The Russian Revolution of 1917 Was the Dollar's Victory over the Pound

In 1914 Russia went to war as Britain's ally in the Entente. A few years later everything had changed. The Soviet government was courting recognition in Washington, its first international bank was doing business with New York bankers, and the gold it paid with abroad was moving through American banks. How did a country that London had spent a century raising slip out of British hands so fast?

The answer matters because it explains how hegemons change hands in the 20th century. My claim is simple: whoever has Russia serving as its viceroy is the world's hegemon. Moscow has never been a center of power in its own right. It has always served whoever ruled the world at the time, and every time Moscow changed masters, the world changed masters too. In 1917 London still wore the hegemon's crown, but the serious money was already in New York. From 1915 the House of Morgan was lending to Britain and France, and London itself had become a debtor of American bankers. The next step was for New York to take London's chief viceroy away from it. That viceroy was Russia.

Who answered to whom shows up even in the exchange rate. Under the gold standard a pound sterling was worth $4.86. From January 13, 1916, to March 20, 1919, the pound never fell below $4.76, because J.P. Morgan & Co. in New York paid to keep it there. Acting as agent of the British Treasury, the firm bought every pound offered in New York at that rate. In other words, the February Revolution, the Bolshevik coup in October, the Treaty of Brest-Litovsk and the first year of the Russian Civil War all took place while American money was propping up the British currency. In March 1919 Morgan stopped buying pounds, and sterling slid. By 1920 it fetched $3.18.

The official history explains the Bolshevik coup of 1917 with German money. In that version Germany stood behind Lenin, and nobody else did. The German General Staff shipped Lenin across its territory, the German government paid the Bolsheviks through the Stockholm bank of Olof Aschberg, and German Foreign Minister Richard von Kühlmann wrote himself that only a steady flow of German money had allowed the Bolsheviks to publish Pravda and grow their narrow party. All of this is true. But Germany was wrecking the Russian army for one purpose only, to knock Russia out of the war, and, as General Max Hoffmann later admitted, it had no idea what it was shipping. Berlin did the dirty work and lost the war a year and a half later. Somebody else collected the result.

In 1974 the American historian Antony Sutton found documents about that somebody in the archive of the US State Department. Sutton argues that the Wall Street financiers were the Bolsheviks' partners rather than their enemies, and that without money, diplomatic cover and political support from New York the Bolsheviks might well have been swept away. Sutton put this down to American bankers chasing a monopoly on the Russian market. I read the same documents differently. They show American capital taking Britain's chief viceroy away from it.

Wall Street had experience with other people's revolutions well before 1917. Sutton shows that weapons for the Mexican revolutionary Pancho Villa were paid for through Guaranty Trust of New York, a bank controlled by Morgan. Drawing on the records of a Senate committee, Sutton concludes that the government of Venustiano Carranza, which adopted the world's first Soviet-style constitution, would hardly have survived without American arms. These men, in short, had learned to finance revolutions long before Petrograd.

American capital entered Russia in 1916, while the czar was still on the throne. Rockefeller's National City Bank and Morgan's Guaranty Trust lent money to a Russia at war, even though the State Department had warned them outright that this broke international law. Until then Russia had borrowed mostly in London and Paris, and the Americans walked into that market without asking permission from the British or from their own government. The go-between in those loans, interestingly, was the same Aschberg. In 1916 he arranged American credit for the czar. In 1917 German money for the revolutionaries passed through his bank.

Sutton also points out that some of the German money itself came out of New York. During the war Germany borrowed from New York banks to fund espionage and covert operations across North and South America. German agents got credit through Guaranty Trust, including money to buy newspapers that would write in Germany's favor. At the same time the same bank was financing the Allies, meaning Britain and France. New York money was working for both sides of the war.

The same logic leads Sutton to the story of the so-called Sisson Documents. In 1918 Edgar Sisson, the Petrograd representative of the US Committee on Public Information, bought a bundle of papers that supposedly proved Lenin and Trotsky were German agents. The US government published them as genuine. They later turned out to be almost entirely forged, their German text riddled with crude mistakes. In Sutton's view the forgery served as a smokescreen. It convinced the public that Germany alone stood behind the Bolsheviks, and it drew attention away from what the Americans were doing in Russia.

The key figure in Sutton's account is Trotsky. In January 1917 he arrived in New York. By his own account he lived there on fees from a poor émigré journal. Yet Trotsky rented a good apartment, rode in a chauffeured car, and when he set off for Russia he was carrying $10,000. In April the British took him off his ship in Halifax, Canada, because they believed he was on his way to overthrow the government of an allied country. People in Ottawa began lobbying hard on his behalf, and a month later the Admiralty in London ordered his release. A Canadian intelligence officer, Lieutenant Colonel John Bayne MacLean, later wrote that the release had been pressed by the British embassy in Washington. The embassy was acting at the request of the US State Department, which in turn was acting on behalf of someone else. The Russian publisher of Sutton's book draws the obvious conclusion in a footnote: the logical place to look for Trotsky's money is among the financiers who arranged his passage and sailed with him on the same ship.

