Key Points from Book: Oceans of Grain – How American Wheat Remade the World

OCEANS OF GRAIN: HOW AMERICAN WHEAT REMADE THE WORLD

by Scott Reynolds Nelson

By the spring of 2011, we were already seeing some of the longer-lasting results of the 2008 downturn. For example, a surge in the price of grain had led Arab states—which import most of their food—to stop subsidizing the price of bread in cities. Bread riots followed in an “Arab Spring” that would soon topple governments in Libya, Egypt, Tunisia, and Syria.4 Newspaper reporters were flying to the Arab world because of protests there, but as a historian I was heading to Odessa. Egyptian protesters called for “bread, freedom, and social justice” in 2011. I was thinking about calls for bread, freedom, and justice in the French Revolution of 1789, the downfall of Sultan Selim III in 1807, the European Revolutions of 1848, the Young Turk Revolution in 1910, and the Russian Revolution in 1917. Wars and revolutions now, just as in the past, have much to do with wheat. That is the topic of this book.

After Napoleon’s defeat, these vast fields of Russian wheat did not delight European landlords. They faced what is called “Ricardo’s paradox,” in which rents drop when food gets cheap. For forty years taxes on foreign grain slowed cheap sacks of Russian Azima and Ghirka wheat. But then a water mold, unknowingly carried in from America, killed potatoes and brought food insecurity that forced European states to open the trading floodgates to wheat again in 1846. A century-long contest emerged between the wheat fields of Russia and the wheat fields of America to feed Europe’s working class.

Russia’s boom went suddenly bust when larger boatloads of cheap American wheat burst across the ocean to European markets in the wake of the American Civil War. A group of US capitalists I call the boulevard barons helped break the power of southern enslavers and then stole a march on Russia’s grain trade. The boulevard barons who sold grain internationally had partnered with the Union Army to create a new financial instrument called the futures contract, which allowed a London merchant to buy ten thousand bushels of wheat in Chicago and sell it for future delivery on the same day in Liverpool, nearly eliminating the risk of price fluctuations. Other innovations cheapened the cost of delivering American wheat. An Atlantic telegraph allowed purchase of a futures contract. Portable nitroglycerin widened American rivers and cut through the Appalachian Mountains that separated American prairies from the coast. Huge sailing ships that could never pass through the Suez Canal were forced onto the Atlantic. While Odessa at its peak could export a million tons of wheat each year, New York in 1871 was putting a million tons of grain afloat every week. As a result, European grain prices dropped nearly 50 percent between 1868 and 1872, and merchant fees fell along with them.

By the middle of 1873, Ricardo’s paradox had done its work, not just in Russia but in much of Europe. The Bank of England, fearing that banks were using interbank lending credit to buy up real estate, raised interest rates in a series of shocks. A real estate bubble burst almost simultaneously in Odessa, Vienna, and Berlin. This so-called Agrarian Crisis set off a financial panic and then an economic downturn in agricultural Europe that was so severe, it was known, until the 1930s, as the Great Depression. In other words, oceans of grain had flooded Europe, and the flush times in Odessa and much of central Europe had ended, sending shock waves around the world.

By 1914 Russia’s anxiety that Turkey might halt Russian grain shipments on the Black Sea helped start World War I—a war over nothing less than foreign bread. If Russia lost a hundred thousand men in the Russo-Japanese War, it would soon lose millions more in a fight over oceans of grain. The loss of those men, who would never again harvest wheat, brought Russia again to the brink of revolution.

Parvus argued that trade was an active force of its own that “took on different forms and gained different meanings” in different societies, ancient, medieval, and modern. Trade, he thought, shaped the structure of a society in ways impossible to fully understand. Empires assembled themselves on paths of trade, he argued, but were vulnerable on the very lines that connected them to their inner and outer rings; they were thus prone to what he called Zusammenbruch: crash, breakdown, or collapse.

Historians, like geographers, have long treated grain ports, like those on the Black Sea, as the children of thalassic empires, with chumaki as their worker bees. The ancient Greek word for such a provisioning port is emporion, the source of the word “empire.” Port traders in these emporia specialized in gathering, drying, and storing food for shipment. Grain came as trade, tribute, and tax to the emporia to feed the arms of an empire, its armies. In the historian’s imagination the Roman Empire built trade in western Europe, for example, with Roman roads, mileposts, and armies. There was no China, the story goes, until Han canals fused the region into a single domain of trade. New archaeological evidence suggests that the folklorists have it right and that the black paths are prehistoric, nearly as old as bread itself. The proof that trade pathways were ancient is a tiny bacillus that traveled inside chumaki traders’ bodies: Yersinia pestis. This is the bacillus that causes what we now call plague but which Slavs called chuma. The chuma crossed these plains many times, each time riding on trading paths, each time decimating human populations in the towns where grain was gathered and stored. Chuma rode with the chumaki.

Empires, for their part, claimed to police and protect trade. Indeed, imperial origin stories often emphasize their capacity to drive out competing tax agents (commonly called robbers, highwaymen, or pirates). Thus Thomas Carlyle, in extolling the growing empire of Frederick the Great, argued that his greatness came from defeating the robbers that demanded tribute for trade over the Rhine River and were ruining Germany. “Such Princes, big and little, each wrenching off for himself what lay loosest and handiest to him, found [robbery] a stirring game, and not so much amiss.”11 The heroic Frederick the Great replaced local robbery with an even more stirring game: taxing robbers. For their own benefit emperors might cheapen trade by forcing imperial subjects to improve roads, build milestones and lighthouses, and deepen ports. In improving prehistoric trade routes between towns, an empire could decrease the price of what I will call, using an obsolete medieval term, “tollage,” a travel cost measured in pennies per ton per mile.12 This was simultaneously a measure of cost, weight, and distance. Absolutist states turned rivers into canals and built roads across rivers. Decreasing tollage centralized imperial authority and quickened trade.

In AD 324, after the Roman caesar Constantine defeated his rivals and declared himself emperor, he relocated the Roman Empire’s imperial capital to Byzas’s hill, the safe and defensible pinch point that could command the fruits of Europe, Asia, and Africa. In AD 330, Constantine planted a column—Cemberlitas—at the forum in Byzantium, rededicated Byzantium as New Rome, and invited wealthy and well-connected families throughout the old Roman Empire to settle there. At some point later it became Constantinople, in Constantine’s honor. Traders from the Black and Aegean Seas delivered grain to horrea, massive grain banks large enough to feed citizens during long sieges by rival empires.6 These granaries of the Greek, Roman, and Byzantine empires were the predecessors of modern banks.7 Elite citizens made deposits and withdrawals of grain by wheelbarrow. Individual vaults in a horreum stored valuables, just as safety-deposit boxes do in many downtown banks today. A receipt for grain stored in the horreum could be bought or sold, used as collateral for contracts, or seized in cases of debt. These grain receipts collectively became what we now call money.

Grain pathways on the Black Sea and the Mediterranean fed Constantinople for over a thousand years, from before 300 to 1453. The imperial city’s wealth rose and fell as the black paths converging on the Bosporus expanded and contracted.

Medieval western Europe, often cut off from regular trade with the East after 542, changed drastically. Just as bread made prehistoric fables and fed ancient empires, it increasingly defined medieval serfdom as lordship over smaller communities by bread-making masters. Formal slavery declined in Eurasia after the Plague of Justinian, though historians hotly debate whether that was a result of the plague. Aristocratic landlords derived their control in part by monopolizing grain milling and distribution, just as the kings of ancient empires had done, but on a much smaller scale. In medieval England, for example, the word “lord” comes from hlāford, meaning “loaf-ward”: the person who guards the loaves distributed from the medieval mill and bakery. The word “lady” derives from hlǣfdīge, meaning “loaf-kneader”: a maker of loaves. In part because the communal bakery turned wheat or rye into bread, controlling the loaf meant controlling people.

in 1347, the four horsemen appeared again, heralding the return of Yersinia. The bacillus probably came from the eastern steppe over the Silk Roads that stretched across the Mongol World Empire into the khanate of the Golden Horde. Yersinia’s first documented arrival from this route was in the Black Sea emporium of Caffa. According to legend, Mongols besieging the emporium became infected with plague. They then allegedly used catapults to launch infected corpses over the city gates.20 While there are reasons to doubt the story, new genetic evidence suggests that the plague’s expansion from Central Asia onto the steppes as early as the 1200s may have helped the Mongol Empire’s expansion east and west from what is now Mongolia.21 The plague started overland but found access to water by 1340. Genoese and Venetian traders had by this time established long-distance sea routes from the Black Sea to the Mediterranean, as chartered agents of Constantinople. Along with grain and slaves, traders again brought plague through the gates of Constantinople to western Europe.

