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Epilogue

In times of crisis, local government institutions hadperformed valuable service. In 1812 noble assemblies and town dumas had collected considerable sums and foodstuffs which they contributed to the war effort.[55] The zemstvos (which by this time reflected predominantly noble interests) carried out important relief work during the Russo-Japanese War and the First World War. The All-Russian Union of Towns performed the same service in the First World War.[56] These were exceptional circumstances, but nevertheless, this activity demonstrated that there was some potential for local society to act collectively to address not only local but also national interests. By the early twentieth century there is some evidence that a corporate, or 'estate', identity had developed amongst the provincial nobility and at least in the merchant-dominated towns like Moscow. This was the type of identity which Peter I and Catherine II had tried to stimulate in the eighteenth century with very limited success. The tragedy was that by the time it had been achieved it was already anachronistic in the light of the very rapid social and economic changes which had taken place since the late nineteenth century. The exclusion of the most dissatisfied groups in society - peasants and workers - from all but the most limited participation in these institutions was symptomatic of a more general failure to recognise that society had changed and that local institutions should modernise to reflect the new economic and society reality. The fault lay not only with the government which established, and then modified, these institutions but also by the early twentieth century with the local institutions which blocked further reforms in defence of 'corporate' interests which no longer served the interests of the country.

State finances

PETER WALDRQN

In 1898, Sergei Witte, the Russian minister of finance, wrote to Emperor Nicholas II:

The French state budget is 1,260 million rubles for a population of 38 million; the Austrian budget is 1,100 million rubles for a population of 43 million. If our taxpayers were as prosperous as the French, our budget would be 4,200 million rubles instead of its current 1,400 million, and if we matched the Austrians, our budget would be 3,300 million rubles. Why can we not achieve this? The main reason is the poor condition of our peasantry.[57]

While the minister of finance bemoaned the poverty of the Russian population and the consequent low level of taxation that it produced, the Russian state's overall financial performance had proved to be relatively successful. Although it had faced financial difficulties, Russia had avoided the type of financial crisis that had made a major contribution to the collapse of the French monarchy at the end of the eighteenth century, and had given the Habsburg state such difficulties during the eighteenth and nineteenth centuries.[58] Witte's analysis identified low per capita yields from taxation as the fundamental weakness of the Russian state's financial system and he laid the blame for Russia's inability to generate a sufficiently large state budget firmly at the door of the peasantry. But Witte, Imperial Russia's most successful and influential finance minister, failed to recognise that the tsarist regime had proved adept at both avoiding fatal financial crises and at overcoming lesser problems. It had proved able to fight a multitude of wars and to expand the boundaries of its empire, as well as to make major internal reforms that had financial implications. This discussion of Russian state finances will examine the Russian government's chief elements of expenditure and revenue and analyse changes that took place during the eighteenth and nineteenth centuries. It will also analyse the impact of the government's taxation policies on the empire's population and the wider social consequences of fiscal policy.

The Russian state budget hardly warranted such an appellation until well into the nineteenth century. Troitskii describes the 'inadequate centralisation of financial administration, the lack of a central treasury, the secrecy of the budget, the unsatisfactory recording of business, the lack of accountability in agencies and the almost complete absence of state fiscal control of expenditure' that characterised Russian state finances during the first half of the eighteenth century.[59] Catherine the Great acknowledged the disarray of Russia's financial position at her accession to the throne in 1762: soldiers' wages were in arrears, customs duties had been farmed out for a tiny return to the state and the currency itself was of dubious worth.[60] While there were improvements during Catherine's reign, financial policy-making and the process of budget-making remained weak until the last decades of the nineteenth century Even in 1879, a committee established to examine ways of reducing government expenditure reported that the Ministry of Finance could exert little influence over the process by which expenditure was determined and noted that, in effect, the Finance Ministry had proved unable to assert its authority over the spending ministries.[61] The process of budget-making was essentially driven by the demands of the spending ministries and the role of the Ministry of Finance was to raise the revenue that was demanded to meet the spending plans of each ministry. The absence of proper cabinet government in Russia until the first decade ofthe twentieth century also contributed to the lack ofa clear direction in financial policy Individual ministers had the right of access to the emperor and were able to plead the case for their own ministries' spending plans directly to the tsar, bypassing their fellow ministers. The inter-departmental Committee of Finances, designed to provide overall political direction for the empire's financial policies, played an inconsistent role. While it was the formal arena in which fiscal and monetary policy could be debated, its significance could depend on the level of interest that the emperor displayed in its affairs, as well as in the political status of the Minister of Finance and on his place within the

hierarchy of the empire's governing elite.

***

It was military expenditure that dominated Russia's state finances. During the eighteenth century, the army and navy consistently accounted for more than half of the Russian state's spending and, at times, more than 60 per cent of the budget was devoted to military expenditure.[62] This is hardly surprising, given Russia's persistent involvement in wars and the continuing impetus to extend the territorial boundaries of the empire. Military expenditure grew significantly during times of war, with sharp increases during the Napoleonic Wars, the Crimean War and the Russo-Turkish War of 1878-9.[63] There was also a considerable increase in military spending in the years preceding the First World War, with expenditure growing from 420 million roubles in 1900 to 820 million roubles in 1913.[64] Although this did not represent a significant increase in the proportion of the government's income devoted to military spending, since the state's budget was growing rapidly during this period, it was a much heavier burden than at first appears. By 1914, Russian military expenditure exceeded that of Britain, even though Britain's army and navy were needed to protect the security of its far-flung empire.[65] Throughout the nineteenth century, there were repeated efforts to restrain military expenditure and government committees regularly grappled with the problem of the cost of the Russian army and navy. A special committee met in 1818, followed by a review of military expenditure by A. A. Arakcheev in 1822, and a further attempt to rein in expenditure in 1835. This last review concluded that reductions in expenditure during the 1820s had had a negative impact on both Russia's military forces and on the overall national economy, as a reduced demand for materials by the army had resulted in an overall reduction in the prices of domestically produced goods and this had affected both manufacturers and the treasury, since the government suffered a consequent loss of tax revenues. The dominant place that Russia's military strength played in the government's thinking is reflected in the results of the 1835 review: the committee could only suggest 'housekeeping measures' to limit military spending and then only if both economic and military conditions continued to be stable.[66] A further attempt was made to reduce overall government expenditure in 1861 but, in the aftermath of the debacle in the Crimea, no serious attempt was made to constrain military spending.[67] The 1879 committee's work came at the end of the Russo-Turkish War, when it was again clearly impolitic to propose any major reductions in military spending. At the first hint of a proposed reduction in the army's budget, D. A. Miliutin, the minister of war, wrote to A. A. Abaza, the president of the State Council's economic department that 'any significant reduction in [military] expenditure would rapidly cause damage to the crucial matter of the state's readiness to support its political dignity'.[68] Abaza's committee had begun with the lofty ambition of moving beyond short-term solutions to the recurrent financial difficulties that faced the Russian government, and instead putting in place measures that would prevent ministries increasing their expenditure after their annual budget had been set. But by the middle of 1879, Abaza was compelled to admit that due to 'the alarming events of recent times', ministries had been unable to devote adequate attention to the work of his committee and that they had proved very tardy in providing the information he needed in order to proceed.[69] The Russian bureaucracy proved able to frustrate these plans; central authority was not yet well established enough to override the power of individual ministries.