The Anxious Triumph

by Donald Sassoon

  He complained that, when he was in charge of the Ministry of Finance and hence the funding of the railways, ‘a great many members of our highest aristocracy’ were constantly ‘flocking to my reception room’ seeking railway concessions:

  It was then that I found out of what inferior stuff all these people with ancient names were made. Unlimited greed seemed to be their chief characteristic. These men who at Court functions wore princely airs were ready to crawl on all fours in my office, provided they could obtain some financial advantage. For many years some of these scoundrels and hypo-crites have been holding the highest Court positions …55

  Witte, a technocrat who had worked for years in the administration of the railways (and was then Minister of Transport and, as Finance Minister, one of the champions of the great Trans-Siberian Railway), seemed to think – as Ricardo, Saint-Simon, Marx, and, later, Keynes did – that an intelligent bourgeois should not let upper-class scroungers stand in the way of capitalist development. Above all, it was necessary to use the state. Witte explained that:

  It was imperative to develop our industries not only in the interest of the people, but also of the State. A modern body politic cannot be great without a well-developed national industry. As Minister of Finances, I was also in charge of our commerce and industry. As such, I increased our industry threefold. This again is held against me. Fools! It is said that I took artificial measures to develop our industry. What a silly phrase! How else can one develop an industry?56

  Yet the ‘silly phrase’ embodied the key classical liberal assumption: industry develops spontaneously with no ‘artificial’ political interference. Witte – unlike some of his predecessors – realized that a policy of industrial development required a reform of state institutions. The main principle of autocracy, he believed, should be the development of private initiative. Becoming rich was in itself an emancipatory process.57

  Witte was far from isolated. Admiration for the West and despair at the Russian state was growing among the elites. This longing to be truly ‘civilized’, namely, truly ‘European’, could be discerned even in the lamentations of the most embittered of Slavophiles such as Dostoyevsky. Celebrating the Siege of Geók Tepé (1881) in central Asia, where Russian troops defeated Turkmen troops and massacred thousands of civilians, Dostoyevsky described Russia’s role in Asia thus:

  Asia, perhaps, holds out greater promises to us than Europe. In our future destinies Asia is, perhaps, our main outlet! … We must banish the slavish fear that Europe will call us Asiatic barbarians … In Europe we were hangers-on and slaves, whereas we shall go to Asia as masters. In Europe we were Asiatic, whereas in Asia we, too, are Europeans.58

  To be masters in Asia might have been some consolation but it was not a solution to Russia’s woes. Even so, some thirty years earlier the Russian commander-in-chief in the Caucasus, Baron G. V. Rosen, thought that Transcaucasia could become a source of raw cotton for the domestic industry, and that the inhabitants could ‘be our Negroes’.59 But if you cannot join an exclusive club you can try to create your own. This was the position of Slavophiles such as Nikolay Danilevsky, a philosopher and naturalist (of the anti-Darwin kind). The sickness of Russia, he wrote in 1871, consisted in trying to be European. What it should do, instead, was to construct a younger civilization around a Greater Slav Nation with the Poles, the Czechs, the Slovenians, Croats, Bulgarians, etc.60

  The solution to Russia’s problem lay not in some kind of pan-Slavic mirage (Slavic nations such as Poland were unremittingly hostile towards Russia) but, as almost everyone knew, in the land question. If laggard Russia aspired to catch up with the ‘West’ something had to be done about the peasants. It took the 1905 Revolution to scare Tsar Nicholas II, who was even less intelligent and reform-minded than his father, into appointing Pyotr Stolypin Prime Minister in 1906 to carry out further land reforms. Yet, on the eve of the First World War, backward Russian agriculture still accounted for 50 per cent of national income.61 Observers noted, undoubtedly with some exaggeration, that Russia’s rural economy was cultivated by ‘medieval methods’ and was five hundred years behind the West.62

  The backwardness of Russia’s rural economy acted as a brake on industrialization. In the years 1861 to 1883 industrial output doubled but output per worker increased very slowly, if at all. Then, in the years leading up to the First World War, output grew more rapidly.63 By the eve of the war Russia was fifth in the league table of industrial states (after the United States, Germany, Great Britain, and France), though in per capita output it was way down the table.64

