Russian History Breadth - Economy

Economic Developments

The emancipation of the serfs in 1861 removed a considerable barrier to industrial growth. Serfdom was incompatible with an industrialising society. The basis of such a society was agriculture and serfdom ensured a restricted home market, poor agricultural advancement and a largely immobile population. Russia’s pyramid structure with a huge peasant population and small elite of landed gentry left little room for the development of a middle class. Above all, serfdom bred attitudes inimical to modernisation.

Total industrial production grew by about 5% per year after emancipation, accelerating markedly by the mid 1880s.

After emancipation, peasants were able to obtain passports to work away from their communes, and market their crops. Additionally, limitations of emancipation, e.g. shortages of land, meant these peasants could supply new factories’ labour forces.

The beginning of state-promoted industrial growth

Industry Early 1860s:

• State-run factories producing essential goods, mainly military. Used serfs.
• Domestic crafts made in the homes of peasants. Weaving, spinning e.g.
• Artels – Workshops making products from metal/leather etc for domestic market.

Only privately owned industries which were large scale were of the textiles and sugar industry.

Motives:

• Russia lagged behind western competitors in industrial and technological capacity. Had to industrialise to catch up with and match these countries.
• Russia = backward, agricultural country. Many peasants relied on subsistence farming rather than producing surplus which could be sold.
• Needed to develop its industrial to produce its own manufactured goods rather than relying on imports. Also needed this to produce military equipment for modern war -> Crimean War.
• Generate wealth.

In the absence of an entrepreneurial middle class, industrialisation in Russia was largely driven by the state.

Mikhail Von Reutern (Minister of Finance 1862-78)

Produced a series of reforms designed to boost the economy and provide funds to drive industrial growth.

• Govt subsidies offered to encourage private entrepreneurs to develop railways.
• Tax system reformed to include more indirect taxation.
• Tax farming abolished. (Forced to look elsewhere to invest)
• Trade promoted with reduction of import duties (1863)
• Foreign investment encouraged with a govt guaranteed annual dividend.
• Govt funded development of cotton industry to capitalise on American Civil War 1861-65.

Average annual growth rate of 6% under Von Reutern.

New developments:

Oil extraction began in Baku 1871.

Iron works set up in Donetsk 1872.

Despite these improvements: Russia’s economy remained comparatively weak.

1/3 of all govt expenditure went into repaying debts.

Rouble subject to variations in value.

Limitations of emancipation edict and new focus of indirect taxation left peasantry poor and domestic market small.

Tariff reductions (to improve trade) reduced govt expenditure so were raised again 1878.

Vyshnegradsky (1887-1892)

Import tariff rose again to 30% in 1880s to boost home production. Helped the iron industry.

Vyshnegradsky needed to balance the budget while financing enterprise.

• Negotiated valuable loans, e.g. French 1888, increased indirect taxes and mounted drive to increase grain exports.

Appeared successful:  1881-1891 Grain exports up by 18%. 1892 Budget in surplus.

However, this was achieved at the expense of the peasants who…