Also there was the
fact that these machines had been packed so care-
fully, with so much extra boarding, that it seemed
incredible that they should have been intended for
the regular market.
fact that these machines had been packed so care-
fully, with so much extra boarding, that it seemed
incredible that they should have been intended for
the regular market.
Soviet Union - 1931 - Fighting the Red Trade Menace
Smoke from a score of factories streak
the landscape and tells of industry in this tiny chip
off the massive block of Russia.
So unpretentious is this little land that the out-
side world has often forgotten that Riga is the capi-
tal of an independent state and letters come addressed
to "Riga, Russia. " Latvia, though, has not forgotten
that she used to be a Russian province. She has not
forgotten that her whole economic existence is de-
pendent upon commercial contact with the vast hinter-
land that now is Soviet, and in this country may be
found a most perfect microcosm of the non-Soviet
world's relations with the strange new state to the east.
How Latvia suffers and how she profits from Soviet
trade is interesting enough, and her flax warehouses,
231
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? 232 FIGHTING THE RED TRADE MENACE
lumber yards, her rubber factories, car barns and
paper mills are rich sources for an investigator of the
influence of the Five-Year Plan on European trade.
But all these places have not a fraction of the interest
and significance of No. 20 Elizabeth Street.
No. 20 Elizabeth Street has a wide show window.
In that show window stands a tractor. Heaped
around it and back of it are a dozen other varieties
of agricultural implements. Surely, not a very excit-
ing sight.
Nevertheless, to anyone who has asked himself
the question whether the Soviet Union under the Five-
Year Plan or after the Five-Year Plan can produce
manufactured articles for competition with the non-
Soviet world would hardly have been able to restrain
an exclamation of surprise upon entering the agri-
cultural implement store at No. 20 Elizabeth Street.
I paused long enough outside to read on the radiator
of a tractor in Russian "Fordson, Krasnaya Puti-
lovetz Leningrad. "
Inside, before I could ask about the tractor, a sign
on the side of a trim, red threshing machine caught
my eye. "Made in U. S. S. R. " The same sign was
on a broad horse rake in another corner, on a reaping
machine, on a row of milk separators, on a bundle of
pitchforks and of scythes, on two kinds of flax
breakers, on disc harrows and tooth harrows, on a
-?
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? FIGHTING THE RED TRADE MENACE 233
grain sorter, on ten varieties of plows all neatly
ranged in rows, on several kinds of pumps and churns,
on a series of implements whose use I did not know,
and, finally on a twelve-horsepower fuel oil engine.
Back in the dim recesses of the store, handles stuck
out of wrappings on indiscernible machines and light
glinted from rows of metal receptacles.
"You only sell Soviet products here? " I queried
the salesman.
"Oh, yes," he replied, "they make a pretty com-
plete line. "
"How's business ? " I asked.
"Fair and getting better," was the answer.
When I told the salesman that I had been in the
Soviet Union and seen a good many of the factories
whence came the implements he was selling, the man
became cordial. "But I must admit," I said, "that I
didn't expect to find them exporting agricultural im-
plements abroad. Are you really selling them? How
do your prices compare? "
"Really selling them! Of course we are. We've been
selling them now for a couple of years, though this
year is the first that we've done real business. See that
big horse-drawn rake there? We've sold 1,000 of them
already. And the prices? Well, nobody can touch
us there. "
We began with the tractor, an exact model of
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? 234 FIGHTING THE RED TRADE MENACE
Ford's ten to twenty horse-power wheel tractor,
turned out by his Cork plant for the European
market.
"This tractor," said the salesman, who was a Lett,
"is really good. I think it is better than the original.
It stands up better. It is built out of stronger ma-
terials. "
"That's probably a matter of speculation, isn't it ? "
I said, iChut how much do you want for it? "
The price he said, was $900. "But we only ask 20
per cent down and give the buyer thirty months in
which to pay the balance. The original Fordson costs
$1,000 and you only get eighteen months' credit. "
We went from one machine to another. The price
differential on all other implements was much greater.
The thresher, bearing the mark of the Elizavetgrad
factory, formerly Ellworthy works, a British concern,
was priced $300, against the price for a similar
thresher by the International Harvester Company
of $700. A flaxbreaking machine from the Pskov
factory, "Metallist," was priced $40, against $90
for a similar machine of German make. A seeder from
the Petrovskovo factory in Kherson was priced $74,
against $96 for a German or Czechoslovakian machine
of the same kind. Another flaxbreaking machine of
a different model was priced $20, against $40 for a
German make.
The horse rake of which the salesman said he had
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? FIGHTING THE RED TRADE MENACE 235
sold 1,000 was priced $34, against $46 for German
and Swedish rakes. This rake came from the Soviet's
prize new implement factory, "Selmashstroi," that
I had visited six months ago in Rostov-on-the-Don.
When I was there last October they told me they had
produced 4,000 such rakes, but were scheduled to
turn out 100,000 in 1931.
Many of the implements on sale here in Riga were
produced in pre-revolutionary factories renovated
under the Five-Year Plan, but the horse rakes, of
which they had sold the most, came from the one im-
plement manufactory that has been erected since the
Five-Year Plan without the help of foreign engineers.
A grain sorter from the factory, "Trier," at Voro-
nezh, was priced $64, against $110 for a German
make. Finally, the stationary fuel oil engine, trade-
mark "Vozrozhdenie," from Markstadt on the Volga,
was priced $320, against the $540 of a German com-
peting brand.
The salesman presented me with two catalogues in
Lettish, one containing pictures and description of
fifty varieties of agricultural implements, the other
describing four types of heavy oil stationary and
portable engines as well as one for motor-boats. All
these Soviet products the salesman assured me, could
be obtained on order, and only lack of space prevented
him from showing them in stock.
The Lett salesman explained that his company,
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? 236 FIGHTING THE RED TRADE MENACE
"Standartlini," had exclusive rights for the sale of
Soviet agricultural implements in Latvia. I asked
if Soviet implements were being sold elsewhere. "Oh,
yes," he replied, "all through the border states,
Esthonia, Latvia and Lithuania, and I understand
they are also being sold in Persia and Turkey. "
All this provided a large, substantial mass of ma-
terial upon which to ruminate. It was not possible,
however, so quickly to digest a phenomenon that was
the most surprising discovery of a tour that has not
been lacking in new views of Soviet economy. For,
despite the anxiety of Manchester textile manufac-
turers and of other makers of fabricated goods about
Soviet competition, it has not seemed likely to many
observers of the Five-Year Plan that any serious
export of manufactured products from the Soviet
Union could be expected in some time. At any rate,
not the export of comparatively complicated products
such as agricultural machinery.