Historians have called these Genoese and Venetian traders the first capitalists.22 As authorized agents of the Byzantines between eastern and western ports, and as competitors with the Islamic empires in the south, they combined the technologies of both trading corridors. Early in the fourteenth century they blended ancient Roman and more recent Islamic traditions, including Arabic numerals and legal agreements, to craft private bills of exchange. Using advances from Islamic algebra, these capitalist traders helped to develop and define double-entry bookkeeping. The first European central bank, the Camera del Frumento in Venice, purchased grain from ports along the Black Sea, then resold it to cities on the Mediterranean. Merchants borrowed from local citizens by drafting bills of exchange in banks with a promise to pay in ninety or more days when the ships came in. These bills of exchange were private credit instruments, guaranteed by the name of the trader, which any citizen could buy. A bill of exchange increased in value between the time it was issued and when the ship came in, allowing it to act as a privately issued, appreciating currency.

Between 541 and 1347, control of bread became baked into the laws of medieval European, North African, and Arabian empires that surrounded the Bosporus Strait. Kings, queens, aristocrats, sultans, and tsars built their power on grain, regulating the size of loaves and carefully controlling grain and the boundaries where it was grown. As late as 1835, bakers in Britain remained public employees paid by the state for each loaf of bread they produced. The same was true in Istanbul, where the nan-i ‘aziz, or standard loaf, weighed exactly 110 dirhem (just over thirteen ounces). If a baker’s loaf weighed less, a market inspector might instruct local police to parade him through the streets or, after multiple offenses, nail his ear to the door of his shop.24

When the Ottomans took over Constantinople in 1453, they had nominal control of Podolia but shortly lost it to Polish and Russian princes who warred over the bread lands on those rivers. While the princes put their names in chronicles, farmers north of the Black Sea did the more vital work over the centuries, seeking and recombining nearby strains of wheat to suit the weather. We have little worthwhile from the princes, but the thousands of unremembered farmers left us something much more vital for humanity’s long-term survival: dozens of varieties of wheat suited to dozens of microclimates and seasons. The later settlement of western Canada, the northern United States, Argentina, and Australia would have been impossible without the many landrace strains of wheat that developed over centuries in this region.

Empires survive only as long as they control the sources of food needed to feed soldiers and citizens; they fund themselves by taxing those who sell it. Before empires, ancestors of the chumaki traded food over long distances along with salt and leather. International trade shrank in periods when Yersinia pestis, in the bellies of rats, found a way to hitchhike on those same trade routes.

In 1768 Catherine relied on another note to trade for her army’s wheat: the assignat. The assignat, like the British pound, became an imperial currency and represented the tsarina’s future promise to pay for provisions. In the same period Catherine seized land previously owned by the Russian Orthodox Church inside Russia’s borders. Serf owners could buy this land with assignats. This made the assignat a particularly valuable form of currency.3 While Venetian bills of exchange represented grain in motion, Catherine’s assignats represented recently seized land and future land her empire would take by force.

The assignat was a bold move, one France soon adopted when French revolutionaries seized lands from the Roman Catholic Church.4 Catherine created a national debt in a strategy that would be embraced by an infant empire created at nearly the same moment: the United States. Indeed both Thomas Jefferson and Benjamin Franklin plunged into the same physiocratic waters that Catherine did. Physiocratic ideals shaped their vision of agricultural colonization of the West, investment in education, and plans for the export of grain. Those ideals would define their plans for independence.5 While French reformers defined American and Russian plans for expansion by wheat, the plan to turn national debt into currency likely came directly from capitalist traders in the Dutch Empire. Hope and Company in the Netherlands advised all three empires. A Hope representative would have pointed out how in the seventeenth century the Netherlands had established a national debt, created a national bank to issue that debt, and then used debt to expand its military empire around the world. Shortly after the Dutch expansion, Great Britain appropriated a deficit-based expansion strategy when English lords persuaded the Dutch prince William and his wife Mary to take the English throne. William formed the Bank of England in 1694. British consols and bonds helped fill the Atlantic with English ships. Historians have called this the financial revolution.

North America’s flour barrels occasionally made it all the way across the Atlantic, particularly during European wars. But the risk of selling flour was always great since the price and condition of flour barrels could change drastically during a stormy two-month journey across the Atlantic. Even still, the former colonies’ love affair with grain never faltered. From 1793 to 1815, continuing wars between Republican France and Europe provided opportunities for the Americans to provision the ships, as well as the tropical islands, of Britain, France, and Spain. In those years the country exported an average of a million barrels of flour a year at an average price of nearly $10 a barrel. “Our object is to feed and theirs to fight,” quipped Secretary of State Thomas Jefferson in 1793 after news emerged of France’s expanding war with the European powers. “We have only to pray that their souldiers may eat a great deal.” The French Revolutionary Wars drove wheat prices so high in Europe that American ships could occasionally feed ports in Spain, Italy, and Britain.

Because physiocrats viewed farmers as the primary creators of wealth, they saw landlords as a drain on the national balance sheet. As a result physiocrats argued that taxes should rest on landowners. In both the United States and Russia, powerful landed interests (enslavers and serf owners) strongly rejected this principle.23 Spending to boost agriculture, however, they strongly supported. As a result both landed empires imposed minor taxes on imported manufactures, because taxing goods at a few ports was simpler than collecting income or land taxes.

Provisioning flour to cities at war was as risky for the United States as it was for Russia. American shippers had to be especially inventive in defying British and French blockades. They introduced the concept of the “broken voyage” in which a shipper would bring sugar from a French colony, stop for a day in Baltimore to pick up grain, and then ship out again for France with a new ship manifest that declared all the goods to be American. Whether merchants practiced intentional physiocracy or not, selling grain past imperial blockades built merchant fortunes and expanded the international market for American flour, which fed the US Treasury before it had even erected a building.

In 1784, Britain imposed Foster’s Corn Law to ratchet up Irish grain imports over Russian and American grain. The danger, as the English Crown and Parliament saw it, was that spending foreign exchange on wheat would pull gold and silver out of Britain. Subsidizing grain fields just offshore was a classic imperial move, one that Julius Caesar would have applauded but that physiocrats abhorred. Britain expanded those corn laws in 1815 after Napoleon’s defeat. The United States responded with the American Navigation Acts of 1817 and 1818 to block selected British manufactures. Britain responded in turn with the Free Port Act of 1818, one of the most important and understudied acts in American history. Proclaimed in August 13, 1818, it blocked American ships from entering British ports, with the exception of the distant Canadian ports of Halifax, Nova Scotia, and St. John, New Brunswick. Once a Canadian buyer took grain and other provisions, that merchant could only use British ships to carry this American grain into the Caribbean.28 The result in America was a 50 percent drop in the price of flour and the American panic of 1819, perhaps the severest panic in nineteenth-century American history. Land prices dropped 40 percent, particularly along the Mississippi River. The US Land Office and the Second Bank of the United States seized thousands of acres for defaulted loans. In the sixteen years between 1803 and 1819, the total value of American wheat and flour exports had averaged $10 million, about the same as cotton exports. By 1820 American wheat and flour had shrunk to one-fifth the value of cotton exports. By the 1830s it had sunk to one-tenth. Cotton replaced wheat as America’s most valuable export. A Catherine-style policy of expanding by grain export appeared on the decline, at least relative to the growing empire of cotton.

