Industrial Development under Nicolas II: Sergei Witte
Terms Tarriffs: a tax levied by a government on imports and exports for purpose of protection, balancing payments, or raising revenue. Under reign of Nic II, the Witte System justified high import tariffs originally imposed in 1891, which raised the price of manufactured goods and luxuries. This upset the land-owning nobility, who were the major agriculture producers and exporters and the main support group of the Tsar. For Russia to industrialize, they needed to import industrial equipment, but protective tariffs discouraged imports. PROTECTIVE TARIFFS (protect domestic economy) VS. FREE TRADE (no tariffs)
Taxes: DOMESTIC Idea of modernizing the country by improving the lives of people. Slavophiles, however, thought the social division was important in Russia, whereas Westerners valued social mobility. Russia wanted to modernize and industrialize, but also wanted to keep an aristocracy, which was considered backwards in Western standards. Every time there is a commercial transaction, the country gains money through sales tax. Income tax, property tax, excise tax, (sin tax) on alcohol and tobacco. Main idea is for government to raise money: is it better for government to have money and increase livelihood of citizens, or is this better done through private means, where people are free to invest in other things.
Interest Rates: a rate charged for the use of money, in addition to principle amount. BONDS: peasants paid redemption taxes. Government pays back loans from private investors with interest. Raising interest rates encourages investments, but then the government has to pay more money back. But with low interest, people won’t invest. After revolution, people that invested in Russia lost money when the Tsar fell.
Gold Standard: fixing prices of domestic currency: pricing the standard and interest of a currency. Reserves of gold “fix” money- provides common currency- Western idea. Showed Russia was modernizing because it could invest like the rest of the world
Servicing a debt: paying back a death with interest
National debt: money owed by national government- through bonds. Russia had a large national debt when Tsar fell (big investments in France)
Trans-Siberian Railway: made commerce more efficient- industrialization
Growth from a low base:
Raising Money • Major problem: Russia did not have the money to spend on industrialization • Witte faced a dilemma: Raising money for government spending in the form of taxes and interest rates would result in less money for private enterprise. Avoiding this problem by attracting foreign investment would leave the country at the mercy of the international money markets. - Nobility paid taxes, resulting in less money for private investments. - Russia saw themselves as leader of Slavic people: nationalistic, but they were dependent of foreign investments from Westerners- contradiction. Stalin’s main goal was to end Russia’s dependence on the West
Witte’s Dilemma Taxes on the peasantry? Most peasants were subsistence farmers: only had enough to eat. Entrepreneur farming was a western concept.
Interest rates on loans from the state bank?
Tariffs on foreign imports? Benefits for increasing: Russian government would make money, promote Russian products and domestic investment For decreasing: more countries would invest (promote foreign investment), lower prices for Russian citizens
Should we put Russia on the Gold Standard? Benefits: easier trade with other countries by providing common currency Against: heavy government spending to provide gold used, could result in money withdrawels from the government
International loans?
Spend government money on transport, or on social improvements?
Witte’s Decisions/ Consequences
Policies
Results
Raising Money: Gold Standard/Taxes
Money for Government - Raised massive amounts of capital • Secured a loan from France, • Raised taxes, tariffs and interest rates Money for Industry - Put Russia on the Gold Standard in 1897 • Currency can now be changed for gold • 20th Century equivalent of the Euro • Foreign investment in Russia trebles in 10 years
Money for government – more taxes means less available for free enterprise ▪ This was a “command economy” Money for government – more taxes means less available for free enterprise ▪ This was a “command economy”
Investing Money: Trans-Siberian Railway
• Massive railway investment (military + economic advantages) = Tsar enthusiastic. • The Trans-Siberian Railway stretched 9600 miles from Moscow to Vladivostok.
• Symbolic value only– only single track, unfinished by 1914. • Encouraged Nicholas II to believe he could defeat Japan.
Overall
industrialisation” – minimise social dislocation. • Massive growth 1893-1900 • All this in the face of the suspicion and hostility of the conservative establishment (Milyutin had faced the same problem).
