What was the Great Spurt?

A time when Russia underwent a sudden industrialization during the reign in the 1890’s orchestrated by its Finance Minister – Sergei Witte. Explore Witte led Russia into a rapid process of industrialization that changed Russia’s economy.

The Great Spurt brought Russia into a rapid industrialization under the auspices of its finance minister Sergei Witte (served 1892 - 1903). At that time, Europe had been already widely affected by the Industrial Revolution. It gave many western countries tremendous improvements and developments in the fields of economy, science and technology, culture and society. But in Russia, industrial development seemed to be stagnant. In the 1880’s, under the rule of Alexander III, Russia began to move towards the direction of industrialization. But it ultimately materialized only under the tenure of the courageous, bold and intelligent Finance Minister Sergei Witte. Under his guidance, Russia moved towards a period of industrialization and growth of capitalism.

Russia in the 1880’s

Russia in the 1880’s remained as the largest country in the world, spanning across 11 different time zones and covering various terrains. Beneath all of this lands laid vast quantities of natural resources – ranging from iron, coal and oil. She boasted a population size of around a hundred million from various ethnicity. Most of the Russian population who resided in the western part of Russia, had the status of peasants who suffered poverty, especially those who had been freed from serfdom in 1861. Only a small fraction of the population owned much of the wealth of the Empire.

Alexander III, Tsar and Emperor of All Russia, ruled the country from 1881 to 1894. He ascended to the throne after the assassination of his father, the Tsar Liberator, Alexander II. Alexander III realized that his father’s liberal policies of tolerance resulted to his tragic demise. With this realization, Alexander III initiated reactionary and conservative policies including restrictions in movement and expression. He did not tolerated any form of descent. Nevertheless, Alexander III welcomed reforms in the military as well as in the economy. Especially, when Russia faced though challenges from Europe.

His son, Nicholas II ruled from 1894 to 1917 after Alexander III passed away due to nephritis. He also believed in the maintaining of Russian autocracy and continued some of his father policy, including the program of industrialization. A program of industrialization that Russia badly needed as Europe eclipse the giant Russian Empire.

Industrialized Europe humiliated Russia many times during the 19th century. Russians suffered a serious defeat in the hands of the steamships, modern artillery and new guns of the British and the French in the Crimean War in the 1850’s. In the 1878, Russia signed the Treaty of San Stefano in advantageous terms to end the Russo-Turkish War. But Western European powers took Russia’s advantageous terms with the signing of Treaty of Berlin. Russia cannot face Europe in a war due to its industrial stagnation. But Russian establishment remained averse with reforms. Some Russian officials who promoted industrialization faced tremendous obstacles.

Attempts for Economic Reforms in the 1880’s

In 1881, Alexander III appointed Nikolai Bunge as the new finance minister (served from 1881 – 1886). Bunge attempted to enact economic reforms. However, he faced the challenge of managing a financially broke country due to the Russo-Turkish War of the previous decade. He attempted for Russia to adopt the gold standard but met stiff and difficult opposition from the nobility. He also launched an industrial take off by approving new railroad construction projects. But in 1886, facing staggering opposition, Bunge stood down from his post.

Ivan Vyshnegradsky assumed the position of finance minister (served from 1886 – 1892). He continued many of Bunge’s policies, including the extensive construction of railroads under a new Director of Railway Affairs – Sergei Witte. Vyshnegradsky too faced tough opposition and even corruption allegations. Many accused Vyshnegradsky accepting bribes from the French banking giant – the Rothschilds – to give to them a loan to be taken by the Russian government. His position became ever more precarious when his policies failed to prevent the 1891 famine. Eventually in 1892, Vyshnegradsky stood down from his position as well. Alexander III then appointed Sergei Witte as the new finance minister.