Catherine was dead by the time Napoleon’s armies expanded east across Europe, adding up victories and bodies, crushing baronies and kingdoms. Understanding the physiocratic principle that food was power, he did his best to close off every European grain port to English commerce. He did so by seizing towns along the Baltic, North Atlantic, and Mediterranean coasts and inventing nearly a dozen tributary republics to control them, with every republic sworn to block British trade. Britain responded to this “Continental System” with orders in council that blockaded every one of Napoleon’s ports. No neutral state, according to the British orders in council, could use a port that blocked British commerce. This was warfare, in part, through bread: Britain couldn’t buy grain in European ports, but France couldn’t easily carry bread over water to feed armies. Bread brinksmanship of this kind would be repeated in World Wars I and II. By 1807, when it came to bread, the British and the French had checked each other. Britain could not buy flour abroad, and Napoleon’s armies would have to lug their food overland along vast army corridors with tree-lined vistas that are still visible in Europe today.

In roughly 7000 BC, South American hunter-gatherers began selecting and modifying nightshade plants for their fleshy roots. They created what we call the potato, though in the region that became the Inca Empire, hundreds of different varieties emerged, with dozens of different names. Phytophthora infestans coevolved as the potato’s parasite, an invasive water mold that colonizes, reproduces inside, and then devours potatoes, their living host.1 After Europeans encountered the Americas, they transplanted American potato tubers throughout western Europe, between roughly 1700 and 1840. The potato’s dry and dormant transmission over the cold Atlantic appears to have temporarily rescued the plant from its well-evolved, invisible freeloader. Though it took many decades for European growers to adjust to the food, the fleshy, bulbous, white potatoes soon became a crop for farmers, peasants, and their neighbors, most famously in Ireland but also throughout continental Europe. An underground crop that required work to bring up from the ground, potatoes were relatively safe from the depredations of a different kind of freeloader: imperial soldiers. Potatoes, unlike wheat, do not have a Persephone stage of dry safekeeping. Locking up a potato for long-range transmission to an imperial capital is difficult. Thus wheat-growing peasants began to grow potatoes for themselves and for those who lived near them. Because these vegetables traveled short distances on farmers’ trucks, Americans have called them “truck crops.” Within a few generations a social hierarchy emerged in Europe that resembled the Incan hierarchy. In the Inca Empire potatoes fed agricultural workers, while the dry, transportable starches—quinoa and other grains—were locked up and delivered to the elite.

Famine and revolution in the 1840s, though, burned new grain pathways from Russia into Europe. With infestans on the loose, bread increasingly replaced potatoes as poor peoples’ food, most decidedly in European cities whose sizes had always been limited by the availability of food. By 1850, as many as four hundred ships per year carried grain directly from the Black Sea to European ports, providing food for Europe’s urban workers.18 This cheap Black Sea wheat altered the quality of bread that Europeans ate and, with it, Europeans’ sense of divisions among social classes.

Odessa’s bounty allowed working families in the 1850s to buy their bread white, which most people preferred, not recognizing that the bran and endosperm in brown bread made it a healthier food because it supplied more protein and delivered indigestible bits (“roughage”) that scrubbed the sides of intestines. Urban, working-class families got shorter over the mid-nineteenth century, probably in part as a perverse side effect of the white bread upgrade that the wheat fields around the Black Sea provided to working-class diets.

Thus emerged what Parvus called the European consumption-accumulation city. Labor and capital accumulated where food was cheapest. Cheap food arriving by water meant that cities with the deepest docks thrived. As emigrants and orphan children from nearby rural areas filled these dock cities, would-be manufacturers collected and deployed them. Reformers and capitalists huddled poor people fresh from the countryside into workhouses, where they assembled goods from foreign and domestic sources: matchsticks, pencils, hard candy, lead toys, wooden boxes, and combs, to name just a few. Near the docks, storage and further processing of food expanded. Far from the docks, inland processing of grain declined. Tens of thousands of inland wind- and watermills became historical relics within a generation. Dozens of inland towns competed for river, canal, and railroad access to these consumption-accumulation cities. The successful ones became cities by drawing cheap food from coastal ports and specializing in manufacturing. Capital increasingly accumulated at ports in the hands of middle- and upper-class families with too little land to spend it on.

Both the United States and the Russian Empire ended forced labor without full cooperation of the owners of human flesh. The two empires disowned manorial lords and enslavers in a cataclysmic end to slavery and serfdom with effects that reverberate to this day in Russia, Poland, Ukraine, and the American South. Historians have tended to laud imperial and nationalist heroes for the end of slavery and serfdom: Catherine the Great who professed to dislike the harsh punishment of serfs; “the liberator” Alexander II, who demanded that his Council of Ministers end bondage by shouting, “I desire, I demand, I command”; and Abraham Lincoln, who wrote in 1860 that he could compromise with slaveholders on other things but would “hold firm” against slavery’s extension “as with a chain of steel.” Certainly the language used to end slavery and serfdom dropped from their lips like sweet-smelling myrrh.6 As we shall see, the end of serfdom and slavery had little to do with the bold pronouncements of emperors and presidents, however. The shearing of bondage and wheat, of slavery and capitalism, was a complicated and bloody matter. It had much to do with how wheat grew, who harvested it, and how farmers expanded across the plains. The economics of railroad freight, the influence of foreign investors, and the impact of war contributed more to the rapid end of serfdom and slavery than liberal impulses and amber waves of grain.

Russia’s ninth invasion of Turkey ended rather differently than the previous eight. It started the first global war over bread since Napoleon, and its conclusion would, more than any other factor, contribute to the end of serfdom in Russia. In the previous eight wars between Russia and Turkey, the British and French monarchies occasionally defended the Ottoman Empire against Russian and Austrian aggression, but Russian physiocratic expansion had mostly benefited those empires as it provided them with cheap grain. In part because France and Britain had fostered Ottoman independence movements in what became Greece and Egypt, they mostly they looked away as Russia and Austria alternated in carving off Ottoman-controlled regions along the Black Sea. But cheap bread, and Western European empires’ dependence on it after 1845, kept the attention of Britain and France on the region. Both states worried about a Russian grain monopoly. European observers of grain exports argued that Russia had been intentionally disabling its competitors on the inland ocean. The most glaring example was that the Russians had been entrusted with ensuring that the Danube exited freely into the Black Sea, but for decades they had allowed it to silt up, weakening the export prospects for the independent states of Wallachia and Moldavia.

Alexander, like nearly every tsar after Catherine, regretted serfdom, but the Russian failures in the Crimean War accelerated change. The empire’s key financial advisor, Julius Hagemeister, faced three related problems that became intimately connected after Nicholas’s abortive war for control of the Bosporus Strait. In the long term, according to Hagemeister, serfdom would always hold back full exploitation of the plains above the Black Sea. Having visited numerous farms and landed estates in that region in the 1830s, he felt that family ownership yielded more crops per acre and produced the cleanest, most sellable wheat. Serf estates, he had learned from grain traders, produced dirty wheat, filled with rocks and sand. As the wheat traveled inland, he continued, serfs had no desire to look after the grain and so often left it uncovered, causing it to spoil on its way to market and sell at a steep discount. In Russia, according to Hagemeister, wheat would always have a serfdom problem.

Unlike in the United States, the formerly bound population of Russia actually received land, even if it took small farmers more than a generation to pay it off. No such redistribution took place in the American South after emancipation, a result that has hobbled the family fortunes of the formerly enslaved to this day. As in Russia, wheat production relocated when slavery ended in the United States. After the American Civil War, grain came increasingly from the area around the Great Lakes rather than its former preserves in Virginia, Maryland, Missouri, and Kentucky.

Nicholas’s dream of capturing Istanbul with a serf army ended with a humbled, almost bankrupted empire in which his son, in a desperate attempt to stave off bankruptcy, abolished serfdom. The Peace of Paris in 1855 placed limits on Russia’s expansive power. The treaty created an independent international body that took control of the Danube’s grain route through the Black Sea. Within a few years, European powers would discover a way to blast out the Danube’s exit and allow a new grain state, Romania, to emerge as Russia’s miniature rival.31 Finally the allies against Russia banned Russian warships from passing through the strait at Istanbul. With serfdom ending and Russian imperial expansion diminished, Britain and France felt they had tamed Russia.

