3. 1918, the Russian Revolution

Bolshevik revolutionaries repudiated the foreign debt of the Tsarist regime. According to Eric Toussaint, the total amount of Russian debt in 1917 was £3,385 million, or $381 billion in today's dollars.

The debt of the Russian state was among the root causes of the communist revolution, and the repudiation of this debt by the revolutionaries participated in inciting western nations like France and the United States to send troops to Russia to support the tsarist forces and try to restore the status quo.

The repudiation of national debt by the communist regime was the largest debt repudiation in modern memory. Truly, it was the largest debt repudiation that we know about. The term repudiation is used when a country unilaterally decides to cancel part or all of the debt owed by the state. The revolutionaries repudiated the debt inherited from the tsarist regime because they didn’t recognise the legitimacy of the monarchy and considered that it was imperative to re-start their economy from scratch after the disaster of the first world war. Millions of Russian soldiers had died and the population was hungry and destitute.  

In 1917, just before the revolution, Russian debt had risen dramatically because of the cost of Russia’s involvement in the war. Russia had sided with France and England against Germany, Austria-Hungary and the Ottoman Empire (Turkey). Most of the debt was in the form of bonds that were sold to the general public in the nations allied with Russia in the war. But in the years prior to the revolutions, russian bonds were mostly sold in France. 

This is a well-known story in France. Russian bonds were a popular form of investment for anyone with a little money on the side. It was later revealed by the disclosure of the archives of the old regime that the tsar had corrupted influential politicians and journalists to promote russian bonds and convince the French public that Russia was doing well in the war and that the bonds were a safe investment. It was in the interest of the government of France to help Russia finance its armies because they were fighting in the same camp. The French population, on the other side, had also lost millions of people in the war. The nation’s economy was in shambles and resentment was brewing against the elite for not bearing their share of the war’s deadly toll. 

Even after the debt repudiation by the bolsheviks, russian bonds were still being traded in France and elsewhere, because investors and politicians simply couldn’t believe that the new regime could do such a thing as repudiating the debt. Many believed that the revolutionaries would be overcome by the tsarists. At the same time, the egalitarian and redistributive idealism behind the Russian revolution was inspiring social movements in Europe. Lenin and the communist party were calling for a global revolutionary movement. In France, England and the rest of Europe, labor and women’s rights movements were organising and taking action to stand up against the patriarchal proprietary class. 

The reaction by the establishment was repression, but also concessions. The example of the Russian revolution created the fear of the same happening in other countries. The repudiation of Russian bonds was a blow to the bourgeoisie and a ray of hope for the struggling working class. While soldiers, exhausted in 1918, mutinied when they were sent to Russia to fight the revolutionaries, workers and women were obtaining concessions from the bourgeoisie. For example, women obtained the right to vote in the United Kingdom in 1918, and voting rights stopped being conditioned to land ownership. In France, workers obtained the 8-hour work day and a progressive taxation system, which means the tax rate increased according to wealth. 

In Russia, the debt repudiation didn’t go without consequences. Creditor countries sent troops to support the tsarist armies in a civil war that lasted until 1922. About two million people died in combat, and a million more died in political violence and mass executions at the hands of both factions, the bolsheviks and the tsarists. On top of that, the economic isolation and requisition of food and resources by the communist regime caused famine and diseases that caused the death of six to ten million people. The total casualties of the Russian civil war is estimated between seven and twelve million. The political terror created a climate of paranoia which incited the new regime to shut down all dissent and devolve into totalitarianism with Stalin, where no voice was allowed outside of the governing party.

To conclude, the Russian debt repudiation is an extreme case. The Tsarist regime was an oppressive monarchy that could only be toppled by radical action, and the economic consequences of the debt repudiation were worsened by foreign intervention in the civil war. As we will see in the other historical cases, not all debt cancellations need to happen that way. Debt For Climate published an article on how we can achieve debt cancellation today.  

Thanks to Scarlett for her feedback and corrections.

This article is the third of series dedicated to the timeline of debt cancellations in history.