Nature's Evil

But, in a time of crisis, gold and silver are no more reliable assets than paper – shares, debentures or title deeds to property. The very materiality of metals, which seems so reliable, turns out to be a factor of vulnerability. Granted, gold doesn’t rot or burn like grain or oil; but gold and silver are vulnerable to theft, plunder, corruption – to the evil with which gold has been intertwined for millennia. Gold has to be hoarded and counted, kept in safe boxes or carried about in armoured trains, weighed by the ton to the accuracy of a milligram – and guarded, constantly guarded.

Karl Polanyi wrote that the gold standard was a rare phenomenon in which heaven concurred with hell and Marx with Ricardo. In fact, the gold standard was maintained thanks to the extraction of gold from South African mines: again, worldwide development depended on one tiny, remote spot. Finding the roots of the totalitarian regimes of the twentieth century in the racist empires of the nineteenth, Hannah Arendt examined the interwoven history of apartheid and gold. Gold had no function in production or consumption; it was precisely because of this that gold, that most superfluous of resources, acquired its special role as a means of exchange. Limiting consumption, the mercantile empires found in gold the key to their problems of surplus. Gold became a ‘reserve’, a converted form of labour and resources through which mercantilist empires could calculate their redundant capital. These empires disagreed about everything, but the consensus about the gold standard was astonishing. For Arendt, the gold fever of South Africa started off the process that ‘turned peoples into races’. 22 Destined to be a bulwark of stability, gold added to the financial sphere a shade of unreality and meaninglessness.

The secrets of the Russian economy in the twenty-first century are known to its critics: its dependence on the export of raw materials, its excessive military expenditure, the degradation of human capital. Its passion for turning the state’s revenues into gold is less well understood. The gold reserve of the Russian Federation is disproportionate to its economy. According to the economist Yakov Mirkin, Russian gold reserves have increased threefold in the period 2009–19, although during this time the economy grew only by a quarter. In 2009 the share of gold in the Russian reserves was 5.2 per cent, in 2018, 16.9 per cent. 23 This is very unusual from a global perspective. The budget for education is falling, the pensions deficit is rising, but the weight of gold in the Russian reserves is increasing at unbelievable speed. During this decade, Russia was the major purchaser of gold on the world markets. Great Britain has seven times less gold, although its economy is larger than Russia’s. The population of India today possesses huge stores of personal gold, possibly more than in any other country; but the Indian state has three times less gold than Russia. And even China, whose economy is many times larger than Russia’s, has less gold.

The Russian Empire also accumulated large gold reserves, but they didn’t help it. In 1913, the gold reserve of the Russian state bank was 1,300 tons – the largest reserve in the world. On paper, it remained so until October 1917; but the national debt was also among the largest in the world. The historian Oleg Budnitsky has traced the adventures of Russian gold after the Bolshevik Revolution. 24 In 1915, during the First World War, the state gold reserves were evacuated far behind the lines, to Kazan. By the summer of 1918, bank vaults in Kazan housed more than half of Russian gold. For this and other reasons, the Volga region turned into the epicentre of the civil war. The Bolsheviks attempted to remove the gold reserve but they managed to dispatch from Kazan only a hundred boxes; all the rest were seized by fleeing Czechoslovakian units and their allies in the White Army. In October 1918 the gold was deposited in the middle of Siberia, in the Omsk branch of the state bank. Admiral Alexander Kolchak, self-proclaimed supreme governor of Russia, had at his disposal 490 tons of gold. Most of it disappeared: according to accounts from 1923, the Soviet state’s gold reserve was ten times less than the pre-war reserves of the Russian Empire. The Soviet state had to obtain gold by new means – through the labour of prisoners in the Gulag camps and the system of

Torgsin

– hard currency pawn shops which exchanged food provisions for the gold of the starving population. 25 After the Second World War, the first Soviet capitalists joined in these experiments. Survivors of the Gulag, they procured gold in the Arctic with unparalleled efficiency. Later, massive exports of Russian oil and gas brought many more tons of gold into the vaults of the central bank.