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which were dominated by Old Believers, were very critical of their Petersburg counterparts. The Riabushinskiis, for example, believed Petersburg was a city of temptation, ‘a frightening city’, where ‘market orgies’ and ‘unprincipled brokers’ reigned.62 This disunity would influence the Russian bourgeoisie’s role in the political life of the country.

Financial and commercial policy at the beginning of the twentieth century

The world economic crisis at the beginning of the twentieth century and the ensuing depression brought serious harm to the Russian economy. The economy had not recovered when the country found itself locked in the RussoJapanese War of 1904–5. In 1905 came revolution.

Witte’s reforms did not pass these tests unscathed. During the war economic reforms were not possible. In addition, the Finance Ministry lost its special role in determining overall government policy after the creation in 1905 of the Council of Ministers, whose chairman was to play the role of prime minister. In the same year the Ministry of Trade and Industry was formed, and the Ministry of Agriculture was re-named and strengthened, thereby reducing the Ministry of Finance’s previous domination of economic policy.

In 1903 Witte was forced to leave the Ministry of Finance. E. D. Pleske replaced him as minister. Pleske was an experienced and knowledgeable bureaucrat but was not connected with financial or scholarly circles. The same thing can be said of V. N. Kokovtsov, who headed the Ministry of Finance from 1904 to 1914, with a short break between 1905 and 1906. Until 1907, by Kokovstov’s own admission, it was impossible even to think of any creative policies. His key concern was to maintain the gold standard, and then support P. A. Stolypin’s land reforms.63

The revolutionary movement in Russia in November–December 1905 led to a massive outpouring of gold from savings banks. At the end of December 1905, the State Bank had almost exhausted its statutory lending limit. The fate of gold money in Russia depended on a large foreign loan. V. N. Kokovstov was sent to Paris on an emergency mission to conclude a deal. His trip coincided with the worsening of Franco-German relations over a conflict in Morocco. The Moroccan crisis was supposed to be solved at an international

62B. V. Anan’ich, Bankirskie doma v Rossii. 1 860–1 91 4. Ocherki istorii chastnogo predprinimatel’stva (Leningrad: Nauka, 1991), p. 124.

63V. S. Diakin, Dengi dlia sel’skogo khoziaistva (St Petersburg: St Petersburg University Press,

1997), pp. 191–206.

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conference in Algeciras in January 1906. The French government repeatedly announced that it was counting on Russian support at Algeciras. Nicholas II ordered V. N. Kokovtsov to tell the French government in Paris that Russia was prepared to support France at Algeciras. In return, the French agreed to organise a small, and once the Algeciras conference was over, a large loan for Russia.

On 29 December 1905 / 11 January 1906 a contract was signed with French banks for a loan worth 100 million roubles. The situation was so critical in Petersburg that officials did not wait until the loan documents arrived from Paris by post and hurried to add 50 million roubles to the balance of the State Bank’s foreign accounts.64

When on 18/31 March 1906 an agreement was finally reached in Algeciras, the French finance minister allowed the Russian ambassador in Paris, A. I. Nelidov, to begin negotiations with bankers for a larger loan. The Russian 5 per cent loan of 1906 was concluded on 9/22 April for a sum of 2,250 million francs, 1,200 million of which France paid, 330 million came from England, 165 million from Austria, 55 million from Holland and 500 million from Russian banks. The Russian government was unable to secure more international creditors for the loan: German, Italian, American and Swiss banks refused to participate.65 The 1906 loan allowed the preservation of Witte’s gold standard.

The trials to which the Russian financial system was subjected in the years of war and revolution motivated Kokovtsov to reject further forced development of domestic industry designed to catch up with the more economically developed countries of Western and Central Europe.

The world economic crisis of 1900–3 slowed the growth of Russian industry and resulted in more then 3,000 enterprise closures. In 1903 Russia boasted 23,000 industrial enterprises employing 2,200,000 workers.66 In 1904 the rest of Europe experienced growth while the Russo-Japanese War and revolution led to the destabilisation of monetary circulation and a fall in industrial production in Russia. After a series of poor harvest years beginning in 1906, Russia finally produced a strong harvest in 1909. This immediately made an impact on the general economic health of the country. According to customs statistics, Russian exports were worth 1,300 million roubles in 1909, the highest figure of

64B. A. Romanov, Ocherki diplomaticheskoi istorii russko-iaponskoi voiny, 1895 –1907 (Moscow and Leningrad: Izd. AN SSSR, 1955), p. 616.

65B. V. Anan’ich, Rossiia i mezhdunarodnii kapital. Ocherki istorii finansovykh otnoshenii

(Leningrad: Nauka, 1970), pp. 170–6.

66Shepelev, Tsarizm i burzhuaziia v 1904–191 4 (Leningrad: Nauka, 1987), p. 15.