As historian Laurence Evans has suggested, the railway company, as both a road and the monopoly agent on that road, defied the logic of traditional economic models of supply and demand curves: “What is [the economist] to make of a good [like a railroad] that cannot be stored; that is dissipated forever if not used when it is available; that cannot be removed from the market except at substantial cost to the supplier; and that must be operated at less than maximal efficiency if it is to be of the greatest benefit to the market and the economy as a whole?”46 In many countries, the government response to the difficulties posed by this kind of monopoly pathway was to nationalize railway companies. As we shall see, a decade after the American Civil War brought cheap grain to Europe, Prussia and Russia assumed control of most railway companies, producing interesting, perverse incentives. Adjusting railway rates could sharpen or dull the effects of tariffs, encourage fiscal overreach, and make state capture by political elites more appealing. Continued private ownership in the United States before the Civil War, however, produced a different set of incentives. Because of the intertwining of economic and political power, railroad trunk lines remained in the hands of the merchant princes, allowing them to multiply and diversify their assets. From the outset, these merchants’ obsessive attention to the wants of the railroad’s customers turned them into social engineers, for railroads could carefully calibrate the prices charged for every manner of good that passed back and forth. A minor change in railroad rates could promote or dampen incentives—crop by crop—for farmers, artisans, and manufacturers. For example, grain always traveled at the cheapest, fourth-class rate on a railroad through the midwestern plains, making grain growing an obvious first choice for farmers near its edge. Grain farmers thought twice about diversifying into crops that would be charged second- and first-class rates. Monopoly corridors, by favoring a single commodity with low shipping rates, helped strengthen monocultures: wheat in the Midwest and cotton in the South. Railway companies also operated coal and copper mines along their corridors and frequently charged higher rates to competing mines to strangle their earnings.47 High rates for shipping manufactured goods to the West led rural people to manufacture their own substitutes, but by suddenly dropping the rate for imported goods, a railway company could destroy an inland manufacturer. American farmers on these monoculture railway lines did not despise capitalism; they despised the publicly favored, privately owned railway companies that—once built—charged rent on their every interaction with the outside world.

The Republican merchant princes of New York, Boston, and Philadelphia understood intimately why a railroad through the slave state of Missouri would fail miserably. As we shall see, slavery helped produce a society with an insubstantial middle class of resellers and consumers of eastern goods. Impoverished enslaved people couldn’t buy cloth, razors, plate glass, or hard candies. Without a sturdy middle class of consumers, no one would erect stores to sell eastern goods in interior regions. While it seems ironic that New York millionaires would resent slaveholders for their inordinate wealth, this was precisely the boulevard baron’s problem with slavery. From the founding of the Free Soil Party and the Republican Party that followed, these important merchants hated slavery not on moral but on economic grounds, declaring that slavery degraded labor, slave and free, producing a society of extreme inequality.56 Nonslaveholding communities had “populous, thriving villages and cities,” according to Republican orator and Iowan James Grimes, but if southern congressmen forced slavery into productive territories like Nebraska, then the developmental possibilities of the West would be lost.

The tension between bondage and railroads, between slavery and capitalism, was more than just political. Most southern railroads faced a serious problem with backhaul: railway cars moved east with the slave-produced staples of cotton and tobacco, but the demand for hardware, dry goods, manufactures, and imports in slave states was minuscule. Railway cars returned from east to west mostly empty, effectively doubling the price of goods sent from west to east.

A conflict over inequality and forced labor in the Western Hemisphere would alter the world’s grain pathways. Once the South seceded and Confederate cotton was blockaded, the Union cabinet and Congress knew that it needed a new crop for foreign exchange in order to fight secession. And Americans in the War Department recognized that if the nation’s roads could be refashioned to transport wheat more efficiently than the Ukrainian chumaki, they might turn Lake Michigan into another Black Sea and Chicago into another Odessa. The pathways of the world’s grain might change again. In December 1863, Peter H. Watson and David Dows had created a new technology that would alter the flow of grain: a futures market that could bring oats and grain to soldiers stationed a thousand miles away. A new kvassy empire, built on the export of wheat, was in the making.

Whereas Catherine the Great had successfully issued assignats to pay for her war against the Ottoman Empire, Union-issued paper money had given Watson nothing but headaches. After February 1862, the War Office was paying for supplies with the US Treasury’s legal tender notes—called greenbacks. Unlike dollars issued by prewar banks, these were not backed by gold or silver reserves. As a result they traded for as little as thirty-five cents to the gold dollar. Two prices were thus frequently quoted for commodities during the war: a low price for gold dollars and a higher one for greenbacks. The other problem for potential contractors was time: because the government paid its debts in greenbacks, signing a contract with the government could be risky if the value of the currency dropped by the time government auditors approved the purchase. Even worse, after mid-January 1863 the commissary-general’s office had been paying contractors not with checks but with “certificates of indebtedness” that would be payable at a later, unspecified date.10 Of course, if the Union won an important battle or two in the interim between billing and payment, the greenbacks would be worth more, sharply increasing the profits of a contractor.11 This made the intelligence gleaned by spies in the War Department valuable. The rapid fluctuations in both the price of oats and the value of the notes paid for them made contracting with the government risky. The number of contractors willing to assume the risk shrank through 1863, and the prices of provisions rose.

The futures contract was not entirely new. By the mid-nineteenth century, a forward contract for goods where parties agreed to future delivery, a fixed price, and a fixed quantity was well established and decades old. Parts of the process were centuries old. In 1859, a Baltimore commission merchant named Sackett with good references might enter into a contract with Mr. Tiller, a farm owner in Indiana, to take 253 bushels of his country wheat after harvest based on evidence of previous sales. Sackett would offer Tiller a cash advance for this business, which could be used to buy more land, pay for seed and provisions, or buy harvesting equipment. That contract might then be sold to a flour mill operator or a broker who collected such receipts or even sold to other brokers. A bank would certainly lend money to Sackett based on evidence of contracts in hand. Tiller and Sackett’s contract might pass through four or five hands, and a speculator who knew of a coming wheat shortage might pay more for it.

But the army’s futures contract had new features: a fixed month of delivery; a fixed percentage paid by each party to guarantee the contract (the “margin”); a standardized quality based on third-party inspection; a standardized (and smaller) quantity (one hundred or one thousand bushels), which was called the “contract”; a third-party arbiter (the Chicago Board of Trade) that collected the margins; and the arbiter’s legal authority to punish the buyer or seller for nondelivery. An Illinois state charter ensured the board’s arbitration committee had authority over these contracts. The harshest sanction was expulsion from the Board of Trade.

Using the force of nearly 275,000 atmospheres in nitroglycerin, humans could shatter molecular bonds in shale, limestone, or slate, bonds produced by planetary and interplanetary forces measured in millions of pounds per square inch. Civil engineers thought of it more viscerally: this new explosive could rip holes in the world’s mountains and blast passages in rock, allowing the construction of railway tunnels through mountains and turning inland river towns into ocean ports. Small cities like Antwerp, Rotterdam, and Amsterdam would become the planet’s grand gateways. Contractors exploded thousands of containers of nitroglycerin underwater in the five years after the accident in Colón. They had a dramatic effect on international trade by deepening ports, shrinking the distance between them, and allowing a radical realignment of grain pathways.

The merchants of Antwerp understood better than most how cheap grain could reshape Europe. After the American Civil War, the Antwerp Chamber of Commerce used Nobel’s new explosives to widen and canalize the Scheldt River, then tore down the historic city walls to erect a continuous wharf space nearly three miles long. Antwerp became an ocean port large enough to service deep-draft ocean vessels from anywhere in the world. “The big city,” to quote Parvus, “discards national egg shells and becomes the hub of the world market.”10 Antwerp became a consumption-accumulation city.

