Peter I Nicolaus II Modernisation Spurts and the Mir –
Continuity and Progress
The combined NIE and Evolutionary Institutionalism Framework Applied.
Paper prepared for the EHES Conference 2009,3-6 September in Geneva
Sylvia Sztern
PhD student
Department of Economic History
Lund University
Sweden
e-mail [email protected]
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Theoretical Introduction
The following discourse is anchored in the complementarity between NIE and Evolutionary
Institutionalism (Sztern 2005). The assumption on the rational utility maximising individual
calculus, which is, the neoclassical core of NIE (D.C. North 1973, 1981) is conceived of, as
compatible with, and complementary to the assumed in Evolutionary Institutionalism
“reconstitutive downwards causation” process (Hodgson G.M. 2004). According to the latter
process, institutional structure shapes and moulds individual preferences over time (Sztern 2005).
Thus, the rational hedonist, ad hoc (North D.C. 1973), and long term oriented pay off
calculus(Vanberg 1994), is restricted as well as enabled, by an institutional framework, which
constitutes a knowledge repository, inherited from past generations (Hodgson G.M. 2004). This
proposition embodies the meaning of bounded rationality (Nelson & Winter 1982). The latter
concept bridges between NIE and Evolutionary Institutionalism (Sztern 2005). Although both
theories are interactionist (Hodgson G.M. comment 2007), the relative emphasis on upward
causation (individual interaction explaining the institutional structure) in NIE is understood as
complementary to the relatively more outspoken weight of reconstitutive downwards causation in
Evolutionary Institutionalism. Graphically the theories constitute complementary structures
according to the following figures.
NIE Upwards causation
Figure I.:NIE based on (North 1973 1981 1990 2005), emphasis on “Upward causation” as
regards the source of structure: Source: Sztern S, with profound gratitude for discussion with
G.M. Hodgson and L. Schön.
Formal Institution
Enforced by the state
Opportunity cost/
Incentive structure
Accumulated collective experience
Legitimates the formal structure
Informal Inst.
social sanction
Opportunity cost/
Incentive structure
Organisations
Individual experience within organisation
Players …
Opportunity cost/
Incentive structure
Ind. Hedonist
calculus, rel.price
Individual experience
Population
Changes
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Evolutionary Institutionalism- Downwards Causation
Figure II is the summary of the evolutionary approach as inspired by T. Veblen 1931, Hodgson
2004, Hodgson & Knudsen March 2004 and Hodgson and Knudsen 2005. The emphasis in this
approach is on “reconstitutive downward causation” operating through the process of natural
selection and adaptation. Source Sztern S with profound gratitude for discussion with G.M.
Hodgson and L.Schön.
Institution
(society)
Natural
Selection
/adaptation
Conditions of life
Natural selection/adaptation of Institutions
Routine
(organization)
Nat. selection/
Adapt.
Habit
(acquired through
social interaction)
Natural select../
Adaptation
Inherited Instinct
Parental bent
Workmanship
Exploit
Combining NIE’s hedonist conception of the human, as a pain minimiser and pleasure
maximiser, with the notion of the acculturation shaped, individual agency (the process defining
which endeavour is to be perceived of as pleasurable or painful), inspiring Evolutionary
Institutionalism, enables a realist and holist understanding of human preferences and actions
(derived from Hodgson G.M., Hamilton D 1999, Sztern 2005).
