How successful were the finance ministers of the period of transforming Russia economically? (1855-1904)

by packo456 (student)

The transformation of the Russian economy had begun in the reign of Alexander II in response to the humiliation in the defeat in the Crimean war of 1854-56. This led to a development of a railway-building programme and a limited spread of factories. However, still, by 1881, Russia’s economic development still lacked far behind that of Western Europe and there was a huge gulf between Russia’s potential, given its vast supply of natural resource’s and manpower. . I am going to be looking at the works of Ivan Vyshnegradsky 1887 - 1892 and Sergei Witte 1892 - 1904 and focus on how successful these men were in transforming Russia’s economy. It wasn’t until the reign of Alexander III a real ‘industrial revolution’ took off, and its developments owned much to Vyshnegradsky and Witte.

Ivan Vyshnegradsky was born on the 1st January 1832 in St. Petersburg. In 1886 he was appointed a member of the State Council and in 1887 became the head of the Ministry of Finance. Vyshnegradsky improved the finance of the country and built up its gold reserves by indirect tax increases and by grain imports, trading with foreign country’s needed to boost in order to transform the economy. He also reduced imports by increasing tariffs – The Tariff Act of 1891 increased duties to protect iron, industrial machinery and raw cotton from outside competition. By 1891, import duties had reached 33%. He also negotiated some valuable loans to kickstart growth, e.g. from the French in 1888. On the surface, the policy looked very successful. Between 1881 and 1891, grain exports increased by 18%, as a percentage of total Russian exports, and by 1892, the Russian budget was in surplus.
However, this export drive was achieved at the expense of the peasants. They really suffered the burden of indirect taxes, which seriously reduced their limited purchasing power. Whilst this was going on, the price of goods rose because of the import taxes and their grain was being requisitioned by the government to sell abroad. Many peasants’ were left with no reserve stores and often went hungry. A drastic consequence of this policy was the famine of 1891/2 when a bad harvest brought widespread famine, it affected 17 of Russia’s 39 provinces and around 350,000 suffered the consequences and lost their lives. Weakened by hunger, outbreaks of cholera and typhoid followed – and most families were left without their main breadwinner.
The government failed to organize adequate relief and it was left to volunteer groups to help the destitute peasant’s, this led to Vyshnegradsky’s dismissal in 1892.
So even though, the economy at first was on the up, it was to the expense of the peasants’ and this policy caused many unease and deaths within the period that could have possibly been avoided.

This led to the employment as Sergei Witte in 1892. He was committed to modernization at to reserve Russia original ‘Great Power’ status. Without an entrepreneurial class, Witte believed that industrialization needed to be directed ‘from above’ (state capitalism). Also, he felt that Vyshnegradsky’s policies essentially were correct, and that economic development would lead to improved living standards and this in turn would reduce revolutionary activity and unrest. For economic growth to be achieved, 3 key problems needed to be solved and to continue the policy of protective tariffs, heavy taxation and forced export to generate capital.
3 key ...

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2) Lack of technical and managerial expertise – Witte encouraged foreign experts and workers, engineers and managers from Europe and Scandinavia to oversee industrial developments and advise of planning and expertise – Russia was rapidly forced into an industrial revolution.

3) The importance of railways – 1880s, Russia began to buy up private railway companies using capital gained from continuing with protective tariffs, heavy taxation and forced exports. The construction of long distance state railways – by 1905, 66% of the railway system was state owned and this led to a huge acceleration of railway building. Railways opened up the Russian interior and allowed more extensive exploitation of Russia’s raw materials, resulting in the economy starting to build up. Other railways connected industrial and agricultural areas with markets ore ports e.g. Kharkov to Odessa, which reinforced the grain export drive. The Trans – Siberian railway was under construction from 1891 to 1902, it linked ventral European Russia fro Moscow to the Pacific Ocean at Vladivostok. Benefits of this consisted of a huge demand for coal and metals. Economic and strategic advantages to the development of western Siberia escaped from restrictions and over-crowding, and farming in the regain increased. So troops could be quickly if chaos broke out in more lawless distracts of the empire.
The railways stimulated the development of iron and coal industries and encouraged the founding of new industrial areas along their lengths; transport costs fell bringing down the prices of goods.
However, other forms of transport developed but slowly with less investment. River and sea navigation improved with more steam ships but most of the overseas trade was carried in foreign ships, the roads still remained poor. However, it promised more than it delivered, and parts of the railway were still incomplete in 1914. The Trans – Siberian railway proved a huge drain on finances, in fact under Witte the state budget was doubled, eating the the profits of economic growth. Also, Witte was too dependent of foreign loans and investments, which had to be paid back with interest.

In conclusion, Vyshnegradsky had little impact on transforming Russia economically; even some improvements were made, it could be argued that his region was a drastic failure as it resulted in the deaths of hundreds and thousands of people due to famine.
Wittes achievement’s were significant even with the limitations.

How successful were the finance ministers of the period of transforming Russia economically? (1855-1904)

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