The new competition from Antwerp prompted the Dutch government to hatch its own Antwerp. It spent over three million Dutch guilders to blast through the “Hook of Holland,” to turn the inland town of Rotterdam into a seaport city for steamships. Once the route opened to steamship travel in 1871, Rotterdam—with easy access to hungry German cities along the Rhine—vied with Antwerp for the status of biggest grain port in continental Europe.

During the Middle Ages, the term “last mile” referred to the end of a journey or to death. Beginning in the 1970s, military suppliers and Bell Laboratories engineers redefined it. In their quest to minimize delivery costs, they identified the last mile as the longest and most expensive part of any delivery. Whether one delivers electricity, water, or bread, the last mile will consume up to 80 percent of the total cost of getting the product to the consumer. It includes things like storefront rent, hand delivery, physical connection, and billing to a house, all of which are distinct and particular. They require people, negotiation, and settlement of bills. Last-mile costs are the reason rural areas in the United States were the last to receive telephones in the nineteenth century, electricity in the twentieth century, and broadband internet in the twenty-first century.15 If we include grinding and baking in the last mile of grain’s delivery, a loaf of bread in your hand costs over one hundred times the price of the grain that goes into it. Yet, because the last mile was such a large part of the price, cheapening the long, narrow end of the supply chain had a profound effect: cheap grain made cheaper bread, especially in deepwater ports. A four-pound loaf of bread in the city of London cost an average of 8.5 pence in the 1850s but just over 5 pence by 1905.16 For new consumption-accumulation cities like London, Liverpool, Antwerp, and Rotterdam, consumers inside the last mile got the lowest prices. For wage workers, who for centuries paid half their wages just for food, cheap food in port cities became irresistible magnets after 1868. Irish and Scottish families moved to Liverpool and London; Antwerp drew dockworkers from rural Belgium, the Netherlands, France, and Germany. Just as American railroads from the 1830s to the 1850s allowed a surge in the size of the American port cities of New York, Philadelphia, and Baltimore compared to midsize American cities, so these European ports—favored by free trade and built by controlled explosions—began to grow more dramatically than other European cities. Antwerp’s population was just over 88,000 in 1846; by 1900 it was 273,000.17 American grain ships gave Antwerp international reach.

Industries emerged in the places where raw materials were abundant, food was cheap, and manufactured commodities could flow backward in the railway cars and ships that brought in food. Most disturbing to German and French landlords was that cheap American grain threatened to drive down rural rent in the European countryside. The explosion in 1866 was an accident, but the long-term effects of nitroglycerin on the black paths connecting growers and eaters of grain would, in just a few years, bring agrarian crisis to Europe.

Nitroglycerin helped speed the decline of the six-month bills that had once kept commodities afloat all over the world. The most memorable change wrought by nitroglycerin was the creation of the Suez Canal, which opened a route between the Indian Ocean and the Mediterranean that bypassed the Cape of Good Hope on the southern tip of Africa.28 After its completion in 1869, ship travel times from London to Calcutta dropped from six months to less than thirty days.29 A continuous journey could also supplant both the overland Silk Roads and the two-part passenger journey that required changing ships in Egypt.

Why did speed not matter to grain ships? The underwater telegraph, once completed and running reliably in 1866, perfectly complemented grain delivery by sail; combined with the futures contract, it simply changed the way that goods were ordered and paid for. As Walter Bagehot pointed out, “The telegraph enables dealers and consumers to regulate to a nicety the quantities of commodities to the varying demand.” A grain dealer could order grain in New York and either sell it before it arrived or have the skipper wait until the ship docked at the Isle of Man to determine if it would go to Hull, Liverpool, London, Antwerp, or Rotterdam. More disturbingly for London merchants, however, once grain was afloat, granaries became unnecessary in expensive cities of demand. If grain prices shrank, grain could wait in cities of supply like Chicago, Minneapolis, and Milwaukee. Thousands more bushels “on the float” at sea heading toward Europe could be ordered in transit. Just as wartime Cincinnati grain and oat dealers could be outfoxed by the Union Army’s use of futures markets and telegraphed orders, so English dealers were bypassed by a large-scale grain trader who could use the telegraph to order a hundred thousand bushels on the Chicago Exchange and—on the same day—sell it for future delivery in London or Liverpool. Buying and selling on the same day effectively eliminated the risk of a change in prices. Between 1866 and 1873, the “margin”—the difference between the buying and selling prices—for grain traders shrank from 20 percent to 1 or 2 percent for vastly larger quantities of grain. For a trader this meant that a loan for a six- or nine-month journey was unnecessary. Established grain traders who had already sold what grain they bought had less need to borrow.

Prussia’s need for foreign grain to fight a war was visible to everyone, and that stung. Men without titles, otherwise unknown because they lacked a “von” in their name, knew the dispensation of Germany’s forces. No German officer could order these footloose grain traders in fashionable hotels to work any more quickly. With thousands of ships at sea carrying grain, war had changed. Supply lines often became external to empires, internal lines were no longer always the most efficient way to feed an army, and news of an army’s victory or loss determined the price it paid for its food. Grain at sea made it increasingly possible for French, British, Italian, German, and Belgian armies to invade other places without worrying overmuch about finding local supplies or using costly, fuel-inefficient battleships to supply food. European imperialism after 1866, thanks in part to American grain, became easier for European empires to imagine. If foreign grain helped make a saltwater invasion easier, it also made that invasion everyone’s business. “Newsrooms” in the spacious trading halls of grain-receiving ports—London’s Baltic Exchange, Liverpool’s Corn Exchange, the bourses in Le Havre and Marseilles—kept abreast of every army at war, becoming the information gatherers of Europe. Traders received telegrams with the freshest news, well before it reached newspapers or general staffs. The grain exchanges accumulated stories of storms, revolutions, delayed soldiers, failed campaigns, droughts, and the high prices that resulted from these events. These traders, while unknown to von Goltz, knew everything. They traded on armies’ successes or failures, buying and selling boatloads of grain before it arrived in port. Warfare summoned pulses of grain, and the lack of grain could halt it. European cities competed with armies on the same exchange. Cities relied on fresh news and international markets to ensure their food supply, empires and soldiers be damned. This was the world that grain traders knew and the Prussian army despised. The London Baltic Exchange, the Berlin Bourse, and the burzha in Odessa received many of the same newspapers and magazines. These had been the multilingual centers of the world’s news for centuries, the true centers of power, the nerves of the world. Within a few years the Prussians would desperately need men in the grain trade, though this irked military officers to their core.

Marxists rejected traditional family life for its enslavement of women. A diverse and constantly squabbling group, they made inroads into working-class communities, particularly among skilled workers and professionals. Marx, in his ambitious, world-spanning histories, hoped to establish a model for the entire world economy that explained multiple things at once: the alienation of workers, the tyranny of husbands, class hatred by elites, the failure of religion, the solution to poverty, the brutality of states and empires, the horrors of child labor, and the evils of slavery. Marx’s understanding of the world and the future flowed from his understanding of Ricardo’s paradox. David Ricardo, a classical economist and Whig, had marveled at improvements in grain production. In the 1820s Ricardo sought to establish a mathematical formula to explain these changes. Some improvements, like enhanced crop rotation and the use of manure, allowed more production on less land. Other improvements, like better plows and threshing machines, required less labor.11 But a paradox left Ricardo puzzled. Landlords used these improvements, he said, but improved efficiency would probably hurt them collectively. Land-saving improvements meant that less land was needed to grow food. All things being equal, this would cause rents to fall. Labor-saving improvements were bad too. Because fewer workers would be needed, landlords would not have to borrow as much to hire workers. So interest rates (“money rent” in his phrasing) would also fall. Here was trouble. Improvements in agriculture provided short-term benefits to a single landlord but hurt landlords collectively as renters of land and lenders of money.

Radical improvements that bettered people’s lives—and they were everywhere—might motivate individual landlords and capitalists. But ultimately landlords were gonna landlord, Marx thought. Technical improvements would threaten the “rentier class” that made money on rents. Then Marx made a massive, but interesting, logical leap. Ricardo’s paradox, Marx posited, drove human history. A kind of landlord dominated each stage of a society’s development. In ancient societies, this was the slaveholder; in serfdom, this was the lord; in capitalism, this was the capitalist. The “forces of production,” according to Marx, advanced in each stage of a society’s progressive development: ancient slavery became medieval serfdom, which became modern capitalism. In each case the forces of production hit their peak, after which point existing property relations became oppressive. Then social change came through “contradictions”: slave uprisings, peasant revolts, and workers’ struggles against employers.