The Tsarist Russian collectivist mutual insurance system, legally enforced until 1906, which
structured the commune village- obshchina, is then understood as a consequence of the
historically harsh climatic conditions, resulting in low yield to seed ratios (Milov 2001,
Eggertsson 1990 applied) which increased the probability to perish of starvation and as the result
of the Tsarist Tax extraction system (Chicherin B 1828-1904). Deducing from NIE, the village
commune is assumed to have constituted a pre modern risk sharing mechanism (applied Scott J
1976, applied Eggertsson 1990, Moon D 1999). This understanding is however only partial. The
nineteenth century commune, based on the collective responsibility for taxes and dues,
“krugovaya poruka” (Gerschenkron 1962, Worobec 1995, De Madariaga 1998) constituted an
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initially organic structure, in the course of time formally enforced, coercively consolidated, and
exploited as a tax extraction mechanism, by the Tsarist state (based on Blum J 1961). Collective
responsibility for taxes and dues ensured the Tsarist state of the tax revenue due (Gerschenkron
1962)
The nineteenth century obshchina - commune village system had been inherited from the
serfdom era. Thus, partially, the Tsarist state governed, tax extraction system, “from above”
shaped the institutionalised collectivism of the Russian peasant. Applying Evolutionary
Institutionalism, the impact of serfdom institutions, including the labour, skills, mutual social
control supply due to fear of corporal punishment (Hoch 1986), outlived the formal emancipation
of the serfs Act of 1861. Combining the theoretical models, it becomes evident that the Russian
peasant collectivism contained voluntary and involuntary elements.
The centralised state structure is within the combined theoretical framework, understood as the
long term historical legacy of the Mongol Horde ( reconstitutive downwards causation assumed
Hodgson 2004, Yaney 1973) and as a rational transaction costs minimising mechanism aimed at
enabling the government of vast culturally heterogeneous geographical territories (application of
Coase R 1937 and Borodkin L discussion 2008, Sztern 1997).
Acknowledging that structures possess emergent properties irreducible to individual interaction
in line with the Critically Realist (Lawson 1997, Hodgson 2004) thought, which permeates,
Evolutionary Institutionalism, allows defining the long term costs of State Entrepreneurship and
the costs of dictatorship (Gerschenkron 1962), in the Gerschenkronian “substitution” pattern.
Seen through the combined NIE and Evolutionary Institutionalism perspective the
Gerschenkronian “substitutions” mechanism may be understood as a rational response to
deficient institutional, endowment, instrumental for industrialisation (deduced from NIE, Rostow
WW 1960) and as a geopolitical position, climatic and topographic conditions (Montesquieu
1960 in Durkheim, Montesquieu, Rousseau 1960 applied) ) interacting with historical religious
beliefs, determined structure. Focusing on the latter dimension of Tsarism, this structure follows
predominantly political (Hayek 1944) as opposed to economic rationality, accumulating over
time the costs of dictatorship including the costs of transactions, exceeding the economic
breaking point of the scope of state entrepreneurship (Sztern 1997). State structure shapes and
moulds individual preferences, temporarily surpassing the economic equilibrium point. The socio
economic development and progress is thereby retarded (Evolutionary Institutionalism combined
with NIE, applied). The institutional structures are assumed to possess their own pre conditioning
dynamics (Archer 1995, Hodgson 2004, North 1981, Sztern 2005), which in the short run can not
be affected by the changes in relative scarcities (contrary to North 1973).
This condition may be seen as the source of stability (R.C. Allen Economic History seminar
2009) conducive to economic development and growth, but it is also the source of retardation, as
the costs of necessary institutional adaptations are increased (deduced from North 1973). In the
Tsarist Russian case, the costs of the opportunities forgone, inflicted by the structural rigidities
imposed by State Entrepreneurship, should be added to the costs of dictatorship ( based on
Gerschenkron 1962, Owen 1995). The latter costs; the perpetuation of the totalitarian structure
with its endogenous preference for successful warfare, as the main legitimacy base, caused the
continuous over the two hundred years period over viewed, prioritized assignment of government
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expenditures to military use. This particular set of priorities retarded the development of
capitalism in Russia.
The theory combination NIE and Evolutionary Institutionalism integrates the “bottom up” and
the “top down” causations. Seen in the combined perspective the railroad, i.e. the imported
technological innovation not only is assumed to affect the relative prices/premiums, and the
opportunity costs of risk insurance, enabling famine relief, thereby out competing the pre modern
village commune system (Based on Eggertsson 1990, Scott 1976).
Following Evolutionary Institutionalism, institutions do not vanish. Structures transform.