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the decade by more than 325 million roubles. The trade surplus increased by 500 million roubles. This affected monetary circulation and increased Russia’s gold reserves. By 1 January 1909 the gold reserve was 1,307 million roubles, and by the end of the year the sum had reached 1,708 million roubles, having increased by 401 million roubles.67

Russia’s entrance into the Entente in 1907 strengthened Franco-Russia relations and coupled with renewed industrial growth promoted the development of co-operation between French and Russian banks. In particular, the French helped to improve the finances of the Petersburg private banks. In 1910 the Northern and Russo-Chinese Banks united. Together, they formed the new Russo-Asian Bank. During the years of economic growth before 1914 FrancoRussian financial groups were formed. From the Russian side, the main participating banks were: the Petersburg International, the Russian CommercialIndustrial, the Azov-Don, the Petersburg Discount-Loan, the Russian Foreign Trade, the Russo-French, and the Siberian Commercial Bank; and from the French side – Credit´ Lyonnais, Comptoir National d’Escompte, Banque Franc¸aise pour le Commerce et L’Industrie, Banque de L’Union Parisienne. French and Russian banks co-operated on railway projects in Siberia, Turkestan and the Caucusus and in joint operations in the Balkans.

The Franco-Russian financial co-operation did not end German influence in Russian banking, which continued to exist on the eve of the First World War. All the major Petersburg banks continued to work with banks in Berlin and Vienna. English capital became an important factor only immediately before the war. Petersburg banks undoubtedly played the central role in international banking connections. By 1914 the eight largest Petersburg banks controlled 61 per cent of the market share of joint-stock banks, which exceeded similar indicators of banking concentration in England and Germany.68 On the eve of the First World War banks began to finance industrial enterprises more actively. Both Petersburg and Moscow banks played an important part in the development of industry in central Russia. The growing role of joint-stock banks affected their relationship with the State Bank. After the gold standard was introduced in Russia, the State Bank became the primary lending institution and commercial bank. It retained its status as the ‘bank of banks’, but by 1914 it nevertheless had less total financial strength than the joint-stock banks. Fifty joint-stock banks

67Anan’ich, Rossiia i mezhdunarodnyi, p. 264.

68On the participation of French banks in the Russian economy, see R. Girault, Emprunts russes et investissements franc¸ais en Russie. 1 887 –1 91 4 (Paris: Armand Colin, 1973). V. I. Bovykin, Frantsuzskie banki v Rossii. Konets XIX–nachalo XX vekov (Moscow: Rosspen,

1999).

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with 778 branches boasted balances of 6,285 million roubles compared to the State Bank’s 4,624 million roubles.69

Banking houses also retained their influence in the economic life of the country, especially in St Petersburg and Moscow. By 1913 there were sixteen large banking houses in St Petersburg, including branches of Moscow firms. Among them were the banking houses: Zachary Zhdanov and Co., Kaftal, Handelman and Co., G. Lesin, A. I. Zeidman and Co., and I. E. Ginzburg. The Ginzburg banking house played an important role not just in the economy, but also in the cultural life of the capital at the beginning of the twentieth century. In Moscow, the banking house of Riabushinskii remained very influential. In 1912 it was reorganised by the Riabushinskii brothers into a large joint-stock commercial bank.

After the revolutionary events of 1905–7 the activity of political parties intensified, as did the consolidation of capital. These new party and business leaders took the initiative to formulate a programme for the development of Russia’s productivity and industry. These problems were regularly discussed in St Petersburg at the meetings of the Council of Congresses of Representatives of Industry and Trade, where scholars and economists were invited to present research. In Moscow, the Riabushinskii banking house became a centre for such discussions, with debates on the economy taking place in P. P. Riabushinskii’s apartment on Prechistinskii Boulevard. Famous historians, economists and law scholars took part in these discussions, including M. M. Kovalevskii, N. Kh. Ozerov, P. B. Struve and S. N. Bulgakov. Financial leaders’ concern with the productivity of the country was reflected in a new series of commercial publications. In 1909–10 alone several newspapers and magazines appeared which were devoted to economics and finance: Birzhevoi artel’shchik,

Finansovoe obozrenie, and the Bankovskaia i torgovaia zhizn’.

In 1911, at a meeting of the Congress of Representatives of Industry and Trade, V. V. Zhukovskii, a St Petersburg businessman and one of the leaders of the Council of Congresses defined the role of commercial-industrial circles in the following manner:

We must think about the general situation of the country. We must take a systematic approach to solving the peoples’ tasks, we must try to be a part of the very brains of the country, we cannot stop our ideological work. The wealth of the people is based not only on the land, but also in the factories; not only in money, but perhaps mainly in the people’s moral foundations

69See B. V. Anan’ich, S. V. Kalmykov and Iu. A. Petrov, Glavnii bank Rossii. Ot gosudarstvennogo banka Rossiiskoi imperii k tsentral’nomu banku Rossiiskoi Federatsii. 1 860–2000 (Moscow: TSPP TSB RPH, 2000), pp. 63–4.

