RUSSIAN INDUSTRIALIZATION

The Industrial Revolution is one of the most important landmarks in the history of mankind. Not
only did it alter production methods, technology, organization but also domestic life,
demographics, social structure and politics.
According to Peter Mathias, the expression, Industrial Revolution, should not be used just to
denote industrial or mechanical innovation, advancement in technology or even conversion of a
single industry into a mass production unit, driven by more than human power. The concept, on
the other hand, implies the onset of fundamental change in the structure of economy and the
fundamental redeployment of resources away from agriculture. Growth in agricultural
production was to be in absolute terms. But what is important is the process of differentiation
and specialization in different sectors of the economy. There is an evidence of economic growth
which is distinct from economic expansion. Economic growth is to be understood in terms of
structural changes in the economy, deepening of investment, technical change involving a
change in production function (specialization).
The term, Industrial Revolution was coined by a Frenchman in the 1820s but came into
widespread use after Arnold Toynbees 1884 Lectures on the Industrial Revolution. Most
historians have agreed that this process began in England around 1750 and then spread to the
Continent after the Revolutionary and Napoleonic Wars. Steven M. Beaudoin talked in terms of
First and Second Industrial Revolutions. In the first phase, the three primary industries
textiles, metallurgy and transport were dramatically transformed; first, in England and later,
spreading to Belgium, France and Germany in the nineteenth century. In the second phase, use
of electricity and internal combustion engine mechanized all aspects of manufacturing. There
was introduction of new industries like chemicals, automobiles, etc. According to Beaudoin, the
process has no clear beginning or end since continuous change, particularly in manufacturing
technology, is a fundamental part of its essence.
The understanding of this phenomenon was taken to a whole new level by W.W. Rostow, who
in 1940s/50s gave a model of industrial take-off in his work The Stages of Economic Growth.
According to him, for a plane to take off, all the factors were to be perfectly aligned. He
imagined that English economy at the end of eighteenth century took off as a result of the
perfect alignment of developments in agriculture, industry, long distance trade, market,
finance, transport, etc. This model was fit for England which had no blueprint for its
development. Industrialization in England was not state-engineered but was an initiative of the
bourgeoisie, with the state on its side.
For scholars like David Landes and Joel Mokyr, technology played the most important role in
the coming about of the Industrial Revolution. According to Landes, so many technological
innovations and inventions took place in England from 1750-1800 that it led to the creation of
critical mass, the explosion of which impacted the entire society. Mokyr distinguished between
inventions (leap in technical knowledge) and innovations (process of bridging the gap between
the best available technology and techniques most commonly used). For Annalists like
Ferdinand Braudel and Paul Bairoch, something more than technology was important, that was
the creation of persistent demand and acceptance of technology at the level of the populace.
According to Clive Trebilcock, between 1750 and 1914, Europe experienced three major waves
of industrialization. First was between 1780s and 1820s in England. Second was between 1840
and 1870 in France, German states, across the Atlantic and in the United States. Third was in
the two decades preceding the First World War in Italy, Japan, Sweden, the Austrian section of
the Habsburg Empire and Russia. This third wave brought about a recovery in the world prices
level that had fallen due to the world-wide Great Depression of 1873-96.
The third-wave economies, who were the late developers, were expected to grow at a
significantly faster pace like a great spurt out of backwardness, as proposed by Alexander
Gerschenkron. The Gerschenkron model was a state-engineered industrial drive, where-by,
there was a blue-print for development. Thus, lesser risks were involved. It was envisioned that
the backward countries would already have access to the advanced technology being used by
the powerful economies and that this technology would produce high percentage growth rates.
This model was applied to countries like Russia, Sweden, etc. and they did manage to show
promising rates of growth. But the Russian case faced a special difficulty (Trebilcock).
The traditional monographs have tended to define the Russian society as a backward peasant
society, heavily dependent on technologically inefficient agriculture. Widespread poverty and
ignorance, social and political conservatism, and restricted social mobility and enterprise never
allowed industrial sector to develop. However, Roger Munting calls this a distorted picture
since according to him, an industrial revolution in Russia has been identified at various points
from the eighteenth century of Peter the Great to the Stalinist industrialization drive of the
1930s. The major industrial developments in Russia took place between the abolition of
serfdom in 1861 and the First World War. These developments were a result of the
autonomous function of the market and not wholly due to the initiatives of the state apparatus.