It was, therefore, natural that one should view
even this display of implements with considerable
skepticism and the remark of an American, who has
lived long in Latvia and studied the ways of the Rus-
sian trade representatives with care, sounded plausi-
ble. "This is all window dressing, I think," he said.
"Just window dressing. It makes a good impression
on the Latvian public. It is fine propaganda for the
Soviets here, but that's all. "
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? FIGHTING THE RED TRADE MENACE 237
Prepared to have this impression confirmed, I
visited the head of the Baltic agency of one of the
largest agricultural implement concerns in the world
and asked him what it all meant.
Before replying he pressed a button and ordered
files. A clerk brought a thick bundle of papers.
Thumbing them he began, "This is what it means.
Two years ago they began this. We all thought it
was a bluff. Last year they had sold, however, 10 to
12 per cent of the total market. Not much, but enough
to make us sit up and take notice.
"This year," he continued, "they plan to sell in
Latvia alone to the value of $400,000, which would be
equal to our total sales and would be about 40 per
cent of the market. And that is only in Latvia. They
are operating on the same scale in Esthonia and
Lithuania. "
"And how much do you think they actually will
sell? "
"Maybe $200,000 worth. If they do, they will be
doing well. But," he exclaimed, "how can you meet
this sort of thing? "
He turned a sheaf of pages, paused at one and be-
gan to read:
"On spring-tooth harrows, five teeth, they ask $3.
We ask $5. On seven-tooth harrows they ask $3. 60.
We ask $7. On nine-tooth harrows they ask $4. 20. We
ask $8.
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? 238 FIGHTING THE RED TRADE MENACE
"On disc harrows, eight discs, they ask $26. We
ask $44. On disc harrows, ten discs, they ask $29-
We ask $48. On seven-tooth one-horse cultivators
they ask $9. We ask $18. For a nine-tooth cultivator
they ask $9. We ask $23. On a five-foot reaper they
ask $50. We ask $96. On a four-and-one-half-foot
mower they ask $33. We ask $66. On horse rakes
they ask $20. We ask $36. And so on. All along the
fine just about 50 per cent less.
"But that is not the worst. What really cuts us
down are the terms they offer. On nearly all their
sales they let the farmer take the machines with no
cash payment and only ask for a first payment after
six months. On small machines they give from six to
eighteen months' credit, while we can only afford to
give from six to nine. On machines like reapers, mow-
ers and rakes they give up to twenty-four months'
credit. We give six to nine. On tractors they give
thirty months' credit. We give eighteen. "
The gentleman spoke without agitation. His tone
was reflective.
"Well, you can't offer the peasant any better terms
than that. All he has to do is come in the store, pick
out the machine and walk off with it. He doesn't have
to pay a cent of money. "
Hopefully, he continued. "But what will that peas-
ant do after six months when he is called upon to pay ?
I think a lot of them will use their reaper to harvest
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? FIGHTING THE RED TRADE MENACE 289
their crops and after six months bring it back, say
it is no good and refuse to pay. "
This note of optimism disappeared when I asked,
"How about the quality of Soviet implements? "
"Last year they looked so rough and unfinished
that I think that was one reason they did not sell
many. That and the fact that they actually could not
deliver. This year, though they are delivering and--
well, here is the report on two machines my agent
observed. "
He read. The machines in question, according to
the report, were so brightly painted, varnished, pol-
ished, nickled, so gleaming spick and span, that the
agent had written he was almost sure they must be
machines for a special exhibition.
Also there was the
fact that these machines had been packed so care-
fully, with so much extra boarding, that it seemed
incredible that they should have been intended for
the regular market.
"And so," he said, "I figure in the first place that
they will lose 25 per cent of their turnover from the
machines the peasants return in order to avoid pay-
ing at all. And then I don't think they can afford to
put out a fancy product like those we've seen. As to
their durability and real efficiency, we haven't had
time to judge. We can tell after this season. But as
to sales. Well, all over this country and in Esthonia
and Lithuania they keep turning up, here, one car-
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? 240 FIGHTING THE RED TRADE MENACE
load, there one carload. It is hard to keep track of
them. "
He paused. "At any rate," he finished, "It's no
joke. "
It is just because this topic of the Soviet Union's
sale abroad of manufactured articles is so hotly de-
bated and because the evidence upon it is so likely to
be called in question that the writer has put this par-
ticular report in quotation form and attempted to
render as nearly as possible, a dictaphone account of
these first-hand findings. From another source, but
not first-hand, were obtained more data of interest.
In the first place, as to tractor sales. As far as
could be ascertained only one has been sold. And this,
apparently, will be the only one sold for awhile. Not,
however, because the Latvians did not want to buy
Soviet tractors, nor because they could not be de-
livered, but because Ford has protested against the
sale abroad of a tractor made on his blueprints and
his patents that had been licensed for use in the Red
Putilov factory at Leningrad for the manufacture of
tractors for Soviet domestic consumption, but not for
export. While Ford is still cooperating with the
Soviets under a $30,000,000 contract to supply
plans, engineers and automobile parts for the Nijny
Novgorod plant, it appears unlikely that the Soviets
should ignore his protest against the sale abroad of
Soviet model Fordsons.
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? FIGHTING THE RED TRADE MENACE 241
Very interesting in this respect was the statement
of the salesman in the "Standartlini" store that "we
expect in six months to be selling Soviet automobiles. "
I asked, "Where from? "
"From Nijny Novgorod. "
I objected that the Nijny plant was apparently so
far behind schedule that it was hard to conceive that
they would be producing so soon, much less export-
ing Soviet Ford cars abroad.
"Well," said the salesman, "that's what we've been
told. We've been told to get ready to push Soviet au-
tomobile sales here this coming autumn. Anyway, we
are already selling Soviet sewing machines. "
"Standartlini," the implement sales concern, it ap-
pears, has been granted the territory in the three
border states, Lithuania, Latvia and Esthonia, by the
Soviet Foreign Trade Monopoly for the sale of Soviet
implements. Prices, it is said, shall be fixed at about
25 per cent below rival prices, but prices at which the
Soviet factories sell to the agents shall be such that
agents will still have a profit of at least 25 per cent.