• Growth was from a very low base. • No political reforms to match economic reforms = tension • 4/5 of population in 1914 still peasants
Terms
Tarriffs: a tax levied by a government on imports and exports for purpose of protection, balancing payments, or raising revenue. Under reign of Nic II, the Witte System justified high import tariffs originally imposed in 1891, which raised the price of manufactured goods and luxuries. This upset the land-owning nobility, who were the major agriculture producers and exporters and the main support group of the Tsar. For Russia to industrialize, they needed to import industrial equipment, but protective tariffs discouraged imports.
PROTECTIVE TARIFFS (protect domestic economy) VS. FREE TRADE (no tariffs)
Taxes: DOMESTIC Idea of modernizing the country by improving the lives of people. Slavophiles, however, thought the social division was important in Russia, whereas Westerners valued social mobility. Russia wanted to modernize and industrialize, but also wanted to keep an aristocracy, which was considered backwards in Western standards. Every time there is a commercial transaction, the country gains money through sales tax. Income tax, property tax, excise tax, (sin tax) on alcohol and tobacco. Main idea is for government to raise money: is it better for government to have money and increase livelihood of citizens, or is this better done through private means, where people are free to invest in other things.
Interest Rates: a rate charged for the use of money, in addition to principle amount. BONDS: peasants paid redemption taxes. Government pays back loans from private investors with interest. Raising interest rates encourages investments, but then the government has to pay more money back. But with low interest, people won’t invest. After revolution, people that invested in Russia lost money when the Tsar fell.
Gold Standard: fixing prices of domestic currency: pricing the standard and interest of a currency. Reserves of gold “fix” money- provides common currency- Western idea. Showed Russia was modernizing because it could invest like the rest of the world
Servicing a debt: paying back a death with interest
National debt: money owed by national government- through bonds. Russia had a large national debt when Tsar fell (big investments in France)
Trans-Siberian Railway: made commerce more efficient- industrialization
Growth from a low base:
Raising Money
• Major problem: Russia did not have the money to spend on industrialization
• Witte faced a dilemma: Raising money for government spending in the form of taxes and interest rates would result in less money for private enterprise. Avoiding this problem by attracting foreign investment would leave the country at the mercy of the international money markets.
- Nobility paid taxes, resulting in less money for private investments.
- Russia saw themselves as leader of Slavic people: nationalistic, but they were dependent of foreign investments from Westerners- contradiction. Stalin’s main goal was to end Russia’s dependence on the West
Witte’s Dilemma
Taxes on the peasantry? Most peasants were subsistence farmers: only had enough to eat. Entrepreneur farming was a western concept.
Interest rates on loans from the state bank?
Tariffs on foreign imports?
Benefits for increasing: Russian government would make money, promote Russian products and domestic investment
For decreasing: more countries would invest (promote foreign investment), lower prices for Russian citizens
Should we put Russia on the Gold Standard?
Benefits: easier trade with other countries by providing common currency
Against: heavy government spending to provide gold used, could result in money withdrawels from the government
International loans?
Spend government money on transport, or on social improvements?
Witte’s Decisions/ Consequences
capital
• Secured a loan from France,
• Raised taxes, tariffs and interest rates
Money for Industry - Put Russia on the Gold Standard in
1897
• Currency can now be changed for gold
• 20th Century equivalent of the Euro
• Foreign investment in Russia trebles in 10 years
available for free enterprise
▪ This was a “command economy”
Money for government – more taxes means less
available for free enterprise
▪ This was a “command economy”
advantages) = Tsar enthusiastic.
• The Trans-Siberian Railway stretched 9600 miles from
Moscow to Vladivostok.
• Encouraged Nicholas II to believe he could defeat Japan.
• Massive growth 1893-1900
• All this in the face of the suspicion and hostility of the
conservative establishment (Milyutin had faced the same
problem).
• No political reforms to match economic reforms = tension
• 4/5 of population in 1914 still peasants
By: Greta Hiestand