Reducing the cognitive distance (derived from Craft N EHES conference 2007, Martens B 2004)
through intensified otkhodnichestvo- wage work on the side, the railroad contributes to the rural
urban institutional exchange, enhancing the creation of urban cooperation and collective action
units (Barzel 2002). Those were shaped by the agricultural system based on “krugovaya
poruka”— initially kinship based, mutual solidarity for all obligations unit (Sztern 1997, De
Madariaga 1998, based on Johnson 1979, inspired by Hodgson 2004). The thus created labour
commitment devices (Greif 2006) developed into a successful mechanism of subversion, that
increaseed the costs of surveillance to the ruler (North 1973), enhancing the democratisation of
Tsarist Russia. Paradoxally, the imported railroad technology, that constituted the most
successful of Tsarist state entreprenades and could be understood as the “extended hand of the
Tsarist Government” contributed to the disintegration of the ancién regime.
“Progress Despite Coercion” in Russia
The modern Russian historian Evgenii V Anisimov (1989), subtitled the English translation of his
book “Vremia Petrovskich Reform”- the “The Era of Petrine Reforms”; “Progress through
coercion in Russia”. Studying selected, Western and modern Russian sources, it becomes evident
that this title summarises, the Janus faced character of the industrialisation. This process entails
the institutional transformation.
Not only the Petrine époque, can be depicted in this sentence. The transition to modernity,
effectuated under the last Tsar; Nicolaus the II, although, following the serfs Emancipation 186163, to a much lesser extent, relative its eighteenth century predecessor, was burdened with the
collectives violation of individuals rights.
Alexander Gerschenkrons 1962 “substitution theory”, where State entrepreneurship substitutes
for missing “pre requisites” for industrialisation (Rostow W.W 1960 ), analyses autocracy’ssamoderzhavia’s (De Madariaga 1998) crucial roll in modernising Russia. It is the purpose of this
discourse to emphasize, that this “substitution pattern”, is not costless, to the society. Coercion is
profoundly costly, not least due to the invention and innovation forgone, as a result of the
degrading treatment of the individual by the totalitarian state structure (based on Hughes L 1998,
Sztern 2007, 1997, 1994 Poznanski K 1985, Mokyr 1990). The latter, is additionally aggravated
by a “hierarchy of values” (Mokyr 1990) that prioritises the “common- to individual
good”(Anisimov 1989 p.122) defining the former according to the needs of warfare. As will be
argued below, the appropriate title representing the industrialisation spurts under Peter I and
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Nicolaus II should have been “Progress Despite Coercion in Russia”. Substituting for the
domestic new technology production, massive skill and, the per force accompanying value
systems, import, (Sztern 1997 , Boyer and Orlean 1993) characterised both industrialisation
spurts. The European value systems absorption contributed to an institutional revolution (Cracraft
2004) that fuelled the demand for civil rights embedded in the petition to the Tsar of 1905
(Ascher 1988). The consequent democratisation (Ascher 1988, Sztern 1997, 2005) of Tsarist
Russia constituted an “unintended consequence” (Lal D 1998) of the Tsarist modernising
reforms.
This chapter elaborates upon the continuity of the dual character of transition to modernity in
Tsarist Russia. The eighteenth century saw the progressive systematisation of government,
reform of the taxation system, the military statutes, the educational and welfare systems (Yaney
1973, Cracraft J 2004, Hartley 1999), and the equalisation of the service mans pomest’ie with
allodial property of 1714 (Bartlett 1999 in Hosking &Sevice 1999). The listed reforms and the
Table of Ranks of 1722 heralding the “increasing allocation of political roles in accordance with
the standards of achievement rather than ascription” (Cracraft 2004 p. 14), coexisted with the
reliance on the bonded labour of the serfs. High coercion levels, forced rather than induced the
labour and skills supply (based on Anisimov 1989, Sztern 1994).