  The impact of the government on industry was massive: state enterprises, state railways, large government orders, government credit, tariffs, industrial and taxation policy – all combined to promote industrial capitalism. By the 1890s, as the Soviet economic historian Peter Lyashchenko wrote in 1939, the national economy of Russia had been brought into the ‘world system’ (his words) of capitalism, and it had become ‘apparent even to the most convinced champions of pre-capitalist Russia that a retreat from capitalism with all its historically positive and negative elements was impossible’.65

  This had been clear to Nikolai Bunge (Finance Minister, 1881–6, and Prime Minister from 1887 to 1895). In a ‘Memorandum to the Tsar’ he had submitted towards the end of his life (probably in 1894, he died in 1895) to Alexander III, he delineated what amounted to a nationalist reformist programme. In order to emancipate itself from the tutelage of other nations, he explained, Russia should strengthen its own national state structures, streamline the state machine, extend state institutions to all parts of the empire, improve the conditions of the peasants, centralize the state, and integrate minorities, such as the Jews. He advocated a broadening of the activity of local government bodies (the zemstva): rationalizing them, making them more responsive, more ‘democratic’ (though, of course, he does not use the word).66 He had been appointed Finance Minister by Alexander III in 1881, the only reformist minister in the new government. Yet Bunge was able to achieve much: the regulation of working time for women and children, the strengthening of the zemstvo and factory inspectorate, and the creation, in 1883, of a Peasant Land Bank, which enabled some peasants to purchase their own farms. He overhauled the inefficient and largely private railway system by having the state acquire some private companies and establish control over the growing network. He also abolished the iniquitous poll (or ‘soul’) tax as well as the equally unpopular salt tax, making the tax system somewhat less inequitable (shifting the tax burden away from the rural population) – no mean feat in the reactionary atmosphere of the 1880s.67 Some peasants did get rich, but not on the scale required for industrialization. And since it was obvious that the state had to step in to finance industrial development, the key question was the extent to which taxes could be levied on the peasantry. In the end, contrary to what economic historians such as Alexander Gerschenkron have suggested, agriculture was not unduly taxed or, at least, was taxed proportionately less than the urban sector: ‘the urban-industrial sector furnished almost 70 per cent of the entire tax receipts’.68 The workers paid for industrialization more than the peasants, but, of course, many of the workers had been, until recently, poor peasants.

  Nikolai Bunge encountered the wrath of the reactionaries, particularly because of his labour legislation. Mikhail Katkov, in an editorial in his Moskovskie vedomosti, accused him of ignoring Russian realities and compounding the sin of ‘following the West’. Eventually Bunge had to resign as Finance Minister, and was ‘kicked upstairs’ to be Prime Minister. He was followed as Finance Minister by Ivan Vyshnegradsky in 1887, the candidate of the reactionaries.69 They were disappointed in him. Vyshnegradsky had come up from a humble, clerical background, had made a fortune administering joint-stock companies, and was a tooth-and-claw pro-capitalist. However, he was no one’s pawn, and he continued the modernizing policies of Bunge, and even attempted to develop factory and labour legislation to protect the workers and to reduce child labour. A followe
r of Friedrich List’s idea of ‘national capitalism’, Vyshnegradsky erected a formidable tariff barrier to nurture Russia’s infant industries. He was forced to resign after his poor handling of the famine of 1891. The problems were huge. After all, this was a largely peasant agriculture lacking markets, capital, and the technology to raise productivity, and the economy did not produce enough savings to enable the state to invest in industrialization.70

  Vyshnegradsky’s successor was Count Witte, after Bunge the greatest architect of Russia’s industrializing process, and, like Vyshnegradsky, an admirer of Friedrich List and author of a pamphlet about him published in 1889.71 Since the key question remained the peasant question, Witte asked Alexander Rittikh (his special assistant for agriculture and later in charge of implementing land reforms) to investigate the conditions of the peasantry. The resulting Memorandum on the Peasant Question appeared in 1903 under Witte’s name. It concluded that the obshchina had prevented the formation of a rural proletariat, and that, far from being the collectivist dreamland of the populists, it was in reality dominated by a rich minority of kulaks (who were already hated well before 1918, when Lenin demanded their suppression as ‘blood-suckers’ and ‘vampires’, calling for ‘Ruthless war on the kulaks! Death to them!’72).

