fall of the Russian Monarchy: A Study of the Evidence (New York: Knopf, 1939) pp. 238348Google Scholar passim; Francis to Lansing, 15 Nov. 1916, 861–77/39; and Francis to F. L. Polk [a friend], c. Jan. 1917, as quoted in Francis, pp. 42–3.

50 Based on: [Anon.], Russia Invites Our Exports’, Literary Digest, XLIX (1914), 617–18;Google ScholarHogan, J.V., ‘Russian-American Commercial Relations', Political Science Quarterly, XXVII (1912), 635–42;Google Scholar Kohlenberg, pp. 92, 95, 101, 114, 129; Moore, H., ‘American Commercial Relations with the Russian Empire and the USSR’, American Quarterly on the Soviet Union, III, nos. 2–3 (1940), 45;Google Scholar Stat. Hist. pp. 537, 546; Whelpley, J.D., ‘What About Russia?’, Century Magazine, LXXXVIII (19131914), 731–4;Google Scholar and Idem., ‘Trade of Russia’, pp. 296–310.

51 From 1 Aug. 1914 to 1 Apr. 1917, American profits from trade with Russia were about $700 million, from all overseas trade about $28 billion (estimating earnings as in n. 4 above).

In the same period, Russia received about $2–6 billion of military aid from abroad, $900 million from her allies, the rest from the United States. From 1 Aug. 1914 to 1 Nov. 1917, when the Bolsheviks took it out of the war, Russia received a total of $4 billion in foreign loans with which to pay for that aid, of which $26 billion came from the United States, $12 billion from Britain and France, and $200 million from Japan.

52 Based on: J.J. Burns, ‘A Study of the Neutrality of the United States‘, Munitions Industry, pp. 61–73, esp. p. 73; Fisk, H.E., The Inter–Ally Debts: An Analysis of War and Post-War Public Finances, 1914—1923 (New York: Bankers' Trust Co. 1924), passim, esp. pp. 121,Google Scholar 132, 145–7, 302, 345; Journal of Commerce Bulletin [New York], 2 Jan. 1917, as quoted in Tansill, C.C., America Goes to War (Boston: Little Brown, 1938),Google Scholar App. B, pp. 662–3; Kohlenberg, pp. 152–6; Letter of Secretary of Treasury to Senate, 27 Jan. 1920, U.S. Congress, Senate, Senate Document 191, 66th Cong., 2nd Sess. 1920, as quoted in Tansill, App. A, pp. 660–1; New York Times, 6 Oct. 1915; Stat. Hist. pp. 351, 434, 552; and U.S. Congress, Senate, The Special Committee Investigating the Munitions Industry, 74th Cong., 2nd Sess. part 26, pp. 9205–6.

53 Based on: Kohlenberg, pp. 131, 156–64, and passim.

54 Earned on a gross of about $2.4 billion, this was a profit of about 8.3%, which may be compared with the 562.5 million or 4.5% profit Morgan and Company earned on a gross of $1.4 billion in organizing the United States Steel Corporation at the turn of the century.

55 Not only because nearly all the loans, goods, and investments which formed the tie were supplied by American sources, but also because they were supplied on commercial terms exceedingly favourable to those same sources. For example, the Russians paid nearly double the then–normal financial fees on their American transactions of the kind (see n. 54 above), at least 25 % (on average) in excess of already-inflated domestic U.S. market prices for their American supplies, and about a dollar in service charges for every dollar's worth of such supplies landed at one of their seaports. Thus, in return for an outlay of about $3 billion in the United States from 1914 to 1917, they actually received only about $1.3 billion worth of matériel.

56 See nn. 19 and 57.

57 Basic policy documents relating thereto are: a speech by Wilson, 4 July 1914, reprinted in Harper, G.M. (ed.), President Wilson's Addresses (New York: Holt, 1918), p. 90;Google Scholar W. J. Bryan, ‘The State Department and Foreign Trade', Nation's Business, 15 Feb. 1915, pp. 6–7, 24, as quoted in Kohlenberg, p. 179; and Wilson to B. H. Griswold Jr. [U.S. banker], 10 June 1915, as quoted in Diamond, p. 147. Also see: Ibid. pp. 131–58; Kohlenberg, pp. 151–6, 187–212; and n. 19 above.

58 As made apparent, for example, by its ready resort to force in the occupation of Haiti and Santo Domingo, and in the punitive expeditions against Mexico.

59 However, it should be pointed out that American imperialism toward Europe was more moral than material and therefore tended to manifest itself in politics rather than economics. The Versailles Treaty, an American-inspired document climaxing the wartime American intrusion into Europe and European affairs, is probably the best single indicator of its moralpolitical bias and imperialist character.

60 And, in the course of such negotiation, to secure a relaxation of Tsarist anti-Semitism and an improvement in the tone of official relations.

61 In spite of its dominant position in and undoubted capacity for influence upon Russian-American relations, the House of Morgan cannot be viewed as an independent force in shaping those relations—contrary to the opinion of Ambassador Francis at the time and of Senator Nye and others of the ‘merchants of death’ school of interpretation some years later. The firm undoubtedly possessed the potential for independent policy-making toward Russia but, judging from the evidence, declined to exploit it—either in deference to the dictates of its Allied employers, or because of satisfaction with the large profits to be garnered by letting the Russians dominate the relationship under Allied sanction. Whatever the reason, Morgan and Company abstained from any attempt to dictate the character of U.S. policy toward Russia, save in so far as it seconded Anglo-French efforts to do so.

