Economic Modernisation in Tsarist Russia

by James Graham

The Russian Empire at the turn of the twentieth century was governed by an ancient autocratic system. By the time Alexander III was crowned to head of the system, Russia had lost its position as a great power and could only regain it by increasing Russia's economic might. Industrialisation was however fraught with dangers that neither Alexander nor his successor Nicholas II could avoid. The Tsars failure to balance the autocratic system with the dangers of economic modernisation directly caused the revolutions of 1917 and the collapse of the autocratic system.


The Russian autocratic system gave absolute power to the Tsar of the day. The Tsar was the embodiment of God on earth and was left to rule according to his own consciousness of duty and right. The Orthodox people of the empire accepted this personal rule based on the perceived mystical union between themselves and their Tsar who loved and obeyed them as a father. Traditionally then, the only restraint on a Tsar was that of mortality. For the most part this is how the system operated, when problems arose between Tsar and his subjects they were blamed on his servants and evil advisors. A distinctive feature of the Russian autocratic system was that it was over governed in the centre by St Petersburg bureaucrats and under governed at the local level where power rested with the landed gentry. While the autocracy was arbitrary and absolute it was by no means universally unpopular before Alexander's reign.

The Crimean War of 1854-1856 signalled the end of Russia's status as a great power but the ambition of greatness remained. Britain and France's rapid industrialisation allowed the two allies to defeat Russia on its own soil. This defeat had a great affect on Russian thinking and a consensus prevailed that Russia needed to 'catch up to the west' through a policy of economic modernisation. This was the goal of the last two Romanov Tsars. The difference between the two was that Nicholas had some comprehension of the dangers this goal entailed. The formation of new social classes, urbanisation and the heavy burden that modernisation placed on the peasants were the main concerns. While Nicholas was aware of the risks of industrialisation he was spectacularly unsuccessful in preventing them exploding into direct attacks on the autocracy.

Alexander muddled through his short reign failing to articulate a clear vision for Russia's development. His government had an inability or unwillingness to lay down a clear line of economic policy and then adhere to it. He did however place great trust in his Finance Ministers. Bunge the first Finance Minister tried to balance public expenditure with public income. He also lightened the taxation load on the peasants hoping it would allow them to increase consumption of industrial products thus increasing the nation's industrial growth. Vyshnegradskii, Minister of Finance from 1886 to 1891 introduced the contradictory policy of taxing the peasants harder to create budgetary surpluses and gold reserves. The reserves were needed to encourage domestic and foreign investment in Russian industry. Accordingly he increased indirect taxation, raised tariffs and pressed the collection of arrears on redemption payments and the poll tax. What resulted was a peasant population with little reserves of food or money. This ensured that the crop failures of the 1890s were disastrous for the peasant population. After the 1891 famine Vyshnegradskii lost his post but the damage had been done. The peasants were now more wary of the Tsar's motives and less favourably inclined towards him. The replacement minister Witte vigorously intensified Vyshnegradskii's program. The cornerstone of Witte's plan was a stable rouble and export surpluses to allow the government to borrow abroad. Under Witte the state also became the main instigator of Russia's industrialisation. The railroad network was the prime target with vast projects like the Trans-Siberian railroad. The Trans-Siberian railroad was not without its critics who believed encouraging peasants to colonise Siberia would deplete the Noble landowners supply of cheap labour and westernise the Russian countryside. These fears were brushed off by the Tsar as irrelevant without much thought, such was his complete lack of understanding of modernisation and its consequences. Perhaps luckily for Alexander he died in 1894 before the effects of his modernisation could be felt.

Economic Modernisation in Tsarist Russia

Economic Modernisation (Part 2)
Economic Modernisation (Bibliography)