  The gap between Count Sergei Witte and Lenin was thus not quite as great as either imagined. In a way the Bolsheviks were both Slavophiles and Westernizers, since they condemned pitilessly the rural remnants of Old Russia, including the obshchina, while assuming that they could skip the stage of Western capitalism on the road to communism.

  Witte, as a minister of Imperial Russia, was just as scathing as Lenin in his disdain for the romanticism of those who wanted to preserve the obshchina. For him the obshchina was a relic of the primitive past that had survived because of the way in which the emancipation of the serfs had been fashioned. And while populists of various ilk proclaimed the muzhik, the poor peasant, to be a kind of latent communist, Witte, who had once been inclined to share the Slavophiles’ positive view of the obshchina, wrote that Bunge had convinced him:

  that the medieval obshchina was a serious hindrance to the economic development of the country. In order to raise the productivity of peasant labour it was necessary, I found, besides removing the legal disabilities of the peasant class, to make the product of labour the full and assured property of the toiler and his heirs.73

  In other words, development on the basis of small rural property ownership was the way forward. It would create, so it was thought, a class of conservative small landowners (as in the West) who would be grateful to the system and become its bulwark – all the more necessary after the destabilizing effects of the Revolution of 1905.

  What almost all the elites wanted, however, was a modern industrial society, regardless of whether it was capitalist or socialist or some kind of peculiarly Russian one. Part of the success of Marxism in late nineteenth-century Russia (and in the Third World for much of the twentieth century) was that it was regarded as an unashamedly pro-industrial ideology that viewed the coming industrial modernity as an iron law of history, against which nothing could or should be done, and yet it promised industry without the painful necessity of capitalism. In the end Russia was industrialized mainly by the state with foreign money, or by foreigners with state money. Even attracting foreign capital for investment in Russia on the scale required was not easy. Some entrepreneurs blamed the government, others blamed the bureaucracy; all blamed the backwardness of the country, the lack of paved roads, sewers, and lighting even in the largest cities, and all because, as the journal Industry and Trade declared in 1909, of the ‘primordial and universal hostility towards capital’.74

  No foreigner would want to invest without strong guarantees from the Russian state, so the state borrowed to build infrastructures. From 1880 onward, it invested in the railways, took over private lines, and imposed a uniform tariff policy to encourage the movement of goods over long distances.75 By 1903 Russian railways exceeded the size of the French and German networks (the territory was, of course, much larger).76 Their development constituted the most important structural change in the Russian economy before the First World War.77

  The reforms of the rural sector, initiated by Witte and developed by Stolypin after 1906, when the revolution of 1905 frightened even the obdurate Tsar into action, were all aimed at cutting, as Alexander Gerschenkron wrote, ‘the umbilical cord that tied the individual peasant to the village community’, by creating a mechanism to transfer land into private ownership. ‘From the point of view of Russia’s industrialization,’ he continued, the ‘potential positive effects were undeniable’, since the reforms created an economically strong peasantry, a heightened demand for industrial capital goods, and an increase in the number of industrial workers through accelerated flight from the land.78

  The reforms aimed to destabilize the obshchina and accelerate the shift towards capitalist agriculture, thus transforming a tradition-bound peasantry into modern farmers.79 The peasantry might have to suffer for a while, ‘stew in the factory boiler’ was how Nikolai Ziber, a contemporary economist, put it, adding that this was inevitable if Russia was to become capitalist.80 Needless to say, peasants were less relaxed about the abolition of the obshchina.81 Stolypin’s reforms did not really take into account what the peasants thought. His aim was to eliminate communal land, which, with the law of 1908, could be re-partitioned among the members of the commune if only one member demanded it because he wanted to leave. The idea was that the strong and enterprising would want their cash, move to the city, become workers or entrepreneurs (or drunkard do-nothings), leaving behind sturdy capitalist farmers.82

