Chapter 2: the impact of dictatorial
regimes on the economy and society
the extent and reasons for economic change
industrialisation
1855-1964 accelerate industrialisation -emphasis on heavy
industry
‘catch up with the west’ - based progress on iron and coal
industries
To emulate the revolution that had occurred in the west -
increase and maintain world power status
industrialisation proceeded through different phases-
differences in political leadership; changing world context
common thread that affected development- relationship with
agricultural activity; peculiar nature of Russian society
alexander II and the proto-management of the economy
before 1855 - reluctance to engage in industrialisation,
associated with rise of urban proletariat who displayed a
propensity to revolt
Alexander II recognised that the threat of peasant unrest was
just as great - this could be dealt with by moving rural workers
off the land and into industry
factories warranted a new work discipline
- factory owners introduced strict rules and regulations
that were required for employees to work safely and
efficiently with machines
- way of controlling the activities of the bulk of the
population
more committed move towards state involvement in industry -
appointment of Mikhail Reutern as minister of finance
- helped to implement emancipation; minister of finance;
introduced a unified state budget
- adopted a sensible approach- continued railway
construction, attraction of foreign technical expertise,
employment of foreign investment capital
modernisation + expansion within the staples and newer
industries
Ludwig Loop - developed the Russian textile industry
the Nobel brothers - growth of oil industry around Baku in the
Caucasus
1
,Berenice Ings – Russia and its Rulers 1855-1964
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
1884- New Russian Coal, Iron and Rail-making Company
was the largest producers of pig iron in the whole of the
empire
start of the 20th century- responsible for 1/2 of the steel
production of Russia
accompanied by social investment- constructed a new town
(Yuzovo)
had english schools, public houses and 32,000 welsh Russians
by 1904
clear demonstration of the value of employing foreign
technical expertise to move Russia forwards - trend that
continued throughout the period
railway construction
1837- first railway in Russia completed during the reign of
Nicholas I; work of Gerstner
1851- St Petersburg to Moscow line opened- stimulated by the
success of the Manchester to Liverpool railway
design + construction influenced the American engineers
George Washington Whistler
Reutern built on this foundation
7x increase in amount of railway track opened
- 1862- 2194 miles
- 1878- 13,979 miles
gave a significant boost to the industrial sector, major reason
for the doubling of industrial output - average annual growth of
6% during Reutern's term of office
allowed Russia to cushion itself against the European economic
depression from 1873 to 1882
government bonds- way of investing in the government by
buying bonds and cashing them in at a later date with interest
taxation exemptions- being allowed to pay lower tax in
return for lending money to the government
monopoly concessions- being given the right to the only
seller of a particular product
some of money that went to government was used to protect
railway projects from failure-construction was placed in the
hands of private contractors
to secure their services the government made guarantees to
bail out projects if they encountered financial difficulties
- resulted in a certain amount of corruption and an
expensive transport system
- very high costs of construction and operation
2
,Berenice Ings – Russia and its Rulers 1855-1964
94% of railway lines were in private hands by 1880
reutern created the first state managed exercise in industrial
advance HOWEVER, his efforts were cut short by the coming of
war
paved the way for others to follow
reforms after the death of alexander II
further economic reforms enacted by the new finance minister
Nikolay Bunge
- professor of economics at Kiev University; experience of
local administration; considered to hold liberal political
views
fiscal amendments- abolition of the salt tax (1881), creation
of a Peasant Land Bank (1883), move towards greater state
ownership of the railways
- 1911- 69% of the system under public control
Alexander III blamed Bunge for a dramatic fall in the value of
the rouble in the mid 1880s
replaced him with Ivan Vyshnegradskii
- son of a priest; educated at a church seminary;
professor at the St Petersburg Technological Institute;
gained useful experience of the private business sector
by acting as director of the South Western Railway
Company
managed to balance the government budget and make a
surplus of income
more efficient utilisation of income from taxes, railways, crown
properties, the state bank and treasury
revenue raised through the Medele'ev tariff of 1891
income gained by exporting large amounts of grain – “we
ourselves shall not eat, but we shall export”
1891 famine was seen partly as a result of Vyshnegradskii's
policies -> forced to give way to Count Witte
the great spurt
1893- economic activity revolved predominantly around
agriculture
Wanted total commitment to industry – achieved at the
expense of agriculture, which caused suspicion and
consternation among sections of the Russian elite
taking out foreign loans, raising taxes and interest rates to
boost available capital for investment in industry +
encouraging foreign experts to come to Russia
1897- placed the rouble on the gold standard; potential
investors confidence in the value of the Russian currency
most investment went on heavy industry and the railways
3
, Berenice Ings – Russia and its Rulers 1855-1964
further industrialisation was to be planned and managed
mainly by the state
- coal production doubled
- iron and steel production increased 7x
stimulus provided to the development of a more specialist and
new technologies in the oil and chemical industries
- railway track opened: 17264 miles in 1891 to 31125
miles in 1901
- growth in capital from abroad- average increase of
120%1893-1898
- income from industry: 42Mr 1893 to 161Mr by 1897
indication that Russia had started to catch up with other
nations
1900- France had been ousted into 4th place in world iron
production
annual average rate of increase in industrial production of
7.5%
criticisms of witte's policies
witte focused on heavy industry and neglected other areas of
industry
short sighted- the demand for metals came from other
industries
the reliance on foreign capital criticised as being dangerous-
loans recalled at short notice; reliance on foreign expertise
stunted the emergence of home grown talent
the railway system was costly and not as impressive as in
other parts of Europe
- 1914- Russian had 11x fewer miles of track than
Germany
- most railway investment was made in the Trans-Siberian
line started in 1892- never fully completed
- although greatly aided the industrial and agricultural
expansion of Siberia - rushed and poorly constructed
scant attention to agriculture- rural discontent and distrust
from other members of the government
the first world war and industrialisation
August 1903- Witte was dismissed from his post
Nicholas II: expansionist foreign policy - Witte opposed
because of cost
dip in the economy + disastrous war in japan ->social unrest in
1905
Witte = prime minister
Stolypin = minister of finance
- joint efforts resulted in a revival of the economy
4
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