The objective is to bring into attention the “social cost” (Kahan A 1985 p.86) of transition to
modernity within the reconstituting structure (Hodgson 2004) of the Russian militarised
absolutism, focusing on “the cost of allocating a large, bound labour force to the industry” (ibid.
my itallic). The Tsarist industry, prioritized production for military purpose (Anisimov 1989).
The analysis emphasizes the costs incurred by the society as a whole due to the invention and
innovation forgone, caused by the disabling restrictions anchored in the ethos of bondage and
corporal punishment (based on Mokyr J 1990, Sztern 2007, 2008, 1994, Poznanski K 1985, Hoch
1986, Hughes L 1998). Those phenomena are assumed to have retarded human capital
accumulation, and entrepreneurial risk taking during the eighteenth as well as the nineteenth
centuries. Structures shape the preferences and goals of individuals for generations to come. Thus
the newly emancipated population of the nineteenth century still carried the imprint of serfdom
institutions on the “habits of thought” (based on Hodgson 2004, Veblen 1931, Hoch 1986).
According to criteria such as the level of “governmental involvement” and the degree of
“centralisation of government functions” Petrine Russia, could certainly be conceived of as a
rapidly modernising society (Cracraft J 2004 p. 14). Nevertheless, the deficiencies concerning
other modernisation criteria referred to by James Cracraft such as the “impersonalised rule of
law” (Cracraft J 2004, Yaney 1973, Sztern 1997, Raeff 1984) and the “level of individuation” in
the rural structures (Cracraft J 2004, Sztern 2007) constituting mutually dependent phenomena
(Sztern research project description, derived from Frank S 1999) imply that the uncertainty to life
and property remained very high in Russia under Peter the Great, indicating backwardness.
Whilst the estate primarily affected by the Petrine cultural revolution (Cracraft J 2004), the
Russian nobility, acquired French language, and Western thought, dietary and dressing habits
(Raeff M 1984), cultivating its ties with Western philosophers, engineers and other specialists,
the whole society, modelled upon hierarchies of patriarchal structures (derived from Hoch S
1986) had been permeated by the degrading practice of corporal punishment (based on Hughes
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L1998, Hartley J 1999). The latter, fostering risk aversion, retarded invention and innovation,
rendering the domestic stock of knowledge, dependent upon technology import (based on North
1981, Mokyr 1990, Sztern 2007, 2008, Poznanski K 1985). Most of the technological
improvements and the congruent institutional innovations, constituted initially a foreign and to
the society’s vast layers alien phenomenon (Raeff M 1984). The economic system as a whole had
been permeated by skilled labour shortage, which caused enserfment of the skilled workers
(Kahan 1985 p. 89). This practice, undoubtedly, created short run, disincentives for the
acquirement of new skills resulting in a vicious circle.
Although Peters Europeanization of Russian governmental institutions, norms and values in a
restricted sense deserves the label; a modernisation process (Cracraft J 2004), the endemic social
burden of bondage additionally aggravated by the, widening, due to the nobility’s West
orientation, inter estate cultural gap (Frank, S 1999, Raeff M 1984) warranted Alexander
Gerschenkrons conception of the Russian peasant constituency, a hundred years latter, as
backward in a relative sense. The inter estate cultural gap constitutes a historical continuity.
Applying additional modernity criteria referred to by James Cracraft; “mass popular interest and
involvement in the political system” clearly distinguishes the serfdom and absolutism (De
Madariaga 1998) burdened Russian Empire from its European counterparts.
In Tsarist Russia until 1906 the Stolypins Land reform, the issue of the peasantry’s citizen status
“grazhdanstvennost” related to the equality before the law principle, had not been addressed.
Living under customary law (Yaney 1973), the institutional foundations of which differed from
those guiding the Imperial Code - Svod Zakonov Rossijskoj Imperii, the peasants, constituting
roughly 80% of the Tsarist Russian population, could, due to the lack of transparency, and wide
spread illiteracy, neither take the interest nor be involved in the Empires political system. Passive
and active resistance to the yoke of serfdom and the post Emancipation obligations (Hoch 1986,
Kolchin 1987, Gerschenkron 1962, 1968) characterised the peasants participation.
