Letter to Nikolai Danielson, April 10, 1879

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... And now, primo, I am obliged to tell you (cela est tout-à-fait confidentiel) that I have been informed from Germany, my second volume could not be published so long as the present regime was maintained in its present severity. This news, considering the status quo, did not surprise me, and, I must confess, was far from annoying me – for these reasons:

Firstly: I should under no circumstances have published the second volume before the present English industrial crisis had reached its climax. The phenomena are this time singular, in many respects different from what they were in the past and this – quite apart from other modifying circumstances – is easily accounted for by the fact that never before was the English crisis preceded by tremendous crises now lasting already five years in the United States, South America, Germany, Austria, etc.

It is therefore necessary to watch the present course of things until their maturity before you can ‘consume’ them ‘productively’, I mean ‘theoretically’.

One of the singular aspects of the present state is this: There have, as you know, been crashes of banks in Scotland and in some of the English counties, principally the Western ones (Cornwall and Wales). Still the real centre of the money market – not only of the United Kingdom, but of the world – London has till now been little affected. On the contrary, save a few exceptions, the immense joint-stock bank companies, like the Bank of England, have as yet only profited of the general prostration. And what this prostration is, you may judge from the utter despair of the English commercial and industrial philistine of ever seeing better times again! I have not seen the like, I have never witnessed a similar moral dislocation although I was in London in 1857 and 1866!

There is no doubt, one of the circumstances favourable to the London money market is the state of the Bank of France, which, since the recent development of the intercourse between the two countries, has become a succoursale to the Bank of England. The Bank of France keeps an immense amount of bullion, the convertibility of its bank-notes being not yet re-established, and at the signal of any perturbation of the London Stock Exchange French money flows in to buy securities momentarily depreciated. If, during last autumn, the French money had been suddenly withdrawn, the Bank of England would certainly have had refuge to its last remedy in extremis, the suspension of the Bank Act, and in that case we would have had the monetary crash.

On the other hand, the quiet way in which the restoration of cash payments was effected in the United States, has removed all strain from that corner upon the resources of the Bank of England. But what till now mainly contributed to prevent an explosion within the London money market, is the apparently quiet state of the banks of Lancashire and the other industrial districts (saving the mining districts of the West), though it is sure and ascertained that these banks have not only invested great part of their resources in discounting of bills of, and advances upon, unprofitable transactions of the manufacturers, but have, as for instance at Oldham, sunk a great part of their capital in the foundation of new factories. At the same time stocks, mainly of cotton produce, are daily accumulating not only in Asia (India principally) whither they are sent on consignment, but at Manchester, etc, etc. How this state of things can pass away without a general crash among the manufactures, and, consequently, among the local banks reacting directly upon the London money market – is difficult to foresee.

Meanwhile strikes and disturbance are general.

I remark en passant that during the past year – so bad for all other business – the railways have been flourishing, but this was only due to extraordinary circumstances, like the Paris exhibition, etc. In truth, the railways keep up an appearance of prosperity, by accumulating debts, increasing from day to day their capital account.

However the course of this crisis may develop – although most important to observe in its details for the student of capitalistic production and the professional théoricien – it will pass over, like its predecessors, and initiate a new ‘industrial cycle’ with all its diversified phases of prosperity, etc.

But under the cover of this ‘apparently’ solid English society, there lurks another crisis – the agricultural one which will work great and serious changes in its social structure. I shall recur to this subject on another occasion. It would lead me too far at present.

Secondly: The bulk of materials I have not only from Russia, but from the United States, etc, make it pleasant for me to have a ‘pretext’ of continuing my studies, instead of winding them up finally for the public.

Thirdly: My medical adviser has warned me to shorten considerably my ‘working day’ if I were not desirous to relapse into the state of 1874 and the following years where I got giddy and unable to proceed after a few hours of serious application. ...

In regard to your most remarkable letter I shall confine myself to a few observations.

The railways sprang up first as the couronnement de l'oeuvre in those countries where modern industry was most developed, England, United States, Belgium, France, etc. I call them the "couronnement de l'oeuvre" not only in the sense that they were at last (together with steamships for oceanic intercourse and the telegraphs) the means of communication adequate to the modern means of production, but also in so far as they were the basis of immense joint stock companies, forming at the same time a new starting point for all other sorts of joint stock companies, to commence by banking companies. They gave in one word, an impetus never before suspected to the concentration of capital, and also to the accelerated and immensely enlarged cosmopolitan activity of loanable capital, thus embracing the whole world in a network of financial swindling and mutual indebtedness, the capitalist form of "international" brotherhood.

