What were the main features of Russian economic backwardness - Essay Example

? Introduction The backwardness model details a theory of economic growth advanced by Alexander Gerschenkron. The model hypothesizes that the more backward an economy is at the beginning of economic development the more probable is that certain conditions are likely to manifest. The more backward the economy is the higher level of production and enterprise is; the higher the dependence on borrowed instead of indigenous technologies is; the higher the prominence of the production of producer groups compared to consumer goods is; the higher the emphasis on capital-intensive rather than labor-intensive production is; the bigger the dependence on productivity growth is (Gerschenkron 1962, p.6). In approaching the economics of Tsarist, Russia one encounters two remarkable and entirely opposite features of the Russian economy at that period, namely: a) the industrial “boom” of the 1880s and (2) the economic backwardness of 1914. Economic historians attest to the fact that in the period ranging between 1891 and 1900 Russian economy did grow (Spulber 2003, p.33). This period details the period of industrial boom within Russia and featured the period at which the industrial output of Russia rated among the highest. During this period, majority of the industrial areas were growing speedily whereby the “Tsarist empire, Europe’s biggest economy has by 1900 displaced France from 4th position within the world iron production and had raked 5th position within steel output (Goldsmith 1961, p.441). The railway system rose in mileage by 87% in the period 1892-1903 while oil extraction tripled in the period 1887-1898. These were evidently significant achievements of Russian economic planning, especially the Russian finance minister of the time. At the period, from 1892-1903, the finance minister attempted to do his best to improve Russia in both fiscal and industrial capacity to be at par with other European powers and the entire government awarded support in this endeavor. Russian government was eager to foster industrialization since (1) the market featured deep control from the state (2) the expansion of heavy industry enabled a speedy catch-up, speedily covering the gap that manifested within the country’s economy, and (3) the industrialization enhanced the overall military capability of Russia. Nevertheless, the massive project demanded enormous investments. The investments demanded entailed: (a) the capital resource investments, (b) workforce investment, and, (c) knowledge capital investments. With regard to capital investments, Russia was unable to avail capital investments in adequate quantities and, as a result, foreign investments were broadly encouraged. Ultimately, some of the industries fell into the hands of the foreigners (Goldsmith 1961, p.442). By the start of the Crimean war, Russia featured as the world’s largest debtor nation. The war can be regarded as one of the core obstructions that hindered the progress of Russia economically. This detailed one of the core reasons for Russia’s further incapability to keep the pace of the “boom” given that significant energy and finances directed towards supporting the war against Britain and France (O'Brien 1998, p.227). With regard, to workforce investments, the rapid pace of industrial development owed much of its accomplishment to the common working people, frequently regular peasant who went to the cities to seek new industrial jobs (Gregory 1973, p.486). The flow of the labor force from the villages to the cities yielded a highly unbalanced economy. The Russian economy at this period cannot be likened to a plan of a system. As Alexander Gerschenkron outlines it, this economy of industrialization was fundamentally a “powerful spur” out of backwardness (Gerschenkron 1962, p.5). The Main Features of Russian Economic Backwardness The economic successes that Russia experienced then (after 1914)were practically unsustainable owing to a number of reasons, namely: (1) originally, the full-scale Russian industrialization remained deterred by the massive amounts of money spent in financing the war against France and Britain (the Crimean war). Moreover, the devaluation of the ruble abroad made it hard for the Russian government to borrow foreign capital. (2) Russia’s notion for industrialization as a follower economy can be regarded as unsophisticated given that it lacked the capital necessary for a large government-led process of industrialization (Spulber 2003, p.34). The government highlighted the construction of railroads that necessitated the use of iron, coal, and steel with the hope that this would yield to the creation of steel, iron, and coal industries, as well as other industries focusing on the production and consumer goods. This did not materialize but instead led to a significantly imbalanced economy (McKay 1970, p.6). (3) The industrialization process demanded a large workforce; nevertheless, a significant