62 See nn. 28 and 39 above.

63 According to this mutant conviction in its initial form, the extension of American credit to its European customers was necessary to keep the faltering American economy healthy by bolstering its overseas trade. However, as has already been suggested (see n. 27 above), the recession in late 1914 probably was not caused by the slump in foreign trade which followed the ban on lending to belligerents. Nor was the removal of the ban probably necessary for the recovery of that trade and, in its wake, of the whole economy, since, as has been shown (see n. 35 above), the Allies could have done without American credit from 1914 to 1917 but not without American productivity (see nn. 21 and 22 above), and since the United States could therefore have done business with Europe on its own terms—or not at all—at little or no probable cost to American economic health (see n. 67 below).

In its second stage, the Wilsonians' belief that relaxing the ban on loans was in the national interest came to rest upon the further belief that American sources had to finance trade with Europe (still held to be essential to the general well-being of the American economy), even in the face of Europe's ability to pay its own way, lest the transatlantic system of finance be thrown into chaos by the large-scale liquidation and transfer of assets which the latter alternative would entail. That no harm to American national interests would have resulted—whether or not such chaos had ensued—is suggested by the fact that barely twenty years later, in the face of stringent American regulations, a relatively less wealthy Europe once again at war managed to finance its trade with the United States without appreciable harm to American interests for over two years.

In short, since there was no basis in the economic realities of 1914–15 for maintaining that the Wilsonian economic policy toward Europe was in the national interest, the only logical justification for it lay in a political interpretation of international affairs which linked American national interest with that of its chief customers abroad, Britain, France, and Russia—in the tacit alliance of a neutral United States with the Entente against Germany to preserve the balance of power. However, since in 1914 and 1915 the Wilsonians expressly repudiated this and professed to be completely neutral, it becomes necessary to assume that their economic policy toward Europe, however much it may have anticipated the shape of things to come, simply had no logical (or at least no consciously logical) basis at the time it was formulated, that it was instead a product of American policy-makers' miscalculations, indifference, and ineptitude—or perhaps even their subconscious motivations—in other words, the result of accident, bungling, or wishful thinking rather than design.

64 E.g. Wilson to E. House [a friend and adviser], 19, 27 July 1915, as quoted in Baker, V, 369.

65 Seligman, pp. 760, 767, 775.

66 In the wake of the 1917 revolution in Russia, the wartime boom in Russian-American trade collapsed; and it took the entire inter-war period from 1919 to 1941 for that same commerce to recover even to its pre-war (1913) level (see Table 1 and its sources).

67 Because American commerce with Russia during the neutrality period consisted largely of the former supplying the latter with goods and services ordered on the strength of American credit, it is conceivable that greater benefits might have accrued to the American economy had there been no commerce whatever with Russia, since the same credit upon which it was based might then have been available to finance the purchase and consumption of even more goods and services within the United States, domestic prices for both being lower than export prices (see n. 55 above).

68 The boom in Russian-American economic relations and the benefits the American economy derived therefrom lasted only across the neutrality period. When in 1917 Russia collapsed into revolution and shortly thereafter succumbed to Bolshevism, the S3 billion American investment in that country which had been built up during the wartime boom was swept away by Communist fiat. Only 14 per cent was ever recovered (as compared with 9 per cent of U.S. Lend-Lease advances to Russia in World War II), and that through Anglo-French repayment in part of advances made to them and subsequently passed on to Russia. Almost none of the $700 million Americans claimed to be due them for direct loans, securities, and confiscated property was repaid. Less sums lent by the American government, inflation of capital values from 1917 to 1921, interest accumulated in the same period, and private firms' wartime earnings in commerce with Russia, the net American loss from dealing with that country during the war was, as of 1921, $1–5 billion, nearly one-third of American earnings from all the belligerents across the same span of time.

The net rate of such overall earnings, taking account of the post-war losses in Russia, was $29 million per month from 1 Aug. 1914 to 1 Apr. 1917, essentially the same as the pre-war rate of $28 million per month from 1 Aug. 1911 to 1 Aug. 1914. In the end, therefore, America's mishandled economic dealings with Russia from 1914 to 1917 not only proved a grave liability to those who sponsored them, but also served to nullify the benefits which the American economy derived from similar relations with all the warring countries across the same period. See: Moulton, H.G. and Pasvolsky, L.,Russian Debts and Russian Reconstruction: A Study of the Relations of Russia's Foreign Debts to Her Economic Recovery (New York: McGraw-Hill for the Brookings Institution, 1924),Google Scholar passim; and Sack, A., Diplomatic Claims against the Soviets (1918–1938) (New York University School of Law: Contemporary Law Pamphlets, ser. i, No. 7; New York: New York University Law Quarterly Review, 1938),Google Scholarpassim.

69 Since the principal American contribution to the United States' bitterly hostile relations with Communist Russia—participation in the Allied military intervention against the Bolsheviks in 1918–19—was made on the pretext of protecting some of the American supplies provided to Russia from 1914–17 and still stored in its seaports; and since the principal Soviet contribution to the same state of relations—repudiation of all foreign debts and confiscation of all foreign property—antagonized the United States chiefly because it wiped out the huge American investment made in Russia from 1914 to 1917, it might even be argued that those relations were a direct result of the adverse connexion the Un ited States had just previously had with Tsarist Russia—or, more precisely, of the untrammelled economic intercourse carried on between the two countries under that connexion.