Lieven D. (ed.) The Cambridge History of Russia, Volume 2: Imperial Russia, 1689-1917

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Russian society, law and economy

of Russia’s overall backwardness. The lessons of defeat forced the government

of Alexander II to embark on radical changes in Russia’s economic and ﬁnancial

systems.

The era of Great Reforms

In the summer of 1859 advocates of radical change in the Finance Ministry

prepared a monetary and credit reform. The decision was made to abolish

state treasury banks. In that same year, Jewish merchants of the ﬁrst guild were

allowed to settle outside the Jewish Pale and the practice of accepting serfs, or

‘living collateral’, for credit to landowners was ended. On 26 December 1859

the Loan Bank no longer accepted deposits. The Commercial Bank accepted

deposits until 1 July 1860. The supporters of ﬁnancial and economic reforms

in the Ministry of Finance were inﬂuenced by Western European economic

theories, in particular, by the ideas of Saint-Simon on the all-powerful role of

credit in industrial development. Relying on this theory, the famous bankers

Isaac and Emile Pereire founded the major joint-stock bank Soci

erale

de Cr

edit Mobilier in 1852, which was closely connected with the government

of Napoleon III. This new-generation ﬁnancial enterprise actively engaged

in railroad construction in France, Austria, Hungary, Switzerland, Spain and

Russia. The extraordinary sweep of its operations drew attention, and the bank

served as a model for similar institutions across Europe. The idea of credit’s

omnipotence conquered Russia as well and helped drive the development of

private commercial credit, and later joint-stock credit.

On 31 May 1860 the State Bank was established, marking the beginning of a

new banking system in Russia. The State Bank was located in St Petersburg, in

the building of the old Paper Money Bank. The State Bank became a distinctive

symbol of the empire’s ﬁnancial strength. Its basements housed Russia’s gold

reserves. From the moment of its creation, the State Bank was under the

authority of the Ministry of Finance. Its resourceswere used forimportant state

needs. It was supposed to promote the development of trade and monetary

circulation. It was allowed to discount promissory notes and other obligations,

to buy and sell gold, silver and state bonds, to accept deposits and give out

loans. The State Bank quickly became the ‘bank of banks’, and allowed the

government to inﬂuence the economy and banking. The State Bank was

commercial, and not a bank of issue: new bank-notes were released only at

the order of the Finance Ministry. The main source of income for the State

Bank was deposits at a 4 per cent interest rate. The ﬁrst director of the State

Bank was Alexander Stieglitz, the last court banker.

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The Stieglitz banking house grew up in the 1830s and early 1840s. In 1840

the Russian Finance Ministry took out a series of 4 per cent loans. The inter-

mediary between the Russian government and the bankers of Amsterdam,

London and Berlin was Ludwig Stieglitz, and after his death in 1843, Alexan-

der Stieglitz. Alexander did much to make his banking house prosper. He

established relations with the London banking house Baring Brothers and Co.

and through them in 1849 a loan was secured to complete a railway from St

Petersburg to Moscow. The most important loans during the Crimean War

were also secured by Alexander Stieglitz.

Before the beginning of railway construction in Russia, foreign loans mainly

were used to cover military expenditures and to support monetary circulation.

Railwayconstructiongavebirth to a newcategoryof loans. Railwaycompanies’

loans often were guaranteed by the state. In 1857 Alexander Stieglitz helped

to found the Main Society of Russian Railways, which was formed to build

and operate a planned 4,000 versts of railroad lines. These railway lines were

supposed to connect Russia’s farmlands with Petersburg, Moscow, Warsaw

and the coasts of the Baltic and Black seas. Bankers from Warsaw, London,

Amsterdam and Paris also helped to found the company.

