Russian Economy
Money, money, money, must be
funny, in a Capitalist’s world. I thank
1. Explain industrial and agricultural changes.
2. Identify turning points.
3. Begin to assess social and economic impact.
Alexander II
• Fear of industrialisation, would create proletariat
and revolts.
• New work discipline – rules and regulations for
employees in factories.
• Did develop state involvement, particularly in
railways, coal and iron production.
• Managed, with Mikhail Reuturn as Finance
Minister, to attract foreign investment (J.J.
Hughes – steel in Ekaterinoslav).
• New industries open up, including oil industry in
Baku and Caucasus.
Railways – Al II next to a train,
• Used foreign expertise.
• Stimulated by British
• Reutern helped increase
railway 7x from 3532km to
22,498km by 1878.
• Boosted industry and
cushioned from 1873-1882
• Did cause some corruption,
i.e. government bonds, tax
exemptions and monopoly
• By 1880 94% of railways in
private hands.
• 1881 Bunge takes over as
• Abolished Salt Tax in 1881
and Poll Tax in 1886.
• Created Peasant Land
Bank 1883, started to
allow railways to go into
state hands.
• Bunge replaced by
Vyshnegradski, hardliner
and balanced books, but
responsible for 1891
Great Spurt - Witte
You looking at me?
Ain’t no one else
around, so you must
be looking at me…
• Encouraged foreign investment.
• Sacrificed agriculture, some
• Raised taxes, interest rates and
foreign loans.
• Focussed on railways, iron and
• 1897 rouble placed on the gold
 Coal doubled and iron and steel
increased 7x.
 52,612 km railways by 1901.
 Industrial income increased from
42m Roubles 1893 to 161R 1897.
WWI and Nic II
• Witte dismissed 1903,
ignored agriculture and
railways costly and poorly
• Became PM in 1905,
Stolypin FM.
• 1909-1913 GNP increased
by 3.5%p.a.
• BUT – population boomed,
small scale producers still
around and productivity not
• Starvation still a real
• WWI killed economy.
• Inflation rampant, loans
called in, food and fuel
prices rocketed.
• Killed off Romanovs.
• Russia faced WWI hangover and Civil War.
• Introduced State Capitalism, reaction to situation
– nationalised economy until it could “safely” be
passed back.
• Nov. 1918 – Land Decree, Nov.1918 Decree on
Workers Control (power to run factories).
• Dec. 1917 Supreme Economic Council, helped to
nationalise over 30,000 entities. This was
subservient to Council of Labour and Defence,
chaired by Lenin.
Civil War
Nullified all gains from State Capitalism.
Industrial output fell.
Inflation rocketed.
By Oct 1920 the rouble was worth 1/10th of
value from 1917.
• 90% of all wages were paid “in kind” due to
worthless nature of money.
War Communism and NEP
War Communism
• State capitalism saw Bol. take
over economy.
• 1917 Decree on Land.
• 1917 Supreme Economic Council
(SEC) nationalised all enterprises,
1918 Decree on Workers Control
= “extra powers”,.
• 1920 30,000+ enterprises, SEC
struggled to control.
• Labour militarised, nationalisation
meant workers lost control of
production and distribution and
grain was forcibly requisitioned.
• By 1921 Party and people wanted
• Denationalisation of small
scale enterprise and private
ownership allowed, small
workshops flourished.
• State control of heavy industry
• Trade increased with less state
restrictions, i.e. food sales.
• Rouble re-valued and
• Grain requisitioning ended and
peasants able to sell surplus.
Impact of NEP
Economic Impact
• Initial results were strong.
• Market goods improved.
• Nepman were created,
entrepreneurs who by 1920
were responsible for 60% of
• Scissors crisis kicked in, food
increased and outstripped
demand, prices fell.
• Peasants reluctant to sell
surpluses, but industrialists
needed them to.
Political Impact
• “Temporary deviation, a
tactical retreat”.
• Papered over by call for
greater party unity,
instigated by 1921
Kronstadt uprising.
• Lenin’s death in 1924
exacerbated divisions.
• Stalin remained ambivalent
between rightists and
leftists, pulled NEP in 1929.
Stalin and 5 Year Plans
• Two aims:
– Economic autarky for war footing.
– Improved value of workers.
• Based on strict control and
centralised planning.
• Plans were set on often flimsy
evidence and targets were often
• Gosplan set targets, passed on to
regional commissariats then
industrialists. Only guidelines on
what was required, not
instructions on how to do it!