The consumption-accumulation cities of Europe became an ideal place for Marxist thought to spread. A polyglot collection of workers was assembling. The lowered cost of living after 1860 allowed workers to organize into unions and fight for shorter hours. For workers in Britain and industrial Europe, the period from approximately 1860 to 1890 really was a golden age.16 Shorter hours gave workers time to read and helped create a class of autodidacts who collected in consumption-accumulation cities. Shorter hours provided an opportunity for workers to band together in collective institutions and see a new world emerging that was not another bloody empire or racially exclusive state. The coherence of Marxist theory as a model for the history of the world and its future helped draw in both women and men, as well as democrats, socialists, utopian planners, engineers, and refugees from broken empires. While he rejected assassination, Marx suggested that the end to all the broken institutions would require a violent cataclysm. This prediction was millennial in a way that resembled the books of Daniel, Paul, and Revelation. The very coherence of Marxist theory made fragile empires regard Marxism as an existential threat.

The steamships—with compound engines, screw propellers, and capacities of approximately twenty thousand tons—found the choppy waters and cramped harbor outside Odessa challenging.1 Even sailing ships faced difficulties in Odessa. Shipmasters there complained about delays imposed by the workmen’s guild, the customshouse bureaucracy, and the Odessa banks.2 British trade officials, stationed in Odessa to help shipmasters, gave them little time or respect. “To few ports do a lower class of shipmasters come than to Odessa,” complained British consul Eustace Clare Grenville-Murray in 1869. “Five out of six are uneducated colliers from Shields or Sunderland,” he continued, and the worst were those “troublesome half-educated men known among sailors as a sea-lawyer.”3 Grenville-Murray was removed from his position, but the merchants of Odessa attested that shipmasters, whether knowledgeable about the law or not, faced numerous difficulties, including the inattention of the governor-general and negligent port officials.4 Other tribulations for shipmasters included the narrow passage at Constantinople, which the Ottoman Empire might block in case of war, famine, or revolt. The possibility of additional taxes or delays in paperwork at the strait had always given merchants pause.5 For all these reasons, by 1869 the cost of moving a bushel of wheat from Odessa to a European port was at least twenty-five cents. The same quantity of wheat could be transported from the United States for less than twenty cents, even though the route from Odessa was shorter, took less time, and did not cross the deepest part of the ocean.6 After 1870, then, cheap American grain and flour began to replace Russia’s as the food of Europe’s urban working class.

Two years after the start of the 1873 panic, the merchant Charles Magniac summarized the problems grain merchants faced and how they led to the crisis: “the Suez Canal, in conjunction with steam and ocean telegraphy” made obsolete “all the old machinery—warehouses, sailing vessels, capital, six months’ bills, and the British merchant, whose occupation [was] gone.”13 Sailing ships survived, but grain merchant warehouses and short-term bills of exchange did become outmoded.

The sudden drop in shipping prices brought by nitroglycerin’s collapse of travel times helped usher in the period economic historians call the first wave of globalization, from 1871 to 1914. Colonial goods worth more than roughly fifty cents a pound, like coffee, sugar, silver, and cotton, had been traveling across the Atlantic since the 1600s. With free trade, instant sharing of prices by telegraph, and nitroglycerin’s elimination of expensive barriers, shipping became cheap enough for bulkier, lower-value goods worth less than fifteen cents a pound, like wheat, beef, and kerosene.

Thus Parvus was a new kind of Marxist, one who studied a world system of commodity pathways around the world. He believed that this world system was older than capitalism. He also believed there was a bonus for everyone in shrinking the world, whether by lowering tariffs, improving grain-drying methods, building grain elevators, or deepening harbors. Cheaper bread, if the benefit could truly be shared, might save millions of workers from lives of endless toil. Having tried to organize workers in Odessa, he knew that their time mattered as much to them as money or more. He argued that the bounty realized from lowering the tollage in grain distribution should benefit everyone both in material and time. Shorter, tighter pathways might allow a shortening of the standard twelve-hour workday to ten hours, then eight hours. The international scope of Parvus’s model was as vast as the steppe and as deep as the ocean; explained clearly, it could attract workers to an international movement. Indeed, it required an international movement; otherwise workers in one country might—in a workshop bonded together by trade routes—compete against workers ten thousand miles away.

Between 1838 and 1911, the Ottoman Empire had become locked in the fiscal orbit of Great Britain. The difficulties started in 1833, when Sultan Mahmud II faced a revolt by his Egyptian governor, Muhammad Ali, which threatened to end the empire. Only hasty Russian intervention prevented Ali’s capture of Istanbul itself. Reeling from this threat, Mahmud II sought the support of the British navy. In 1838 he signed the unequal treaty of Balti Limani with Britain, which made Turkey a kind of fiscal vassal to Great Britain. British merchants received free access to Ottoman markets with no corresponding Ottoman access to English markets. In return for this enormous favor, Britain helped the Ottomans beat back Egyptian forces, most famously with the 1840 British bombardment of Acre in Jerusalem. Thereafter cheap foreign flour and textiles imported by English merchants continually weakened the Ottoman Empire’s internal industries, which had no ability to slow down imports. The empire imported more than it exported for the rest of its days. To make up for the loss of tariffs, it increased taxes on the Balkan states, adding fuel to the fire of independence movements in Serbia, Bulgaria, Wallachia, and Moldavia. Britain’s ability to bypass an empire’s tariffs became a model for squeezing resources out of Asia, Africa, and the Pacific thereafter.

While the physiocratic empires of Russia and the United States had most of their wealth on their edges, European states, like Germany and Italy, that consumed and taxed cheap grain strengthened and concentrated wealth in their capitals. The gullet cities that prospered from cheap food tried to fight back. Millers and other processors of grain inside European gullet cities resisted grain tariffs at first but then agreed upon a complex new system of exclusions and transformations for grain. The states introduced a “drawback” for all grain used to make exported flour. In France, for example, a miller who exported ten thousand sacks of flour to a French colony in 1892 received a drawback certificate for $2,900, which grain traders bought to reduce their tariff expenses. In this way a grain tax could be reduced if the resulting flour, bread, and biscuit produced in gullet cities could be exported to a hungry world outside Europe.16 Grain tariffs helped build railroads and battleships. European states would fight over potential markets in Asia, Africa, and the Pacific. Processing food from across the ocean and selling it abroad became the new work of European states.

Taxing the flood of foreign grain was not just a sop to landowners. The tariff had important benefits for state building in filling federal coffers. Tariffs and railway charges together made up the two largest sources of revenue in the Prussian budget. Both kinds of grain taxes—tariffs and high railroad rates for foreign grain passing through Germany—gave the empire a fund to buy off the smaller federal principalities that resisted the German Empire’s authority.31 German economists at the time justified the military rather than the economic advantages of grain tariffs, though as economists they recognized that cheap food benefited everyone who was not a landlord. They noted that, by 1881, the “double danger” of cheap food and cheap transport had allowed England’s agriculturalists to dwindle to fewer than 8.5 percent of the population compared to a European average of between 35 and 69 percent. Only by taxing cheap grain could Germany escape the threat of starvation in case of war.32 Just as importantly, the tax on cheap grain from abroad allowed Germany and Italy to build up war budgets without raising taxes on land. Cheap grain built European states, but it also gave them the resources to kill people.

Beginning around 1878, the empires lashed outward; the mile marker could not hold. European brutality in the desire for overseas colonies was not new of course, but after 1879 violence in the name of opening markets reached shocking levels, including in the Anglo-Zulu war of 1879, the French conquest of Tunisia in 1881, the Russian capture of the region east of the Caspian Sea from Iran in 1881, the British occupation of Egypt in 1882, and the continuing Dutch war against the Aceh in Indonesia. European states established brutal colonial governments throughout Asia, Africa, and the Middle East. This was the scramble for Africa, the scramble for Asia, and the Great Game in the Middle East. Prosperous European states battled one another for imperial markets.

