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The Russian Review/Volume 1/March 1916/Should Americans Go to Russia?

Should Americans Go to Russia?

By Count S. I. Shulenburg.

The following article is an extract from Count Shulenburg's speech, delivered before the Alumni of the Massachusetts Institute of Technology on January 29, 1916.—Ed.

Perhaps I am mistaken, but my impression is that a great many Americans think of Russia as an enormous, limitless field covered with eternal snow and ice, deserted, almost uninhabited, where severe Winter reigns all the time and where people can live only when dressed in heavy overcoats made of bear fur.

But the real picture is not so gloomy as it might seem to some. It is true that a part of Russia's territory overlaps the Arctic Circle, and that the Winter there is cold and, no doubt, not very pleasant. Yet even there, Summer comes regularly. And then snow disappears, and it becomes possible to raise certain vegetables and grains, for the sun never sets for weeks and even months. But then, another part of Russia's territory extends far south. Our Crimea has mild, wonderfully pleasant climate, where snow is almost unknown and in which grapes and other warm-climate vegetation thrive. The city of Tiflis in the Caucasus lies almost on the same latitude with New York, and Russian mid-Asiatic provinces lie as far south as the state of Virginia. Even our famous Siberia in its central and southern parts has a good, healthy, dry climate, with cold Winters, but with warm and dry Summers. The raising of crops there, presents no difficulties. If any Americans do not put faith in my words, let them ask their own countrymen who have visited Russia, or, better still, let them visit the country themselves. And even those who do believe me should come to Russia to study the country, and, as a result, become Russia's friends. I make this last assertion without hesitation, because I know that the majority of Russians who have spent some time in America inevitably became her friends, and this happens because, as it seems to me, there are many traits that both Americans and Russians have in common.

The more the people of America will become acquainted with that of Russia and with the conditions of life there, the easier will it be for every one of us to find the answer to the question: whether close commercial relations between Russia and America will be possible in the future. This question is undoubtedly of great interest and of great importance. I shall permit myself to give a very direct and definite answer to this question. My answer is: Trade relations between Russia and America are possible, desirable, and must necessarily come about, as a result of the natural trend of things. But it is clear that a rapprochement of this kind cannot come of itself. It is necessary that both sides should make efforts to eliminate the unfavorable circumstances in the way, and to create favorable ones.

I consider the inadequate development of both the Russian and the American mercantile marine as one of the unfavorable factors in this connection. It seems to me that most serious attention should be given to this matter, in order to remove the difficulties which have hitherto stood in our way. A detailed discussion of this subject would lead me too far, and I am compelled, therefore, to content myself with just this suggestion.

If it is desirable that the trade relations between the two countries should be close, animated, and long-lasting, it is necessary that such relations should be profitable not alone for one of the countries, but for both. In other words, the trade relations should not be one-sided. Therefore, I shall permit myself to warn you against being carried away by the thought that export trade from America to Russia should be brought about at any cost. Such export relations can and will develop only when there will exist, and be ready for development, an equivalent in value import of Russian goods to America. This, perhaps, is so plain, that it scarcely needs special proof.

In speaking about the future trade relations, it is natural that the question should arise as to what goods can be exported, and what goods can be imported. I think that it would be perhaps a little hazardous on my part to give a detailed list of such goods. This question can be settled only by a most elaborate and careful study of all conditions of the markets in each department of trade. These conditions change continually: goods that cannot be sold to-day may be sold very readily to-morrow. Moreover, it is absolutely impossible to forecast to-day the market conditions that will exist after the war.

My presence in this country is in connection with purchasing for Russia rails, locomotives, cars, and other railroad supplies. There seems to be an impression that after the war there are fair prospects for export trade in this line. Therefore, I think

it necessary to point out that, during the last fifteen or twenty years, domestic metallurgical and mechanical industries have developed to such an extent that the Russian railroad system procured all its supplies at home. It was only occasionally, and then in small quantities, that rolling stock and rails were purchased abroad. On the contrary, seven or eight years ago there was a period when a considerable amount of rails and cars was exported from Russia to Italy, England, and even Australia. Therefore, I think that we should not expect a very extended development of export trade in railroad supplies.

This, however, does not mean that Russia is not a good market for the sale of metallurgical and machinery products. On the contrary, I have no doubt that many of the American machines and means of production will find a ready and wide sale in Russia. This is true especially of all kinds of agricultural implements and machinery. The production of such implements in Russia has been developing very rapidly in recent years, but the demand for them was developing even more rapidly, and therefore the annual import of agricultural machinery has been very considerable. I have no doubt that in the future the demand for these articles will increase every year, and that, therefore, in this field the Americans can do a great deal.