At the beginning of the nineteenth century during the 1812 Napoleons invasion of Russia, the
Empires conservative leaders still feared the most, the import into the Tsarist Empire of the value
systems adaptations, demanded in the French Revolution ( Tolstoy L. 1953 Voina i Mir).
Following Marc Raeff (1984), the prominent Russian historians Kliuchevsky and Miliukov
maintain that Peters drive to modernise Russia had been dictated by the needs of the war. In the
words of Vasily Kliuchevski, war “determined the order of reform, set its pace and its very
methods. Reforming measures followed one another in the order dictated by the requirements
imposed by the war” (Hughes L. 1998 p 63). Even if warfare, particularly the Northern war with
Sweden, wasn’t the sole factor motivating the import of European institutions into the Russian
Empire, in Petrine times, as Raeff M 1982 argues, the post Crimean war, timing of the Great
Reforms, starting with the Emancipation Act of 1861, warrantees treating also the eighteenth
century reforms as expressions of the continuous over time geo political rationality of a
totalitarian state structure (Hayek 1944). In such structure, an improved surplus extraction, the
secured territorial claim including conquests, and secured internal stability, constitute the
dominating motives for concession and reform (based on Gerschenkron 1962, 1968, Sztern
1997).
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Warfare, as regards the Petrine period, the Northern war with Sweden, is therefore treated as an
organising principle in the conception of the Europeanization and modernisation process in
Tsarist Russia.
The Petrine projects of development blocks dignity (Gerschenkron 1962), outspokenly driven by
government demand was the Arsenal in Moscow, the fortress and the Admiralty in St: Petersburg
(Kahan, A 1985, Hughes L 1998 p 63). In the post reform government 1717-18 the Colleges of
War, the Admiralty, and the Foreign Affairs were devoted the largest shares of state revenues
(Hughes L 1998 p. 63 Yaney 1973). The social standing of the military, according to the Table of
Ranks of 1722 was higher relatively the civilian service men (Hughes L 1998 p. 63 Hartley J.M.
1999 p. 53). In a letter to Alexander Menshikov congratulating the birth of a son, Peter wrote
“God has given him to you as a recruit” (Hughes L 1998). This blessing clearly indicates the
“hierarchy of values” (Mokyr 1990), whereby warfare constituted the highest priority, structuring
the Russian society.
Reputable Western historians attribute to Peter the “transformation of the Russian army “from an
Asiatic horde into a professional force” (Hughes L. 1998 p 64) such as had been maintained by
Sweden, France and Prussia. This view does not remain unchallenged referring to the Russian
victories in the Thirteen Years’ War against Poland during the seventeenth century (ibid.). Those
latter historical events clearly indicate the pre Petrine professionalization of the Russian troops
(ibid.). It is however unchallengeable, that the Russian defeat at Narva in the war against Sweden
1700 made urgent Peters drive to modernise the Russian government and army (ibid.).
Traditionally, including the reign of Ivan III (1461-1505), the Imperial modernisation process
entailed an import into Russia of weapons and ammunition, as well as the hiring of foreign
military specialists from abroad (Hughes L. 1998 p 71). The modernisation of the Russian army
and society in the times of Peter the Great followed this tradition. The import of technology
included the importation of organisational structures (in the Hodgsonian 2004 sense of the
concept) from Europe (Sztern 1997). This mere fact indicates Russia’s relative technoinstitutional backwardness.
In this context, an important question must receive due attention; Why did Tsarist Russia as a
matter of historical continuity, for defence purpose, import foreign technology, and foreign
expertise on a massive scale? Why did Britain, France, and Germany lead in this respect? The
figure below proposes an answer to this question.
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Fig.III
The vicious circle of State entrepreneurship-accumulated social costs.
Degrading humans’ treatment
Until 1861-Bonded labour system
Deficient property rights, in
Petrine times, including those of the
Nobles, rural collectivism,
Lack of domestic
technological
invention and innovation
weak incentives.