If European empires found a way to respond to the promise and prospect of cheap food by cranking up armies and navies, the story was different for the Ottoman and Qing empires, which struggled against cheap foreign food that drained their empires of gold and silver. Subjects of the Qing Empire, especially in its port cities, bought enormous quantities of California flour and its products, leading urban diets to shift from rice or noodles to bread and cakes.44 These two empires mortgaged their futures on international bond markets. To compete with the German, French, British, and Italian empires, the Ottoman and Qing empires issued bonds and laid impossibly long railroads, built deepwater ports, and funded trading fleets. They borrowed and borrowed with little oversight.45 The Ottoman and Qing empires, to pay their ever-growing infrastructure bills, allowed international firms to take over their tax collection, a dangerous step. The Chinese Maritime Customs Service (founded 1854) was technically international, but nearly all its agents were British. Its officers taxed junks that crossed the Yellow Sea but exempted British-owned steamships. The Ottoman Public Debt Administration (OPDA), founded 1881, was an organization elected by British, French, and German bondholders, though, according to Parvus, the French administrators were strongest inside it. Each tax agency had its own internal police force and had nearly complete autonomy inside the state. The Ottoman sultan could inspect the books of the OPDA’s salt and tobacco monopolies, and the Qing emperor could do the same for internal customs inside China, but neither could alter the manner and method of tax collection.

Beginning with his 1891 dissertation and continuing with his 1895 article “The World Market and the Agrarian Crisis,” Parvus argued that cheap American food had changed the world’s food roads, bringing Europe its crisis in 1873. When he arrived in Berlin in 1892, he understood that these self-proclaimed empires were responding to these food roads by building battleships and submarines. The agrarian empires in particular—Russian, Ottoman, Qing, and Habsburg—might not survive in a world where oceans of grain could stream from Odessa, New York, or San Francisco to whatever ocean port had the gold to pay for it.

The Japanese siege of the Russian citadel at Port Arthur lasted from August 1904 to March 1905. In May 1905 the Russian Atlantic fleet finally arrived at Port Arthur. It took the Japanese navy only three days to destroy it. The Russian minister to Tokyo, Baron Roman Romanovich Rosen, pointed out (with the benefit of hindsight) that with Russia finally forced to surrender the port, the billions of francs spent on a railway across Siberia could never be repaid. The Russian Empire’s “sacrifices in blood and treasure” were already enormous, and it would have to default on its long-term debt for a road to nowhere. Russia was essentially bankrupt. This futile, costly railway expansion and the surrender that followed, Rosen argued, spelled the end of the Russian Empire.

PARVUS’S ARRIVAL AT the end of 1910 was fortuitous, for the Ottoman Empire soon faced catastrophe. In September 1911 Italy invaded North Africa west of Egypt in what is now Libya. As soon as a large portion of the Ottoman army was away in North Africa, a “Balkan League” hurriedly formed to invade and seize all Ottoman land in the European part of the empire. Here, in the slow-motion collapse of the Ottoman Empire, World War I began.11 Parvus was ready with a prescription for the empire’s malady. As he did in his book Starving Russia, he performed in 1911 a forensic accounting of empire in a series of articles in Türk Yurdu. He examined how it contracted debt, how interest rates were set, and how foreign-controlled institutions ensured payment. The Ottoman Empire’s debt problems had begun with the Crimean War, he concluded, after carefully studying its accounts. In seeking to save Istanbul from invading Russia, Sultan Abdulaziz had borrowed heavily, and as debts came due, his successors had gradually turned over the empire’s most valuable monopolies—in tobacco, for example—to European states. Parvus calculated that the European-controlled Ottoman Public Debt Administration (OPDA) had probably already collected all the taxes necessary to pay off Ottoman debts. Yet it continued to control tax collection in the empire and could easily disguise its prodigious bounty by (for example) expanding the OPDA printing, publishing, training, and foreign relations apparatus while counting those as expenses recouped directly from the tax. The Turkish Empire would always be on a short leash so long as the foreign-controlled OPDA collected its most valuable internal taxes on tobacco and salt and allocated the benefits to its growing infrastructure. This was the same system of external taxation on an empire’s internal trade that Britain had imposed upon China with the Maritime Customs Service.

Empires, just as they had from the days of Julius Caesar’s milestones, needed cheap, fast, efficient paths that delivered food to cities and brought a backhaul of manufactured goods to the countryside. The sultan had spent too much on railroads that could move armies over mountains. This made the Ottoman Empire’s logistical pathways expensive and prone to breakdown. Parvus worried that these costs could never be recouped. Parvus was making a case not for traditional economic nationalism and tariff barriers but rather for a grain-to-city infrastructure, protection of private agricultural property, expanded loans to farmers, a currency exchangeable internationally, and higher taxes on farmland that would force agricultural improvement. Bulgaria had once been a poor part of the Ottoman Empire, Parvus pointed out. But once it gained independence, it exported much more grain than it ever had in the Ottoman domain and could thus pay higher taxes.13 Parvus’s observations must have puzzled orthodox Marxist readers of his Turkish articles. His Marxist-inspired development strategy, emphasizing private property in agriculture combined with a mix of public and private control of industry, had been his prescription for the Prussian state as early as 1895. The same strategy would transform China and Vietnam a century later, though without his direct influence.

As Parvus saw it, the Young Turks needed to understand that the Ottoman Empire’s biggest problem lay not in its position as a target for the Russians, nor in its frequent fires, nor in its colossal debt. Its biggest problem lay in how it funded, produced, taxed, and distributed the grain that passed from its farmers’ fields, to its ports, to its capital on the narrow strait of the Bosporus.

World War I has been characterized as a “great powers” conflict with Germany as the aggressor. A Serbian assassin killed Archduke Franz Ferdinand, heir to Austria-Hungary’s throne, leading that empire to declare war on Serbia. Russia backed Serbia, mobilizing its army near the Austro-Hungarian border. Germany, itching for conflict, supported Austria-Hungary and demanded that Russia demobilize. When Russia refused, Germany invaded Belgium to attack France—Russia’s ally and financial backer. In the same month the Germans and Austrians attacked Russia near Tannenberg, wiping out the Russian First and Second Armies. England joined the side of the Franco-Russian Allies after Germany invaded Belgium. The Ottomans only joined the Austrian-German Central Powers two months later.1 That’s an oft-told story, but for scholars of the pathways of grain around the world, the war’s history begins a little earlier and much farther east. In 1911, Italy invaded what would become Libya, taking it from Turkey. The day after the fighting stopped, Greece, Bulgaria, Serbia, and Montenegro took advantage of the conflict to invade Turkey. Then, crucially, Turkey closed the Bosporus and Dardanelles Straits to commerce, blocking all Russian grain and oil exports. Russians, fearing that Bulgaria or Greece might capture Istanbul, put both their army and the Black Sea fleet on alert. Russian agriculture minister Alexander Krivoshein, who then dominated the tsar’s council, reorganized the Russian cabinet in 1914 to prepare for a global war. From the cabinet’s perspective, this coming conflict would be the seventh Russo-Turkish war since the reign of Catherine the Great, yet another attempt to protect Russia’s precious grain-export trade. Krivoshein saw in Istanbul an existential threat. He recognized that Germany, in helping build up Turkey’s military, was drawing Istanbul into its orbit. The paranoid Russian cabinet saw signs of this German-Ottoman alliance everywhere. German officers had been training the Ottoman army since 1883, and Prussian officers organized the placement of the artillery that Parvus had purchased on city walls in Istanbul and Adrianople. Most concerning was that, in July 1914, the Turkish state would receive its first dreadnought: a costly state-of-the-art ship from the English firm Vickers & Co., with other ships on order. This dreadnought was a massive upgrade from previous generations of battleship, with more guns on board than any ship afloat. Russia feared a repeat of its defeat in the Yellow Sea: a single Japanese battleship had led a small armada that destroyed Russia’s eastern and then its western fleets. A single Turkish dreadnought, with a small escort of torpedo boats, might wipe out the Russian navy on the Black Sea. Such one-sided battles had become familiar. The Americans had done the same to Spain in the Spanish-American War in 1898, Italy had done it all over North Africa in 1911, and the Greeks had done it to the Ottomans in the Balkan Wars in 1912 and 1913. If a Turkish dreadnought passed through the Dardanelles, wrote Russia’s naval minister, the “Turks would have undisputed mastery of the Black Sea.”

