Foreign loans became one of the most important sources of finance for Witte's economic policies. He reorganised the system of commercial foreign agents within the Finance Ministry and by the beginning of 1894 he had opened agencies in Paris, London, Berlin and Washington, and later in Constantinople, Brussels, Yokohama and many other cities. In 1898 commercial agents were renamed agents of the Ministry of Finance and added to the ranks of Russian embassies and missions. As a result of this reform Witte was able to receive regular information about markets in Europe and other countries.
By the end ofthe i890s, Witte began to advocate that Russia attract as much foreign investment as possible. This policy faced serious opposition, led by the Grand Duke Alexander Mikhailovich, who favoured limiting foreign capital investment in Russia, in particular in the oil industry.
Witte's programme of encouraging foreign investment accompanied protectionism, increasing indirect taxation and the raising of the commerce tax. This tax increase consisted of two parts: a main tax and an additional one. Businessmen paid the main tax by purchasing permits to operate their business. The tax burden was determined not by which guild the owners belonged to, as had been the case under previous legislation, but by the size of their business. The supplementary tax for joint-stock companies was divided into a tax on capital and a tax on a percentage of profit. It was levied only if profits exceeded 3 per cent of the fixed capital. The supplementary tax for non-public companies was divided into an arbitrary tax and a percentage tax on profits. The tax burden was determined by calculating the average profits of various enterprises.[386] Thus, a significant part of the commerce tax was based on an archaic and primitive principle of apportioning taxation. Despite its imperfections, the new commerce tax increased state revenues. In 1898 collections from trade and commerce were 48.2 million roubles, and in 1899 - after the new commerce tax - 61.1 million roubles.[387]
By the end ofthe 1890s, Witte's economic programme had gained distinctive characteristics. The Finance Ministry's influence went far beyond its normal sphere of activity, and Witte had much influence on overall domestic politics. Witte linked Russia's economic development with a determined effort to gain access to markets in the East. In the second half of the i890s, the Finance Ministry attempted the so-calledpeaceful economic penetration of Manchuria, Korea, Persia and Mongolia with the goal of preparing future markets for Russian industry. Banks played a central role in this policy: the Discount-Loan Bank of Persia, which was essentially a branch of the State Bank, and also the Russo-Chinese Bank, which dealt with both Russian and foreign capital. Aided by state and 'neutral' foreign capital, and through generous expenditures, the government planned on doing what the weak Russian private initiative still was incapable of undertaking. Witte hoped that within several years Russian industry would reach a rather high level of development. Russian goods would become competitive on the markets of Central Asia and the Far East, and this would allow 'the surplus from exports in Asia to pay the interest on capital obtained in Europe'.[388] From the very beginning of his tenure as Finance Minster, Witte regularly consulted with scholars. His assistants in important economics problems were D. I. Mendeleev and also the well-known economist I. I. Kaufman. Witte, perhaps more than any other minister, understood the value of science in developing the productive power of the country. This explains, in particular, his decision to create a network of polytechnic institutes in Russia.
Witte's programme to speed up the development of Russia's industry bore fruit. Industry grew particularly quickly in the mid-i890s. In the last forty years of the nineteenth century the volume of industrial production in Russia increased more than 700 per cent, while Germany's increased 500 per cent, France's 250 per cent and England's more than 200 per cent.[389] This great increase in the pace of industrial production is partially explained by Russia's relatively weak level of industrial development at the beginning of the 1860s. This was accompanied by relatively low productivity and low production of goods per capita as well. According to the Ministry of Finance's statistics, in 1898 cast-iron production per capita in Great Britain was 13.1 pood (old measurement in Russia = 16 kg), 9.8 pood in the United States, 9.0 pood in Belgium, 8.1 pood in Germany, 3.96 pood in France and 1.04 pood in Russia. Great Britain extracted 311.7 pood of coal, Belgium - 204, the United States - 162.4, Germany -143.8, France - 50.7, and only 5.8 pood in Russia. This lag in production affected consumption and trade too. Russia's trade turnover, 1,286 million roubles in 1897, was less than a third of that in Germany and the United States, one-fifth of that in Great Britain, and was only equal to the turnover of Belgium.
In terms of capital, Russia was also poor. The total amount of capital in public companies, trade and industry, and also city and village credit was 11 billion roubles. About half of this amount came from abroad. At the same time, Germany's capital worth was 30 billion roubles, and England's was 60 billion.[390]
The development of industry promoted the growth ofthe working class and its consolidation. Data based on factory records, zemstvo documents and the 1897 census indicate that by the beginning of the twentieth century there were 14.5 million workers.[391] The development of industry also led to the growth of cities and urban populations. According to the i897 census the population of both Moscow and St Petersburg was over one million. Cities gained an industrial feel and image as well. Petersburg turned into a capital for machine building. New areas of industry were being developed there: chemical and electrical industry. The Moscow industrial region remained the strongest in Russia. Besides old areas (the Central Industrial Region and the Urals) new areas arose: the coal-metallurgical district in the south and the oil district in Baku. The metallurgical factories in the south were built with foreign capital. They were equipped with the newest technologies and became noted for their high productivity. By the beginning of the i890s, domestic production satisfied 93.7 per cent of the country's demand for cast-iron, 91.7 per cent of demand for iron and 97.1 per cent of demand for steel.[392] By the beginning of the twentieth century Russia became the world's leading extractor of oil. However, it was not able to keep this title and was overtaken by the United States.
In post-1861 Russia there was an intensive railway-building campaign, especially between 1895 and 1899. Russia entered the twentieth century with the second longest track in the world, and 40 per cent of it had been laid in the 1890s.58 At the end of the 1890s and beginning of the 1900s, Russian was one of the world's leading grain suppliers, competing with the United States. Russian grain exports in these years were nearly 500 million pood a year, about 20 per cent of its total grain harvest.59
A key financial characteristic of turn-of-the-century Russia was the extremely fast growth ofthe state budget. In i867 revenues numbered only 4i5 million roubles. Thirty years later, they had increased to one billion roubles and by 1908 to two billion roubles. Five years later the budget reached 3 billion roubles. Over this whole period, however, the budget grew 2.4 times quicker than national revenue. Increased budgetary expenditure greatly depended on the income from the spirits monopoly.60 As a result of the economic growth of the 1890s, Russia came closer to the level of industrially developed states, but did not reach it as Witte had planned.
387
S. Iu. Witte,
390
'Vsepoddaneishii doklad S. Iu. Vitte "O polozhenii nashei promyshlennosti" Fevral' 1900',
392
D. I. Mendeleev, 'Fabrichno-zavodskaia promyshlennost' i torgovlia Rossii', in D. I. Mendeleev,