In my opinion, the basis of all foreign trade is as follows: to export goods which are cheap at home and expensive abroad. Now, I consider that America possesses one class of goods, which is cheap here, but very dear in Russia. Therefore, trade in this class of goods is sure to be profitable. This goods is money, capital. Here, in America, money is cheap. Just now money is literally streaming in from abroad. After the War there will be a great deal of free capital on the American market. Capital will become even cheaper and will begin to seek new fields of application. Failing to find these at home, it will be compelled to turn to foreign countries.

There can be no better market for this kind of commodity than Russia. Russia's natural resources and her people's productive forces are truly enormous, almost incalculable. Russia's life, commerce, and industry are just beginning to develop, and they will continue to develop for many years to come. The people's purchasing power and the demand for all kinds of commodities is growing rapidly, and the tempo of this growth becomes faster and faster.

I cannot find a single field of trade or industry in which American capital would not be able to find safe and profitable application. Therefore, one of the most important factors of the future Russian-American business relations will, no doubt, be American investments in Russian enterprises. There are unlimited prospects in this field of application for American capital.

The field of mining industries, metallurgical in general, and iron and steel in particular, deserves special attention. Russia possesses very rich deposits of gold, platinum, copper, manganese, mineral oils, etc. Her iron ores are of the best quality in Europe, and the supply is so enormous that it cannot be calculated. In many places iron and coal deposits are found almost side by side.

Now, despite the fact that there are in Russia many blast-furnace, steel, and rolling mills, there is still much to be done in this field. Let me quote a few statistics. In 1910 the production of pig-iron was as follows: Russia, 3½ million tons, Great Britain, 10½ million tons, and the United States, 26 million tons. This means per capita production as follows: Russia, 45 pounds, Great Britain, 500 pounds, and the United States, 660. The need of iron and steel increases very rapidly and these figures show that their production should and must be increased about tenfold. In other words, the number of factories or the productivity of those already in existence can easily be increased tenfold without flooding the home market.

Let me turn now to the railroad industry in Russia. In this industry a great deal has been done, but present conditions do not as yet satisfy the demand, and there is still much to be accomplished. Russia now has 45 thousand miles of railroad. In this respect, she occupies the first place in Europe and the second place in the world, being outdone only by the United States, with their system of 260,000 miles. By the way, it is interesting to note that no other country in the world has such a long line as that between Petrograd and Vladivostok, which extends for 5,500 miles and over which a passenger may travel without changing cars.

But if the Russian railroad system appears large when the figures are taken absolutely, it proves to be totally inadequate if taken in relation to the area and the population of the country. Comparing Russia with other countries, we get the following picture: In European Russia there are 16 miles of railroad per thousand square miles of territory; in Asiatic Russia, 2 miles; in the United States, 65; in France, 142; in Germany, 176; and in Great Britain, 181 miles.

Per hundred thousand inhabitants, the mileage of the system is as follows: In European Russia, 26 miles; in Asiatic Russia, 32; in the United States, 259; in France, 80; in Great Britain, 50; and in Germany, 58. These figures show that the Russian railroad system must be increased about three times. This means that about 100,000 miles of railroad lines must be constructed in the very near future. The operation of the Russian railway system at present gives good financial returns, the net earnings being, on the average, 6% on the capital invested.

The tonnage carried by the Russian railways increases constantly and rapidly. For instance, during the last three years the annual increase of tonnage was 10%. This figure is very significant, as it shows how rapidly the economic life of the country is progressing and how insistently it demands the improvement of the railroad lines already existing and the construction of new ones. Two-thirds of the Russian railroads are owned and operated by the Government, and one-third is owned and operated by private companies. The private railroad companies are under Government control and almost all enjoy the privilege of Government guarantee. This means that the Government guarantees the payment of interest on railroad bonds even when the net earnings of the railroad are not sufficient.

What I have just said is enough to indicate that in the railroad field, Americans, when working in co-operation with Russians, will find highly favorable conditions for the application of their capital and energy.

. . . It is sometimes permissible to indulge in a little daydreaming. It seems to me that three or four decades from now, Russia's railroad system and her trade with America will have developed so much that it will be quite natural to realize that, as a matter of fact, we are very close neighbors, that our territories are separated only by a narrow strip of water, scarcely thirty-five miles in width. Then it will be well to remember also that the Russian and the American railroad builders have always been bold, that they have never stopped before the most serious problems, and have always solved them successfully. And then, perhaps, our two Continents will be joined together by one line of rail, and your children and grandchildren will be traveling in a Russian-American Through Express train from New York, across the Behring Strait, direct to Petrograd. And let me assure you, they will be greeted there with the sincerest Russian welcome!