Industrialisation - tsars

Why does Russia need to industrialise rapidly in 19th Century under Alexander II

• Crimean Defeat 1856 – showed backwardness of Russia vs France and Britain, needed to modernise to maintain great power status – this was reinforced by diplomatic defeat at Berlin Congress 1878

• Rivals’ strength – rapid economic development of Britain and Germany – need to match them (Specifically manufacturing (textiles, metal), railways, military tech)

• Utilisation of resources – need to develop own (natural) resources (e.g. oil deposits – 8000 tonnes of crude oil – also iron, lumber, coal, gold, grain [but low agricultural productivity]) rather than rely on imports, agricultural depression (alternative sources of wealth needed to be found), railways vital to organise resources (exports, military) – but needed development of industrial, banking structure

• Financial – economic advance -> increased wealth -> greater potential government revenue

• Urbanisation

• Political power – internal + projected power 

Stat on Russia oil deposits around Alexander II

8000 tonnes of crude oil → need to extract it and refine it etc.

Minister of finance 1862-78

Mikhail Reutern

Reutern approach overall

• Continued railway construction

• Attraction of foreign technical expertise + employment of foreign investment capital

• Modernisation and expansion within iron, coal, textiles and new industries such as oil

Reutern; Foreign technical expertise during Alexander II

• Ludwig Loop from Manchester helped develop the Russian textile industry → Knoop was responsible for equipping 187 cotton mills on Russian territory.

• Nobel brothers responsible for the growth of the modern oil industry around Baku in the Caucasus

Reutern; Alexander II and J.J. Hughes (still foreign expertise)

• Welshman – J.J. Hughes – transformed iron and steel production at Ekaterinoslav

• Employed in 1871 by the Russian government as an expert in the manufacture of armour plate

• By 1884 his New Russian Coal, Iron and Rail making Company was the largest producer of pig iron in the whole empire

• By start of 20^th century he and his associates were responsible for about half of the steel production in Russia

• Constructed a new town (Yuzovka) with English schools, public houses, and by 1904 Welsh Russians

Stat on J.J. Hughes 1884

By 1884 his New Russian Coal, Iron and Rail making Company was the largest producer of pig iron in the whole Russian empire

Reutern; railways increase + new abilities

• Seven-fold increase in the amount of railway track opened between 1862 and 1878

• Capacity of railways to ‘break bulk’ at speed → boost in industrial sector

Reutern; industrial output and average annual growth rate

Doubling of industrial output and an average annual growth rate of 6% during Reutern’s term of office

Reutern; general

• Secured foreign monies and investment → through issuing of govt. bonds, taxation exemptions and monopoly concessions

• Some of money going straight to Russian government used to protect railways against failure

• To secure their services – government made guarantees to bail out projects if they met financial difficulties

• Resulted in some corruption – for example, financial help was given to certain companies when it was not really needed – and an expensive transport system

Reutern; his new transport system was expensive; evidence

Due to very high costs of construction and operation – about 94% railways in private hands by 1880

Finance minister 1882-6

Bunge

Bunge; 1881

Abolishment of Salt Tax

Bunge; 1883

Creation of a Peasant Land Bank → bank set up by government to allow peasants to borrow cheap money at relatively cheap rates to allow purchase of land

Bunge; 1886

Abolishment of Poll Tax, based on no. people in household

Bunge; move towards state intervention in railway construction and greater state control of railways; evidence

By 1911 69% of railway system under public control

Finance minister 1886-1891

Vyshnegradskii

General Vyshenegradskii policy

• Balanced govt. budget

• Made surplus of income → efficient utilisation of income from taxes, railways, crown properties, state bank and treasury

• Soliciting French loans

• Raised import duties to prevent consumption of foreign goods, aggressive export policy

1891 Vyshnegradskii

Mendele’ev tariff (raising duties on imported manufactured goods to support domestic producers) → income gained from this and from exporting large amounts of grain even though there was the prospect of domestic shortage and starvation

Why was Vyshnegradskii criticised?

Advancing industrial development at expense of agriculture → radicals see 1891-2 famine as result of his policies

i.e. insistence on increasing grain exports meant the peasantry had poor supplies in case of a poor harvest which happened with famine

Vyshnegradskii was ultimately…

Forced to give way to Count Witte

Witte + ‘Great Spurt’

• Finance minister + great spurt 1892-1903

• Total commitment to industrialisation

• Achieved at expense of agriculture (1893 Russian activity → mostly agricultural production) → suspicion amongst elite

• Taking out foreign loans, raising taxes and interest rates → hopes to boost available capital for investment in industry

• More investment in heavy industry and railways, move away from private enterprise also

• New taxes on liquor → in effect replaced the poll tax which had been removed → trying to balance to budget

Witte’s Great Spurt - success for coal

Production of coal doubled

Witte’s great spurt → railway increase on average from 1893-1898

120% per annum

Witte’s great spurt → increase in industrial production

of 7.5% → far exceeded Russian achievement for any comparable period before 1914

Witte’s great spurt → railways vs other European country

1914 Russia had 11x fewer miles of track than Germany

Witt'e’s great spurt → the Rouble

Gold Standard in 1897

Witte’s great spurt - Trans-Siberian line

Most of focus in investment here, but never fully completed - did aid industrial and agricultural production of Siberia, but rushed + poorly constructed

Witte’s great spurt - agriculture

·       Scan attention to agriculture -> rural discontent and distrust from other members of the government -> one of key reasons for Witte downfall in 1903

Russia(n empire) → oil stats

• 1880s

• Fastest growing industry

• 1900 Russia world’s leading oil producer

• But by 1913 only 1/3 USA production

Stat on Yuzovka and Hughes

1871 Welsh industrialist Hughes set up New Russian Coal, Iron and Rail-making company, by 1884 biggest pig iron producer, new town named after him (Yuzovka) -> by 1904 30,000 Welshmen employed in mines

Witte dismissed August 1903

Opposed N. II’s expansionist foreign policy on grounds of cost → dip in the economy

Witte and Stolypin in 1905

Only short-lived fall in favour for Witte -> after disastrous war in Japan (1904-5) and social unrest in 1905 Witte appointed PM (+ Stolypin minister of finance)

Success of W + S in reforming economy

GNP increased per annum by 3.5%, industrial output increased too

Would Russia have caught up with West if no WWI?

Probs not - 1913 overall production levels in certain industries still lagged behind Russian competitors, e.g. Russian coal production start of WWI was 10% produced by Britain, GNP per capita 20% Br

WWI

• Factories → employed lots of labour to compensate for lack of investment in modernisation

• Vast numbers of industrial workers employed in small-scale, handicraft-based enterprise → NOT SIGN OF DEVELOPING ECONOMY

• Russian economy fell apart during the First World War -> despite having the largest stock of gold reserves in Europe in 1914, this was not enough to pay for armaments required to wage war

• More money borrowed, gold standard abandoned, taxes up → inflation

WWI → prices of food and fuel

Quadrupled 1914-15, wages also failed to keep up