Carroll Quigley - Tragedy and Hope - A History of the World in Our Time

This period of progress punctuated by violence which lasted from 1890 to 1914 has a number of aspects. Of these, the economic and social development will be discussed first, followed by the political and, lastly, the ideological.

As late as the liberation of the serfs in 1863, Russia was practically untouched by the industrial process, and was indeed more backward by far than Britain and France had been before the invention of the steam engine itself. Owing to lack of roads, transportation was very poor except for the excellent system of rivers, and these were frozen for months each year. Mud tracks, impassable for part of the year and only barely passable for the rest of the time, left villages relatively isolated, with the result that almost all handicraft products and much agricultural produce were locally produced and locally consumed. The serfs were impoverished after liberation, and held at a low standard of living by having a large part of their produce taken from them as rents to landlords and as taxes to the state bureaucracy. This served to drain a considerable fraction of the country’s agricultural and mineral production to the cities and to the export market. This fraction provided capital for the growth of a modern economy after 1863, being exported to pay for the import of the necessary machinery and industrial raw materials. This was supplemented by the direct importation of capital from abroad, especially from Belgium and France, while much capital, especially for railroads, was provided by the government. Foreign capital amounted to about one-third of all industrial capital in 1890 and rose to almost one-half by 1900. The proportions varied from one activity to another, the foreign portion being, in 1900, at 70 percent in the field of mining, 42 percent in the field of metallurgical industry, but less than 10 percent in textiles. At the same date the entire capital of the railroads amounted to 4,700 million rubles, of which 3,500 belonged to the government. These two sources were of very great importance because, except in textiles, most industrial development was based on the railroads, and the earliest enterprises in heavy industry, apart from the old charcoal metallurgy of the Ural Mountains, were foreign. The first great railroad concession, that of the Main Company for 2,650 miles of line, was given to a French company in 1857. A British corporation opened the exploitation of the great southern iron ore basin at Krivoi Rog, while the German Nobel brothers began the development of the petroleum industry at Baku (both about 1880).

As a consequence of these factors the Russian economy remained largely, but decreasingly, a colonial economy for most of the period 1863-1914. There was a very low standard of living for the Russian people, with excessive exportation of consumers’ commodities, even those badly needed by the Russian people themselves, these being used to obtain foreign exchange to buy industrial or luxury commodities of foreign origin to be owned by the very small ruling class. This pattern of Russian economic organization has continued under the Soviet regime since 1917.

The first Russian railroad opened in 1838, but growth was slow until the establishment of a rational plan of development in 1857. This plan sought to penetrate the chief agricultural regions, especially the black-earth region of the south, in order to connect them with the chief cities of the north and the export ports. At that time there were only 663 miles of railroads, but this figure went up over tenfold by 1871, doubled again by 1881 (with 14,000 miles), reached 37,000 by 1901, and 46,600 by 1915. This building took place in two great waves, the first in the decade 1866-1875 and the second in the fifteen years 1891-1905. In these two periods averages of over 1,400 miles of track were constructed annually, while in the intervening fifteen years, from 1876 to 1890, the average construction was only 631 miles per year. The decrease in this middle period resulted from the “great depression” in Western Europe in 187 3-1893, and culminated, in Russia, in the terrible famine of 1891. After this last date, railroad construction was pushed vigorously by Count Sergei Witte, who advanced from stationmaster to Minister of Finance, holding the latter post from 1892 to 1903. His greatest achievement was the single-tracked Trans-Siberian line, which ran 6,365 miles from the Polish frontier to Vladivostok and was built in the fourteen years 1891-1905. This line, by permitting Russia to increase her political pressure in the Far East, brought Britain into an alliance with Japan (1902) and brought Russia into war with Japan (1904-1905).

The railroads had a most profound effect on Russia from every point of view, binding one-sixth of the earth’s surface into a single political unit and transforming that country’s economic, political, and social life. New areas, chiefly in the steppes, which had previously been too far from markets to be used for any purpose but pastoral activities, were brought under cultivation (chiefly for grains and cotton), thus competing with the central black-soil area. The drain of wealth from the peasants to the urban and export markets was increased, especially in the period before 1890. This process was assisted by the advent of a money economy to those rural areas which had previously been closer to a self-sufficient or a barter basis. This increased agricultural specialization and weakened handicraft activities. The collection of rural products, which had previously been in the hands of a few large commercial operators who worked slowly on a long-term basis, largely through Russia’s more than six thousand annual fairs, were, after 1870, thanks to the railroad replaced by a horde of small, quick-turnover middlemen who swarmed like ants through the countryside, offering the contents of their small pouches of money for grain, hemp, hides, fats, bristles, and feathers. This drain of goods from the rural areas was encouraged by the government through quotas and restrictions, price differentials and different railroad rates and taxes for the same commodities with different destinations. As a result, Russian sugar sold in London for about 40 percent of its price in Russia itself. Russia, with a domestic consumption of 10.5 pounds of sugar per capita compared to England’s 92 pounds per capita, nevertheless exported in 1900 a quarter of its total production of 1,802 million pounds. In the same year Russia exported almost 12 million pounds of cotton goods (chiefly to Persia and China), although domestic consumption of cotton in Russia was only 5.3 pounds per capita compared to England’s 39 pounds. In petroleum products, where Russia had 48 percent of the total world production in 1900, about 13.3 percent was exported, although Russian consumption was only 12 pounds per capita each year compared to Germany’s 42 pounds. In one of these products, kerosene (where Russia had the strongest potential domestic demand), almost 60 percent of the domestic production was exported. The full extent of this drain of wealth from the rural areas can be judged from the export figures in general. In 1891-1895 rural products formed 75 percent (and cereals 40 percent) of the total value of all Russian exports. Moreover, it was the better grains which were exported, a quarter of the wheat crop compared to one-fifteenth of the rye crop in 1900. That there was a certain improvement in this respect, as time passed, can be seen from the fact that the portion of the wheat crop exported fell from half in the 1880’s to one-sixth in 1912-1913.

This policy of siphoning wealth into the export market gave Russia a favorable balance of trade (that is, excess of exports over imports) for the whole period after 1875, providing gold and foreign exchange which allowed the country to build up its gold reserve and to provide capital for its industrial development. In addition, billions of rubles were obtained by sales of bonds of the Russian government, largely in France as part of the French effort to build up the Triple Entente. The State Bank, which had increased its gold reserve from 475 million to 1,095 million rubles in the period 1890-1897, was made a bank of issue in 1897 and was required by law to redeem its notes in gold, thus placing Russia on the international gold standard. The number of corporations in Russia increased from 504 with 912 million rubles capital (of which 215 million was foreign) in 1889 to 1,181 corporations with 1,737 million rubles capital (of which over 800 million was foreign) in 1899. The proportion of industrial concerns among these corporations steadily increased, being 58 percent of the new capital flotations in 1874-1881 as compared to only 11 percent in 1861-1873.