These items of information came at second hand.
Data on turnover and actual prices charged do not
admit of doubt, coming, as they do, from both the
Soviet and their competitors. More difficult, but not
insoluble, is the problem of why the Soviet Union,
that is working so hard to supply its farms with im-
plements and is still spending considerable sums on
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? 242 FIGHTING THE RED TRADE MENACE
the importation of implements, and especially of
tractors, should be exporting these products.
If one wishes to understand this situation and not
merely to dismiss it as too infernally paradoxical, it
is necessary to observe first, that all implements on
sale, despite their number and variety, are compara-
tively small implements suitable for use by individual
farmers on small or moderate sized farms. Even the
tractor and thresher are the smallest types of these
machines.
Now the Soviet Union has gone over definitely to
big-scale farming and on the state and collective
farms tractors of the Fordson size already are being
discarded as too small. On Gigant and Verblud, the
two huge state farms in the Northern Caucasus, they
were even complaining last autumn that ten-ton cater-
pillar tractors were scarcely up to the job of hauling
the batteries of plows or of seeders that they wanted
to use in plowing or seeding as fast as possible, on
fields comprising an area equal to the state of Rhode
Island. But the Red Putilov factory at Leningrad is
geared to turn out only the Fordson type of ten to
twenty horse-power wheel tractors. And the Lujbert-
sky factory, employing 3,600 men and geared for
small reapers and mowers, turned out 100,000 of
each last year.
From these considerations alone it is conceivable
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? FIGHTING THE RED TRADE MENACE 243
that the Soviet authorities might consider it more
economical to sell abroad their small implements than
either to use them at home on farms that need larger
implements or to close the factories that make them or
to remodel those factories for manufacturing the
larger implements suitable for the state collective
farms. From another standpoint also, however, the
Soviet sale abroad of agricultural implements does
not appear so puzzling as at first.
The one big aim of the Five-Year Plan, beside
which all other aims sink into insignificance, is to in-
troduce into the country sufficient of the instruments
of production to be able, after the plan is completed,
to continue the process of industrialization, even if
the outside world should impose a boycott and cut off
the Soviet Union from its present sources of the in-
dispensable, fundamental, first tools of production.
Until these tools are present in sufficient quantity
within the Soviet Union, no consideration, or little
consideration, will be paid to the production of con-
sumption goods. Tractors and agricultural imple-
ments are instruments of production. They are not,
however, the sort of fundamental instruments of pro-
duction, that is, machines that make machines, that
are of most importance in the Five-Year-Plan. As
long, though, as tractors help produce grain that may
be sold abroad to buy the machines that make ma-
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? 244 FIGHTING THE RED TRADE MENACE
chines, tractors are entitled to be regarded as primary
tools of production and, hence, should not be ex-
ported under the Five-Year Plan.
Now, however, the grain market is so depressed
that it appears plausible to reckon the more cash
might be obtained from direct sale of agricultural
implements abroad than could be obtained by the
sale abroad of the grain produced by those agricul-
tural implements. Nor does any of this argument dis-
turb the indubitable fact that the sale of these Soviet
agricultural implements in Latvia, Esthonia and
Lithuania is good propaganda and that, even if there
is something back of the window dressing, it is effec-
tive window dressing.
For American, German and Swedish manufacturers
of agricultural implements it does not make much
difference what motives lie back of the Soviet cam-
paign to sell implements abroad. That campaign has
ceased to be a mere curiosity to the representatives of
those non-Soviet concerns in this country and it is
just as difficult to try to get one of them to "laugh
off" the Five-Year Plan for Agricultural Implements
as it is to try to get an oilman to dismiss the Five-
Year Plan for Oil or a grain man to take the Five-
Year Plan for Grain on the light shoulder.
None of this should be interpreted to mean that it
is the writer's opinion or the opinion of the non-
Soviet agricultural implement agents here that the
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? FIGHTING THE RED TRADE MENACE 245
Soviet Union in the near future is going to flood the
world with manufactured products.
It does appear, however, that anyone interested in
knowing what the Soviet Union is doing, and not in
mere ejaculations of approval or of disapproval, may
find something valuable in this view of the activities
in one small corner in Europe of one branch of the
Soviet economy.
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? CHAPTER XXII
Berlin:
Canada, Rumania, Hungarj7, Jugoslavia, Bul-
garia and Albania have all put down the equivalent
of absolute bans on the importing of Soviet goods.
Crying protests against Soviet "dumping," protests
that crescendoed to a world-wide chorus last autumn,
these six nations took the most rigorous measures that
nations can take. They closed their borders hermeti-
cally against anything from Russia, and the world,
checking off, one by one, their entrance into the
"anti-Soviet front," exclaimed that this was a
doughty blow to the economic expansion of the dan-
gerous new competitor state.
Moscow was once more aroused from chronic to
acute alarm. Fanfares of warning were blown in
every Soviet newspaper, and the proletariat of Rus-
sia and the world was called upon to make ready to
defend "the first workers' and peasants' republic. "
Newspapers elsewhere published headlines "Eu-
rope checks Soviet dumping. " Bankers thought it a
good time to put up the rates of interest on Soviet
notes, and the gentlemen of the "black bourse" added
a modest 5 or 10 per cent to their exactions from
frightened sellers of goods to the Soviet Union. If
246
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? FIGHTING THE RED TRADE MENACE 247
Soviet exports were blocked by six nations, it meant,
did it not, that Soviet trade was in a fair way of run-
ning on the rocks, that Soviet economic expansion
was suffering a check?
It did not.
What it meant was that the Soviet Union, out of
its total exports of $500,000,000 had to find a new
outlet for $1,050,000 worth of goods, that the Soviet
Union had lost one-fifth of 1 per cent of its exports.
To Canada, the Soviet Union, in 1930, sent $500,000
worth of goods; to Rumania, $400,000; to Jugo-
slavia, $50,000; to Bulgaria, $130,000; to Hungary
and Albania, nothing. These, at any rate, were the
official exports of the Soviet Union, officially listed
and entering the country of destination with the
Soviet Union as the country of origin. Indirect Soviet
exports via other countries and the Soviet exports
under false certificates of origin cannot be counted
and would probably continue in an equal quantity
also under embargo bans.