Industrialization Under Witte

Sergei Witte

Sergei Witte, a Georgian-born railroad manager, served as Russia’s finance minister from 1892 to 1903. Under his tenure, Russia experience a great surge in industrial growth. Born on June June 29, 1849 in Tiflis, Georgia, Witte descended from German Lutherans in his father side and from the ancient noble family Dolgoruky in his mother side. He attended the Novorossiyk University in Odessa excelling in mathematics. After his studies, he worked in the growing railroad industry in the 1870’s and 80’s until Tsar Alexander III offered him in 1889 the position Director of Railway Affairs under the Finance Minister Ivan Vyshnegradsky. During in between, Witte read and wrote many books and essays concerning political economy and finance. The German economist Friedrich List influenced him so much. In 1892, amidst a financial crisis brought by a famine in the previous year, Vyshnegradsky stood down from his post. Alexander III appointed Sergei Witte as the new finance minister.

Witte enacted serious economic reforms and projects aimed in developing Russia’s industries. He saw industrialization as a means to improve Russia as a whole. He saw industrialization as a path towards a better society and lesser reliance on subsistence agriculture. He also enacted financial reforms vital for setting up a strong funding for his industrialization program. It did not came without opposition from both home and abroad. And his projects allowed the development of local industries and infrastructure in a wide scale, including the great modern marvel in railroad construction – the Trans-Siberian Railroad. By the end of his role as finance minister, he brought Russia into a better standing when it came to industrialization.

Russian Finance

Witte planned a massive industrialization of Russia but he needed money to finance it. Russian finances faced tremendous difficulties after the 1891/92 famine. Witte had to print banknotes to pay government workers and prevent bankruptcy. But he knew that too much printing of money would result to inflation and so he looked for other sources to fill Russia’s coffers.

One way, he decided to use foreign loans and investments. Witte allowed the entry of huge foreign investments into the country. He allowed foreign companies to invest in Russia by setting up manufacturing facilities. Companies, such as Siemens & Halske, established electric motor factories in Russia. Witte also encourage foreign companies already established in Russia to expand their production. And so companies like the Branobel of the Swedish Nobel family led the expansion of Russia’s oil production in Baku.

Besides foreign investments, loans also financed Witte’s projects. Russia accumulated foreign loans amounting to $ 4 billion. It came from various countries such as England, the Netherlands, Germany, but mostly from France. This loan then spread across various industries through the Imperial Bank.

However, this utilization of loans earned criticism from many Russians. Most especially the revolutionary communist, including Lenin himself. Lenin wrote in 1902 an attack on Witte’s policy of borrowing calling him wasteful. Nevertheless, Witte proceeded even with his detractors oppose his policy in many ways.

Witte looked also for other sources of income. In this part, Russia just gained a new source of revenue a year before Witte became Minister of Finance. In fact, Witte himself wrote the policy of the 1891 tariffs. It imposed tariffs on imported manufactured goods as well as on iron and coal. This also meant to protect local industries from competition. Another major source of government income came from the Vodka Monopoly set up in 1894. Although Witte justified that the monopoly aimed towards a moral objective of instilling sobriety to the Russian people, it nevertheless provided additional income.

In the Vodka Monopoly, the government became the sole buyer and distributor of vodka. Under the system, vodka producers could only sell their vodka to the government. And in turn, the government distributed and sell the vodka to the public. In this situation, the government served as a middle man and had the power to regulate the amount of vodka to be produce as well as the price of vodka to be sold to the people. Although Witte justified that the monopoly aimed towards a moral objective of instilling sobriety to the Russian people, it nevertheless provided additional income.

With foreign loans and investment, in addition to other government policies and monopolies, Russia improved its finances as well as its industries, infrastructure and industrial output.

Industrial Development

The money from various sources allowed Witte to proceed with his plans and projects. Witte continued the expansion of Russia’s railroad system. Throughout the 1890’s the railroad boom continued. He saw it as a way to improve on local expertise, human capital, employment, and demand for coal and iron. He used the construction railroad lines to drive the increase in Russia’s industrial output.

The loans and investment also allowed the acquisition of foreign technology and experts. Russia imported the newest machineries for its factories. She also hired foreign experts, such as engineers and chemist to work and to transfer technology to the Russians. This allowed a surge in the number of factories, mines and wells within the country.

