Agriculture inefficient and backwards: peasants used medieval tools and old-fashioned land usage. This meant Russian farming was much less efficient per acre than UK or the USA. (Caused by mir’s preventing of innovation, and lack of investment in agricultural technology).
While industrial output had increased during the reigns of AII and AIII, it was still at a low level when compared with the industrial powerhouses of Western Europe and the USA. (Late industrial development was partly a result of an underdeveloped banking system, and partly due to serfdom preventing an available source of workers for new industries.)
Development was also prevented by Russia's backwards communications and transport system, making the transport of raw materials and finished goods virtually impossible. By 1860 Russia had 1,600 km of railways compared to Britain's 15,000 km. This increased by c. 5,000 km by 1890, but this still left Russia far behind the West, especially given its huge size!
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Sergei Witte and the answer to Russia's Problems!
Sergei Witte, a Russian nobleman of Dutch origin, served as Minister of Finance from 1892 and 1903 and oversaw some impressive changes to the Russian economy.
Witte’s belief was that the key to Russia’s continued ‘Great Power’ status rested on successful and rapid forced industrialization. Developing industry would be a way to avoid dependency on more developed economies and also create a strong modern state in Russia.
Witte’s plan to deliver an industrialized Russia was based on a four-fold plan to fund the programme of capital investment: i) protective tariffs on foreign goods to protect against competition from Europe, ii) attraction of foreign capital in the shape of loans, esp from the French, iii) placing currency on the Gold Standard to encourage further foreign investment, and iv) squeezing resources out of the peasantry and workers - through low wages, high taxes and exporting ‘surplus’ grain.
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Successes of Witte's Industrialization Drive
Rapid increase in foreign investment: from c. 200 million roubles in 1890 to 900 million in 1900. This contributed to the development of heavy industries.
Impressive advances in industrial output, esp. in heavy industry - i.e. overall output increased by 400% between 1890 and 1910, with coal, iron and steel production increasing accordingly.
Particular focus on development of railways, which Witte saw as a way of improving communications and stimulating industrial demand for goods associated with railway building. Railway coverage expanded from c. 7,000 km in 1890 to c. 60,000 in 1905. Plus engineering feat of the Trans-Siberain railway to connect with Vladivostok, stretching 9,600 km.
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Limitations of Wittes Policies
There may have been impressive advances in industry, but Russia was still far behind her European rivals.
Similarly, while railways might have been increased, overall rail coverage was still minimal when compared with, i.e., USA, and the Trans-Siberian was largely symbolic - only one track! Plus, other forms of communication lagged behind - i.e. roads, and shipping.
Dependency on foreign capital for industrialization meant that interest payments on the loan had to be made regularly - 20% of government spending annually om servicing this debt! Political opponents of Witte also accused him of being unpatriotic in his courting of foreign capitalists.
Squeezing the peasants for grain and taxes led to starvation during bad harvest years (i.e. 1900 and 1902), and thus an increase in peasant uprisings.Furthermore, his focus on industry meant that he paid little immediate attention to the serious agricultural problems Russia was facing which affected the vast bulk of the population!
Though only a small proportion of the population employed as industrial workers (c. 2% in 1900), these faced low wages, long hours and poor living conditions, protests at which led to calls for more political power for workers.
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