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and values. And in this regard the commercial-industrial class needs to show its work, its ideas, its conscience. And once we succeed in uniting, we will have the right to define and work towards a government programme which is drawn up from our commercial-industrial perspective and which is a synthesis of our practical interests and our ideological viewpoints.70

The growth of business organisations’ influence in the financial life of Russia was linked to the new industrial growth in the country. However, at least until the beginning of the First World War, despite the co-operation of the state with representatives of financial circles, there were no signs of direct participation by business circles in the formulation of economic policy.

Industrial growth was very strong in 1910 and continued until 1914. By 1913 there were 29,315 industrial enterprises in Russia, employing 3,115,000 workers. The average yearly growth of industrial production was 8.8 per cent. Its value was 7,358 million roubles. Russia was second in the world in oil extraction, third in demand for cotton, fourth in steel production, fifth in coal extraction and sixth in iron ore.71

The grain harvest between 1909 and 1913 averaged 4,366.5 million pood yearly. This allowed Russia to increase its grain exports significantly, especially from 1909–10. However, already by 1914 the yield of almost all grain crops was dropping.72

On the eve of the First World War co-operation between Russian and French banks became even closer and more varied. The amalgamated railway loan of 1914 for 665 million francs, or 249 million roubles became an important event in Russo-French financial relations. Representatives of a large syndicate of powerful French banks helped float the loan, as did a small syndicate of provincial banks.

By 1914, seventy-one Russian industrial properties were listed on the Paris stock market. Their total value was 642 million roubles, and they included the stocks of fifteen of Russia’s largest metallurgical factories, twelve oil and fifteen coal enterprises, and five banks. In Paris, stocks of Russian coal enterprises were traded that amounted to 60 per cent of the total money invested in these companies.73 The French controlled 80 per cent of Russia’s

70I. Glivits, ‘Politiko-ekonomicheskie vzglyady V. V. Zhukovskogo’, Promyshlennost’ i torgovliia (22 October 1916): 306–9.

71Shepelev, Tsarizm. 1904–1 91 4, p. 23.

72S. G. Beliaev, P.L. Bark i finansovaia politika Rossii 1 91 4–1 91 7 (St Petersburg: Izd. SPbu,

2002), p. 86.

73B. A. Nikol’skii, Frantsiia i Rossiia (k 25 -letiu franko-russkogo soiuza) (Petrograd: Red. Vestnik Finansov, 1917), p. 15.

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foreign debts, and 35 per cent of foreign capital invested in Russia came from France.74

The Russian Empire entered the First World War with a significant state debt – more than 9 billion roubles. Of this, 4.3 billion roubles was foreign debt, more than twice the value of all foreign investment in the Russian economy. At the beginning of the twentieth century Russia had the second largest state debt, after France, but had the largest loan repayments. From 1904 to 1908, according to official statistics, Russia paid an average of 4.2 per cent interest on its foreign loans, and in the next 5 years paid 4.5 per cent annually, while France paid less than 3 per cent each year during the same period.75

Despite economic growth, Kokovtsov’s policies became the object of sharp criticism in the press and by a series of influential opponents in government. Witte was one of the most uncompromising critics of Kokovtsov. He not only started a campaign against Kokovtsov in the press but also spoke out against him on 10/23 January 1914 at the State Council, accusing the minister of using the spirits monopoly not to fight alcoholism, but to ‘pump out money from the people into state coffers’. ‘The Russian people’, said Witte, ‘spend one billion roubles each year on vodka while the government spends only 160 million roubles on the Ministry of Education.’76 The revenues from the sale of spirits occupied an important place in the budget not only in Russia, but in other countries as well. In the Russian budget, spirit sales were one of the most important sources of income. In 1895 the state received 16 million roubles from the sale of alcohol, and in 1913 – 675 million roubles. This was caused partly by the government’s repeated increase of vodka prices.77

In January 1914, Kokovtsov was removed from office. I. L. Goremykin was appointed prime minister, and P. L. Bark was placed in charge of the Ministry of Finance. After Bark’s appointment the government proclaimed a ‘new course’ in economic policy. However, the First World War destroyed their plans. After the war began, bread exports across European borders and the

74P. Renouvin and J.-B. Duroselle, Introduction a` l’histoire des relations internationals (Paris: Librairie A. Colin, 1964), p. 139.

75See Gosudarstvennaia duma. Stenograficheskie otchoty. Vtoraia sessiia, ch. III (St Petersburg,

1914), column 1140.

76Anan’ich and Ganelin, Serge, p. 371.

77Beliaev, P.L. Bark, pp. 153–5. According to data collected by Beliaev, the average yearly income in roubles for an Englishman was 309 roubles, of which he spent 32 roubles on alcohol. A Frenchman spent 34 roubles of 256 on drink, while the average Russian citizen spent 6 roubles, 83 kopeks out of 63 roubles annually on alcohol. Beliaev calculated his figures based on the data in two books by M. I. Fridman: Vinnaia monopoliia, vol. I: Vinnaia monopoliia v inostrannykh gosudarstvakh (St Petersburg: Pravda, 1914.), vol. II: Vinnaia monopoliia v Rossii (Petrograd: Pravda, 1916).

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