Industrial centers emerged in various regions of Russia. Factory chimneys rose towards the skies of St. Petersburg and Moscow. Ukraine became a center of the coal industry and the River Don in its east hosted as the center of the steel industry. On the other hand, the Caucasus Mountains and especially the city of Baku, became a center of the oil industry.

But the Trans-Siberian Railway remained as one the greatest feat of Russia’s Great Spurt and of Witte’s reign as finance minister. In 1892, the construction of 5,772 mile long railroad stretching across the Siberian Tundra from Moscow in the west to Vladivostok in the east began. It took decades to complete. Not to mention, Witte had to negotiate with the Chinese to allow a portion of the railway to pass through Manchuria, making the route shorter, faster, and cheaper. Workers completed the construction in 1903. At that time, the Trans-Siberian Railway took the title of the longest railroad line in the world.

New Educational Institutions

Witte also knew the importance of improving human capital for Russia’s industrialization. He established new institutions aiming to teach relevant skills to various industries. Most of this institutions centered in learning on electronics, engineering, shipbuilding, and metallurgy.

But even before Witte, some institution already provided higher learning in technical fields. In the 1860’s during the reign of Tsar Alexander II, the St. Petersburg Technological Institute reorganized its curriculum to add new subjects in learning modern sciences and technology. In 1862, the Riga Polytechnic Institute was established. In 1885, the Kharkov Polytechnic Institute was founded.

In the 1890’s Witte established additional polytechnic institutes. In 1898, Warsaw and Kiev founded its own Polytechnic Institutes. In 1899, with the assistance of the great chemist, colleague and Director of the Chamber of Measures and Weights, Dmitry Mendeleev, they founded the St. Petersburg Polytechnic Institute.

Witte aimed these institutions to train Russia’s next scientist and engineers to sustain the industrialization of the country.

Improving Russia’s Trade and Currency

Witte enacted reforms in the currency as well as improvements in Russia’s trade relations. The former aimed in aligning Russia with other foreign currencies by adopting a new standard to allow the ruble’s conversion to other currencies. The latter meant to expand Russia’s trade in equal footing with other countries. In both, Witte faced significant challenges.

In 1894, Russia and Germany signed a commercial treaty after much negotiation and stand-offs. In the early 1890’s Russia and Germany attempted to sign a win-win commercial agreement. The problem was that Germany imposed higher tariffs on Russian goods than any other trading partners. Russia and Witte wanted to eliminate this to expand Russian exports. Negotiations broke down as Germany used its higher tariffs on Russian goods as leverage to gain an advantageous deal. Witte resisted and imposed the same two-rate tariff system against the German goods. A tariff war ensued. But in 1893, both countries felt tired and decided to return to the negotiation table. Eventually, both sides agreed to impose lower tariffs on each other’s exports. At the opening of 1894, both countries signed the commercial deal. Commercial treaties with other countries followed under the model that Russia achieved with Germany. This allowed Russian goods to flow fairly to the European market. But other than trade deals, Russia needed another reform to strengthen its export – the adoption of the gold standard.

The debate over the introduction of the gold standard dragged on since the 1880’s during the time of then finance minister Nikolai Bunge. Witte agreed to gold backing the Ruble. But the proposal faced daunting opposition from conservatives as well as small time peasants. Many of them saw the currency reform’s potential to decrease significantly their grain exports. But for Witte, pegging the Russian Ruble to gold would align their currency with other countries and offers an opportunity to expand trade. France attempted to intervene and to influence the new Tsar Nicholas II to adopt a standard like theirs – the bi-metallic standard. Witte, however, saw that adopting the bi-metallic standard was costly. Thankfully, Tsar Nicholas II trusted Witte and supported his policies. In April 1896, Witte presented the proposal for the gold standard in the Imperial Council. It failed as many minsters opposed the idea. But with much campaigning and cajoling, in another proposal in January 2, 1897 (Old Style) to the Financial Committee of Tsar Nicholas, it passed without any hurdles. And on January 3, the Russia adopted the gold standard.