But these were only the actual sales lost by the
Soviet Union to the six nations in question. What
were the potential sales that might have been made;
what proportion of the world's buying power was lost
by the Soviet Union through the determined meas-
ures taken by Canada, Rumania, Hungary, Jugo-
slavia, Bulgaria and Albania? Their total buying
power, as represented by their share of world imports
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? 248 FIGHTING THE RED TRADE MENACE
in 1929, was 5 per cent of the world's total buying
power. The six countries in question imported in
1929 $1,854,000,000 in goods, but the total world
imports were $35,361,000,000. The Soviet Union,
knocking on 100 doors of 100 possible customers,
found but five shut in its face.
Nevertheless, the list of six nations was long enough
to be impressive, and when France and Belgium were
added, with their license systems imposing not em-
bargoes but certain restraints on Soviet imports,
again the world exclaimed that something serious was
being done about Soviet "dumping. " The results of
the French and Belgian license systems and their al-
most complete failure to exercise even a check on
Soviet imports have already been pointed out, but
the total effect of these measures on Soviet exports
has not yet been computed.
This computation, however, shows that if French
and Belgian purchases from the Soviet Union con-
tinue during the whole year under their license sys-
tems as they have developed in the first five months of
those systems the total Soviet exports to those coun-
tries will have fallen off in the case of France by
$5,000,000; in the case of Belgium, by $2,000,000.
Which means that the Soviet Union, losing $7,000,-
000 in exports, will have lost, by reason of the re-
strictions placed by these two countries upon Soviet
trade, a total of 1. 4 per cent of its total exports. These
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? FIGHTING THE RED TRADE MENACE 249
losses from France and Belgium added to those from
the six countries that laid down complete embargoes
would mean that the Soviet Union had lost a grand
total of 1. 6 per cent of all its exports, unless it found
other takers for this amount of goods.
Furthermore, in suffering even a partial restric-
tion on its sales to France and Belgium, the Soviet
Union has suffered a partial restriction on sales to
countries that, important as they are in world trade,
represented only 9 per cent of the world's purchasing
power, or imports of $3,268,000,000 in 1929 out of a
world total of $35,000,000,000. If the Soviet Union,
however, were disconsolate over even so infinitesimal
a setback in its opportunities of trade, the prospect
would appear much more cheerful upon contempla-
tion of England, Germany, Italy, Austria, Denmark,
Norway, Finland, Latvia and Esthonia.
These nine countries present 31 per cent of the
total buying power of the world. In 1929 they im-
ported $11,769,000,000. And these nine countries
not only have not done anything, and are not doing
anything, and most probably will not do anything to
check Soviet imports, bat, by putting the financial
guarantees of their Governments back of trade with
the Soviets, are doing, and probably will continue to
do, everything possible to encourage trade with the
Soviets.
While headlines were large over every accession to
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? 250 FIGHTING THE RED TRADE MENACE
the ranks of those countries that had embargoed
Soviet trade, few, even among those most interested
in Soviet affairs, noted that from year to year, al-
most from month to month, the number increased of
those countries which were guaranteeing Soviet
credit and thus not only expressing governmental be-
lief that trade with the Soviet Union was a profitable
affair good for national economy but expressing, in a
certain sense, their official belief in the solvency of
the Soviet Government and their official faith in its
capacity and willingness to meet its obligations.
Every one of the nine countries named have systems
of export credits, in some cases intended to insure
trade with any foreign country, and in some cases in-
tended to insure trade only with the Soviet Union,
but in all cases operating chiefly to insure trade with
the Soviet Union. These credit guarantees usually
cover 75 per cent of the total amount of Soviet obliga-
tions, insuring sellers of goods to the Soviet Union
that the Government will pay three-fourths of a bill
owed by the Soviet Union if the Soviet Union were to
fail to pay. From these nine countries the Soviet
Union bought in 1930 39 per cent of its total pur-
chases abroad.
This is a generous percentage, it would seem, yet,
curiously enough, the export credit systems of these
nine countries have been accompanied by a much
greater import of Soviet goods into their territories
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? FIGHTING THE RED TRADE MENACE 251
than an export of their goods into Soviet territory.
Whether there is any causal connection or not may
be difficult to establish, but it is interesting to observe
that, whereas these nine countries sold $193,000,000
worth of goods to the Soviet Union in 1930, they
bought from the Soviet Union $340,000,000 worth.
The Soviet Union spent 39 per cent of its total funds
available for purchases abroad on purchases from
these nine countries, but of all the Soviet Union's
sales abroad 67 per cent went to these countries.
An export credit system, granting government
guarantees on the sales by its citizens to the Soviet
Union, may be interpreted in a way as an expression
of good will toward the Soviet Union, or, at any rate,
as an expression of a desire to improve trade rela-
tions. Curiously enough, however, those countries,
that grant such governmental guarantees, enjoy but
39 per cent of the Soviet Union's total purchases and
buy from the Soviet Union two-thirds of all Soviet
Union exports.
However that may be, a more important conclu-
sion from this analysis of Soviet foreign trade is that,
while cries against "Soviet dumping" were making
the World's economic welkin ring and while some ob-
servers noted with satisfaction that Europe was tak-
ing adequate measures, these measures, when added
up, result in the following balance: The Soviet Union
lost 1. 6 per cent of its total exports.
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? 252 FIGHTING THE RED TRADE MENACE
It was effectively debarred from submitting its
goods to 5 per cent of the world's purchasing power.
It was ineffectively debarred from presenting its
goods to another 9 per cent of the world's purchasing
power. It was encouraged to present its goods to 31
per cent of the world's purchasing power, while na-
tions representing 55 per cent of the world's purchas-
ing power did nothing one way or another officially
to influence Soviet trade, but continued privately to
do normal business.
All of the countries that put effective embargoes on
Soviet goods were countries with no diplomatic re-
lations with the Soviet Union, most of them were
countries with long standing political grudges against
the Soviet Union, and all were countries that really
suffered from Soviet exports, not in their home mar-
kets to any important extent, but in their foreign
markets. Special political differences and historical
reasons made it easy for Rumania, Hungary, Bul-
garia, Jugoslavia and Albania to cut off Soviet trade.