This account, most associated with Russian historian Sean McMeekin, puts Russia as the primary aggressor in World War I. Fearing a rapid Turkish buildup on the Bosporus Strait, the Russians sought the earliest-possible opportunity for a conflict with Turkey. They feared that the combination of new harbor defenses and a dreadnought would make the passageway to the Black Sea impregnable and threaten Russian trade. The assassination of Franz Ferdinand provided Russia, already prepared for conflict, a perfect pretext to assemble troops on the border. The Russians had little interest in defending Serbia but knew that massing troops at the border would provoke Germany and Austria-Hungary to declare war first, and if war was declared before the Turkish dreadnought arrived, Istanbul might be easy prey for Russian ships. Russia hoped that a hasty German attack would provoke Britain. A too-rapid attack on Turkey, however, risked revealing the Russian dagger: the deep desire to take Istanbul.

By 1916, Russia’s grain prices had risen more quickly than prices on the world grain market, an astonishing transformation for a country where grain had been so cheap and that had exported half of its grain before the war. In response to the rapid increase in grain prices, a black market in grain trading emerged. Governors then imposed tariffs and finally embargoes on grain exports from their regions. Soon governors and tsarist militias were competing to block and sideline grain cars bound for Russian cities. While grain prices had doubled around the world, including in the grain-rich United States, in Russia the price of bread increased more than tenfold between the spring of 1916 and the spring of 1917.4 Then on March 8, 1917 (February 23 on the Russian calendar), protests over food rationing in Saint Petersburg led to a riot. Instead of suppressing the unrest, as it had in 1905, the army turned against its officers. Within days Tsar Nicholas II abdicated. Parvus, who had predicted much of this in his twenty-page memo, suddenly drew intense interest from the German war ministry, which he admonished not to extract a price from Russia’s ruling Duma or break Russia into pieces. Both actions would now only embolden the Russian opposition and maintain the war, he wrote.5 He also knew these actions would strengthen the authority of nationalists, liberals, and manufacturers. For Parvus, who remembered the fate of communists in the Paris Commune and his friends executed by Russia in 1905, this would be unacceptable. Instead, Parvus said, the German government needed to spend much more, perhaps an additional fifty million deutsche marks, to send a sealed train of Bolsheviks and Mensheviks to the Finland Station outside Saint Petersburg. The Germans would have to follow up with delivery of pistols, dynamite, and medicines. He could arrange for grain deliveries to Germany from Russian warehouses on the Baltic. His agents in neutral Denmark would contact agents in Petersburg and elsewhere on the Baltic by wireless telegraph. He already controlled neutral ships with Danish and Swedish flags.6 The Bolsheviks and many of the Mensheviks, Parvus promised, would embrace defeat. Some Russian socialists supported the war. These Social Patriots, Russian socialists who supported Russia’s side in the conflict, needed to be defeated with counterpropaganda. He promised that the Bolsheviks and Mensheviks would permit an independent Ukraine and an independent Finland and would surrender on the eastern front.7 His new trading agencies between Copenhagen and other Baltic ports would have the support of socialist dockyard workers and permits to trade on the Baltic. Russian grain would be traded for German munitions and medicines.8 It was much like the trade Parvus had organized in the Black Sea during the Balkan Wars. The German army would have bread, the measure of victory; Russia would have revolution. Between fifty and two hundred million deutsche marks flowed from Germany to the Bolsheviks in 1917. Parvus multiplied that aid with his efficient smuggling operation. Much went to the delivery of newspapers. The Bolsheviks’ access to machine guns and artillery by mid-1917 gave them the military capacity to defend themselves against the Duma and the counterrevolution under General Lavr Kornilov, just as the Young Turks had defended themselves against a counterrevolution by the sultan in 1909. In mid-1917 the Duma tried to put Vladimir Lenin, Leon Trotsky, and others on trial as German agents. Prosecutors announced in the newspapers that they had considerable evidence of telegraphic communication between Lenin and Parvus through third parties that showed how German money was funding the Bolsheviks. The October Revolution prevented the trial, and the documents have disappeared.

The Bolshevik “Decree on Land” converted all land to state land and then declared that it would be redistributed. While the redistribution of land shrank the number of landless peasants, it also broke up the “frontier estates” that had been Russia’s primary source of grain. For a variety of reasons, five-hundred- to one-thousand-acre estates may have been the most practical way to grow wheat. Larger plots may have been necessary for growing grain on the steppe for numerous reasons. Efficient grain plowing and harvesting on rugged, flat plains demanded heavy equipment; the dry plains needed coordinated, long-distance irrigation; and the plains had long used a four-field rotation system that required leaving many acres unused each season.16 The revolution also apparently revealed other difficulties in relying on the peasant estates to produce more food. Russian agrarian economist Alexander Chayanov did careful measurements of peasant productivity immediately after the revolution. He noted, based on these close studies, that peasants didn’t respond to the market the way one would think. Disagreeing with David Ricardo, he argued that land, labor, and capital were not three equally replaceable quantities for a peasant. Because peasant families employed themselves to work, their resistance to drudgery was exponential. As they got closer to the peak amount of work they and their families could do, their resistance to that drudgery got sharper and sharper. In that environment, if the price of grain increased, as it did in 1918 and 1919, a family might not apply more labor to produce more crops in order to get more capital or land. Instead, peasants might actually produce less grain when prices rose because no increase in capital or land could match the satisfaction peasants got from not working themselves so hard. He also found that peasants worked hardest when they had young children, then gradually lowered the total working hours on the farm when the children got older. The family life cycle, not prices, governed their behavior. A “frontier estate,” by comparison, looked more like a capitalist firm in that a farmer could purchase extra land, labor, and capital when grain prices were high. Bolsheviks rejected Chayanov’s assessment of the peasant economy because it appeared to favor kulaks and suggested that peasant agriculture could not save Russia. He was arrested in 1930 on made-up charges and exiled to Kazakhstan. In 1937 he was rearrested and shot on the same day.

World War I, as a battle between European nations dependent on foreign grain, meant that the grain-powered great powers could only last so long. The allies’ inability to break the blockade at Istanbul prolonged the war, leading to starvation in Belgium and long-lasting devastation in France. Germany endured longer in part through secret negotiations for Baltic grain that are still not fully understood. It is possible that only Parvus could answer the question of how much grain Germany got in its financial arrangement with him and, indirectly, the Bolsheviks. For the Ottoman, Qing, and Russian empires, revolutions arrived in 1908, 1911, and 1917. World War I was an interregnum in which most of the world’s empires fought for control of the food-trade-tax nexus. By 1917 Bolshevik revolutionaries had gained insights from the Young Turk Revolution into how to successfully topple the massive Russian Empire. Crucial to their success but contrary to their revolutionary program, the Bolsheviks redistributed land to peasants across the steppe in 1917. They learned that authority was constituted through the control of bread and that breaking up the grain-delivering power of the Duma, the revolutionary line committees, and even the mesochniki was critical to seizing power. The Soviet Union would continue to define itself as the monopoly holder and distributor of bread, just as the ancient Romans had done in the days of the annona.

About Journeyman

A global macro analyst with over four years experience in the financial market, the author began his career as an equity analyst before transitioning to macro research focusing on Emerging Markets at a well-known independent research firm. He read voraciously, spending most of his free time following The Economist magazine and reading topics on finance and self-improvement. When off duty, he works part-time for Getty Images, taking pictures from all over the globe. To date, he has over 1200 pictures over 35 countries being sold through the company.
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