Results of Witte’s Industrialization

Witte’s policies resulted to massive increases in many sectors of the economy. For instance, railroad mileage doubled. From 19,510 miles in 1891, it increased by 70.5% reaching 33,270 miles of railroad by 1901. Telegraph lines increased by five-folds. Coal production soared from 5.9 million tons in 1890 to 16.1 million tons by 1900, about three-fold increase. Pig iron production rose from just 0.89 million tons in 1890 to 2.66 million tons by 1900, almost three-folds increase as well. Oil production also grew by more than three folds, from 3.9 million tons in 1890 to 10.2 million tons by 1900, making Russia the top oil producer in the world. Exports also rose significantly. From exports amounting to 400 million Russian Rubles, it grew to 1.6 billion Russian Rubles by 1913. Russian finances also reported budget surpluses during the tenure of Witte. By the time he stood down in 1903, Russia had accumulated 380 million Russian Rubles in reserve as a result of years of surpluses.

Although Russian industrial output rose significantly. It also had its failures. For instance, foreign debt swelled to over $ 4 billion. Many parts of the population remained reliant to agriculture and lived in poverty. Witte believed that industrialization should mean improvements in the lives of peasants and workers. It did not materialized. Working conditions remained dismal. Russian workers toiled for 11 hours a day for meager wages. Moreover, factories and mines had terrible working conditions. Workers had no voice since the government banned unions. Even though Witte’s reforms improved Russia’s industries, it, however, failed to improve the welfare of workers.

Aftermath of the Great Spurt

Witte served as finance minister until 1903. By that time, Witte earned many enemies within the aristocracy and revolutionaries. The Tsar had no choice but to appoint Witte as chairman of the Imperial Committee. Many agreed, including Witte himself, that the position had no powers and that it appeared that the Tsar sidelined him. For Russian industries, it continued to grow. However, when the Russo-Japanese War resulted to a defeat, Russia suffered an economic recession. In 1905, factories that grew out from the Great Spurt became breading grounds for discontent and for reformist, both moderate and revolutionary. They played a key role in the Revolution of 1905, which led to the reforms in its aftermath. Afterwards, factories remained a nest for communism, which gave rise to the 1917 Revolution. This revolution finally toppled the Russian Tsarist regime. Witte’s work later became the industrial foundations of the Union Soviet Socialist Republics (USSR).

Summing Up

The Great Spurt, as Alexander Gerschenkron dubbed, allowed Russia to propel itself from a backward country, into a major industrial country within a decade. However, social problems and the deeply engraved aversion to reforms and change kept Russia from truly transforming into an industrial country and society. Peasants remained poor. Nobles in court continued to oppose changes in the political and social status quo. Not mention, their privileges continued. The inefficiencies for reforms led to a humiliating defeat of Russia in the hands of the Japanese, which then cause an upheaval in St. Petersburg in the form 1905 Revolution. But ultimately, the Great Spurt laid the foundations for the future of Russia in economic, social, and political aspects. The Great Spurt, even in its magnificence in turning a country into an industrialize nation in a decade, still had limitations. Limitations that failed to prevent the fall of the regime that spurred it.

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Bibliography:

General Reference:

Corfield, Justin. "Witte, Sergei." in the Encyclopedia of the Industrial Revolution in World History Volume 3. Edited by Kenneth E. Hendrikson III. Lanham, Maryland: Rowman & Littlefield Publishing Group, Inc., 2015.  

Books:

Bushkovich, P. A Concise History of Russia. New York: Cambridge University Press, 2012.

Lynch, M. Access to History: Reaction and Revolution, Russia, 1894 - 1924. London: Hodder Education, 2005.

Palmer, R. et. al. A History of the Modern World. Massachusetts: McGraw-Hill, 2002.

Witte, Sergei. Translated by Abraham Yarmolinksy. The Memoirs of Count Witte. Garden City, New York: Doubleday, Page & Company, 1921.

Website:

Lenin, Vladimir. “Concerning the State Budget.” Marxists.org. Accessed on January 31, 2016. https://www.marxists.org/archive/lenin/works/1902/jan/15.htm