The Russian society and economy had certain built-in barriers to change that widened the gulf
between it and the other economies of Europe in the eighteenth century. Eighteenth century
Russia was the most populous European country which was constantly expanding. This was a
period when the size of a country and its ability to raise large armies determined its political
standing. The economic structure was overwhelmingly agrarian in nature. Climatically, Russia
experienced long and harsh spells of winter which led to a short growing season. The soil was
difficult to cultivate on. Moreover, Russia was a land of vast distances and scattered natural
resources. This led to isolation of village communities and, thus, prevented the growth of a
national market for large-scale industry. Geographically, Russia was located far away from areas
that witnessed a positive impact of the discovery of the New World. The social structure of
Russia was predominantly feudal in character. The landed nobility formed the ruling class and
extracted a surplus from the underlying peasantry. In the sixteenth century, when most of
Western Europe broke out from the shackles of old feudal ties, Russia saw the strengthening of
feudalism and serfdom.
80 per cent of the Russian population comprised of the peasant mass. The peasants were
grouped in families that were part of the village community (mir or obshchina) which controlled
distribution and use of peasant lands, and through which the peasants obligations in dues,
services, taxes, and military service were met. During this time, the mir enjoyed the support of
the state. There were hardly any avenues for investment of merchant capital and for setting up
specialized industries producing for the market. The peasants were hardly left with any service.
What existed was only a market for limited range of luxury or semi-luxury items. There was
hardly a middle class of merchants, traders and industrial entrepreneurs and the growth of few
that existed was stifled. Such an economy would have required the support of the state for its
development.
Peter the Great (1682-1725), compelled by military needs of the empire, established some
heavy industries. Even though many of these were later sold off to merchant entrepreneurs,
these remained under the supervision of the state. The workers were mainly serfs. Due to
widespread poverty of the servile masses, the home market never developed and hence, there
was no incentive for investment of private capital in industry. Industries were mainly organized
on putting-out lines (kustar industries). Areas which saw greater concentration of these
showcased certain features of proto-industrialization. Artisans and craftsmen in towns
produced for the wealthy classes.
The Urals-iron industry was the most notable industry in 18
th
century Russia. This was a part of
Peters forced-draught industrialization. It soon went into decline due to its inability to adapt
to the new coal-using techniques. Thus, in the first half of the 19
th
century, Russia remained a
country that was industrially backward.
Due to lack of effective internal communications, weakness in the commissariat and use of
inferior equipment Russia faced defeat at the hands of Anglo-French troops in the Crimean War
of 1854-6. Thus, it became evident that in order to further Russias power and status in the
international arena, construction of its economic and social structure was extremely crucial.
Thus, political and economic interests came to be tied together in Russia.
Economic change in Russia was seen as far from desirable by the Tsar. The main aim was to
retain the old structure of absolutism and its economic basis where-in the landowners
continued to enjoy a privileged position vis--vis the dependent peasantry. Therefore, all the
reforms and changes that were brought about yielded opposite results. Autocracy revealed its
incompatibility with industrial capitalism.
The existence of serfdom was one of the main causes of Russian backwardness and one of the
principal hindrances to its rapid economic development. Scattered distribution of Russias
natural resources, lack of a modern transport system, etc. were the other problems. However,
the abolition of serfdom in 1861 did not unlock a new era of rapid economic growth. This was
because the remnants of the old society and its institutional structure, of which serfdom was a
part, still existed. The fact that emancipation came at such later stage was symptomatic of
Russian backwardness. Gerschenkron viewed the abolition of serfdom as a political decision
rather than motivated by economic concerns. The peasant remained a serf in legal status. The
negligible surplus that the peasant produced over bare subsistence was siphoned off by the
nobility and the state. The peasants were still tied to the land because, in order to leave, the
permission of the lord was required along with and assurance that his obligations would be
fulfilled. They were obligated to pay redemption dues for forty-nine years to come. From the
over-lordship of the aristocracy, the peasants mainly passed into the over-lordship of the village
commune.