The international ﬁnancial crisis of 1858–9 disrupted monetary circulation in

Russia. The Main Society of Railways was also affected. This, in turn, dimin-

ished the authority of Stieglitz. The banking and ﬁnancial reforms of 1860

led to the liquidation of the Stieglitz banking house. But his appointment as

head of the State Bank was, despite the criticisms against him in the press and

the Ministry of Finance, a perfectly logical occurrence. Stieglitz continued to

control all the threads of the empire’s ﬁnancial management. His transfer to

the State Bank meant that many of the functions of the old court bankers

now moved to the new ﬁnancial structures. The State Bank was charged

with managing Russia’s international ﬁnancial dealings. The bank kept this

responsibility until 1866, as long as Stieglitz remained the head of the State

Bank.

In his short time at the State Bank, Stieglitz brokered several foreign loans. In

1862 he helped to secure a loan of

£15 million at 5 per cent interest for monetary

reforms from the London- and Paris-based Rothschilds. In May 1862 it was

announced that henceforth the State Bank would exchange gold and silver

coins and bullion for paper money. However, the State Bank was forced to

cease this practice by November 1863. The reform failed because of the Polish

rebellion of January 1863. The rebellion led to a sharp budget deﬁcit and panic

on the Petersburg stock exchange. The free exchange of paper money into

silver and gold had to be halted. A long period of paper money circulation

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began. Resources were needed to support the budget, and in 1864 and 1866

Stieglitz concluded two large loans at 5 per cent interest rates with the English

and Dutch. These bailouts, brokered byHope and Co.(Amsterdam)and Baring

Brothers (London) wereintended to stabilise Russia’s ﬁnancial situation. Other

measures were taken as well, but this was not enough to overcome the fall of

the exchange rate for the paper rouble. The State Bank raised its discount rate

to 8.5 per cent, and Stieglitz was forced to resign. After his resignation, the

Foreign Department of the Special Credit Chancellery of the Finance Ministry

took control over concluding foreign loans.

In the 1860–80s, a system of joint-stock banks of commercial credit emerged

in Russia, as did mutual credit societies. St Petersburg and Moscow became

large banking centres.

In 1864 in St Petersburg, the ﬁrst joint-stock bank was founded, the Peters-

burg Private Bank. Soon after, several more banks opened in the capital: the

Petersburg International Commercial Bank in 1869; the Volga-Kama Com-

mercial Bank in 1870; and the Russian Bank for Foreign Trade in 1871.In

1899 the Siberian Bank transferred its board of directors from Ekaterinburg to

St Petersburg and at the beginning of the twentiethcentury the Azov-Don Bank

moved its headquarters from Taganrog to the Russian capital. This group of

Petersburg banks began to play the leading role in the ﬁnancial life of the

empire.

In contrast to the Petersburg banks, private banks in Moscow were con-

nected to the government, foreign capital and European banking to a lesser

degree. In Moscow capital was controlled largely by Old Believers, who were

to a certain extent even anti-government. In 1866 the Merchant Bank was

founded in Moscow; in 1869 the Moscow Merchant Society of Mutual Credit;

and in 1870 the Moscow Discount (Uchotnyi) Bank and Moscow Commercial

Bank. A number of other banks were founded in the 1870s but many of them

quickly collapsed. Around the beginning of the twentieth century new inﬂu-

ential banks appeared in Moscow, linked to L. S. Poliakov’s banking house.

Poliakov moved the headquarters of the Moscow-Riazan Bank from Riazan

25 For more on Stieglitz, see B. V. Anan’ich, ‘Stiglitzty – Poslednie pridvornie bankiry v

Rossii’, in ‘Bol’shoe budushchee’. Nemtsy v ekonomicheskoi zhizni Rossii (Berlin, Bonn, Hessen

and Moscow: Mercedes Druk, Berlin, 2000), pp. 196–201.

26 Anan’ich et al. (eds.), Petersburg. Istoriia bankov,pp.120–207; Iu. A. Petrov, Kommercheskie

banky Moskvy. Konets XIX veka – 1914 (Moscow: Rosspen, 1998). Iu. A. Petrov, Moskovskaia

burzhuaziia v nachale XX veka: Predprinimatel’stvo i politika (Moscow: Mosgorarchiv, 2002).