In Rumania, the question of Bessarabia has re-
sulted in a permanent state of latent war between the
two nations. One of the world's great rivers, the
Dniester, separates Rumania from Russia. It is not
so wide but that a row boat can cross it in half an
hour.
the landscape and tells of industry in this tiny chip
off the massive block of Russia.
So unpretentious is this little land that the out-
side world has often forgotten that Riga is the capi-
tal of an independent state and letters come addressed
to "Riga, Russia. " Latvia, though, has not forgotten
that she used to be a Russian province. She has not
forgotten that her whole economic existence is de-
pendent upon commercial contact with the vast hinter-
land that now is Soviet, and in this country may be
found a most perfect microcosm of the non-Soviet
world's relations with the strange new state to the east.
How Latvia suffers and how she profits from Soviet
trade is interesting enough, and her flax warehouses,
231
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? 232 FIGHTING THE RED TRADE MENACE
lumber yards, her rubber factories, car barns and
paper mills are rich sources for an investigator of the
influence of the Five-Year Plan on European trade.
But all these places have not a fraction of the interest
and significance of No. 20 Elizabeth Street.
No. 20 Elizabeth Street has a wide show window.
In that show window stands a tractor. Heaped
around it and back of it are a dozen other varieties
of agricultural implements. Surely, not a very excit-
ing sight.
Nevertheless, to anyone who has asked himself
the question whether the Soviet Union under the Five-
Year Plan or after the Five-Year Plan can produce
manufactured articles for competition with the non-
Soviet world would hardly have been able to restrain
an exclamation of surprise upon entering the agri-
cultural implement store at No. 20 Elizabeth Street.
I paused long enough outside to read on the radiator
of a tractor in Russian "Fordson, Krasnaya Puti-
lovetz Leningrad. "
Inside, before I could ask about the tractor, a sign
on the side of a trim, red threshing machine caught
my eye. "Made in U. S. S. R. " The same sign was
on a broad horse rake in another corner, on a reaping
machine, on a row of milk separators, on a bundle of
pitchforks and of scythes, on two kinds of flax
breakers, on disc harrows and tooth harrows, on a
-?
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? FIGHTING THE RED TRADE MENACE 233
grain sorter, on ten varieties of plows all neatly
ranged in rows, on several kinds of pumps and churns,
on a series of implements whose use I did not know,
and, finally on a twelve-horsepower fuel oil engine.
Back in the dim recesses of the store, handles stuck
out of wrappings on indiscernible machines and light
glinted from rows of metal receptacles.
"You only sell Soviet products here? " I queried
the salesman.
"Oh, yes," he replied, "they make a pretty com-
plete line. "
"How's business ? " I asked.
"Fair and getting better," was the answer.
When I told the salesman that I had been in the
Soviet Union and seen a good many of the factories
whence came the implements he was selling, the man
became cordial. "But I must admit," I said, "that I
didn't expect to find them exporting agricultural im-
plements abroad. Are you really selling them? How
do your prices compare? "
"Really selling them! Of course we are. We've been
selling them now for a couple of years, though this
year is the first that we've done real business. See that
big horse-drawn rake there? We've sold 1,000 of them
already. And the prices? Well, nobody can touch
us there. "
We began with the tractor, an exact model of
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? 234 FIGHTING THE RED TRADE MENACE
Ford's ten to twenty horse-power wheel tractor,
turned out by his Cork plant for the European
market.
"This tractor," said the salesman, who was a Lett,
"is really good. I think it is better than the original.
It stands up better. It is built out of stronger ma-
terials. "
"That's probably a matter of speculation, isn't it ? "
I said, iChut how much do you want for it? "
The price he said, was $900. "But we only ask 20
per cent down and give the buyer thirty months in
which to pay the balance. The original Fordson costs
$1,000 and you only get eighteen months' credit. "
We went from one machine to another. The price
differential on all other implements was much greater.
The thresher, bearing the mark of the Elizavetgrad
factory, formerly Ellworthy works, a British concern,
was priced $300, against the price for a similar
thresher by the International Harvester Company
of $700. A flaxbreaking machine from the Pskov
factory, "Metallist," was priced $40, against $90
for a similar machine of German make. A seeder from
the Petrovskovo factory in Kherson was priced $74,
against $96 for a German or Czechoslovakian machine
of the same kind. Another flaxbreaking machine of
a different model was priced $20, against $40 for a
German make.
The horse rake of which the salesman said he had
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? FIGHTING THE RED TRADE MENACE 235
sold 1,000 was priced $34, against $46 for German
and Swedish rakes. This rake came from the Soviet's
prize new implement factory, "Selmashstroi," that
I had visited six months ago in Rostov-on-the-Don.
When I was there last October they told me they had
produced 4,000 such rakes, but were scheduled to
turn out 100,000 in 1931.
Many of the implements on sale here in Riga were
produced in pre-revolutionary factories renovated
under the Five-Year Plan, but the horse rakes, of
which they had sold the most, came from the one im-
plement manufactory that has been erected since the
Five-Year Plan without the help of foreign engineers.
A grain sorter from the factory, "Trier," at Voro-
nezh, was priced $64, against $110 for a German
make. Finally, the stationary fuel oil engine, trade-
mark "Vozrozhdenie," from Markstadt on the Volga,
was priced $320, against the $540 of a German com-
peting brand.
The salesman presented me with two catalogues in
Lettish, one containing pictures and description of
fifty varieties of agricultural implements, the other
describing four types of heavy oil stationary and
portable engines as well as one for motor-boats. All
these Soviet products the salesman assured me, could
be obtained on order, and only lack of space prevented
him from showing them in stock.
The Lett salesman explained that his company,
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? 236 FIGHTING THE RED TRADE MENACE
"Standartlini," had exclusive rights for the sale of
Soviet agricultural implements in Latvia. I asked
if Soviet implements were being sold elsewhere. "Oh,
yes," he replied, "all through the border states,
Esthonia, Latvia and Lithuania, and I understand
they are also being sold in Persia and Turkey. "
All this provided a large, substantial mass of ma-
terial upon which to ruminate. It was not possible,
however, so quickly to digest a phenomenon that was
the most surprising discovery of a tour that has not
been lacking in new views of Soviet economy. For,
despite the anxiety of Manchester textile manufac-
turers and of other makers of fabricated goods about
Soviet competition, it has not seemed likely to many
observers of the Five-Year Plan that any serious
export of manufactured products from the Soviet
Union could be expected in some time. At any rate,
not the export of comparatively complicated products
such as agricultural machinery.
