Economic and Social Development

• In the mid-1800s, spanning from 1862 to 1878, Russia embarked on state-led industrialization efforts under Finance Minister Mikhail von Reutern.
• Reuturn:

  Reforms included tax collection improvements and the establishment of banks like the State Bank in 1860 and municipal banks in 1862.
• Reuturn 1862-78

  The government encouraged foreign investment, regulated joint-stock companies, and supported industries such as railways, cotton, and mining in the Donets Coalfield. These initiatives aimed to boost the economy and catch up with Western Europe’s industrial advancement.
• Joint-stock company: a business owned by shareholders who invested their own capital in the enterprise
• During von Reutern’s tenure, reforms spurred economic growth, with an average annual rate of six percent.
• Textiles continued to dominate industry, but new sectors emerged, including oil extraction in Baku starting in 1871 and ironworks in Donetsk in 1872.
• The Naphtha Extraction Company, founded in 1879 by the Nobel brothers, expanded coal and oil extraction.
• Reuturn:

  Russia’s economy still faced challenges: high debt repayments, currency instability, and heavy reliance on indirect taxation kept the peasantry impoverished and the domestic market small.
• Tariff reductions led to declining government revenues, prompting tariff increases from 1878 onwards.
• Ivan Vyshnegradsky 1877-1892:

  Under Ivan Vyshnegradsky’s leadership starting in 1887, Russia implemented a high import tariff of 30 percent to stimulate domestic production, particularly benefiting the iron industry and industrial machinery development in southern Russia.
• To finance enterprises and balance the budget, Vyshnegradsky secured loans and increased indirect taxes while promoting grain exports.
• Although grain exports surged by 18 percent between 1881 and 1891, leading to budget surpluses by 1892, this success came at the expense of peasants who faced heavy taxes and saw their grain requisitioned by the State.
• The policy backfired during the famine of 1891-92, leading to widespread suffering and Vyshnegradsky’s dismissal in 1892.
• The Great Famine of 1891-92 struck 17 of Russia’s 39 provinces due to an early winter and a long, hot, dry summer that ruined crops.
• Over 350,000 people died from starvation or disease. The government didn’t provide enough help, so volunteer groups had to assist the affected peasants.​
• Foreign Investment

  
• Sergei Witte(1892-1903) who succeeded Vyshnegradsky, was strongly dedicated to modernizing the economy to suppress revolutionary movements. He believed in using heavy taxation and forced exports to generate capital, along with maintaining protective tariffs to support economic growth.
• Witte directed much investment into mining, metal trades, oil, and banking.
• Sergei Witte:

  He also welcomed engineers, managers, and workers from Western Europe to advise on industrial developments, leading to a significant expansion of the railway network. As a result, Russia became the world’s fourth-largest industrial economy by 1897, boosting exports and foreign trade, although grain remained the primary export commodity.​
• • Russia’s first railway was finished in 1837, and the St Petersburg-Moscow line opened in 1851. State backing led to a significant expansion of the railway network from 1855 to 1894, with the government owning 60% of the entire Russian railway system by the mid-1890s.
• The Peasants’ Land Bank and the Nobles’ Land Bank were established to aid peasants and nobles in acquiring and transferring land.
• The Peasants’ Land Bank supported peasants in buying land directly or from nobles, while the Nobles’ Land Bank assisted nobles with legal costs related to land transfer and improvement.
• Both banks offered loans at low interest rates. These initiatives facilitated the transfer of over 26 million hectares of land to peasants between 1877 and 1905. However, they also sustained some inefficient farms that persisted in traditional practices.
• Emancipation didn’t lead to significant changes in agricultural practices. According to Aleksandr Engelgardt, a radical thinker in the 1870s, things remained much the same as before, with some land reduced and farming quality declining.
• Despite receiving around four hectares on average, peasants faced challenges like high taxes, grain requisitions, and old-fashioned farming methods enforced by village elders.
• These factors hindered agricultural progress. Although there was some increase in agricultural production in the 1870s and 1880s, largely due to efforts by wealthier peasants (kulaks) responding to export demands, the 1891-92 famine highlighted ongoing economic issues.
• Peasants still lacked sufficient land to thrive, despite efforts like the establishment of Land Banks in 1883 and 1885 to facilitate land purchase.
• As Russia underwent industrialization, its traditional land-focused society gradually shifted towards one centered on money, capital, and wages.
• This transition was slow, and until 1895, society remained deeply divided. However, during this period, a new middle class and urban working class began to emerge, positioned between the landowning elites and the majority of peasants
• Paying off debts

  One eighth of the money that nobles gained through land sales went to pay off mortgages with the Nobles' Land Bank.
• In the 1860s-80s, most private industrial enterprises in Russia were owned by the traditional nobility
• However, by the 1890s, non-nobles began to emerge as factory owners, supervisors, and foremen. This shift may have contributed to harsh discipline and a lack of concern for workers’ well-being, as these new owners lacked the sense of moral obligation towards their workers that the old noble class had.
• The landed elite, mainly consisting of nobles, saw changes after Emancipation. Many sold land to pay debts or pursued other professions.
• By 1880, around one-fifth of university professors were nobles. Some entered business, with over 700 owning businesses in Moscow by 1882
• State service and roles in zemstva were also common. While their positions changed, most retained wealth and status
• The middle class expanded due to urban growth and increased education.
• Bankers, doctors, and administrators were in demand. Government contracts and loans for factories provided opportunities. At lower levels, management positions and small businesses grew.
• Payment in kind: payment in goods or services, such as accommodation, rather than money wages
• The urban working class expanded alongside industrial growth, but still made up only about two percent of the population.
• Many peasants moved to cities temporarily for work, while some permanently left rural areas. By 1864, one-third of St Petersburg’s population were former peasants, with the number rising.