2. Economic Development under
Alexander III
Lesson Objectives:
1) To identify reasons why Russia
needed to industrialise
2) Examine the policies pursued by
Witte.
3) To begin to assess the
successes of both Witte and
Stolypin.
3. WHY DID RUSSIA NEED TO INDUSTRIALISE?
The transformation of the Russian economy had begun in the reign of Alexander II
in response to the humiliation of defeat in the Crimean War.
Alexander III was well aware that economic modernisation was also needed to
allow Russia to support her growing population and to recapture her Great Power
Status. At the start of Alexander III‟s reign Russia relied on the export of grain to
earn her money, but crop yields were low because of problems with emancipation.
The countries economy was also heavily dependent on the weather and in 1891 –
1892 famine affected 17 of Russia‟s 39 provinces – the government failed to
organise adequate relief and over 350,000 died from starvation.
Alexander also needed to see economic development to support the growth of his
military (50% 0f government spending) and to protect the Empire.
A railway building programme had started and there was some small-scale
development of factories. However, by 1881, Russia‟s economic development still
lagged far behind that of Western Europe and there was a huge gulf between
Russia‟s potential, given its vast supplies of natural resources and manpower, and
the country‟s actual levels of achievement.
It was not until the reign of Alexander that a real „industrial revolution‟ took off.
4. Alexander‟s reign is remembered for its reactionary policies, but it must be
remembered that it also saw the start of a period of great industrial
expansion.
The Tsars had avoided industrial expansion, as it was seen to be “dirty” and
“western” compared to Russia‟s traditional agricultural economy. However, the
1890s saw the onset of a period of rapid industrial growth, which came to be
known as “the great spurt”.
This was a period of sudden expansion, which was initiated by private
enterprise, but sustained by deliberate government policy.
Two man in particular were responsible for this industrial reform, Finance
Ministers Vyshnegradsky (1887 – 1892) and Witte (1892 – 1903)– both of
whom adopted similar policies – improving the Russian economy by
increasing indirect taxes, negotiating loans, reducing imports and expanding
exports, particularly of grain. A Tariff Act introduced in 1891 protected
Russian iron, industrial machinery and raw cotton.
The Famine of 1891 – 1892 resulted in Vyshnegradsky being sacked but
Witte continued the work.
The ‘Great Spurt‟
5. Tsarist economic policies dominated by 2 men;
Witte Stolypin
Witte was Minister of Finance (1893-1903 – during both the
reign of Alexander III and Nicholas II). He concentrated on
expanding Russian industry.
Stolypin was president of Council of Ministers (1906-11 –
during the reign of Nicholas II). He focussed on improving
Russian agriculture. We will look at Stolypin in greater detail in a few lessons
time
6. Task 1
• Use the extract from Lynch (p 21- 26) and
the handout to make your own notes on
Witte.
• Use the subheadings and questions to
help you.
7. Witte – background and objectives
Sergei Witte
Witte was the minister for finance between 1893 and 1903. He was
unusual because he was not aristocratic, but had gained a position
of great influence, and his aim was to re-invigorate autocracy
through reform. Economic development would, he believed, provide
employment and raise standards of living, so curbing revolutionary
activity.
Witte’s objectives
He wanted to abandon liberal economics, in favour of state
intervention. Traditionally, the Russian government had adhered to
the policy of “Laissez-Faire”.
This meant that the government deliberately played no part in
economic matters, believing it to be the preserve of private
enterprise. Witte aimed to improve Russia’s industrial capacity
through deliberate government policy.
8. Witte’s methods
However, Witte used state power to direct and control the economy,
which is known as state capitalism. He was impressed with the
industrial revolutions, which had occurred in Western Europe, and
hoped to expand Russia’s economy along western lines. This would
require investment on a large scale.
He invited a large number of western managers and experts
to advise and organise new initiatives.
Most importantly, he encouraged investment from western
capitalists, into Russian industry, to encourage growth. (One
key aim was to make Russia less like a “colony” which was
flooded with foreign imports, and did not produce goods
itself).
To get capital which could be invested in Russia’s industries,
Witte took a number of steps:
1. He arranged sizeable loans from abroad.
2. Heavy taxes and high interest rates were imposed at
home.
3. Foreign investment was allowed to flow into Russia.
4. Imports were halted through high tariffs, thus allowing
Russia’s growing industries a secure market.
9. Witte – Results
As can be observed in the data below, there was a good deal of
success through Witte’s policies.
Foreign Investment 1880 - 1914
YEAR Foreign Investment in millions of roubles
1880 98
1890 215
1895 911
1914 2,000
The Russian Economy: annual production in millions of tonnes
Coal Pig Iron Oil
1880 3.2 0.42 0.5
1890 5.9 0.89 3.9
1900 16.1 2.66 10.2
1910 26.8 2.99 9.4
1913 35.4 4.12 9.1
1916 33.8 3.72 9.7
By 1900, 40% of Industry in Russia had been founded after 1891,
and through the 1890’s, Russia’s industrial growth stood at 8%, the
highest level in the world. (Though overall Russia was still well
behind).
10. Witte - Railways
Much of the foreign capital, which came into Russia, was invested
into the growing railways, which had been neglected, as the Tsars
saw them as a western idea, which could harm the empire.
Witte felt that by expanding the railways, this would have a knock
on effect on other industries, like coal and iron. Russia’s rail
network did start to expand rapidly.
Growth of Russian railways (km’s)
1881 1891 1900 1913
21,228 31,219 53,234 70,156
The showpiece of Russia’s rail expansion was the Trans-Siberian
railway, (started in 1891, finished 1902) which linked the western
and eastern parts of the empire, and opened China for exploitation.
However, this was more of a symbol of Russia’s expansion than a
project of real economic value.
11. Criticism of Witte
Criticisms of Witte’s policies
1. Tariffs meant that goods were expensive, and most people
could not afford what was being produced.
2. This “spurt” was part of a worldwide boom.
3. The growth of the proletariat (working class) in the main cities
was not planned, and this led to social problems, and
appalling work, and living conditions.
4. The pan Slav thinkers resented the foreign involvement.
5. Most significantly, Witte made no attempt to rectify Russia’s
agricultural problems. Production of grain was stagnant, while
the population rose, causing suffering and famine.
Note: The First World War caused the economic “spurt” to come to
an end, and the revolutions of 1917 caused further harm to the
Russian economy.
12. Homework
Explain why Witte wanted to
promote industrialisation in
Russia in the 1890s. (12)
Complete for next lesson.
We will self-mark using green pen and mark
scheme at the start of next lesson.
13. Plenary
1) Who was Minister of Finance from 1893-1903?
2)Give one reason why Witte wanted to industrialise.
3)What was state capitalism?
4)Name one policy of state capitalism.
5)Where did the Trans-Siberian railway start and finish?
6)What did Witte’s policies make Russia dependent on?
7)What saw huge growth as part of a transport “revolution”?
8)Give one reason why strikes increased?