For the Moscow bourgeoisie see also T. Owen, Capitalism and Politics in Russia: A Social

History of the Moscow Merchants 1855–1905 (Cambridge: Cambridge University Press, 1981);

A. Rieber, Merchants and Entrepreneurs in Imperial Russia (Chapel Hill: University of North

Carolina Press, 1982).

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to Moscow, and later the bank became known as the Moscow International

Commercial Bank. He also transferred the South-Russian Industrial Bank’s

main ofﬁces from Kiev to Moscow.

In the beginning of the 1860s a new system of mortgage credit was formed

in Russia. In addition, societies of mutual land credit and several joint-stock

land banks opened. Also, two state banks for mortgage credit were founded in

the capital: the State Peasant Land Bank in 1883, and the State Noble Land Bank

in 1885. The creation of state banks for mortgage credit further strengthened

the Ministry of Finance’s control over banking.

Banks in the capital and banking houses were closely connected to the

government and many of them acted as conduits of state policy abroad. Among

such banks at the end of the nineteenth and the very beginning of the twentieth

century was the Saint Petersburg International Commercial Bank. In 1894 it

acted jointly with a group of French banks to found the Russo-ChineseBank. By

the beginning of the Russo-Japanese War this bank became the main channel

for moving capital from Russia to the Far East. The Discount-Loan Bank of

Persia was created in Persia to beneﬁt Russian investment and trade. In contrast

to the Russo-Chinese Bank, the Discount-Loan Bank of Persia was not linked

to foreign capital but instead issued credit at the expense of the State Bank and

State Treasury. Hoping to break into markets in the Far East and Central Asia,

the Finance Ministry also helped to create the short-lived Russo-Korean Bank.

The Great Reforms of the late 1850stoearly1860s, especially the bank-

ing reform and emancipation of serfs, allowed the government to set a

course for faster development of Russian industry. Beginning in the 1860s,

the commercial-industrial policy of the tsarist government acquired a system-

atic character. The Russian government in the second half of the nineteenth

century was often an imperfect machine. However the Ministry of Finance

was a noteworthy exception. It was headed by distinguished statesmen:

M. Kh. Reutern, N. Kh. Bunge, I. A. Vyshnegradskii and ﬁnally S. Iu. Witte

were ministers of ﬁnance for long periods and key ﬁgures in government.

Bunge and Vyshnegradsky were also scholars recognised worldwide.

In his ﬁrst years as ﬁnance minister, between 1866 and 1870, Reutern advo-

cated encouraging private enterprise. With European countries increasingly

27 See B. V. Anan’ich, Rossiiskoe samoderzhaviei vyzov kapitalov, 1895–1914(Leningrad: Nauka,

1957); C. Dokkyu, Rossiia v Koree, 1893–1905 (St Petersburg: Zero, 1996); S. K. Lebedev,

S-Peterburgskii mezhdunarodnii kommercheskii bank vo vtoroi polovine XIX veka (Moscow:

Rosspen, 2003).

28 P. A. Zaionchkovskii, Pravitel’stvennyi aparat samoderzhavnoi Rossii v XIX veke (Moscow:

Mysl’, 1978); L. E. Shepelev, Tsarizm i burzhuaziia vo vtoroi polovine XIX veka. Problemy

torgovo-promyshlennoi politiki (Leningrad: Nauka, 1981).

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allowing private enterprises to form without explicit government permission,

Russianleaders understood that new legislation was needed to give more room

for private initiative in the founding of joint-stock companies.

However, this

idea remained unrealised. Possibly inﬂuenced by the 1873 stock-market crisis,

Reutern ordered that work cease on the proposed legislation in 1874 and began

to support restricting the foundation of joint-stock public enterprises.

In 1877

Reutern argued that the government should use its resources to combat spec-

ulation on the stock market, regulate the exchange rate of the rouble and

bonds, and discourage free competition. It was this logic that started the prac-

tice of the government supporting, according to its own judgement, individual

enterprises and banks by providing them special loans from the State Bank.

