The Forsaken: An American Tragedy in Stalin's Russia (27 page)

 
 
AS ELSEWHERE, STALIN’S portrait dominated Magadan, a declaration of both of his authority and responsibility for the crimes taking place within its hinterland. Hung across the buildings and streets were red banners with slogans: GLORY TO STALIN, THE GREATEST GENIUS OF MANKIND, and KOLYMA WELCOMES YOU!
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As if the prisoners could feel welcomed after their arrival in the hold of a ship. Most had already heard the rumors describing Kolyma as “the land of white death” or “the white crematorium.” Or there was the most straightforward warning of all:
Kolyma znaczit smert
—“Kolyma means death.”
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Columns of prisoners were marched though the city streets of Magadan, named after the ever-changing chiefs of the NKVD. Above them, guards aimed machine guns from watchtowers, and searchlights reflected back their shadows across the snow and ice. The whole of this closed city was effectively one large concentration camp policed by rifle butts and baying dogs, one of “the slave capitals” of the Soviet Union. Marched out of Magadan, the first prisoners had been harried along the only road north into the Arctic wilderness, toward their designated camps and the primitive mines hollowed out of the earth with pickaxes.

To the outside world Kolyma was a void, not even a mystery, just another closed zone of the Soviet Union where no cameras or foreign visitors were permitted to travel. As for the millions of people who vanished into it, the Western world had no idea they even existed. In 1942, the
New York Times
reporter Walter Duranty described a figure of between “thirty or forty thousand” killed during the Terror. If a Pulitzer Prize winner could publish an error of such magnitude without immediate public derision, what hope did anyone else have of discovering the truth? After all, how could an empty space be detected in a hermetic, totalitarian state unless the witness happened to be himself a prisoner?
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Unwittingly the Soviet Union’s own statisticians provided an oblique form of an answer in the results of the 1937 census, which revealed a dramatic shortfall in the Soviet population. According to a report from
Mech,
a Russian-language weekly published in Poland, the census declared a population total of 159 million, instead of the projected 176 million, amounting to 17 million people who had disappeared.
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The Soviet defector Walter Krivitsky, who had access to the NKVD files, quoted the same statistical shortfall as 26 million.
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Whichever number was closer to the truth, the results of the 1937 census were suppressed and Stalin reacted to the news by having the hapless statisticians shot. A new census was ordered whose experts learned from their predecessors’ mistakes and wisely presented the “correct” set of results. Years later a secret report ordered by Nikita Khrushchev revealed that between 1935 and 1941, the NKVD arrested more than 19 million citizens. Seven million of the arrested were shot straightaway. An unknown proportion of the rest perished later, by the many means there were to die in the concentration camps of the Gulag.
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Down this pathway of arrest, imprisonment, execution or the corrective labor camps were driven the American emigrants to the Soviet Union. There was a selection process, and those who survived, such as Thomas Sgovio or Victor Herman, were delivered to work their sentences in the camps. Strangely, it was only the consequence of their labor, never the circumstance of their disappearance, that caused alarm in the capital cities of the West.

14

The Soviet Gold Rush

 
 
 
From the early 1930s, the American secretary of the treasury’s first appointment was an early morning meeting in the president’s bedroom at the White House. According to Henry Morgenthau’s diary, Franklin Roosevelt “would lie comfortably on his old-fashioned, three-quarter mahogany bed. A table stood on either side; on his left would be a batch of government reports, a detective novel or two, and a couple of telephones. On his right would be pads, pencils, cigarettes, his watch, and a plate of fruit.” Refreshed after a night’s sleep, Roosevelt would eat soft-boiled eggs while Morgenthau reported on the behavior of gold and commodity prices. Together their strategy was to keep the gold price moving upward by intervening in the markets and, by boosting the price of every other commodity in its wake, to claw the American economy out of the Great Depression.