The ”Entrepreneurial” Autocracy
substituting new technology import
for domestic technology production
Purpose-war time modernisation,
Financed through tax+ cap. import
This figure is based on: Mokyr J (1990), Gerschenkron A (1962, 1968), Poznanski K (1985),
Sztern S (1994, 2007), Anisimov (1989), Hughes L (1998), North (1981, 1990, 1973)
In Petrine times the Russian peasant had been subjected to serfdom institutions, which were
based on the ownership of man, and fear of corporal punishment as the inducement for labour and
skills supply (Sztern 2007, Hoch 1986, De Madariaga 1998). Allodial, property rights, including
those of the Nobles, did not exist (Bartlett R 1999 in Hosking and Service 1999).
The degrading treatment of the individual peasant in Tsarist Russia, is seen as a factor
continuous but strongly weakening over time. Risk aversion due to the high frequency of corporal
punishment, nevertheless may explain, the low long run propensity to invent (derived from
Mokyr 1990, Sztern 2007, 1994 Poznanski K 1985, Hoch S 1986, Hodgson 2004). The
“reconstitutive downwards causation” process (Hodgson 2004), would prolong the adverse effect
of corporal punishment, inflicted during serfdom (Hoch S 1986).
Catherine the II Instructions, contained a general condemnation of cruelty (De Madariaga 1998,
p.199). The Charter to the Nobility 1785, assigned independent from state service, property rights
to the Nobles (Bartlett R 1999 in Hosking and Service 1999, Hartley 1999). The Emancipation
from serfdom 1861-63, and the above reforms were codified long before the modernisation spurts
of Nicolaus the II. Nevertheless, until the Stolypin reform of 1906, the peasant had continuously
been subjected to the coercive collectivist elements of the village custom. The latter system more
often than not, continued to curb individual initiative, lowering the transaction costs of the Tsarist
tax extraction, through strengthening the grip of the kinship based “krugovaya poruka”collective responsibility for all obligations (De Madariaga 1998 p. 79, Gerschenkron 1962,
Worobec 1995, North 1973, 2005).
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This structure offered at best, collective use rights in land (Gerschenkron 1962, 1968, Moon D
1999). Undesired village commune members could, by the village assembly-skhod be slated for
recruitment or “w administrativnom poriadke” in administrative order - that is, without due trial,
be exiled to Sibiria (Worobec 1995, De Madariaga 1998 p.119, Wood 1990 referred to in Sztern
1997). The institutionalised hegemony of collective judgement, including the instances of
samosud1 , allowing arbitrariness, constituted an all permeating violation of individual rights,
inhibiting domestic technological invention and innovation (based on Engelgardt in Frierson
1993, Mokyr 1990, Sztern 1994, 1997,2007 Poznanski K 1985, De Madariaga 1998, Worobec
2001).
The dependency of the Tsarist Russian state upon the international technology market, relatively
the domestic technology producers, at times of armed conflict, weakened, per force, the
bargaining power of the latter; and of home entrepreneurs, the noble and the serf (applied
Paltseva I lecture 2008). The latter condition additionally hindered the transition to delineated
property rights, retarding, the voluntary, socio economic progress in Russia (based on Anisimov
1989, ibid). Moreover with each victory in the field, the totalitarian state structure had its powers
consolidated and centralised, enhancing the extractive and control of people, state capacity
(Hobson & Weiss 1995). Weakening the civil society (Borodkin L.I. 2008 discussion), caused
deficient domestic new technology production, rendering the historical dependence upon
technology import.
Despite the above depicted obstacles to modernisation, it is suggested that the continuous reform
effort “from above” also bore the seeds of transformation (Fig II). As a matter of paradox, the
continuity of reforms (in face of the internal revolt and war) entailing technology import, affected
the literacy levels and the set of skills available (based on Gerschenkron 1962, 1968, Hartley
1999, De Madariaga 1998, Sztern 1997, Cracraft 2004, Kahan A 1989 p.188 Table 8.3, p.189
Table 8.4 ).