  Were these reforms really so decisive for industrialization? This is almost impossible to establish because the First World War interrupted the process. However, between 1906 and 1915 one-fifth of all households left the obshchina, thus allowing the transformation of an area the size of England into small peasant holdings.83 Were the very high growth rates achieved in the years preceding the war due to the Stolypin reforms of 1906 and to the growth of civilian domestic demand brought about by these reforms? This was the classic view held by Alexander Gerschenkron.84 But not all agree. Advancing solid evidence, Peter Gatrell has argued that ‘Contrary to the view of Gerschenkron, the Russian government continued to exercise a crucial influence on industrial activity, particularly in 1910–14.’ Gatrell argues that the main cause behind the growth in those years was defence spending, not land reforms.85 It is certainly the case that in the years leading up to the First World War, agriculture remained the most important sector of the Russian economy, both as a source of employment and as a contributor to national income, while even in 1913 industry employed only 5 per cent or so of the entire labour force, and that the rate of growth of real income per head in Russia between 1860 and 1913 was close to the European average (one per cent per year) and well below that of the United States, Germany, and Japan. Thus, in that period, Russia failed to catch up economically with the West. It was still an undeveloped country.86

  State direction was the reason why Russian industrial capitalism was lopsided. Large factories were more significant in Russia than almost anywhere else in the world: in 1895 plants with more than 1,000 workers accounted for 31 per cent of those employed in industry (as compared with 13 per cent in Germany).87 In 1902 it was even higher: those employing more than 1,000 workers employed 38 per cent of the workforce.88 Cities did not play a prominent role in industrialization.89 In fact, apart from Moscow and St Petersburg, industrialization took place mainly outside Russia proper; its centre was in eastern Ukraine, in the Donbass area, followed by Poland (near Warsaw, Białystok, and Łódź), Belarus (near Minsk), Latvia (near Riga), and Azerbaijan (Baku).90

  Some of the credit for industrialization should be given to Sergei Witte’s government but also to previous policies that developed the railways and stabilized the currency, enabling the government to borrow abroad, which in turn brought the count
ry into the global economy. Of course only a much more radical transformation of agriculture and a decrease in the burden of taxation required to support the autocracy would have led to a more vigorous industrial development of Russia.91 By the end of the century Russia was the world’s largest debtor country, but it was also the fifth largest industrial power in the world, with a share of world output (8 per cent in 1900) ahead of that of France. In the years between 1885 and 1914 the annual increase in industrial production averaged 5.72 per cent, exceeding that of the United States (5.26 per cent), Germany (4.49 per cent), and Britain (2.11 per cent).92 The high growth rates were not based on an increase in productivity, but were the consequence of massive investment in industry and a considerable increase in population, in so far as one can be certain, given the paucity of reliable statistics. The slow growth rate of agricultural productivity was the main force holding down the overall growth rate of productivity.93

  Both Witte and Stolypin intended to create a class of small private landowners (as in France or the United States), which would entrench a healthy spirit of entrepreneurial conservatism and stabilize the countryside. Similar views about the benefits of a prosperous farming community circulated widely even in countries as different from Russia as Ireland, where the Land Acts of 1881 (introduced by Gladstone’s Liberals) and 1885 (introduced by Lord Salisbury’s Conservatives) were designed to enable tenants to purchase their farms from landlords, thus creating an economy of small peasant proprietors – ‘in effect an agrarian revolution’.94 But Stolypin, at least according to Witte in his self-serving memoirs, wanted to do so by forcefully disrupting the obshchina without granting the peasants full political rights.95

  This was the paradox faced by Russian modernizers. Reform, both economic and political, was necessary for industrialization; yet the purpose of industrialization, at least in the mind of the tsarist reformers, was to strengthen the autocracy, with as little political reform as possible. No one seriously thought that Russian development could possibly take place ‘spontaneously’. Russia, with its mixture of high and low development, became a great laboratory in which an ‘industrial experiment’ was constantly refined and modified, almost a template for the debates pursued throughout the world in the course of the twentieth century: how much state? How much individual entrepreneurship? How much democracy, if any? Under which conditions should one prevail over the other? What was the role of the state?