Later Trotsky played a double game, and State Department records catch him at it almost day by day. On March 20, 1918, a dispatch from Moscow reached the State Department reporting an interview Trotsky had given a Russian newspaper. In it Trotsky declared that Soviet Russia would never enter any alliance with capitalist America, because that would be a betrayal. Three days earlier, on March 17, Ambassador David Francis had cabled Washington that Trotsky was asking the Americans for 5 officers to inspect his new army, and for men and equipment to run the railways. The American general William Judson visited Trotsky at the Smolny Institute without clearing it with the ambassador. Trotsky personally approved the Entente landing at Murmansk in the spring of 1918. Sutton also recalls Stalin's show trials of 1938, where Trotskyists were accused of being paid agents of international capital. Those charges are usually dismissed as the inventions of Stalin's prosecutors. Sutton writes that they match the documents he found.

Meanwhile an American Red Cross mission was at work in Petrograd, which Sutton calls the Wall Street mission. During the war the Red Cross had effectively passed into the hands of New York bankers, and John Foster Dulles later wrote that businessmen saw it as their instrument. The 1917 mission had 24 members holding officers' ranks. Only 5 of them were doctors, while more than half of the whole mission were lawyers and financiers from New York's financial district. Every expense was paid by William Boyce Thompson, a director of the Federal Reserve Bank of New York. Thompson's assistant later admitted that the Red Cross had been nothing but cover for the mission. The doctors went home within a month because they wanted no part in its political work.

According to Sutton, the mission's job was to influence either Kerensky or the Bolsheviks, whoever came out on top, and so open the way to the Russian market and Russian resources for America. Thompson first backed Kerensky. When the Bolsheviks overthrew Kerensky, Thompson switched to them within weeks. In December 1917 a cable arrived at the Hotel Europe in Petrograd in which Morgan reported transferring $1 million to Thompson's account at National City Bank. Thompson's biographer writes that the money went to political purposes. When the Bolsheviks nationalized the banks, the Petrograd branch of National City Bank turned out to be the only bank in Russia the nationalization decree left untouched. Thompson himself, back in America, published a laudatory pamphlet in Russian, "The Truth about Russia and the Bolsheviks".

On his way home Thompson stopped in London with Morgan partner Thomas Lamont and met Prime Minister David Lloyd George. In December 1917 the British War Cabinet was firmly anti-Bolshevik. After the conversation with the Americans it decided to deal with the Bolsheviks and sent an unofficial representative to Russia. So Britain changed its Russia policy on the advice of an American banker. Meanwhile in Washington the State Department instructed Ambassador Francis to build informal relations with the Bolsheviks step by step, and Secretary of State Robert Lansing told the French ambassador that America would not quarrel with any force holding power in Russia.

Thompson's deputy Raymond Robins, who stayed on to run the mission, stated the goal plainly. If the United States recognized the Bolsheviks, he wrote, America would gain control over Russia's surplus resources and would place its own controlling officers at every border point. That one sentence is the whole point of the takeover. The resources go to the new master, his people stand at the borders, and the government inside the country can call itself Soviet, czarist or anything it likes.

Britain tried to keep its position. In the spring and summer of 1918 Entente troops landed at Murmansk and Arkhangelsk, but, as the Russian publisher of the book notes, they landed against the Germans, not against the Bolsheviks. When Germany surrendered, the British left. They carried off part of the czarist stockpiles from the local depots, handed part to the Reds and sank the rest in the sea. The White armies got nothing.

London made its last attempt with money. In the autumn of 1922 the Bolsheviks set up their first international bank, Roskombank. Money came from a foreign consortium, mostly British, and the British government, according to the State Department, also put substantial funds into it. Yet the bank's foreign department, meaning all of its external operations, was run by Max May, a vice president of Guaranty Trust, and Guaranty Trust itself became the bank's representative in the United States. The Swedish economist Gustav Cassel, an adviser to the bank, said it would be reckless to leave Russia and its resources to their own fate. So Britain put the money into Roskombank, and the Americans decided how it was spent.

Five years after the revolution the balance of power had shifted for good. Germany, which had paid for the coup, lost the war and left the game. Britain, Russia's master in the 19th century, was left as an investor with no say in anything. Its troops had left the north, its Russia policy had been suggested by Americans, and its money in the Soviet bank was managed by a New York banker. America got what Robins had written about: the Russian market, Russian resources and access to a government that cursed capitalism in public and quietly asked for American officers. Formally the hegemon's crown passed to Washington only after the Second World War. New York had taken the Russian part of it from London a quarter of a century earlier, and London had already handed control of its own exchange rate to New York in 1916.