Sergei Witte,On The State Of Our Industry
Sergei Witte, Russia's Finance Minister from 1892 to 1903, had the ambitious goal of creating the instutional and infrastructural foundations necessary for rapid industrial growth. He is best known as a railroad builder: to help integrate the Empire economically, he significantly increased both the absolute size of the Imperial rail system and its carrying capacity. Mega-projects to these ends included the Trans-Siberian Railway (meant to connect Vladivostok with the Russian heartland) and the so-called Chinese Eastern Railway (essentially a Trans-Siberian shortcut running through Manchuria). As the present document suggests, Witte was acutely aware that Russia's lack of investment capital was a continual brake on development. Sceptical of the gentry's willingness to finance industrialization, whether through taxes or participation, he continually lobbied for measures to permit easier foreign investment.
1. According to Witte's data, how has Russian industrial output changed since 1877?
2. Growth notwitstanding, how does Russian output circa 1900 compare to that of other industrial nations?
3. What does Witte say Russia needs to do to escape its backwardness?
4. Where does he propose to find the capital necessary for economic development?
February 1900.
In my most respectful report on the state's Budget for 1900 I had the fortune to submit for your Imperial Majesty's examination the following figures on the growth of our industry (all except for the extractive industries) over the last 20 years:
Products (millions of rubles) |
1877 | 1887 | 1892 | 1897 |
| Textiles | 297.7 | 464.2 | 581.6 | 946.3 |
| Food products | 17 | 37.9 | 47.9 | 95.7 |
| Animal products | 67.7 | 79.6 | 72.6 | 132.0 |
| Wood | 16.8 | 25.7 | 33.3 | 102.9 |
| Cotton | 12.7 | 21 | 25.5 | 45.5 |
| Chemicals | 10.5 | 21.5 | 35.3 | 59.6 |
| Ceramics | 20.4 | 29 | 32.3 | 82.6 |
| Metal goods | 89.3 | 112.6 | 162.3 | 310.6 |
| Other goods | 8.6 | 10.4 | 19.5 | 41 |
| Total | 541 | 802 | 1010 | 1816 |
The average annual growth in production was (in millions of rubles):
1878-1887 |
1888-1892 | 1893-1897 |
| 26.1 | 41.6 | 161.2 |
From these facts it is clear that over the last five year period the growth in manufacturing industry has been 4 times faster than in the preceding five year period and six times faster than in the decade before that. The development of the extractive industries is best described in the table below:
| Product | 1877 | 1887 | 1892 | 1897 |
| Coal | 110 | 277 | 424 | 684 |
| Oil | 13 | 167 | 299 | 478 |
| Cast iron | 23 | 36 | 64 | 113 |
| Iron | 16 | 22 | 29 | 30 |
| Steel | 3 | 14 | 31 | 74 |
Such industrial growth in a relatively short time is highly significant in itself. By its speed and strength of growth Russia stands ahead of all foreign economically developed states. There is no doubt that a country which in two decades has shown the capability of tripling its mining and manufacturing industry contains great potential for further development. There is also no doubt that development is absolutely essential in the near future, for however great the results already achieved may be, our industry is still very backward -- both by comparison with foreign states and in relation to the needs of the population.
In foreign states, industry is not developing as fast as in Russia because it has already reached there a far higher level than here. Thus, according to data for 1898, the production of cast iron per inhabitant was:
For the same year, the figures for coal per inhabitant were:
Despite the fact that Russia's underground deposits of coal and iron ore are very rich, the mining of these basic products is far lower here than in the aforementioned states. As for the third important branch of industry, cotton, we are very backward there too. In 1898 the production of cotton per inhabitant was:
In line with this lower production, we also see lower consumption. The consumption of coal per inhabitant is:
The same can be observed in relation to other products of mining and manufacturing. However, our backwardness cannot be explained as solely due to low consumption by the population. Despite the facts that prices for mined and manufactured goods in Russia are higher than abroad, and that imports of foreign goods are taxed at high tariffs, imports continue to grow steeply. Over the 11 years from 1887 to 1898:
Obviously, if our industry grew more quickly, it could satisfy those demands which are now being met by foreign goods, while if at the same time domestic competition grew so as to reduce prices from their present excessively high level, then this reduction in prices would also favor a rise in consumption.
The weak development of our industry is also reflected in our trade. Our external trade in industrial goods in 1897 was 1,286 million rubles. This was:
If we take the size of population into account, then external trade per inhabitant:
Both in trade and industry, Russia lags far behind the main foreign states....
In order for a broad and powerful industry to develop on the basis of natural wealth and cheap labor, active capital is needed which would undertake the difficult work of building things up. Unfortunately our fatherland is not wealthy in capital built up from savings....
If a country is not rich in its own capital, and both the state and industry need it urgently, then there is no other solution to the situation but to attract capital from abroad. But if this foreign capital is directed to the development of national industry, then the latter also benefits from the inflow of more experienced, knowledgeable and risk-taking foreign entrepreneurialism. Foreign capitalists will be interested in its destiny even in periods of political turbulence. However our need for state credit can be satisfied more safely from domestic savings. In my opinion it is harmful and unworthy for a great empire to submit its foreign policy to the danger of pressure from foreign stock exchanges. This would be inevitable, if all our state bonds were sold abroad.
With our dearth of domestic capital, with the necessity of spending a significant part of the national savings on state needs (especially on increasing our war readiness and the extension of the rail network), the indispensable growth of our industry can happen only with direct help from foreign capital.... Only then can mass industry develop here with the domestic competition so essential to the cheapening of its product, and therefore essential not only to the enlargement of internal consumption but to the export abroad of surpluses.
Unfortunately, in practice the founding of Russian public companies with the participation of foreign or Jewish capital, and also the start-up in Russia of foreign companies, meet with significant obstacles. A great deal of existing legislation limits both land ownership by foreigners (in 21 provinces of western Russia, the south and west of the Caucasus, the Turkestan region, the steppe districts and the Amur region) and by Jews (the 15 provinces in the Pale of Settlement, the Don district, the Caucasus district, Turkestan, the steppe districts, Siberia), and their right to undertake certain businesses (coal mining, oil, gold prospecting etc.).... The entrepreneurial activities of Russian capitalists are also surrounded by very significant obstacles....
Source: Unattributed translation of Sergei Witte, O polozhenii nashei promyshlennosti. Vsepoddanneishii doklad Ministra finansov Nikolaiu II (1900). Revised (syntax simplifications, conversion of Russian weights into English, other emendations) Jon Bone.