As a result, in the 1870s the state developed several methods to inﬂuence the

country’s economy.

In the 1870s the Russian government ﬂoated a series of railway bonds on

European markets. From 1870 to 1884 the tsarist government produced seven

issues of consolidated railroad bonds to replenish the special government fund

for supporting railway companies. The ﬁrst four bond issues, as well as the

seventh, carried an interest rate of 5 per cent; the ﬁfth issue offered 4.5 per cent,

and the sixth issue – 4 per cent. The ﬁrst ﬁve issues (two at

£12 million, and the

rest at

£15 millions each) were sold through the Paris and London Rothschilds.

The total sum of

£15 million of the fourth bond issue was partly ﬂoated through

the Rothschilds, the State Bank, and also through Hope and Co. as well as the

Paris banking house Vernier. The active participation of German banks in

Berlin, Hamburg and Frankfurt was signiﬁcant in the sixth and seventh bond

issues.

In the second half of the 1870s, because of the deterioration in Anglo-Russian

relations due to competition in Central Asia, Russia’s main creditor became

Germany rather than England. By the beginning of the 1880s major German

banks (Diskonto-Gesellschaft, Bleichroder, M. A. Rothschild, Mendelssohn,

Warschauer, Berliner Handelsgesellschaft) formed the so-called Russian Syn-

dicate for ﬂoating Russian loans. The Amsterdam banking house Lippmann

and Rosenthal also closely worked with this syndicate.

Reutern’s successors as ﬁnance minister generally shared his overall views

on the government’s role in economic policy. But this does not mean that Rus-

sia’s economic policy after Reutern was unchanged. In many ways, economic

29 I. F. Gindin, Gosudarstvennyi bank i aktsionernaia politika tsarskogo pravitel’stva (1861–1892)

(Moscow: Gosﬁnizdat, 1960), p. 45.

30 L. E. Shepelev, Aktsionernye kompanii v Rossii (Leningrad: Nauka, 1973), pp. 112, 116.

31 Gindin, Gosudarstvennyi bank,pp.46–9.

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policy depended on the general direction of politics and the personality of the

minister. In this regard, the views and activities of N. Kh. Bunge as ﬁnance

minister are quite revealing. Bunge was a distinguished professor and rector

of the University of Saint Vladimir in Kiev and the author of numerous works

on the history of ﬁnance and monetary circulation, trade and credit. He headed

the Finance Ministry from February 1881. The appointment of a university pro-

fessor to such a prestigious governmental post was very unusual. In part it

can be explained by the fact that Bunge was well known to the Romanovs. In

the beginning of the 1860s he taught ﬁnancial law to Grand Duke Nicholas,

the eldest son of Tsar Alexander II, and in the 1880s he taught the future Tsar

Nicholas II. Bunge was very familiar with contemporary Western economic

theory and could evaluate the experience of industrial development in Europe

and the United States. In his academic writings Bunge devoted much effort to

studying the relationship between private enterprise and state involvement in

Russia’s economic development.

As a teacher, Bunge tried to persuade the future emperor Nicholas II that

he should avoid the extreme characteristics of Nicholas I’s policies of state

intervention in the economy. Bunge believed that the state should aid private

initiative only when the state’s interests made this truly necessary.

He was

worried by the state’s increasing role in the economic life of the empire. In

the second half of the 1890s, in his famous ‘Notes from the Afterlife’, Bunge

wrote that on the eve of the Crimean War, ‘the private hand’ in ‘spiritual and

material life’ had been far too restricted.

The disappointment felt by everyone during the Crimean War led to a domes-

ticpolicy...whichexpectedeverythingfromprivateinitiative,butthispolicy

revealed itself sometimes in such deplorable forms that reasonable people

began once again to cry out for governmental oversight and control, and even

for replacing private with state activity. We are continuing in this direction

even now, when people want the government to take over the grain trade and

supply a population of a hundred million. It seems impossible to continue on

in this direction unless you assume that the government should plow, sow and

reap, and then publish all the newspapers and magazines, write stories and

novels and make progress in the ﬁelds of art and science.

