The Gnomes of London

At the end of March discussions, began between the British and Rumanian governments over various debts owed to British capitalists by Rumania. These discussions, of course, didn’t involve the interests of workers either in Britain or in Rumania but they are interesting in so far as they show how capitalism works as an international system.

In the past the City was more the centre of international finance than it is today. Foreign governments and companies used the capital market of London to raise funds. The Rumanian government was no exception. The capitalists expected a price for the use of their capital and got it in the form of interest on the bonds. Up to the Second World War the Rumanian government “met its obligations”, i.e., the capitalists got their share of the exploitation of workers in Rumania, as contracted. In the war, however, Rumania was an ally of the Axis Powers and this source of interest dried up in 1941. Ever since, the owners of Rumanian bonds have been clamouring for compensation. Although Rumania was on the losing side in the war most of these debts have yet to be paid. After the war Rumania fell into the hands of Russian State capitalism and was along with the other States of Eastern Europe, ruthlessly plundered to build up Russian industry and military might. In addition, many foreign-owned industries were nationalised without compensation.

After the death of Stalin the native Rumanian exploiting class began to complain about having to send so large a share of the loot they got from exploiting workers in Rumania to their masters in Russia. They sought to sell their products for as high a price as possible on the world market. The capitalists who had loaned money to previous Rumanian governments saw their chance. Ably aided by the Council of Foreign Bond Holders, they exerted pressure to see that before being allowed favourable trading terms Rumania paid up. In 1960 an Anglo-Rumanian Financial Agreement was signed, under which Rumania agreed to pay £l¼m. to settle certain debts. A further clause said that the settlement of the remaining debts should be discussed in 1966. Hence the recent talks.

Rumanian bonds are still traded on the London Stock Exchange and quoted in the Stock Exchange Daily Official List. For instance, 4 per cent Consols exchange at about £13 for £100 nominal stock. So do 4 per cent External Loan 1922 and 7 per cent Monopolies Institute 1929. Considering that some foreign bonds, like the Chinese 4½ per cent 1898, exchange at only 40s, this shows that some capitalists think there’s a comparatively good chance that their government can get something out of the Rumanian government as a price for access to the world market.

A glance at the list of foreign bonds quoted in the Official List gives a panorama of the past glories of British Imperialism. Russian, Chinese, Hungarian, Greek and South American bonds exchange for little or nothing. Interesting items are the Baltic bonds issued by Estonia, Latvia and Lithuania during their short period of political independence between the world wars. In 1940 they were grabbed by Russia and another source of interest dried up. Yet now these bonds exchange at what seems the surprisingly high price of £50-60. The reason for this is that although Russia got the land and industry of these countries unfortunately for them the gold reserves were kept in London. Talks between Britain and Russia over the division of the property of these former States still go on. The last round finished in April. These Baltic bonds are a better buy than those of Tsarist Russia (also still traded) which are never likely to be paid.

Russia and Rumania are not the only States negotiating with Britain over debts. Last August a delegation from Hungary was in London to discuss Hungarian bonds (now exchanging at about £14). Poland settled most of its debts in 1955, paying £40 for £100 face value. In 1960 Yugoslavia agreed to pay interest on some pre-war bonds. Thus on June 15 the interest on its 5 per cent Sterling Fund Bonds 1936 is due. Greece has also been forced to pay up.

The States of Eastern Europe in recent years have been gaining a degree of independence of Russia. Their privileged rulers now no longer have to share so much of the loot with those of Russia—-instead they are having to share it with capitalists in Britain, France and elsewhere! This is the price of “independence”. It is no accident that Yugoslavia has been forced to pay the most, precisely because it has achieved the most independence of Russia. In capitalism might is right and capitalists and their governments always drive a hard bargain. Incidentally, the Labour government in the person of junior Minister Walter Padley has been just as zealous in pursuing the interests of foreign bondholders as previous governments—thus showing their attempts to stir up xenophobia by talk of “the gnomes of Zurich” to be the hypocrisy it is.

Finally, it looks as if British capitalists are again moving in on the workers in Rumania. In March last year Lazards, the merchant bankers, signed an agreement with the State Bank of Rumania for a loan of £2m. from three British banks to build two cargo ships. This loan is to be repaid over a ten year period after delivery of the ships. At 5½ per cent rate of interest.


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