An Economic Policy for Empire presents the report Sergei Witte, the Russian Minister of Finance from 1892 to 1903, wrote to Tsar Nicholas II on the 22nd of March 1899. It discusses the current economic policy of Russia, in particular the influence of foreign capital and its effect on the Russian economy. Witte’s report is aimed only for the Tsar’s eyes and this is evident throughout as he continually addresses the Tsar whilst trying to persuade his majesty to adhere to his economic policy. Why the report was constructed is evident from the context in which it was written. Witte is addressing the recent opposition the Tsar had shown towards whether Russia should continue with the influx of foreign capital into the state. This document is Witte’s explanation of the argument that Russia should indeed continue with such an influx and continue to follow the economic programme set out under Alexander III. Using his knowledge and experience, historical examples and statistics, Witte has come up with what is stated by Professor Theodore Von Laue as a report that contains ‘a precise formulation of the government’s economic policy and its official motives.’[1] This work looks to critique Witte’s report by addressing what its key principles are, if it is successful in explaining those principles, and what secondary literature has to say about the report.

Witte begins his report by addressing the change in the Russian economic structure that has led the market to represent the collective interest of all domestic enterprises. This is down to a number of reasons, for example the emancipation of the serfs, and has led to a creation of an economic organism. He states that any change at governmental level now ‘touches and influences’ the fate of many Russian enterprises. What Witte is doing in the early parts of his reports is explaining to the Tsar that his decisions have a direct impact on the country’s well-being. Witte could be doing this to emphasize the responsibility on his majesty’s shoulders so that he is persuaded to follow the Witte’s economic policy. The report then goes on to explain that the continuity of an economic plan is key to its success. In this case, it is the protective system which must be continued in order for the Russian economy to benefit. Witte is getting across the importance of following Alexander III’s protective system, and he uses the guilt trip of Russia’s sacrifices to try to convince the Tsar not to divert from the policy that was in place before he took power. The report explains that as Russia is a predominantly agricultural country, its trading with Western Europe is comparable to that of colonial countries and the metropolises that rule them. Both Russia and these colonies export large amounts of raw materials in order to buy the finished goods which Western Europe create from them. He states Russia has ‘the right and strength’ to no longer be a ‘handmaiden’ to Western Europe, that it should instead have its own industry. This is perhaps aiming at the Tsar’s patriotic side, that he can lead Russia to great success if he back Witte’s ideas.

Now he has argued his reasoning as to why Russia needs to keep the protective system, Witte then addresses how, with said system, the state can become an industrial power. He states that to achieve this, the economic policy must force industries to work cheaply. His answer to achieving this is foreign capital, which he says can ‘speedily furnish our country with abundant and cheap goods.’ He argues that foreign enterprise at work on home soil provides the state with capital as the production requires Russian labour, fuel, lighting and raw materials, all of which are bought domestically. Whilst this may be true, the capital earned by the Russians pales in insignificance when compared to the profits made by such enterprises who reign in said profits and send them back to their wealthier home countries. Whilst he argues that 30% of the price of cotton goes to the workers and only 6% to the entrepreneur, this does not take into the fact that the 6% taken home by the entrepreneur is profit, whilst the 30% taken home by the workers is the results of hard labour, labour that could arguably be employed elsewhere with greater profits. His emphasis then turns to arguing that lowering the tariff of 1891 would not allow Russia to obtain cheaper goods. It would in fact ‘deprive the country of the positive results of the protective system.’ Again, he re iterates the idea of sacrifice, that the Tsar will be at fault and cause more agony for the Russian people if he does not follow the protective system. He believes that Russia can obtain cheaper goods with the help of foreign capital, which, by coming in Russia, will help Russian enterprise to promote native industry and speed up the accumulation of native capital.

In his conclusion, Witte finishes with the six main points of which he wants to Tsar to consider. The first wishes for the tariff of 1891 to remain unchanged until 1904, and the third seems to be a reutterance of this except with an explanation as to why; It would allow Russia to insist upon favourable terms for agricultural exports. The second demands that Russia works in the meantime on reducing the price of industrial goods, which needs the influx of foreign capital. The fourth and fifth revolve around this influx, saying that it must remain unrestrained. The sixth basically states that in 1904 the Tsar may reconsider the problem of foreign capital when the new trade treaties are being renewed. It describes foreign capital as a problem, when throughout the report, Witte is constantly suggesting it be Russia’s solution. William Blackwell explains that ‘there loomed the range problems of debt payments and power politics arising from the dependence on foreign capital.’[2] Maybe this is the information Witte is withholding from the Tsar in his report, even though he knows it may hold such issues. As time went on, Blackwell also explains how ‘dependence on foreign capital and technology was greater than ever’ in the early twentieth century.[3] This could argue against the case of the protective system that Witte was trying to pursue. The influx of capital mentioned in his second point is evidently taken up by the Tsar as by 1900 one quarter of French foreign investment was held in Russia.[4] This meant the French banking systems situated in Russia didn’t need to pay the large commissions that the Russian government did. With regards to the third point and agricultural exports, there is no wonder as to why the Tsar may have been doubting the protective system. In 1891 there was vast famine throughout Russia; and there were again serious deficiencies in crops in 1897, 1898 and 1899. How Witte expected to increase exports with so little supply domestically is not clearly explained in his report.[5]

To summarize, Witte’s report is a detailed document looking to influence the decision of the Tsar and the economic policy of Russia. As seen by Feis, it was relatively successful, as Russia continued to rely on foreign capital well up to and after that 1904 deadline. Whether such a policy was the best option is what historians continue to debate today.



Secondary Sources:

[1] T. H. Von Laue, Sergei Witte on the Industrialization of Imperial Russia (New York, 1974), 74.

[2] W. L. Blackwell, The Industrialization of Russia, An Historical Perspective (New York, 1982), 37.

[3] Ibid. 54.

[4] H. Feis, Europe the World’s Banker, 1870-1914: An Account of European Foreign Investment and the Connection of World Finance with Diplomacy before the War (New Haven, 1930), 51.

[5] J. Mavor, An Economic History of Russia (New York, 1965), 141.