Thus, the industrial set-up in the form of possessional industries, kustar industries, etc. that
continued from the time of Peter the Great largely adapted itself to the serf economy. The
workers were ex-serfs; many of the merchants belonged to the class of serf-peasantry.
It was in 1840s that a distinct cotton textile industrial area with a number of spinning industries
emerged in Russia. It introduced the first elements of an industrial capitalist economy to Russia
using free hired labor and owing nothing to government privileges or promotion. But its scope
was still restricted.
Post-emancipation, the increased labor force did not become available to the industrial sector.
Most of them returned to the villages. Villages became over-populated and the living standards
fell. According to most historians, emancipation led to the formation of a free labor force and
increased their mobility leading to industrialization. However, this was not an immediate
development. Only when the village community started developing cracks due the pressure
exerted by the market forces that such a development took place.
Emancipation was part of a larger reform programme carried out by Tsar Alexander II which
included setting up of a system of local government, improvements in the judiciary, education,
role of public services was extended, employment opportunities were opened up to educated
and trained people, state intervention into the economy, etc. As a result, an overwhelmingly
peasant society like Russia saw the rise of an educated and potentially critical stratum who
were ready to critique that very same society. Censorship and repression, implemented by the
state, pushed this self-conscious intelligentsia towards an ideology of revolution.
Some, like the Narodniks, emphasized on mir being instrumental in renovating Russian society
while the Marxists were of the view that only when capitalism would reach its highest order
and bring out an intense class struggle between the capitalists and the proletariat would the
socialist revolution come about with a modern industrial foundation. However, the Russian
peasants were still producing for subsistence purposes and such a society was incapable of
making a transition to commercialized agriculture.
Bourgeoisie was hardly a class in Russia. Business was looked at with contempt by the gentry
and intelligentsia. Most of the entrepreneurs belonged to the ranks of peasantry and small
producers. Some of them came from the ranks of the dissident Old Believers (those who
flourished in the religious underground and were discriminated against). Most of the new and
large-scale enterprises were set up by foreign entrepreneurs. Russian state also played a major
role here but the focus remained on producers goods sector. In such an economy consumer
market did not have a big role to play. Whatever industrial development took place was based
on government expenditure. This is the kind of model that Professor Gerschenkron had applied
to Russia.
Between 1860s and 1890s, industrial development took place, particularly in the sector of
cotton textile. Factory system began being followed and some factory towns like Ivanovo and
Shuja came up. Availability of imported coal, other raw materials, stimulus from railways, etc.
led to the industrial development of St. Petersburg. Large enterprises in mining, metallurgy,
sugar-beet refining and distilleries emerged. But Russian economy was still quite backward in
comparison to the economies of Western Europe and the United States. Mostly, small-scale
production was carried out in small workshops or in cottages.
The state provided the impetus for whatever little development took place during this period.
Railway lines were built that connected Moscow to other provincial cities, Western Russia and
Ukraine. The Imperial Bank of Russia came up in 1864, soon followed by other private joint-
stock banks and discount houses. But all of this burdened the Treasury and the budget and till
1880s inflation was a method used to maintain a balance. Machinery, railway equipment, etc.
were imported. The balance of trade had to be maintained by greater export of grain
1
. Huge
loans that the government had undertaken to fund the industrial development had to be paid

1
Grain surpluses for export came from large estates in which hired labor worked, grain marketed by peasants to
meet their redemption dues and other monetary obligations.
off. Large proportion of grain began being exported even though the producers of grains were
dying of famine and starvation. Russia was in the grips of severe subsistence crises. No agrarian
revolution could have been brought about by the state lest they lost the support of the nobility.
Nor could enclosures, etc be brought about since the nobles wouldnt have been able to
manage those. Also, it could have led to a popular revolt.