Bunge believed that Russia lagged behind Western Europe in industrial

development by a half-century. He argued that one reason for this was that

32 See N. I. Anan’ich, ‘Materialy lektsionnykh kursov N. X. Bunge 60–80x godov XIX veka’,

Arkheograﬁcheskii Ezhegodnik za 1977 god. (Moscow: Nauka, 1978), pp. 304–6.

33 A letter found in N. Kh. Bunge’s papers, 1881–1894. RGIA, Fond 1622, op. I, d. 721,l.52.

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Russian lacked modern legislation regulating factories.

In the beginning of

the 1880s, Bunge introduced new factory legislation. On 1 June 1882,alawwas

passed forbidding the employment of minors in factories. For adolescents aged

12–15 an eight-hour work day was established. In 1882 a Factory Inspectorate

was established under the Ministry of Finance. On 3 June 1886 alawwas

published which regulated relations between factory owners and workers.

The new Factory Inspectorate was charged with enforcing this law. Bunge

also thought that workers should receive a share of an enterprise’s proﬁts, as

this would relieve some social tensions. Bunge formulated his opinions on the

workers question by relying on Western models: the Swiss government, for

example, had built special workers quarters in Bern, and he often used the dye

plants of Leclarke in England as an example of a model enterprise.

Bunge developed and implemented a range of other economic reforms. One

of his most important tax reforms was the elimination of the poll tax in 1886.

This became an important step on the path to replacing estate-based taxation

with property-based taxation. In the beginning of 1885 Bunge introduced an

additional 3 per cent duty to the trade tax (promyslovyi nalog) and three years

later a 5 per cent tax levy was added to incomes from monetary capital.

On 12 June 1886 the emperor authorised a law changing state peasants’ obrok

into payments towards purchasing their land. Thus, the opportunity arose for

these peasants to become full landowners.

Bunge was a staunch opponent

of the existing system of collective responsibility (krugovaia poruka) and of the

passport system, because they hindered the free movement of the peasants.

At his initiative a passport reform was developed. However, following Bunge’s

resignation in December 1886, the reform got caught in bureaucratic red tape

until the beginning of the 1890s.

The policy of forced industrial development

The poor harvests of 1883 and 1885 worsened an already unstable economic

situation. Bunge’s attempts to ﬁx the budget deﬁcit were unsuccessful. Advo-

cates of a new course of state policy took advantage of this failure: The chief

34 L. E. Shepelev, Tsarizm i burzhuaziia vo vtoroi polovine XIX veka (Leningrad: Nauka 1981),

pp. 138–9.

35 A letter found in N. Kh. Bunge’s papers, l. 58 ob–59.

36 PSZ, 3rd series, vol. 5.no.2961.

37 N. I. Anan’ich, ‘K istorii otmeny podushnoi podati v Rossii’, Istoricheskie zapiski, 94 (1974):

201.

38 For the connection between these two phenomena in the government policy of the

1880s–90s, see M. S. Simonova, ‘Otmena krugovoi poruki’, IZ, 83 (1969): 159–95.

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procurator of the Synod K. P. Pobedonostsev, the editor of the newspaper

Moskovskie vedomosti M. N. Katkov, and their supporters spoke out against the

liberal reforms. They argued that ‘a People’s Autocracy’ was a distinctive, nat-

ural form of rule for Russia. In their view, the Russian nobility should be the

connecting link between the tsar and the people. Katkov’s inﬂuence on Alexan-

der III and state policy in the 1880s was so signiﬁcant that in bureaucratic circles

he and Pobedonostsev were seen as a second government alongside the legal

one.

