How far do you agree that Sergei Witte’s policies were successful in modernising the Russian economy in the period of 1892-1904?
At the end of the nineteenth century, Russia had been plunged into depression, because the government was forced to print more and more money which caused a rise in inflation. In addition, because Russia was at war with Turkey, over thirty per cent of the government’s expenditure was being spent on the armed forces, whilst another thirty per cent was being lost on debt interest, which left little money for education or social welfare. Ivan Vyshnegradskii, the finance minister from 1887- 1892 began attempting to rescue the government finances. He reduced imports and imposed tariffs on imported goods, which forced peasants to sell more and more grain which they could not produce, this lead to a famine which overwhelmed large parts of the country in 1891. Russia was also lagging behind many of the Western countries at the time in terms of industrial development too. When count Sergei Witte was appointed finance minister in 1892, there was a desperate need to decrease inflation, improve infrastructure and encourage foreign investment. However, it is debatable how successful the policies introduced by Witte were in modernising the Russian economy.
Witte’s aim was to make the Russian economy strong enough to maintain Russia’s position as a Great Power. However, Russia did not possess several of the essential factors required to be able to rapidly industrialise like countries such as Germany and Britain were. Firstly, the majority of Russian peasant did not have complete freedom, which meant that the migration of workers to towns and cities in search of work was limited. Also, the Russian economy didn’t have sufficient funds to invest in industrial development, because it could not produce enough surplus grain to raise funding to support industrial development. To combat this, Witte encouraged other countries such as Belgium, France and Britain to invest in the Russian economy, because foreign capital was more valuable due to Russia’s current state of inflation. Also, Witte decided to make the rouble (Russian currency) more sought after by putting it on the gold standard, this meant that money was directly exchangeable for gold, which had a higher value.
It could be argued that Witte’s policy of foreign investment was successful, because an increase in foreign investment, in addition to an increase in the value of rouble meant that the national income if Russia between 1894 and 1913 increased by nearly 50%. Consequently, Witte was able put more money into improving industry in order to catch up with other industrialised countries. However, it could also be argued that Russia became overly dependant on foreign investment, which would not have helped their income as an independent country, and should other countries stop investing Russia would be in serious financial difficulty, more so than before Witte introduced his policy. The country was already deeply in debt, and a huge percentage of government money was being spent on debt interest. Also, because foreign investment linked Russia’s economy with the strength of other currencies in the world, if there was an economic crisis Russia would be extremely vulnerable.
When Witte placed an emphasis on industrialisation within Russia, he focused it in St. Pertersburg, Moscow, Baku, and Ukraine, creating jobs in cities and surrounding towns in mainly large factories. Peasants moved from rural areas in the hope of finding work to better themselves, which lead to urban areas expanding at a vast rate. By 1900 over half of the industrial workforce was employed in factories that had over a thousand workers, and the populations of Moscow and St. Petersburg almost doubled by 1914. Additionally, This sudden growth in industrial development benefited Russia greatly because a healthy industry provided a good base on which Russia could improve its economical state. In addition, it allowed russia to develop its military power, because the capital goods that were developed from the factories were also used for military production. However, similar to his policy of foreign investment, it is debatable as to whether urbanising cities caused more harm than good to Russia as a whole. Whilst industrial expansion created jobs, the conditions of these workers were shockingly poor. If they weren’t sleeping by their machines, the poor worked for long hours only to return home to areas with unsurfaced roads, barracks, and overcrowded slums that housed 16 people or more, with six people living in each room. Running water was only available in a third of St. Petersburg, and cesspools, piles of human manure and a polluted water supply was a constant threat to the health of the poor because disease was rife and fleas were everywhere. Moreover, not only did the workforce of Russia have to deal with poor living conditions, but they also had dreadful working conditions. The hours that they were expected to work were long, with days lasting eleven and a half hours with only an hour and half’s break for lunch if they were lucky. Wages were pitiful and didn’t rise with inflation, and jobs were insecure with some workers only being hired on a daily basis. There was no union for workers if they were unsatisfied, which provided the ideal environment for social unrest and support for radical alternatives to Tsarism- workers in Moscow for example decided to demonstrate and strike for better conditions. Their actions provided the beginning of the 1905 Revolution.

The centre piece of the Witte system, and probably his biggest achievement, was a vast construction enterprise: the Trans- Siberian railway. This railway was to run 7000km across the Empire, going from the capital St Petersburg on the Baltic Sea all the way to Vladivostock on the Pacific Ocean in the far East, and was completed by 1903. In addition to creating this 5,400 mile railway, Witte, who had been the Director of the Department of Railway Affairs, used his knowledge to help him expand the railway network that was already there, and Russia had 53,234km of railway which was more than any other nation at the time. Much of this railway system was owned by the state, because Witte knew that Russia’s economy would need a lot of state intervention to be successful. The development of the Trans- Siberian railway meant that the Russian influence over the far east could develop, and it allowed Russia to exploit the vast natural resources of Siberia- there were minerals in Siberia that could be used to stimulate further growth in industry.
As well as improving the infrastructure of Russia, Witte also imposed high taxes on goods within Russia in an effort to improve the economy, though this failed. The taxes were put on everyday, household items such as sugar and and salt, and these increases were high, for example sugar duties were raised 100%. Witte also introduced trade tarrifs on imported goods from abroad, because other countries had been exporting materials like iron and steel into Russia. However, the policy did not aid Russia, but it meant that foreign countries put high tariffs on goods that Russia exported, making foreign trade hard. Also, Witte imposed extra taxing on the peasantry, which caused deep resentment and meant that peasant uprisings became more and more popular.
Although during Witte’s time as Minister for Finance, it does appear that Russian economy and industry greatly improved, the empire still lagged behind the western world in terms of economic growth because it could not match the rate at which they were expanding. For example, although Russia industrialised, Great Britain was producing nearly thirteen times the amount of cast iron as Russia was, according to the ministry of finance records. Also, during the time when Witte introduced his policies, there was a large growth in population, which meant that the improvement was not as impressive, because the rate of improvement should have been more drastic considering the huge population. The factory work that was done in factories was often insufficient, leading to the empire being massively behind in terms of production, meaning in turn that Russia’s trade income of 1.2 million roubles in 1897 was only one fifth of that of the UK; proving that Russia was not the industrialised nation it appeared to be.
In conclusion, although the economic recovery in Russia is attributed to Witte, and the construction of the Trans- Siberian railway greatly benefitted Russia, overall I do not agree that Sergie Witte’s policies were successful in modernising Russia. There is evidence to suggest that he was not alone in improving the country’s finances, for example, Vychnegradskii, who was the Russian finance minister before Witte, had already provided Witte with a basis to place most of his policies- taxes, and the policy of exchanging rouble for gold had actually already been suggested. Furthermore, Witte’s high tariffs and taxes proved to be unpopular with the public, who were 80% peasants. This shows that although the majority of Witte’s policies at first glance appeared to be improve the industrial and economic state of Russia, they were actually a smoke screen because they caused more harm than good. The negative consequences of Witte’s policies such as poor conditions for the peasants and over dependancy on foreign investment, far out weighed the benefits of his policies. Ultimately, despite Witte’s efforts, by the end of his time in office as Russian Finance Minister; Russia was still lagging behind the rest of the world significantly in terms of it’s modernisation, therefore Witte’s policies were not successful.