It was, therefore, natural that one should view
even this display of implements with considerable
skepticism and the remark of an American, who has
lived long in Latvia and studied the ways of the Rus-
sian trade representatives with care, sounded plausi-
ble. "This is all window dressing, I think," he said.
"Just window dressing. It makes a good impression
on the Latvian public. It is fine propaganda for the
Soviets here, but that's all. "
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? FIGHTING THE RED TRADE MENACE 237
Prepared to have this impression confirmed, I
visited the head of the Baltic agency of one of the
largest agricultural implement concerns in the world
and asked him what it all meant.
Before replying he pressed a button and ordered
files. A clerk brought a thick bundle of papers.
Thumbing them he began, "This is what it means.
Two years ago they began this. We all thought it
was a bluff. Last year they had sold, however, 10 to
12 per cent of the total market. Not much, but enough
to make us sit up and take notice.
"This year," he continued, "they plan to sell in
Latvia alone to the value of $400,000, which would be
equal to our total sales and would be about 40 per
cent of the market. And that is only in Latvia. They
are operating on the same scale in Esthonia and
Lithuania. "
"And how much do you think they actually will
sell? "
"Maybe $200,000 worth. If they do, they will be
doing well. But," he exclaimed, "how can you meet
this sort of thing? "
He turned a sheaf of pages, paused at one and be-
gan to read:
"On spring-tooth harrows, five teeth, they ask $3.
We ask $5. On seven-tooth harrows they ask $3. 60.
We ask $7. On nine-tooth harrows they ask $4. 20. We
ask $8.
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? 238 FIGHTING THE RED TRADE MENACE
"On disc harrows, eight discs, they ask $26. We
ask $44. On disc harrows, ten discs, they ask $29-
We ask $48. On seven-tooth one-horse cultivators
they ask $9. We ask $18. For a nine-tooth cultivator
they ask $9. We ask $23. On a five-foot reaper they
ask $50. We ask $96. On a four-and-one-half-foot
mower they ask $33. We ask $66. On horse rakes
they ask $20. We ask $36. And so on. All along the
fine just about 50 per cent less.
"But that is not the worst. What really cuts us
down are the terms they offer. On nearly all their
sales they let the farmer take the machines with no
cash payment and only ask for a first payment after
six months. On small machines they give from six to
eighteen months' credit, while we can only afford to
give from six to nine. On machines like reapers, mow-
ers and rakes they give up to twenty-four months'
credit. We give six to nine. On tractors they give
thirty months' credit. We give eighteen. "
The gentleman spoke without agitation. His tone
was reflective.
"Well, you can't offer the peasant any better terms
than that. All he has to do is come in the store, pick
out the machine and walk off with it. He doesn't have
to pay a cent of money. "
Hopefully, he continued. "But what will that peas-
ant do after six months when he is called upon to pay ?
I think a lot of them will use their reaper to harvest
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? FIGHTING THE RED TRADE MENACE 289
their crops and after six months bring it back, say
it is no good and refuse to pay. "
This note of optimism disappeared when I asked,
"How about the quality of Soviet implements? "
"Last year they looked so rough and unfinished
that I think that was one reason they did not sell
many. That and the fact that they actually could not
deliver. This year, though they are delivering and--
well, here is the report on two machines my agent
observed. "
He read. The machines in question, according to
the report, were so brightly painted, varnished, pol-
ished, nickled, so gleaming spick and span, that the
agent had written he was almost sure they must be
machines for a special exhibition.
Also there was the
fact that these machines had been packed so care-
fully, with so much extra boarding, that it seemed
incredible that they should have been intended for
the regular market.
"And so," he said, "I figure in the first place that
they will lose 25 per cent of their turnover from the
machines the peasants return in order to avoid pay-
ing at all. And then I don't think they can afford to
put out a fancy product like those we've seen. As to
their durability and real efficiency, we haven't had
time to judge. We can tell after this season. But as
to sales. Well, all over this country and in Esthonia
and Lithuania they keep turning up, here, one car-
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? 240 FIGHTING THE RED TRADE MENACE
load, there one carload. It is hard to keep track of
them. "
He paused. "At any rate," he finished, "It's no
joke. "
It is just because this topic of the Soviet Union's
sale abroad of manufactured articles is so hotly de-
bated and because the evidence upon it is so likely to
be called in question that the writer has put this par-
ticular report in quotation form and attempted to
render as nearly as possible, a dictaphone account of
these first-hand findings. From another source, but
not first-hand, were obtained more data of interest.
In the first place, as to tractor sales. As far as
could be ascertained only one has been sold. And this,
apparently, will be the only one sold for awhile. Not,
however, because the Latvians did not want to buy
Soviet tractors, nor because they could not be de-
livered, but because Ford has protested against the
sale abroad of a tractor made on his blueprints and
his patents that had been licensed for use in the Red
Putilov factory at Leningrad for the manufacture of
tractors for Soviet domestic consumption, but not for
export. While Ford is still cooperating with the
Soviets under a $30,000,000 contract to supply
plans, engineers and automobile parts for the Nijny
Novgorod plant, it appears unlikely that the Soviets
should ignore his protest against the sale abroad of
Soviet model Fordsons.
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? FIGHTING THE RED TRADE MENACE 241
Very interesting in this respect was the statement
of the salesman in the "Standartlini" store that "we
expect in six months to be selling Soviet automobiles. "
I asked, "Where from? "
"From Nijny Novgorod. "
I objected that the Nijny plant was apparently so
far behind schedule that it was hard to conceive that
they would be producing so soon, much less export-
ing Soviet Ford cars abroad.
"Well," said the salesman, "that's what we've been
told. We've been told to get ready to push Soviet au-
tomobile sales here this coming autumn. Anyway, we
are already selling Soviet sewing machines. "
"Standartlini," the implement sales concern, it ap-
pears, has been granted the territory in the three
border states, Lithuania, Latvia and Esthonia, by the
Soviet Foreign Trade Monopoly for the sale of Soviet
implements. Prices, it is said, shall be fixed at about
25 per cent below rival prices, but prices at which the
Soviet factories sell to the agents shall be such that
agents will still have a profit of at least 25 per cent.