The central aim of Katkov and Pobedonostsev’s economic programme

was to strengthen autocratic power by developing domestic industry. They

favoured protectionism, maintaining paper-money circulation, tight control

over the stock market and private enterprise, using state monopolies (wine and

tobacco) as a resource for taxation, and economic support for large landown-

ers. The development of domestic industry was supposed to go together with

the strengthening of communal landownership in the villages.

Pobedonostsev and Katkov began to campaign against Bunge in the press

as early as autumn 1885. In January 1887 Bunge left the post of ﬁnance minister

and was appointed to the prestigious but less inﬂuential position of chair-

man of the Committee of Ministers. I. A. Vyshnegradskii, who was close to

Katkov, became the minister of ﬁnance. Vyshnegradskii was a former pro-

fessor of mechanics, director of the Petersburg Technological Institute and

also well known in the entrepreneurial world as a leading ﬁgure in the Peters-

burg Water Company and vice-chairman of the South-western Railways. But

Katkov sought not only Bunge’s resignation, but also that of the foreign affairs

minister, N. K. Giers, and he hoped to replace the two ‘Germans’ with his own

prot

es, I. A. Vyshnegradskii and I. A. Zinovev respectively. But Katkov was

not able to realise his plans fully: in the summer of 1887 the inﬂuential editor

of Moskovskie vedomosti died.

I. A. Vyshnegradskii aligned himself with the Moskovskie vedomosti group

long before his appointment to a ministerial post, and he actively supported

Katkov’s attacks on Bunge. In the middle of 1885, S. Iu. Witte, the young

manager of the South-western Railways, joined the group. Vyshnegradskii set

a goal – to eliminate the budget deﬁcit. He quickly came to the conclusion that

introducing a monopoly on tobacco was unrealistic and also decided against

starting a monopoly on wine.

In March 1889 a Department of Railways was formed within the Ministry

of Finance. It was headed by S. Iu. Witte. As a result of Vyshnegradskii’s

39 V. A. Tvardovskaia, Ideologiia poreformennogo samoderzhaviia (M.N. Katkov i ego izdaniia)

(Moscow: Nauka, 1978), pp. 225, 230, 235.

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Russian society, law and economy

reforms, the state began buying up railways whereupon the income of the

state railways rose, while expenditures on their upkeep declined.

Vyshne-

gradskii also believed that it was wise to develop large and proﬁtable private

railways.

In 1889 and 1890 import duties were raised and a new customs tariff

was introduced. This was a severe protectionist measure and inﬂuenced the

development of domestic industry.

Customs revenues steadily increased.

Beginning in 1889, despite resistance from landowners in central and western

regions, Vyshnegradskii created a system of state regulation of bread prices.

The tariff legislation of 1889 was further developed in 1893–7. During these

years the state’s role in the development of the grain trade increased. Vyshne-

gradskii also re-examined Bunge’s legislation on workers. He removed ofﬁcials

from the Factory Inspectorate who were strongly disliked by the business com-

munity. The Factory Inspectorate now allowed minors to work on Sundays

and holidays, and provincial factory inspectorates and governors could allow

night employment for women and teenagers. As a result of these changes,

the Factory Inspectorate, created by Bunge to enforce factory laws, lost its

inﬂuence to a certain extent.

Vyshnegradskii’s attempt to adapt Russia’s economic policy to the general

political doctrine of Alexander III was reﬂected not only in the increase of state

intervention in the economy and the tightening of worker’s legislation, but

also in his support for a conservative agrarian policy. In 1886 a law was passed

restricting the right of communal peasants to divide their land, and in 1889 the

institution of the Land Captain (zemskii nachal’nik) was introduced. The ‘Land

Captain’ assumed many functions of judges in the mir system. They appointed

ofﬁce-holders in villages and volost’ administrations, as well as volost’ judges.

