Even more than in Elizabeth's time, under Catherine II warfare (Ottoman empire, Poland, Sweden), palace and garden ensembles, art collections, largesse
to friends and favorites, and state expenditures vastly outstripped revenue. Administrative reform added new costs: in 1763 and 1764 salaries for civil servants, central and local, were instituted or raised and pensions for nobles were increased. With the many-fold multiplication of salaried offices in the 1775 administrative reform, expenditures on the state apparatus rose by 2.4 times from 1764 to 1782. In 1785, about 36 percent of state expenditures went to the army, navy, and garrison troops, 36 percent to civil administration, and 10 percent to the imperial court. All this expenditure was beyond the budget: as noted in Chapter 14, Walter Pintner found military expenditures alone exceeding all net income by 1791 and, as Janet Hartley argued, Russian rulers were so consumed with warfare from Peter's time through the Napoleonic period that their fiscal and administrative reforms could hardly be systematic.
Until Catherine II's reign, the state's financial apparatus was uncoordinated. Peter I's last era of reforms had left a simple central administration of about ten Colleges, the Synod, and relatively few other central offices, topped by the Senate. But after his death the central administration became top-heavy: over fifty different agencies were empowered to collect taxes by 1760, for example. Separate Colleges collected income from vodka and salt sales, customs, and trade; military Colleges collected income from the poll tax since it was dedicated to the army; separate offices managed income and expenditures of the court and its lands. Each such agency operated with its own estimated budget; there was no Finance Ministry, Finance Minister, or empire-wide oversight. When Peter III in 1761 and Catherine II in 1762 each came into power and requested empire-wide budgetary reports, local and central offices were unable to provide them. Catherine II focused immediately on the problem of information gathering, insisting in 1763 that tables of organization and budgets be created for civil administration and in 1765 for military. Realistic accounts of expenditures were compiled in 1769, 1773, 1776-7, and annually after that, and from 1780 a unified annual national budget (civilian, army, navy, and court expenses) was produced.
Catherine understood the need to create a centralized hierarchy of fiscal institutions and a fiscally expert corps of bureaucrats who could carry out collections, budgeting, and auditing. Throughout her reign but particularly in the window of time between wars (1774-87), she set to major reforms. In 1773 she centralized state finances in the Expedition (i.e. Office) of State Revenues; by 1780 it was the state's major Treasury organization, divided into departments for income, expenditure, audits, and arrears, all subordinate to the procurator-general. She unified the empire's fiscal administration in reforms of 1775-80s, transferring most fiscal duties to the gubernii; central agencies were gradually phased out (those that remained with fiscal responsibilities—primarily having to do with the Court and Military—were put under the procurator-general's oversight). The key institution in each gubernia and all districts was the Treasury, which was made directly responsible to the procuracy-general in St. Petersburg to forestall abuses of the old system of governors. Surveillance in the form of information gathering— population, maps, harvests, food prices, and the like—became the central task of the new institutions. District Treasury offices kept tax rolls and population statistics and carried out surveying; they oversaw vodka and salt farming contracts and custom houses; they kept financial audits; they managed state lands, supervised mines and factories, and litigated on behalf of the state in financial matters. Respecting the reform's separation of judicial from other arms of government, the Treasury Office had no judicial authority but referred disputes to the gubernia board or to the courts.
At the gubernia level Treasury Chambers were headed by a vice-governor appointed by the empress, five other appointed officials with fiscal knowledge, and a staff of financial clerks. At the district level the treasurer was appointed by the procurator-general and a board of assistants, all generally from the local gentry but selected from experienced, qualified officials. With more specialized officials, these administrative changes improved tax collection, audit ofresources, and the empire's overall ability to budget. Paul I maintained this general structure, adding a few institutions of empire-wide policy making and execution, such as restoring the College of Manufacturing abolished by Catherine II.
INDUSTRY, MANUFACTURING, AND EXPORT
In confronting the challenge of paying for all its commitments, Russia relied on a variety of forms of taxation, monopolies, loans, and currency manipulation. At the same time, trade was the ultimate goal of eighteenth-century European rulers, and their ministers worked to encourage domestic production and trade. Mercantilism by and large shaped policy towards growing the economy and population, winning a favorable balance of trade by developing productive resources, simplifying the national economy, and protecting native industry. Arcadius Kahan, however, pointed out that Russia's ability to implement mercantilist ideas was hampered by its history and social structure. The success of mercantilist policies in Europe depended upon a robust level of economic development, including a relatively commercialized agricultural sector, well-developed money market, industrial skills and organization, access to resources as in a colonial empire and the transport facilities (merchant marine) to move them, and a well-organized bureaucratic apparatus. Russia spent much of the second half of the eighteenth century working on these structural building blocks; it suffered in particular from lack of a free market in labor and available capital. So, in Kahan's phrase, it followed a "proto-mercantilist" policy, pragmatically asserting state control and direct investment in some cases, opening access to the market, and working through merchants and the market when possible. In the crucial mining and iron industries, for example, the majority of factories and mines began as state owned and operated; the state developed crucial roads and waterway networks. In other industries, the state supported private industry and the market. Robert Jones points out, for example, that the state was deeply interested in maintaining a stable grain supply for St. Petersburg and around the realm, but it worked to create that supply without taking the grain trade under direct control of the state (other than maintaining reserves).
Growth in industry in the eighteenth century responded not so much to indigenous demand, but to the intensity of government need for a particular raw material or finished product. Thus, Peter I invested heavily in war-related industries (precious metals, shipbuilding, iron and armaments, textiles, saltpeter and sulfur), using labor forcibly recruited by military recruitment or ascription of state peasants. But not all industrial production was in state factories; Peter and his successors also turned industry over to enterprising foreign or domestic entrepreneurs or noblemen, inspired both by political favoritism and economic theory, providing subsidies and facilitating access to labor. In 1721 merchants were allowed to acquire serfs for industrial labor in the form of whole villages bonded to their factory (the same format applied to serfs ascripted to state enterprises). Free labor (vagrants and the emerging urban class of raznochintsy, discussed in Chapter 18) who signed on were converted into serf status in 1736. Merchants' right to purchase serf villages was rescinded in 1762 in a move that benefited noble entrepreneurs who had been eagerly moving into industry and manufacturing from the 1740s. Empress Elizabeth awarded Urals ironworks and lucrative monopolies to favorite government ministers, although many lacked the expertise to manage a complex industry. In 1775-9 Catherine II abolished the College of Manufactures that had previously provided industrial licenses and opened up manufacturing to all social groups (nobles, merchants, craftsmen). Wealthy nobility engaged in manufacturing using a mixed labor force of serfs and hired labor; they also shadow-partnered with merchants and specialists. Boris Ananich notes that the number of factories using hired labor (vagrants, serfs, and state peasants who left villages seasonally or permanently) increased fourfold to around 2,000 in Catherine II's time.