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Government Policies and the Industrialization of Russia

Published online by Cambridge University Press:  03 February 2011

Arcadius Kahan
Arcadius Kahan
Affiliation:
University of Chicago
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Extract

If we were to reconstruct a blueprint of the Russian government's goals and priorities for industrial development in the late nineteenth century, it would include the following: (1) development of a network of internal transportation, (2) stabilization of the ruble in foreign exchanges through convertibility and the buildingup of an export surplus as a prerequisite for enabling the Russian government to borrow abroad, and (3) stimulation of the development of new industries in Russia and their protection in their “infancy.” Given the relative success of Russia's industrialization during the end of the nineteenth and beginning of the twentieth centuries and the important role that the government played in this effort, there is no justification for outright rejection or condemnation of Russian government economic policies. There were, however, serious shortcomings in particular government policies, and the presumed effects that they had upon the industrialization process were not always desirable. This essay is a modest attempt to reexamine Russian government policies on the assumption that the industrialization of Russia was a continuing goal of the state policies beginning with the 1880's and one of relatively high priority. The implication of the analysis is that if some of the defects of the state's policies had been avoided, the process of industrialization in Russia would have proceeded at least at as fast a pace and the economic costs to Russian society would probably have been smaller.

Type
Obstacles to Economic Growth: Papers presented at the Twenty-Seventh Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 27 , Issue 4 , December 1967 , pp. 460 - 477
Copyright
Copyright © The Economic History Association 1967

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References

I have benefited from general discussions with my colleagues Harry G. Johnson and Robert A. Mundell. A certain familiarity with the data was acquired during the tenure of a National Science Foundation grant. The responsibility for the views and possible errors, however, cannot be shared with anyone.

1 The most important economic issue in Russia, namely the agrarian problem, was left out of the discussion for two reasons: first, because its complexity does not permit a short summary; second, everyone interested in this subject will find an admirable analysis in Professor Alexander Gerschenkron's essay in the Cambridge Economic History of Europe, Vol. VI.

2 The changes over time in the general trend and some of the year-to-year variations are represented in the following tabulation:

3 About 22 per cent of the national income was accounted for in 1909-1910 by about 0.9 per cent of the economically active population, according to the computation of the Ministry of Finance. See, Ministerstvo Finansov (Ministry of Finance). Materialy k Proektu Polozhenia o Gosudarstvennom Podokhodnom Naloge. Podok-hodnyi Nalog (Materials to a proposed law about a government income tax. The income tax). Vol. II. St. Petersburg, 1910.

4 Laue, Theodore H. Von, Sergei Witte and the Industrialization of Russia (New York: Columbia University Press, 1963), pp. 100–101.Google Scholar

5 Finansov, Ministerstvo. Ministerstvo Finansov (Ministry of Finance), 1904-1913. St. Petersburg, 1914, p. 14.Google Scholar

6 For the last years during the 1890's the presence of foreign investment can clearly be detected and this biased the results in favor of industrial investments. Brzheskii, N., Gosudarstvennyi Dolg Rossii [The public debt of Russia]. St. Petersburg, 1908Google Scholar.

7 The third group represents, according to the definition used by Brzheskii, the reported “capital of dividend paying firms” and th e “share capital of industrial corporations;” the second component never rising during this period above 9.5 per cent of the total “capital stock” of this third group.

8 That the following estimates use usable approximations can perhaps.be surmised from the data for increase of the capital stock of Russian industry provided by Strumilin, S. G. in Problema Promyshlennogo Kapitala v SSSR [The problem of industrial capital in the USSR]. Moscow, 1925, pp. 22, 23.Google Scholar Strumilin's estimate at initial cost, of land, buildings, and equipment for 1885-1900 is 1,953 million rubles while the estimate for the same years used below, supposedly exclusive of much foreign investment, is 1,510 million.

9 Details on the totals involved in the Brzheskii estimates and- the calculations on a per capita basis are available on request from the author.

10 The fiscal motives for producing revenue were variously estimated as being responsible for from two-thirds to three-fifths of the total custom revenue.

11 Details on customs duties collected as a percentage of total direct and indirect taxes are available from the author.

12 Data on customs duties as a percentage of the value of imports, 1881-1900, may be obtained from the author.

13 See footnote 12.

14 In 1890, according to the calculations by the statistician, V. E. Varzar, for some branches of the large-scale manufacturing industries, the value of foreign machinery and equipment was 452.3 million rubles vs. 270.1 million of domestically produced machinery and equipment.

15 A good case could be made for using the arithmetic average of both foreign and domestic prices. The difference in some cases would be substantial. Since I was interested in the utilization of this type of analysis rather than in the precise determination of the costs, the simpler version was employed.

16 Quoted by Sobolev, M. N., Tamozhennaia Politika Rossii vo Vtoroi Polovine xix Veka. Tomsk, pp. 843–45.Google Scholar

17 , Sobolev, Tamozhennaia Politika Rossii, p. 845.Google Scholar

18 One ought not to exaggerate and to attribute the net increase on both accounts solely to the monetary reform. It coincided with greater availability of capital in the international money market on the one hand, and with the strengthening of the French-Russian political alliance, which opened up the Paris money market for Russian government and private securities on die other. It was also due to the fact that relative to other countries interest rates in Russia still remained high, and the return on Russian securities and on foreign investment in Russia were still higher than elsewhere.

19 There is a whole host of questions that one could ask pertaining to the regulation of the money supply, which was particularly strongly influenced by government policies, since the State Bank was for all practical purposes controlled by the Ministry of Finance both in the area of note issue and lending operations. Moreover, since 1895 the government had provided the major part of deposits in the State Bank and the government's proportion in the total deposits was growing over time. Although the time is ripe for an analysis of the behavior of the money supply and its impact upon cyclical fluctuations as well as upon the secular trend of growth of the Russian economy, it will not be attempted here.

20 See Muskoseev, V. A., “Money and Credit,” in Raffalovich, A., ed., Russia: Its Trade and Commerce (London: P. S. King and Son, 1918), p. 363.Google Scholar

21 The estimates of the gold reserves pertain to the holdings of the State Bank only and do not include the so-called “free cash reserves” (svobodnaia nalichhost') of the Treasury. The data for this type of reserves are very sketchy, [contd. on p. 476].