These items of information came at second hand.
Data on turnover and actual prices charged do not
admit of doubt, coming, as they do, from both the
Soviet and their competitors. More difficult, but not
insoluble, is the problem of why the Soviet Union,
that is working so hard to supply its farms with im-
plements and is still spending considerable sums on
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? 242 FIGHTING THE RED TRADE MENACE
the importation of implements, and especially of
tractors, should be exporting these products.
If one wishes to understand this situation and not
merely to dismiss it as too infernally paradoxical, it
is necessary to observe first, that all implements on
sale, despite their number and variety, are compara-
tively small implements suitable for use by individual
farmers on small or moderate sized farms. Even the
tractor and thresher are the smallest types of these
machines.
Now the Soviet Union has gone over definitely to
big-scale farming and on the state and collective
farms tractors of the Fordson size already are being
discarded as too small. On Gigant and Verblud, the
two huge state farms in the Northern Caucasus, they
were even complaining last autumn that ten-ton cater-
pillar tractors were scarcely up to the job of hauling
the batteries of plows or of seeders that they wanted
to use in plowing or seeding as fast as possible, on
fields comprising an area equal to the state of Rhode
Island. But the Red Putilov factory at Leningrad is
geared to turn out only the Fordson type of ten to
twenty horse-power wheel tractors. And the Lujbert-
sky factory, employing 3,600 men and geared for
small reapers and mowers, turned out 100,000 of
each last year.
From these considerations alone it is conceivable
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? FIGHTING THE RED TRADE MENACE 243
that the Soviet authorities might consider it more
economical to sell abroad their small implements than
either to use them at home on farms that need larger
implements or to close the factories that make them or
to remodel those factories for manufacturing the
larger implements suitable for the state collective
farms. From another standpoint also, however, the
Soviet sale abroad of agricultural implements does
not appear so puzzling as at first.
The one big aim of the Five-Year Plan, beside
which all other aims sink into insignificance, is to in-
troduce into the country sufficient of the instruments
of production to be able, after the plan is completed,
to continue the process of industrialization, even if
the outside world should impose a boycott and cut off
the Soviet Union from its present sources of the in-
dispensable, fundamental, first tools of production.
Until these tools are present in sufficient quantity
within the Soviet Union, no consideration, or little
consideration, will be paid to the production of con-
sumption goods. Tractors and agricultural imple-
ments are instruments of production. They are not,
however, the sort of fundamental instruments of pro-
duction, that is, machines that make machines, that
are of most importance in the Five-Year-Plan. As
long, though, as tractors help produce grain that may
be sold abroad to buy the machines that make ma-
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? 244 FIGHTING THE RED TRADE MENACE
chines, tractors are entitled to be regarded as primary
tools of production and, hence, should not be ex-
ported under the Five-Year Plan.
Now, however, the grain market is so depressed
that it appears plausible to reckon the more cash
might be obtained from direct sale of agricultural
implements abroad than could be obtained by the
sale abroad of the grain produced by those agricul-
tural implements. Nor does any of this argument dis-
turb the indubitable fact that the sale of these Soviet
agricultural implements in Latvia, Esthonia and
Lithuania is good propaganda and that, even if there
is something back of the window dressing, it is effec-
tive window dressing.
For American, German and Swedish manufacturers
of agricultural implements it does not make much
difference what motives lie back of the Soviet cam-
paign to sell implements abroad. That campaign has
ceased to be a mere curiosity to the representatives of
those non-Soviet concerns in this country and it is
just as difficult to try to get one of them to "laugh
off" the Five-Year Plan for Agricultural Implements
as it is to try to get an oilman to dismiss the Five-
Year Plan for Oil or a grain man to take the Five-
Year Plan for Grain on the light shoulder.
None of this should be interpreted to mean that it
is the writer's opinion or the opinion of the non-
Soviet agricultural implement agents here that the
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? FIGHTING THE RED TRADE MENACE 245
Soviet Union in the near future is going to flood the
world with manufactured products.
It does appear, however, that anyone interested in
knowing what the Soviet Union is doing, and not in
mere ejaculations of approval or of disapproval, may
find something valuable in this view of the activities
in one small corner in Europe of one branch of the
Soviet economy.
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? CHAPTER XXII
Berlin:
Canada, Rumania, Hungarj7, Jugoslavia, Bul-
garia and Albania have all put down the equivalent
of absolute bans on the importing of Soviet goods.
Crying protests against Soviet "dumping," protests
that crescendoed to a world-wide chorus last autumn,
these six nations took the most rigorous measures that
nations can take. They closed their borders hermeti-
cally against anything from Russia, and the world,
checking off, one by one, their entrance into the
"anti-Soviet front," exclaimed that this was a
doughty blow to the economic expansion of the dan-
gerous new competitor state.
Moscow was once more aroused from chronic to
acute alarm. Fanfares of warning were blown in
every Soviet newspaper, and the proletariat of Rus-
sia and the world was called upon to make ready to
defend "the first workers' and peasants' republic. "
Newspapers elsewhere published headlines "Eu-
rope checks Soviet dumping. " Bankers thought it a
good time to put up the rates of interest on Soviet
notes, and the gentlemen of the "black bourse" added
a modest 5 or 10 per cent to their exactions from
frightened sellers of goods to the Soviet Union. If
246
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? FIGHTING THE RED TRADE MENACE 247
Soviet exports were blocked by six nations, it meant,
did it not, that Soviet trade was in a fair way of run-
ning on the rocks, that Soviet economic expansion
was suffering a check?
It did not.
What it meant was that the Soviet Union, out of
its total exports of $500,000,000 had to find a new
outlet for $1,050,000 worth of goods, that the Soviet
Union had lost one-fifth of 1 per cent of its exports.
To Canada, the Soviet Union, in 1930, sent $500,000
worth of goods; to Rumania, $400,000; to Jugo-
slavia, $50,000; to Bulgaria, $130,000; to Hungary
and Albania, nothing. These, at any rate, were the
official exports of the Soviet Union, officially listed
and entering the country of destination with the
Soviet Union as the country of origin. Indirect Soviet
exports via other countries and the Soviet exports
under false certificates of origin cannot be counted
and would probably continue in an equal quantity
also under embargo bans.