section of the working class was under the burden of serfdom. Indeed, this was a false (technical) liberation and extra burdens were transferred to the peasantry such as purchasing their own land or land that they had always worked. All of the outlined weaknesses manifested in 1914 subsequent to the “boom” of the 1890s whereby Russia’s economy “ran out of time.” Consequently, by the end of 1914, the Russian economy reflected a number of traits of chronic backwardness, namely: Agriculture featured the most developed area within the country’s economy, and it was most critical. Nevertheless, comparisons of the Russian agriculture with other European states reveal that Russia lagged behind (and significantly disadvantaged) in terms of the cultivating technique, labor or capital, productivity per unit of land, and constancy of income levels for the bulk of the cultivators (Miller 1926, p.3). b) In the sphere of heavy industry, in spite of its strong efforts at modernization within the 1880s, Russia also lagged behind the majority of the European states. In addition to this, the industrialization that occurred around the country stretched unevenly throughout its economy. c) Russia’s industrialization was additionally deterred by the deplorable financial state of its people, as well as the government. The government was perpetually in debt and compelled to seek foreign investors for revenue while the masses remained poor and ignorant to the extent that a modern banking system could not be launched. d) Furthermore, Russia’s backwardness in the period around 1914 was well demonstrated by the fact that Russian people did not manifest any demand for consumer goods. The limitations inherent upon the peasants’ purchasing power for industrial power for industrial development were severe obstacle to the industrialization of the country (Arcadius 1967, p.460). The industrial development within Russia was headed for rough waters owing to the shallowness of the “internal market.” e) Lastly the common people of Russia (the ones that constituted the basis of the labor force of the country) were essentially uneducated (within 1914, only 10% of the population could be categorized as literate), frequently mistrustful and apprehensive of the rules, and subsequently unproductive. Russia’s rate of literacy was once described as a scandal among civilized nations, besides needing more schools, health and public welfare that needed urgent attention (Polunov 2005, p.3). In conclusion, the Russia of 1914 manifested economic characteristics that suggest that industrial take-off of an autonomous, rather than an unconventional type, although evidently not attained. Both structural and sectored factors engaged in the era of modern economic success within Russia based on structural soundness; speedy rises in industrial activity; agricultural enhancements; enhancements in human capital; heralding fresh engines of growth; and enhancements in the petty economy. Alexander III reforms detailed increasing educational opportunities; intensifying Russification, and heralding economic reforms to modernize Russia. However, Alexander could not articulate a concise vision for Russia’s development. Indeed, his government manifested inability or unwillingness to establish a concise line of economic policy and then align with it. Tsarist ministers response to the challenge of ‘modernization’ in the quarter of a century detailed policies directed at modernizing the Russian economy comprising of government becoming more active in developing the economy; enhanced emphasis on producing more coal, iron, and steel; increasing taxes on peasants to fund the industrialization; implementation of laws aimed at restricting working hours. References Arcadius, K. (1967). Government Policies and the Industrialization of Russia, Journal of Economic History 27 (4), pp.460-77. Gerschenkron, A. (1962), Economic Backwardness in Historical Perspective, Cambridge, MA: Harvard University Press. Pp.5-7. Goldsmith, R. (1961). The Economic Growth of Tsarist Russia, Economic Development and Cultural Change 9 (1), pp441-475. Gregory, G., (1973). The Industrialization of Russia and the Soviet Union,' in Carlo M. Cipolla, ed. The Fontana Economic History of Europe, vol. 4, part 2: 'The Emergence of Industrial Societies, London, Harvester Press. pp. 486-526. McKay, J.P. (1970). Pioneers for Profit: Foreign Entrepreneurship and Russian Industrialization, 1885-1913, Chicago, University of Chicago. Pp.6-8. Miller, M.S. (1926). The Economic Development of Russia, 1905-1914: With Special Reference to Trade, Industry, and Finance, London: P. S. King & Son. Pp.3. O'Brien, P. K. (1998). Industrialisation. London, Routledge. Pp.227. Polunov, A. J. (2005). Russia in the nineteenth century: autocracy, reform, and social change, 1814-1914. Armonk, Sharpe. Pp.3-4. Spulber, N. (2003). Russia's economic transitions: from late tsarism to the new millennium. Cambridge, UK, Cambridge University Press. Pp.33-34. Read More