But change was slowly coming about in the countryside. Mir began being gradually undermined
and peasantry began being differentiated not on the basis of land but on the basis of ownership
of draught animals. Agricultural individualism became visible in traces. The better-off peasants
(kulaks) began hiring their poorer counterparts and often played the role of usurers and
moneylenders in the villages. Thus, penetration of capitalist relations into the countryside
started taking place. As the previously well-off landlords started waning, the proportion of non-
noble and peasant land rose. This was the beginning of the creation of a class of peasant
proprietors. But this was not a uniform pattern of development. This aggravated the agrarian
crisis which gripped Russia in the late 19
th
century.
Peasants started producing for sale in the market and therefore became vulnerable to the
conditions of national and local markets as well as the harvests. The erstwhile landlords now
became estate managers and employers of hired labor. The village community that remained
isolated was drawn into a wider gamut of relations. Towns grew, railways expanded, demand
for primary products in the world market shot up. This provided the stimulus for crop
specialization and improvement of farming methods.
By 1870s, the English model of factory regulations had been adopted. Laws governing child
labor and night work for children came up in 1882; that which dealt with labor wages, contract
of employment, etc. came up in 1886. Most of these laws favoured the employer. Worker
grievances continued. Workers started organizing themselves into trade unions and met with
severe repression since trade unions were illegal until after 1905 Revolution.
Rapid industrialization of the 1890s coincided with a period of low or falling agricultural prices.
The burden of this fell onto the peasantry who were now subjected to higher direct and indirect
rates of taxation while the industrial prices were sky-rocketing. The poverty of the peasantry
never allowed for the expansion of the market for consumer goods. The grievances against the
state were mounting and when the Russians were defeated at the hands of Japan in 1904-05,
together this culminated into the 1905 Revolution. Even though it was brutally suppressed, the
Tsar realized that there was a need for reforms. Thus, the Stolypin reforms were brought about
in 1906, which promised improvement in peasant condition, stoppage of redemption
payments, promotion of individual peasant holdings, etc. The reforms were aimed at
undermining the mir which had been instrumental in mobilizing the peasantry during the 1905
Revolution. Due to the outbreak of the World War, these reforms had to be abandoned and did
not yield much.
Any analysis of the industrial position of Russia is incomplete without a mention of the
backward condition of the agricultural sector. State played an overtly central role in the
industrialization drive. There was a lack of entrepreneurs and rentier capital. In short, the
conditions necessary for the prolonged phase of capitalism in Russia did not exist.
But gradually, certain features of an advanced country started making an appearance.
Syndicates were formed in metal industry of Ukraine in 1902, in production of railway
equipment in 1904 and in south Russian coal mining. The finance of the country became
extremely dependent on the banks that came up. Russian financial structure in 1900 was
dominated by the State Bank and its satellites; The Peasant and Noble Land Banks; overseas
banks like Loan and Discount Bank of Persia (1894) and Russo-Chinese Bank (1895); and an
assortment of municipal, savings, mortgage and private joint-stock banks. The bourgeoisie
started becoming prosperous. The case of Russia is unique in the sense that industrialization
began quite late in Russia with state assistance, unlike Britain.
Post-1905 Revolution, there was another spurt of growth that lasted till the outbreak of the
First World War in 1914. This period saw state encouragement to industry, large-scale
operation, and concentration of control, close ties between industry and the banks and
presence of foreign capital. The Russian economy showcased a sharp dualism between a
modern industrial and financial structure and a backward agricultural sector. Still the industries
were localized in a few centers, largely owned by foreigners. The state was faced by a mounting
foreign debt. France became the principal creditor of the tsarist government. Thus, the Russian
economy became a tributary of foreign business.
Since, Russia conformed to the Gerschenkron model where state played a pivotal role; it
becomes important to analyze the changes that took place in the state policies from 1820s to
1900s.
Kankrin (1823-44), Tsar Nicholas Is Minister of Finance, was extremely opposed to the idea of
modern railways leading to modern industrialization. He was a firm believer of the mercantilist
principles. A change in ideology came about when Tsar Alexander II came to throne and
appointed Reutern (1862-78) as his Minister. Reuterns strategy was based on three aspects
construction of railroads, attracting foreign industrialists and employing foreign capital. His
method of borrowing from abroad was no innovation. Right from the time of Peter the Great,
the Russian rulers had followed an aggressive foreign policy even though the constraints of a
backward country did not allow for such a policy. Even though Reutern managed to secure
stabilization of rouble, augmentation of gold reserves, etc. after war with Turkey in 1877, the
Reutern system could not stand the strain.