However, to prevent speculators from predicting future price increases, they deliberately varied the amount they wished to raise it by each day. On October 25, 1933, for example, the president took one look at Morgenthau, who was feeling “more than usually worried about the state of the world,” and suggested a price rise of twenty-one cents. “It’s a lucky number,” said Roosevelt with a smile, “because it’s three times seven.” In his diary, Morgenthau noted gloomily that “if anybody ever knew how we really set the gold price through a combination of lucky numbers, etc, I think they would be frightened.”
²

“Henry the Morgue,” as the president liked to call his rather dour treasury secretary, owed his position to his predecessor’s sudden ill health. One reporter described him as the “most obscure Secretary of the Treasury this country has ever had”—not long earlier he had been a New York apple farmer in Dutchess County, next to the Roosevelt family estate.
³
Unexpectedly elevated early in the first New Deal administration, Morgenthau was naturally nervous. If the American economy was the sickest of patients, he was the least experienced of physicians.

Four years later, in April 1937, a substantial increase in the world’s gold supply was creating an inevitable downward pressure on price, and Morgenthau was forced into buying ever-increasing quantities to maintain the U.S. government’s fixed price. There was no secret where this surplus gold was coming from, since the Soviet Union had been openly selling shipments of bullion on the metals exchanges of London, Paris, and New York. Here, then, was the explanation behind the sudden cash wealth in Moscow that had allowed Stalin to buy up American factories like so much confetti and wave one-hundred-million-dollar naval contracts beneath the nose of Joseph Davies, salted with ironic promises to help “alleviate American unemployment.”

Furious that his first term’s work might soon be undone, Henry Morgenthau summoned Konstantin Oumansky to his office in Washington. Very bluntly the treasury secretary asked what the Soviets thought they were playing at—“the Russians were children about international finance; I used to call them American Indians. They dumped commodities like quicksilver and killed their markets.” But in response to Morgenthau’s irate line of questioning, Oumansky steadfastly refused to reveal either how much gold was being produced or the amount still held in reserve. Stone-faced, Oumansky volunteered nothing, and so resolutely feigned either real or pretend ignorance that the frustrated Morgenthau found himself having to teach him how the central banking system worked.
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Unbeknownst to the Soviet diplomats, the treasury secretary had been conducting a private investigation of his own. Shortly after his arrival in Moscow, a carefully briefed Joseph Davies had written a report back to Morgenthau:
“I have been making every effort to try to get a line on the gold reserve here. It is practically impossible to get anything definite. It is more or
less a military secret which is guarded with care . . . The other day I was privileged to see the collection of treasure and jewels at the State Bank. What surprised me was the size of the gold nuggets. They had two nuggets of solid gold ranging between forty and fifty pounds each. From their appearance I should judge that they were practically pure gold.”
⁵
Six months later Davies wrote again, describing a meeting with Foreign Minister Maxim Litvinov in which he had asked straightforward questions about Soviet gold production and reserves. The wily Litvinov volunteered that “he could state confidentially that current estimates were rather exaggerated.” In his letter, Davies suggested that the Soviet government was
“ jealously guarding the facts with reference to the gold supply . . . constantly exaggerating its size for propaganda purposes and its possible effect on their enemies.”
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As so often before, Ambassador Davies’ deductions were completely misplaced. Ironically, the one expert who could answer Morgenthau’s questions was lurking right beneath the ambassador’s nose. Stranger still, this expert was an American mining engineer and frequent guest of the American embassy in Moscow. In almost a decade’s service to the Soviet government, Jack Littlepage had played a crucial role in their gold industry.

 
 
WHEN LITTLEPAGE FIRST arrived in Russia, it seemed self-evident that the fledgling Bolshevik state was teetering on the brink of bankruptcy and ruin. After the role of the market was abandoned, prices in the USSR were no longer used as a mechanism for the allocation of resources. With inflation running out of control, most Western economists were confidently predicting the imminent collapse of a regime they perceived as an economic absurdity. Within the Soviet Union itself, everyone understood that the ruble was virtually worthless. Whenever the government required extra money, the State Bank simply printed more and more notes, often with identical serial numbers and on paper so thin it literally fell apart in your hands.
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And although the Wall Street Crash was greeted by Soviet ideologues as obvious proof of the Marxist conception of history, their evident satisfaction was tempered by a growing awareness of the damage inflicted upon the Five-Year Plan. All the factories and specialists arriving from Detroit or Cologne had to be paid for in precious, and fast-diminishing, foreign currency. After the Crash, the Soviet commodity exports were suddenly worth only a fraction of their former value.
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Thus the Kremlin’s schemes to gather hard currency were driven by a mounting sense of desperation. In one project, the NKVD began counterfeiting one-hundred-dollar bills for distribution across Europe and China, forcing the American Federal Reserve to issue widespread warnings against the excellent forgeries.
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At the same time, Stalin authorized the Soviet Art Export Trust to sell off art treasures accumulated over generations by the Tsars. Very quietly a selection of old masters from the Hermitage Museum was delivered to the auction rooms of the West. In one deal, worth over seven million dollars, some twenty-one masterpieces, including Raphael’s
Alba Madonna,
Titian’s
Venus with a Mirror,
and Velázquez’s
Innocent X,
were sold. The paintings were simply taken down from the walls of the Hermitage. The curators rearranged the remainder to cover the gaps and later blamed their absence on the 1931 fire or the Nazi siege.
¹⁰

