Before Herbert Hoover was a U.S. president, he was an investor. One place Hoover invested was one of his era’s most exciting developing countries: Russia. The project was the Kyshtym (“CUSH-team”) Estate in the Ural Mountains, near the town of Yekaterinburg.
Owned by a noble family, the Zakomelskys, the Kyshtym concern was large, by Hoover’s estimate 1.5 million acres, larger than the state of Rhode Island. Kyshtym boasted great forests and rich reserves in copper and other crucial minerals. Iron, steel, and chemicals were processed in plants. Some 100,000 people lived in the area, at least a third of whom worked at the Kyshtym enterprises.
The assets were extensive, but the factories were decidedly nineteenth-century. Around 1908, the owners invited foreign investors, Hoover and others, to participate in the modernization of Kyshtym. Rendering inefficient mines and chemical plants more efficient was Hoover’s greatest skill—he’d made his career as a mining engineer. He jumped at the chance. With the money from Hoover and other investors, and by borrowing on markets in London, the new Kyshtim Corporation quickly built a world-class complex. The corporation brought in new smelters, built large machine shops, and installed other new equipment to make charcoal, a complicated process. The owners also wooed experts from around the world, including young talents from the United States to run the factories until Russians were ready to take over technical jobs.
Operating the plants and smelters was exacting work. Minute by minute, as Hoover recalled, these engineers, chemists, and metallurgists monitored ore content, fluxes, fuel, heat, and chemical gas reactions. The owners meanwhile built out the town of Kyshtym for the workers. They also created a school to train Russian technicians, so that local Russians began to win the plum posts. All workers were paid 25% above the level for the region.
Soon Kyshtym was churning out profits. By Hoover’s estimate, Kyshtym produced 25 million pounds of copper a year, with profits of more than $2 million, a large amount in those days. As Hoover biographer George Nash reports, Hoover took great pride in Kyshtym’s progress; by 1911 Kyshtym was the largest copper producer in czarist Russia.
But the money wasn’t the only reason Hoover liked this enormous undertaking. Everyone recognized that Russia needed change. The head of the Zakomelsky family, Baron Alexander Mellor Zakomelsky, was no radical: he had led the czar’s troops in battles. But Zakomelsky poured his personal profits back into the company so that the company could help his community. As the Baron told Hoover when he bought back company shares, “I must buy it with all my dividends for I must restore it to Russia.” Slowly, Russia was becoming more prosperous and more democratic.
Too slowly for many, however. In 1917, revolution came to Russia. Overnight the Mellor Zakomelsky family became official enemies of the people. The new communist leadership called meetings of workers around Kyshtym. First, they led workers in voting to transfer ownership from the investors and Zakomelskys to a worker collective. Second, all managers were replaced by local worker committees. Third, the workers voted themselves wage increases of 100%. In London, shareholders like Hoover learned their shares were worthless.
In Kyshtym, chaos ensued. The Zakomelskys fled. Before they, too, shipped out, foreign technicians carefully labelled and archived whole warehouses of extra equipment and instructions for the new worker-owners.
Hoover read with horror the reports of what then happened in Kyshtym. As he learned, even the Russian technicians and managers were driven out, “many being brutally treated and many killed as ‘bourgeois.’” The new bosses failed to study the precious archives and lacked the know-how to run the complex factories. They could not operate the machines. Some preferred the quick profits of plunder to mechanical work. Great furnaces “froze” and were not repaired. All the delicate chemical instruments failed as well. Within a week, as Hoover learned, the factories shut down. The revolutionaries were destroying the rail lines necessary to transport any product from Kyshtym. The destruction perturbed Hoover more than the expropriation; he and the investors wanted to see Kyshtym succeed. Yet soon enough, tens of thousands were destitute.
All over Russia, the story replicated itself as the Bolsheviks consolidated power. The following year, 1918, the Russian royal family was executed by a firing squad of Bolshevik guards in Yekaterinburg, only 95 miles away. Famine ensued, and it was Hoover who led an enormous relief effort to feed millions of starving Russians. A report came from one of the relief effort’s staff members who visited Kyshtym: many workers had changed their minds and wanted to bring the old Kyshtym investors back. But Lenin would not allow that.
The experience engendered in Hoover a deep suspicion of communism.
Sources: Memoirs of Herbert Hoover
Nash, George H. The Life of Herbert Hoover: The Engineer 1874-1914, W.W. Norton, 1983.