The beginnings of state-promoted industrial growth

• In the absence of an entrepreneurial middle class industrialisation in Russia was largely driven by the State in a deliberate attempt to match the economic development of Western Europe.
• Following Emancipation Alexander II's Minister of Finance from 1862-78 Mikhail Von Reutern produced funds to drive industrial growth
• Financial reforms:Treasury reformed and new arrangements for collecting taxes. Tax-farming was abolished and tax system reformed to include more indirect taxation Banks and credit facilities extended
• Financial Reforms 2:Gov subsidies were offered to enable private entrepreneurs to develop railways. Foreign investment in Russia was encouraged. New legislation regulated Joint-stock companies to encourage 'safe' investment. Gov support to development of cotton industry
• Von Reutern's reforms forced former tax farmers to look elsewhere to invest while the opportunities provided by gov subsidies and trade treaties encouraged enterprise.
• Use of foreign technical expertise and capital also supported industrial expansion and the railway network saw a marked expansion. Overall there was an annual average growth rate of 6%.
• Although textiles remained the dominant industry there was also new developments: oil extraction. In 1879 the Naptha Extraction Company was established by the Nobel brothers to exploit the coal and oil extraction further.
• However despite these improvements Russia's economy remained comparatively weak. A third of all gov expenditure went on repayment of debts and the Russian currency -Rouble- was subject of wild variations in its value.
• The limitations of the Emancipation Edict and a taxation system which left 66% of gov revenue coming from indirect taxation kept the peasantry poor and the domestic market small.
• Furthermore tariff reductions meant a decline in government revenues and the decision was taken to raise these again from 1878.