On the other hand, the appearance of the railway system in the leading countries of capitalism allowed, and even forced, states where capitalism was confined to a few summits of society, to suddenly create and enlarge their capitalistic superstructure in dimensions altogether disproportionate to the bulk of the social body, carrying on the great work of production in the traditional modes. There is, therefore, not the least doubt that in those states the railway creation has accelerated the social and political disintegration, as in the more advanced states it hastened the final development and therefore the final change, of capitalistic production. In all states except England, the governments enriched and fostered the railway companies at the expense of the Public Exchequer. In the United States, to their profit, great part of the public land they received as a present, not only the land necessary for the construction of the lines but many miles of land along both sides the lines, covered with forests, etc. They become so the greatest landlords, the small immigrating farmers preferring of course land so situated as to ensure their produce ready means of transport.

The system inaugurated in France by Louis Philippe, of handing over the railways to a small band of financial aristocrats, endowing them with long terms of possession, guaranteeing the interest out of the public pocket, etc., etc., was pushed to the utmost limit by Louis Bonaparte, whose regime, in fact, was essentially based upon the traffick in railway concessions, to some of which he was so kind as to make presents of canals, etc.

And in Austria and Italy above all, the railways were a new source of unbearable state indebtedness and grinding of the masses.

Generally the railways gave of course an immense impulse to the development of foreign commerce, but the commerce in countries which export principally raw produce increased the misery of the masses. Not only that the new indebtedness, contracted by the government on account of the railways, increased the bulk of imposts weighing upon them, but from the moment every local production could be converted into cosmopolitan gold, many articles formerly cheap, because invendible to a great degree, such as fruit, wine, fish, deer, etc., became dear and were withdrawn from the consumption of the people, while on the other hand, the production itself, I mean the special sort of produce, was changed according to its greater or minor suitableness for exportation, while formerly it was principally adapted to its consumption in loco. Thus, for instance, in Schleswig-Holstein agricultural land was converted into pasture, because the export of cattle was more profitable, but at the same time the agricultural population was driven away. All the changes very useful indeed for the great landed proprietor, the usurer, the merchant, the railways, the bankers and so forth, but very dismal for the real producer!

It is, to conclude by this my letter (since the time for putting it to post draws nearer and nearer), impossible to find real analogies between the United States and Russia. In the former the expenses of the government diminish daily and its public debt is quickly and yearly reduced; in the latter public bankruptcy is a goal more and more appearing to become unavoidable. The former has freed itself (although in a most infamous way, for the advantage of the creditors and at the expense of the menu peuple) of its paper money, the latter has no more flourishing fabric than that of paper money. In the former the concentration of capital and the gradual expropriation of the masses is not only the vehicle, but also the natural offspring (though artificially accelerated by the civil war) of an unprecedented rapid industrial development, agricultural progress, etc.; the latter reminds you rather of the time of Louis XIV and Louis XV, where the financial, commercial, industrial superstructure, or rather the facades of the social edifices, looked (although they had a much more solid foundation than in Russia) like a satyre upon the stagnant state of the bulk of production (the agricultural one) and the famine of the producers. The United States have at present overtaken England in the rapidity of economical progress, though they lag still behind in the extent of acquired wealth; but at the same time the masses are quicker, and have greater political means in their hands, to resent the form of a progress accomplished at their expense. I need not prolong antitheses.

A propos. Which do you consider the best Russian work on credit and banking?

Mr Kaufmann was so kind as to send me his book on ‘theory and practice of banking’, but I was rather astonished that my former intelligent critic in the Petersburg Messager de l'Europe, had converted himself into a sort of Pindar of modern stock exchange swindling. Besides, considered merely – and I expect generally nothing else of books of this kind – from Fachstandpunkt, it is far from original in its details. The best part in it is the polemics against paper money.

It is said that certain foreign bankers with whom a certain government desired to contract new loans, have asked as a guarantee – a constitution. I am far from believing this, because their modern method of doing business was, till now at least, and would be, very indifferent as to forms of government.

Yours truly

A Williams