Industrialisation between 1880 and 1914 (Including Sergei Witte) (Sergei…
Industrialisation between 1880 and 1914 (Including Sergei Witte)
By 1860, industry mainly looked like:
state-run factories manufacturing essential goods for the military.
Craft-based industries which did things like weaving, spinning and making wooden implements happend out of peasant's homes.
Artels, which were small groups of peasants operating a workshop making products out of metal, leather and other materials for the domestic market.
The only privatised industries were textiles and sugar. Larger factories based in and around St Petersburg produced 90% of cotton for the domestic market. Ukraine, where the majority of the sugar industry was based, was becoming more mechanised and was reducing the reliance on foreign imports.
Alexander II brought in foreign expertise to help industrialisation move forward, including John Hughes from South Wales (Britain) in 1868. This resulted in the establishment of huge iron works in the Donbass region of Ukraine.
Railways were an area which domestically was able to flourish- between 1866 and 1881 the mileage of railway increased from 3,000 to 13,270.
Sergei Witte was appointed by Alexander II as Finance Minister in 1892, a post he would hold untill 1903.
State sponsored development of heavy industry.
Witte saw Iron, coal and steel as the basis for industrial development, just as it had done in Western Europe.
The railways would be key to this, to link up the vast spaces and the people, farms and factories.
The railways enabled procurement from Europe and Asia. Also, by the end the 1890s, 60% of all iron and steel was used to expand the railways; fourt-fifths of locomotives were built in Russia. Witte champoined the Trans-Siberian railway, which took 25 factories.
Foreign loans, investment and expertise.
Russia didn't have the money available for all this industrialisation, so Witte negotiated huge loans, particularly from the French, as well as drawing in foreign investors.
By 1900, one-third of capital in Russian joint-stock companies was invested by foreigners.
In 1888, there were 16 foreign companies in Russia. By 1900, there were 269.
High Tariffs on foreign industrial goods.
This meant more companies brought metal and other products from within Russia, meaning less money flowed out of the country.
Strong rouble, adoption of gold standard.
A stable currency was essential to attract capital abroad.
In 1897 they adopted the gold standard to back the rouble, meaning that exchange rates were fixed against other gold-backed currencies, providing more security for foreign investors.
Raised Taxation rates.
He increased in-direct taxes on items such as kerosene, matches and Vodka.
This hit the peasants hard, meaning they had to sell more grain, but this enabled point 6, increased grain exports, as part of Witte's strategy.
Exports of grain.
Selling more grain was the key to earning more foreign currency to pay the high interest on foreign loans.
Did Witte's strategy work?
Up untill 1900 the plan was working very well, there had been an industrial spout in the 1890s:
The production of iron and steel had risen from 9 to 76 million poods per year.
Coal output tripled.
the production of cotton cloth increased by two-thirds.
In 1899 there was an international recession. Russia entered a deep depression which affected all areas of the economy.
In the Donbass region, in 1903, only 23 of 35 blast furnances were operational.
All other areas of industrialisation was affected- output fell in metal production, as well as the railway industry.
Witte lost the support of the Tsar and was dismissed in 1903.
Criticisms of Witte's industrial strategy:
Foreign loans and their interest was a major drain on finances, by 1900 20% of the annual budget was spent on paying back foreign debt, 10x more than was spent on education.
Lighter industry was overshadowed by the heavy- meaning smaller innovations and electrical goods which could have heavy industry move forward was not developed.
Witte neglected agriculture.
Living and working conditions were terrible, creating social discontent, strikes and general unrest.
There was no market for consumer goods.
It was only after 1908 that industry started to recover from the depression of 1899.
Rearmament meant there was an increased demand for metal, boosting metallurgical output.
Until 1914, industrial output grew at an approximate rate of 6% per year.
By 1914, Russia was the world's fourth largest producer of coal, pig iron and steel. It was the world's fifth largest industrial power.
An advantage of Russia's late industrialisation compared to Europe, was that much of it's production still took place in large scale works, employing thousands of people each.
Igor Sikorksy designed the world's largest aircraft with four engines.
By 1909, domestic investment was x3 more than foreign investment.
There was a growing domestic stock market, with 774 joint-stock companies being created between 1910-1913.
Unfortunately, the share of consumer goods as part of industrial production fell from 52% to 45%.
Rearmament meant that a coherent plan for other sectors of the economy never materialised.
The demand for agricultural tools and machinery weren't met.
67% of industrial workers worked in smaller workshops, but they only produced 33% of total national output.