However, Vyshnegradskii did not blindly follow the economic programme

of Katkov and Pobedonostsev. He rejected their idea of promoting paper-

money circulation and continued with Bunge’s course of trying to set Russia

on the gold standard. In 1889 Vyshnegradskii tried to realise Bunge’s plan of

reconﬁguring Russia’s bond offers abroad. He sought to exchange current 5

and 6 per cent Russian bonds on European markets for new bonds that offered

lower interest rates and longer maturation times. After the ﬁrst group of new

40 P. P. Migulin, Nasha noveishaia zheleznodorozhnaia politika i zheleznodorozhnie zaimy (1893–

1902) (Kharkov: Tipolitograﬁia ‘Pechatnoe Delo’ K. Gagarina, 1903), p. 17.

41 K. Akinori, ‘Ekonomicheskaia programma dvoryanksoi reaktsii i politika I. A. Vyshe-

gradskogo’, Journal of Asahikawa University 5 (March 1977): 209.

42 PSZ, 3rd series, vol. 11.no.7811.

43 Shepelev, Tsarizm i burzhuaziia (1981), p. 160.

44 P. A. Zaionchkovskii, Rossiiskoe samoderzhavie v kontse XIX stoletiia (Moscow: Mysl’, 1970),

p. 257.

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The Russian economy and banking system

Russian bonds were sold in 1889 Vyshnegradskii offered several more series in

France. As a result, a signiﬁcant part of Russian securities moved from German

to French markets.

Vyshnegradskii’s tenure as ﬁnance minister was marked by a sharp increase

in exports. If under Bunge from 1882–6 the average yearly value of Russian

exports was 574 million roubles, and imports were worth 508 million roubles,

then under Vyshnegradskii from 1886–91 the numbers were 710.6 million rou-

bles and 403.3 million roubles respectively. Grain represented the lion’s share

of Russian export. Bread exports rose from an annual average of 312 million

roubles from 1882–6 to 441 million roubles from 1887–91. After abolishing the

poll tax, Bunge had decided to forgive peasants’ debt for unpaid poll-tax arrears

from previous years. Vyshnegradskii believed otherwise, and from 1887 to 1888

was able to collect more than 16 million roubles in back taxes. Thanks to Vysh-

negradskii’s policies, the budget surplus between 1888 and 1891 reached the

impressive ﬁgure of 209.4 million roubles. However, in the famine years of

1891 and 1892 the government was forced to spend 162.5 million roubles to

aid the starving population.

These famine years and their destructive conse-

quences proved to be a high price for Vyshnegradskii’s aim to eliminate the

budget deﬁcit at any cost. Twenty-nine of Russia’s ninety-seven provinces and

oblasts suffered from the poor harvest, and more than 500,000 people died

from famine and cholera.

Under these conditions, the failures of the ‘Vysh-

negradskii system’ became obvious. In 1892 Vyshnegradskii became very ill

and was forced to leave his post. S. Iu. Witte became the new ﬁnance minister.

The famine of 1891–2 once again reminded the world of Russia’s backwardness

and of the necessity for radical changes not only in the economy, but also in

the political system.

Alexander III died in 1894. The new emperor was Nicholas II. In his ﬁrst

public speech on 17 January 1894 at the Winter Palace, meeting with repre-

sentatives of the zemstvos (elected district and provincial councils), Nicholas

announced that he did not intend to change Russia’s political system in any

way. But this did not rule out economic reforms. They were needed to pro-

mote the autocracy and calm liberal elements of society. Consequently, Witte

led a series of important economic reforms at the end of the 1890s.

45 See: Vitchevskii, Torgovaia,p.128; P. A. Shvanebakh, Nashe podatnoe delo (St Petersburg:

Tip. M. M. Stassiulevicha, 1903), p. 14.

46 See A. M. Anﬁmov, ‘Prodovol’stvennye dolgi kak pokazatel’ ekonomicheskogo

polozheniia krest’ian dorevolutsionnoi Rossii (konets XIX – nachalo XX veka)’,

Materialy po istorii sel’skogo khoziaistva i krest’ianstva SSSR (Moscow: Nauka, 1960),

p. 294.

411