5 Year Plans
• First set in 1929, but did not
run full course, often
• Stalin even upgraded targets
towards the end of each
• Statistics are impressive, but
• Khrushchev also centralised,
but saw eventual slowdown
in growth.
Read pp.112-113 and assess
statistics and success.
Russian Agriculture
Agriculture in Russia
• Both Tsars and Commissars experienced similar
• Most of the population was working on the land.
• Industry was always seen as more important to
agriculture and peasants were always seen as
second class citizens.
• Land was always problematic and no leaders
managed to deal with it adequately. Peasant
anger was always fuelled by resentment that they
could not own land outright.
Emancipation (we know this, but…)
Peasants freed, able to
marry whoever and own
Nobles compensated,
payments over 49 years at
6% interest.
Nobles allocated land to
All redemption payments
dealt with by the mir.
Peasants given poorer
quality land and less than
before Emancipation.
Many couldn’t afford
payments or earn enough
from the land.
Mir still in charge of what
was grown.
Subsistence farming kept so
no motivation to farm more.
Al III 1891 Famine
• Blamed on peasant
attitudes and out-dated
• Land captains introduced
to maintain control.
• Consumer taxes raised to
encourage more grain to
be sold, grain also
continued to be exported.
• 500,000 died.
Stolypin’s Reforms
• Appointed PM in 1906 following
peasant unrest that lasted 190507.
• Hoped to improve land
distribution and create stronger
peasant class as role models
(wager on the strong).
• Peasant land bank had unused
land made available.
• Consolidation of strip farms
 Rich peasant class expanded, but
remained angry over available
 2m peasants left land and created
labour shortages, exacerbated by
War Communism
• Showed lack of care for
• Grain requisitioning.
• 3 types of peasant, poor,
middling and the kulak.
• Denounced by village poor
= Cheka class war.
• Peasants still looked down
on by Bolsheviks.
• Wealthier peasants
increased [kulaks].
• In 1925 they were defined
as owning 3 cows, 1928 it
was 6.
• Suffered from higher taxes,
disenfranchised and
children barred from
secondary school.
• Were able to criticise
Bolsheviks = Bol. attacks.
• Small farm units into bigger
• Lenin wanted gradual
approach, only 3% by 1929.
• Shortages believed to be
part of hoarders during NEP.
• 1927-8 saw push for
collectivisation – “socialism
in the countryside”.
• Matched by de-kulakisation.
Process of Collectivisation
• Meant to be voluntary.
• Explained to peasants, komosols
and poor peasants denounced
kulaks ad created fear.
• Kolkhozy (pure) or Sovkhozy
(state) collectives.
• 1930 58% claimed collectives,
• Opposition saw Bransk-oblast
reject Komosols, migrationin
Kazakhstan saw 75% migrate.
• Opposition led to “Dizzy with
Success” paper and peasant
allowed to leave collectives.
Renewed Collectivisation
• 1937 = 98% of peasants
• Now allowed to keep
small plots of land (more
productive than
• MTS stations set up,
meant to distribute seed,
collect grain and decide
levels of payment.
• Disrupted by 1932-34
• Payments of kolkhozy
farmers improved.
• 1941 98% collectivised,
still disliked.
• Hated 1930 end of the
mir, wanted to make
extra independence,
realised famine not
prevented by collectives.
Khrushchev and Agriculture
• G. Hosking “[Khrushchev]
never fully got to grips with
the authoritarian and
bureaucratic structure of
agricultural administration”.
• Khrushchev believed
himself to be an expert.
• Removed MTS stations and
merged smaller collective
farms, believed this would
improve production.
• Tried to provide more
incentives by reducing
taxes, increasing electricity
provision to rural areas and
raised prices on state
• Changes angered urban
workers over price rises.
• 1962-63 saw bad weather
and harvests = riots, worst
at Budyenni Locomotive
Works, 23 protesters shot
by KGB.
Virgin Land Scheme
• Designed to increase
cereal production.
• Meant to be achieved
through increase in
cultivated land.
• 1950 96m acres allocated
for wheat production,
1964 = 165m acres.
• Sense adequate food was
being produced.
• Failures:
– Land overused and crops
not rotated.
– Soil fertility fell and soil
erosion made many areas
too arid for cultivation.
– Largely cut corners due to
speed of implementation.
– Productivity and
production fell.
– Main reason Khrushchev