Fortunately the principal buyer in the latest Soviet art sale happened to be an American citizen equally anxious to maintain the secrecy of the deal. And for good reason, since the gentleman in question happened to be none other than Henry Morgenthau’s predecessor in office. At the time, Andrew Mellon was an elderly, frail man with high cheekbones, sharp blue eyes, and a slight stammer. Ultrareserved, he ranked alongside Henry Ford and John D. Rockefeller as one of the world’s wealthiest men: the Mellon family fortune dominating the American banking, oil, steel, and ship-building industries. He was America’s secretary of the treasury through the Roaring Twenties, and three Republican presidents—Harding, Coolidge, and Hoover—were all said to have “served under him.” And while publicly Andrew Mellon ran the nation’s finances as he saw fit, the scant responsibilities of laissez-faire appeared insufficiently fulfilling for the Republican statesman. Privately, Andrew Mellon was consumed by an altogether more demanding passion—the desire for fine art, regardless of its provenance.

Even while his art dealers were negotiating with their Kremlin interme-diaries, Mellon was responsible for the American government’s economic policy with the USSR—including the controversial question of the first exports of Gulag labor into the American market. It was, of course, a direct conflict of interests. However, in a more discreet age, secrecy remained assured on both sides, and the flow of pictures by Hals, Rembrandt, Rubens, Van Eyck, Van Dyck, Raphael, Velazquez, Botticelli, Veronese, Chardin, and Perugino continued to disappear from Leningrad’s Hermitage collection, to reappear, as if by magic, on the walls of Andrew Mellon’s private apartment at 1785 Massachusetts Avenue, Washington, D.C.
¹¹

The truth became public only in the spring of 1935, under the bright lights of a tax-evasion case. In court, Andrew Mellon was forced to reveal both the value and origin of the art collection he intended as a gift to the nation. His lawyer David E. Finley spoke on his behalf: “Mr. Mellon wanted to keep the thing a surprise until the right moment. It probably would not have been very good politics for the Secretary of the Treasury to spend millions for rare paintings at a time when the government was swamped with unemployment, bank failures and general distress.” Mellon would die before the completion of his National Gallery in Washington, D.C., but when asked why he had collected the paintings, his answer had been characteristically concise:
“Every man wants to connect his life with something that is eternal.”
¹²
It was a strange echo, albeit from the opposite end of the economic spectrum, of the cause that had drawn so many American emigrants to Russia.

 
 
AND WHILE IT was suitably ironic that the finances of the USSR were being saved, at least partially, by millions of dollars from the very men the Revolution had sought to destroy, it was also apparent that Stalin’s state coffers required a more constant source of replenishment. Through the early 1930s, a campaign was launched across the USSR obliging all citizens to hand in their gold to the state. Cash rewards were offered for the denunciation of neighbors’ hoards as investigators from the GPU hunted for gold, foreign currency, and jewelry, tearing through apartments in their quest. In the midst of universal shortages, “gold stores” were opened, fully stocked with every conceivable item to be priced and paid for in metal, the scales on their counters weighing wedding rings and christening spoons. Naturally the state robbed its citizens blinder than a Chicago loan shark—the American reporter Eugene Lyons once calculated that a pair of shoes was charged at twice its weight in silver. There was also another hidden danger to the transaction, since the stores were carefully watched by the GPU, who checked the identities of the customers, ready to arrest them if they considered it worthwhile.
¹³