Reutern was replaced by Bunge (1882-86) who was an exponent of liberal philosophies. It is
ironical that he is the one who is credited for bringing about state ownership of railroads so
that 69 per cent of these came to be concentrated in public hands by 1911. According to him, a
sound currency would stimulate industrial growth, and a prosperous peasantry would have led
to the growth of modern enterprise. He reduced the level of direct taxation to one-third from
1862 to 1886. But the aggressive foreign policy nullified most of his measures. The result was
that the money stock in 1879-91 actually declined. Bunges successor, Vyshnegradskii (1887-92)
resorted to the old practice of looting agriculture to run the rest of the economy. Much of the
development that took place during 1890s can be owed to the construction of railroad that had
started much before the appointment of Vyshnegradskii. The subsistence crisis that gripped
Russia in late 19
th
century, leaving thousands on the brink of famine, finally drove out
Vyshnegradskii from his office.
In 1893, when Count Witte was appointed as the Finance Minister, the Russian economy was
still overwhelmingly agrarian and severely underdeveloped. He was faced by a huge task to
deviate from the standard policy of his predecessors where the agricultural sector remained the
centre of focus. He was influenced by Friedrich List and his concept of national economy
where-in rapid growth could be achieved by concentration upon heavy industries (specially,
machinery and railways) and by enforcing present sacrifice for future gain. There was no place
for light industries and agriculture in this model. Witte advocated a mixed economy that was
based on state capitalism, where public initiatives were combined with private entrepreneurial
responses. Gerschenkrons substitute system reflected in Wittes policies where-in foreign
capital substituted for domestic investment, state capitalism for private enterprise, capital-
intensive manufacture for deficient labor supplies, state control over prices for developed
market in capital goods, etc.
As a result, by the fag end of 19
th
century and early 20
th
century, Russian coal production
doubled, iron and steel increased by four-fold, railways expanded by 87 per cent, foreign capital
saw increase of 120 per cent. Russia ousted France from the fourth place in world iron
production and took over the fifth place in steel manufacture. In terms of average annual
growth of industrial production, Russia achieved a growth rate of 7.5 per cent (never achieved
before). By 1913, Russia ranked fourth in industrial output on a world scale. Russia became the
fourth major manufacturer of industrial machinery in the world and second in oil production. It
even had a nascent airplane industry. But in terms of per capita income Russia remained well
behind the main industrial countries.
However, on the eve of the First World War, the Russian economy was still in an expansive
phase. Two-thirds of the population was still tied to agriculture; the yields were low. The
industrial sector was dominated by large-scale heavy industries. Workers were predominantly
of peasant origin. Majority entrepreneurs were foreigners but a new type of modern Russian
capitalist was also emerging. Politically, this middle-class had no representation. Even the
capital goods sector lacked service and support industries that are its essential auxiliaries. Light
consumer industries remained neglected by all the policy makers. Industry provided a small
part of national income: Factory-based manufacture produced 15 per cent on national income
in 1913; factories, handicrafts and construction together, 32.3 per cent. Agricultural products
provided 75 per cent of export earnings.
According to Trebilcock, probably, Russia never experienced a single industrial revolution, but
discreet periods of industrial transformation, and of these periods, the years of induced
development, 1892-1903, and of autonomous development, 1906-14, were the most
important. Witte has been credited for this first step that Russia took towards industrialism.
This period has been seen as the critical formative phase in the maturation of Russian economy
post-1950s.













Bibliography
1. Beadoin, Steven M. The Industrial Revolution.
2. Kemp, Tom. Industrialization in nineteenth-century Europe. London: Longman Group Limited,
1985.
3. Munting, Roger. "Industrial Revolution in Russia." In The Industrial Revolution in National
Context, by Roy Porter Mikulas Teich.
4. Trebilcock, Clive. "The Industrialization of Modern Europe 1750-1914." In Oxford Illustrated
History of Modern Europe, by T C W Blannings.
5. . The Industrialization of the Continental Powers 1780-1914.