As an increasing number of individuals were able to read out the Tsarist Ukases to the peasants
fuelling rumours of change (Moon D 1999, Worobec 1995, inspired by Mokyr J EHES
Conference 2007), the surveillance costs to the rulers increased (North 1973). The peasant
constituency’s human capital accumulation gradually shifted the balance of power from the
patriarchate based, autocratic agent structure, to the society (based on Sztern 1997, 2005, Martens
B 2004, Burds J 1998, Hoch 1986). The modernisation spurt entailing technology import,
ultimately motivated by the Imperial territorial claims, secured at heavy social cost, resulted in
the intensification of the credible threat from below, forcing conceding reforms.
The latter is assumed to have transformed over the two hundred year period overviewed the
autocratic agent swaying its rule over the serfs into what could have become a constitutional
monarchy, increasingly ruled by free people.
1
De Madariaga 1998 as well as Worobec 2001 depict by this term the peasant practice of taking the law unto the
own hands, punishing socially un desirable individuals
10
The following figure summarises the argument
Fig IV “Unintended Consequences” of the Tsarist Modernisation- the virtuous circle
Increased literacy
and skills level
Credible threat from below, ( starting with
sheer numbers)
Increasing surveillance costs to the
ruler.
Reform ”from above”
Technology and Value Systems Import1711..1890 Enlightment ideas- Catherine the II
“External Invasion”-Europeanization
This figure is based on: De Madariaga (1998), North(1973), Greif (2006), Boyer and Orlean
(1993), Gerschenkron (1962), Sztern (2007), Lal D (1998), Kahan A (1989), Moon D (1999),
Worobec (1995).
Studying the secondary sources, it becomes evident that over time Tsarist Russia had been a net
importer not only of technological but also of institutional innovation. It must therefore be asked
which endogenous factors made the conquest, the expansion and the viability of the Empire
possible. As a matter of an instrumental hypothesis the autocratic system of governance,
anchored in Greek Orthodoxy, is seen as the source of relative strength and weakness; a historical
asset to the Russian rulers and a liability to the Russian people. The combination of pagan and
Christian folk wisdom (Matosian M 1968 Vucinich W. ed. 1968) embodied in the peasant kinship
based egalitarian custom (derived from De Madariaga 1998), most plausibly made obshchinadwellers, highly responsive to the importation of egalitarian and libertarian ideas from the West
(Boyer and Orlean 1993, Sztern 1997). The innovation absorption reformed the Empire (ibid.)
Thus, the vicious circle depicted in (Fig I) is assumed, to have retarded but did not ultimately
hinder Tsarist Russia’s modernisation including the peasant transition from collectivism to
individualism, during the post emancipation period.
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Transaction Costs, Including, Uncertainty Implications of the Tsarist
Governments’ Centralisation.
Yaney’s 1973 analysis advises that although formally, the principles of law and administration in
Russia were much the same as in the West, “the role of system in society and its place in the
individual’s sense of values was very different” (Yaney 1973 p.21). The origins, of the legaladministrative order in the Russian Empire, date from 1240 A.D; the sway of the Tatar (Mongol)
Horde (ibid.). The Russian princes, attempting to manifest their Greek Orthdox affiliation and
unity, operated in an organised manner, a tribute collecting network to provide recruits and
protection money for the Tatars (ibid p 22) The “re-constitutive downward causation” process,
whereby the institutional supra structure, shapes the prevalent “habits of thought” (Veblen 1931),
rendering their replication, (Hodgson 2004, Hodgson & Knudsen Mars 2004) ensured that the
“forced collection and recruiting” were to survive the dissolution of the Horde (Yaney 1973 p.
