Statist Economic Policy
Communism made the economic role of the Soviet state greater than ever before in history, but statist economic policy in Russia hardly began in 1917. Government in Russia always played a leading role in the economy, and in no European country were the ideas of laissez-faire less influential. Adam Smith found a few followers, such as Storch and Turgueniev, who advocated free trade and the abolition of serfdom; but they were outside the mainstream of Russian economic thought.
By far the most significant economic role of the Russian state stemmed from its actual ownership of millions of serfs and the land upon which they toiled. Until the abolition of serfdom in 1861, the Czar owned over one-third of the population (the map below indicates the level of serfdom one year prior to the 1861 decree).
In other cases, the Czars would subsidize industrialization by giving businessmen some slave laborers: "For trifling amounts large works with all their appurtenances, including villages of ascribed peasants, were handed over to these favourites of the Court." (James Mavor, An Economic History of Russia) The Czars carefully graded their followers by rank, giving each successive level power and authority over their inferiors. The Russia economy was thus a perfect example of mercantilism, the incestuous alliance between government and legally privileged business interests.
The czarist
government's role in the Russian economy took many other forms.
It's role in the labor market shrunk dramatically with the abolition
of serfdom under Alexander II. But other areas of the economy
found themselves coming under tighter government regulation and
intervention.
- Protectionism.
Peter the Great set up a 75% tariff on imports to protect "infant industries" and raise additional revenue. While tariffs were cut back in the aftermath of the French Revolution, by the mid 19th-century protection was back in fashion. Serge de Witte, minister of finance from 1893-1903, led the war against foreign imports: "By 1894, under Witte's guidance, Russia had become a thoroughly protectionist country... Protection of manufacturers and great landlords, however, cost the poor peasant and the workingman very dearly: it was demonstrated in 1905 that the retail price of cotton and sugar was two and one-half times as great in Russia as in Germany, that of iron four and one-half times as great, and that of coal six times as great." (Carlton Hayes, A Political and Social History of Modern Europe)
- Industrial Policy.
When Peter came to the throne there were no large factories in Russia; when he died there were 233 State and private factories and foundries. These establishments were either founded by the State and managed by State officials, or they were subsidized by the State.
(James Mavor, An Economic History of Russia)
The Russia state owned and subsidized numerous industries from the time of Peter the Great onwards. The natural extension of this policy in the second half of the nineteenth century was for the Russian government to begin building government-owned railroads, such as the famous Trans-Siberian Railroad. The government also bought privately owned railroads when they proved unprofitable, ran a system of state banks, and much more.
- State Monopolies.
Peter the Great set up numerous government monopolies. Resin, potash, rhubarb, glue, salt, tobacco, vodka, chalk, tar, fish, cards, dice, and even coffins were made the exclusive province of government production. The monopolized commodities' prices were generally set at two to four times their prices under free competition. Witte continued this monopolistic tradition by making the entire liquor industry a state monopoly, and nationalizing private liquor shops.
- High taxes.
Peter the Great found building a "modern state," with modern armies and navies, to be an expensive proposition. Aside from monetary debasement (the "inflation tax"), excises were levied on stamps, rents, beehives, beards, mustaches, private bathhouses, and marriage licenses, and many other goods. Religious dissenters had to pay a special tax; so did the unbaptized. Worst of all was the "soul tax" levied upon every male person; this tax, which did not even exist in 1701, made up over 50% of the government budget by 1724. The profligate tendencies of the czarist state continued throughout its subsequent history.
- Factory and Social Legislation.
While modernizers like Witte tried to state-manage industrialization, agricultural interests struggled to stifle it. But in the end Witte had his way: in the late 1800's industrialization was taking off in Russia. This gave the Russian government a new area to regulate: the employee- capitalist relationship. Bismark-style factory laws regulating working conditions, hours, and child labor were passed. (Notably, the St. Petersburg capitalists were usually for stricter regulation, while the Moscow employers opposed it; the St. Petersburg capitalists probably foresaw that such laws would be a good check upon competition). Witte's administration made government regulation stricter. "Government officials were to mediate in all labor disputes. Mines regulations were instituted, and plans for insurance of all workmen against accidents were prepared." (Carlton Hayes, A Political and Social History of Modern Europe)
