The Russian economy in the 19th century
The Russian empire grew enormously during the 19th century, covering land from Poland in the West to the Pacific coast in the East. The population also grew quickly. In economic terms, this meant an increase in two of the four factors of production: land and labour. You might think then, that the Russian economy at this time was booming. But until the 1860s, this was not true at all. Compared to other important powers like Britain, France and America, Russia's economy was hopelessly underdeveloped. Why was this so?
The main problem was Russia's feudal economic system. Almost 80 per cent of the population were peasants. They either worked on land owned by the state, or they were serfs. Serfs worked land that belonged to a small number of wealthy landlords. In return for a small piece of land and a place to live, serfs had to work for their landlords. In fact, the serfs didn't just work for their landlords - they belonged to them.
This system did not encourage economic growth. Peasants' labour was used in subsistence farming for their families or working to maintain their landlord's estate. Without surplus goods, there were no profits or savings. With no savings, domestic investment for growth was not possible. Russian agriculture still used the most basic technology, and almost the whole workforce was unskilled and illiterate.
In addition, the empire's industrial base was poorly developed. Before 1850, there were relatively few factories, mostly producing textiles. Some factories were run by the state, but many were run on the estates of landlords. Industrial technology was basic, and engineering education was not encouraged by the authorities.
To make matters worse, the Crimean War from 1853 to 1856 had weakened the Russian economy even more. Eventually, the Russian authorities realised that they had to do something about the economy. The empire was now surrounded by modern industrial powers. Russia had to make an economic leap into a new age.
The first step was the emancipation of the serfs. Tsar Alexander II finally made this happen in 1861. This meant that the population was no longer tied to the land and could provide labour for industry. With foreign investment, Russia began to build up its industries. The iron and steel industries grew rapidly. Mining of raw materials increased and industrial centres developed along the Don and Dnepr rivers. The output of the iron and steel industries helped to build a huge railway network, including the Trans-Siberian railway.
Growth continued and by the 1890s the Russian economy was experiencing a real boom. From five per cent in the 1860s, annual growth reached nine per cent in the 1890s - higher than anywhere else in Europe at the time. However, much of the growth was built with foreign debt. Agricultural methods and technology were still primitive. And what about the economy's human capital? The exploited serfs had now become exploited factory workers. The majority of the population remained totally illiterate and desperately poor. With the turn of the new century, how much longer could the boom continue?
Date: 2015-12-11; view: 2357