But these were only the actual sales lost by the
Soviet Union to the six nations in question. What
were the potential sales that might have been made;
what proportion of the world's buying power was lost
by the Soviet Union through the determined meas-
ures taken by Canada, Rumania, Hungary, Jugo-
slavia, Bulgaria and Albania? Their total buying
power, as represented by their share of world imports
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? 248 FIGHTING THE RED TRADE MENACE
in 1929, was 5 per cent of the world's total buying
power. The six countries in question imported in
1929 $1,854,000,000 in goods, but the total world
imports were $35,361,000,000. The Soviet Union,
knocking on 100 doors of 100 possible customers,
found but five shut in its face.
Nevertheless, the list of six nations was long enough
to be impressive, and when France and Belgium were
added, with their license systems imposing not em-
bargoes but certain restraints on Soviet imports,
again the world exclaimed that something serious was
being done about Soviet "dumping. " The results of
the French and Belgian license systems and their al-
most complete failure to exercise even a check on
Soviet imports have already been pointed out, but
the total effect of these measures on Soviet exports
has not yet been computed.
This computation, however, shows that if French
and Belgian purchases from the Soviet Union con-
tinue during the whole year under their license sys-
tems as they have developed in the first five months of
those systems the total Soviet exports to those coun-
tries will have fallen off in the case of France by
$5,000,000; in the case of Belgium, by $2,000,000.
Which means that the Soviet Union, losing $7,000,-
000 in exports, will have lost, by reason of the re-
strictions placed by these two countries upon Soviet
trade, a total of 1. 4 per cent of its total exports. These
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? FIGHTING THE RED TRADE MENACE 249
losses from France and Belgium added to those from
the six countries that laid down complete embargoes
would mean that the Soviet Union had lost a grand
total of 1. 6 per cent of all its exports, unless it found
other takers for this amount of goods.
Furthermore, in suffering even a partial restric-
tion on its sales to France and Belgium, the Soviet
Union has suffered a partial restriction on sales to
countries that, important as they are in world trade,
represented only 9 per cent of the world's purchasing
power, or imports of $3,268,000,000 in 1929 out of a
world total of $35,000,000,000. If the Soviet Union,
however, were disconsolate over even so infinitesimal
a setback in its opportunities of trade, the prospect
would appear much more cheerful upon contempla-
tion of England, Germany, Italy, Austria, Denmark,
Norway, Finland, Latvia and Esthonia.
These nine countries present 31 per cent of the
total buying power of the world. In 1929 they im-
ported $11,769,000,000. And these nine countries
not only have not done anything, and are not doing
anything, and most probably will not do anything to
check Soviet imports, bat, by putting the financial
guarantees of their Governments back of trade with
the Soviets, are doing, and probably will continue to
do, everything possible to encourage trade with the
Soviets.
While headlines were large over every accession to
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? 250 FIGHTING THE RED TRADE MENACE
the ranks of those countries that had embargoed
Soviet trade, few, even among those most interested
in Soviet affairs, noted that from year to year, al-
most from month to month, the number increased of
those countries which were guaranteeing Soviet
credit and thus not only expressing governmental be-
lief that trade with the Soviet Union was a profitable
affair good for national economy but expressing, in a
certain sense, their official belief in the solvency of
the Soviet Government and their official faith in its
capacity and willingness to meet its obligations.
Every one of the nine countries named have systems
of export credits, in some cases intended to insure
trade with any foreign country, and in some cases in-
tended to insure trade only with the Soviet Union,
but in all cases operating chiefly to insure trade with
the Soviet Union. These credit guarantees usually
cover 75 per cent of the total amount of Soviet obliga-
tions, insuring sellers of goods to the Soviet Union
that the Government will pay three-fourths of a bill
owed by the Soviet Union if the Soviet Union were to
fail to pay. From these nine countries the Soviet
Union bought in 1930 39 per cent of its total pur-
chases abroad.
This is a generous percentage, it would seem, yet,
curiously enough, the export credit systems of these
nine countries have been accompanied by a much
greater import of Soviet goods into their territories
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? FIGHTING THE RED TRADE MENACE 251
than an export of their goods into Soviet territory.
Whether there is any causal connection or not may
be difficult to establish, but it is interesting to observe
that, whereas these nine countries sold $193,000,000
worth of goods to the Soviet Union in 1930, they
bought from the Soviet Union $340,000,000 worth.
The Soviet Union spent 39 per cent of its total funds
available for purchases abroad on purchases from
these nine countries, but of all the Soviet Union's
sales abroad 67 per cent went to these countries.
An export credit system, granting government
guarantees on the sales by its citizens to the Soviet
Union, may be interpreted in a way as an expression
of good will toward the Soviet Union, or, at any rate,
as an expression of a desire to improve trade rela-
tions. Curiously enough, however, those countries,
that grant such governmental guarantees, enjoy but
39 per cent of the Soviet Union's total purchases and
buy from the Soviet Union two-thirds of all Soviet
Union exports.
However that may be, a more important conclu-
sion from this analysis of Soviet foreign trade is that,
while cries against "Soviet dumping" were making
the World's economic welkin ring and while some ob-
servers noted with satisfaction that Europe was tak-
ing adequate measures, these measures, when added
up, result in the following balance: The Soviet Union
lost 1. 6 per cent of its total exports.
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? 252 FIGHTING THE RED TRADE MENACE
It was effectively debarred from submitting its
goods to 5 per cent of the world's purchasing power.
It was ineffectively debarred from presenting its
goods to another 9 per cent of the world's purchasing
power. It was encouraged to present its goods to 31
per cent of the world's purchasing power, while na-
tions representing 55 per cent of the world's purchas-
ing power did nothing one way or another officially
to influence Soviet trade, but continued privately to
do normal business.
All of the countries that put effective embargoes on
Soviet goods were countries with no diplomatic re-
lations with the Soviet Union, most of them were
countries with long standing political grudges against
the Soviet Union, and all were countries that really
suffered from Soviet exports, not in their home mar-
kets to any important extent, but in their foreign
markets. Special political differences and historical
reasons made it easy for Rumania, Hungary, Bul-
garia, Jugoslavia and Albania to cut off Soviet trade.
In Rumania, the question of Bessarabia has re-
sulted in a permanent state of latent war between the
two nations. One of the world's great rivers, the
Dniester, separates Rumania from Russia. It is not
so wide but that a row boat can cross it in half an
hour.
