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 reforms, the state began buying up railways whereupon the income of the state railways rose, while expenditures on their upkeep declined.[375] Vyshne- gradskii also believed that it was wise to develop large and profitable private railways.[376] 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.[377] Customs revenues steadily increased.[378]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. Vyshnegradskii also re-examined Bunge's legislation on workers. He removed officials from the Factory Inspectorate who were strongly disliked by the business community. 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.[379]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
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 roubles 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 i888 and i89i 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.[380] These famine years and their destructive consequences 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.[381] Under these conditions, the failures of the 'Vyshnegradskii 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 i7 January i894 at the Winter Palace, meeting with representatives 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 promote the autocracy and calm liberal elements of society. Consequently, Witte led a series of important economic reforms at the end of the 1890s.
As finance minister, Witte tried to continue the economic course of Katkov and Pobedonostsev. However, Witte soon began to move away from their ideas for reasons of pragmatism, and between 1896 and 1898, when Witte's policies began to be seen as a 'system', they were actually a compromise between the ideologists of the 1880s and the advocates of economic changes of the 1860s and 1870s. The year 1896 became a turning point for Witte's own ideology: formerly a staunch defender of communal landownership, he suddenly declared himself an ardent opponent of the idea. At the heart of Witte's strategy was speeding up the development of domestic industry. Until the mid-i880s, Witte was influenced by Slavophile ideology.[382] However at the end ofthe 1880s, his idol became the famous German economist and advocate of protectionism, Friedrich List. In 1889 Witte published a small brochure 'The National Economy and Friedrich List'. In it, Witte argued for rejecting cosmopolitan views and instead following the teachings of List, the prophet 'of Germany's greatness, which was created by Bismark on the basis of his [List's] theories'.[383]
It would seem that the tragedy of the 1892-3 famine should have had a sobering effect on the proponents of higher taxes. Nevertheless, Witte, like Vyshnegradskii, continued to use indirect taxation as an important source of replenishing the budget. From 1892 to 1901, revenues from indirect taxation increased by 50 per cent.[384] The spirits monopoly proved to be one of the most effective methods of raising capital. In 1894 Witte introduced the monopoly in four provinces (Perm, Orenburg, Ufa and Samara); later it was expanded throughout the country. Distilling remained in private hands, however the state gained control over sales. Purifying the spirit and producing vodka occurred in private factories but only to fill state orders and under the supervision of excise regulators. The sale of spirits, wine and vodka was under the sole purview of the state.
In the autumn of 1892 Witte tried to increase the amount of paper money in circulation by introducing a special 'Siberian' rouble to cover the costs of the Trans-Siberian railway. Evidently, Vyshnegradskii did not tell Witte about the Ministry of Finance's long preparations to introduce gold coinage in Russia. N. Kh. Bunge brought Witte's attention to the dangers of inflationary policy, and within a year the finance minister set about monetary reform in earnest. He concluded the conversion operations begun by Vyshnegradskii and conducted a series of measures aimed at stabilising the rouble in a reform announced by the decree of 29 August 1897.[385] The amount of gold backing the rouble was reduced by one-third. Thus one paper rouble was worth 66.6 kopecks of gold. As a result of the reform the State Bank became an issuing institution and was given the right to issue bank-notes. All paper money in circulation, which totalled more than 300 million roubles, should have been backed in gold entirely. The introduction of the gold standard, on the one hand, opened new opportunities to obtain credit on European markets, but on the other hand, it required that the government constantly ensure that the rouble was backed by gold. Henceforth, the empire's loans were often needed not only for military expenditures, but to maintain the gold standard.
375
P. P. Migulin,
376
K. Akinori, 'Ekonomicheskaia programma dvoryanksoi reaktsii i politika I. A. Vyshe- gradskogo',
379
P. A. Zaionchkovskii,
p. 257.
380
See: Vitchevskii,
381
See A. M. Anfimov, 'Prodovol'stvennye dolgi kak pokazatel' ekonomicheskogo polozheniia krest'ian dorevolutsionnoi Rossii (konets XIX - nachalo XX veka)',
p. 294.
382
For Witte's economic views, see: Laue,