22, Hodgson 2004). The coercive, and cruel, character of tribute and recruits collection came to
characterise the Tsarist state from its inception (ibid). Steven Frank’s 1999 account of the
nineteenth century legal and cultural rift between the Tsarist state institutions and its peasant
inhabitants suggests that the quasi colonization condition of the state vis á vis the citizens, was
continuous over the period overviewed. Moreover, in the de facto absence of a functioning legal
system, the hierarchy of personal dependencies constituted the behaviour restricting structure
(Yaney p.23, Sztern 1997, North 1990). Under those conditions, the Tsar, as the ultimate
superior, had been greatly empowered to act arbitrarily, but had very little control over the
actions of his subordinates (Yaney 1973 p.24).
Concerning the actual power distribution, the state structure, in pre Petrine Russia had been
divided at the centre, into forty separate offices. Compared to the local “strongmen”- territorial
chiefs- voevodas, gubnye starosti – eldest structure, the state was de facto weaker (based on
Migdal J 1988, Yaney 1973 p. 28). The system had been permeated by the awe of the superior as
the basic motive for labour and skills supply and bribery that obstructed the exercise of arbitrary
state power (Yaney 1973 p 26, 27). The long term imprint upon the “habits of thoughts” (Veblen
1931) of those structures hindered Peters efforts at the creation of a well functioning Western
style government (Yaney 1973).
In the rural realm of the village commune, transaction costs, including uncertainty as to life and
the use rights in land, of the serfs were high, strengthening all pre modern mutual trust, mutual
insurance and aid networks based on “krugovaya poruka”- mutual responsibility for obligations
(Sztern 1997, 2000, 2007, De Madariaga 1998). Those structures proved, viable over time, as
Judith Pallots’ (1999) analysis of peasant responses to Stolypins land reform indicates, albeit with
decreasing intensity (Sztern 1997, Mironov 2000).
Peters imported institutional innovations; the Senate, the procuracy, the central colleges
constituted attempts to centralise and systematise the Tsarist government (Yaney 1973 p.29),
reducing transaction costs and uncertainty level, within the Russian bureaucracy. However, the
re-constitutive imprint of centuries of personalised rule caused that sufficiently and arbitrarily
empowered by the Tsar persons, could achieve the Senate ruling in their favour (Yaney 1973).
Although the Senate became in practice the un-tuned instrument of the Tsar in person (based on
Yaney 1973, Sztern 1997, Raeff M 1984), both ordinary people and statesmen, increasingly
12
resorted to this institutions’ resolution (Yaney 1973 p.29). The latter condition indicates a very
high ideologically determined demand, for the impersonalised rule of law, intensifying in the
course of the eighteenth century (Sztern 1997, Yaney 1973 p.29).
According to Marc Raeff (1984), Peters rule, clearly distinguishable, due to the relative weight of
imported technological and institutional innovations, created a deepening rift within the Russian
society between the increasingly West oriented elite; intelligentsia and nobility, and the introvert
and xenophobe Russian peasantry (Owen T 1995). The incoherence, between the formal
institutions; Imperial Code – Svod Zakonov Rossijskoj Imperii, structuring the lives of the elite
and non peasant town dwellers (Hartley 1999), and the informal customary law structuring the
daily lives of the peasantry, resulted in a system endemically burdened with high transaction
costs (applied Nee, V (1998), North (1990), refer to Sztern (2008), based on Yaney (1973),
Hartley (1999)).
Moreover the personalised and arbitrary rule, the long run historical legacy of the Mongol Horde,
additionally contributed to high transaction costs within the society (Sztern 1994, 1997).
Theoretically, high transaction costs weaken the incentive structure of property rights (Poznanski
K 1992, Sztern 1994, 1997). Consequently, the innovation level in a high transaction costs
environment is assumed to be low. Thus the transaction costs aspect of property rights theory
(Poznanski K 1992, Barzel 1989 ) may additionally explain why Russia historically had been a
net importer of technological innovation. Moreover, it is more likely that, due to the private
entrepreneurs’ weakened incentive structure, the technology import, in a high transaction costs
environment would be a state led venture (derived from Coase 1937, Gerschenkron 1962, Sztern
1997). A crucially important common denominator between the eighteenth century Petrine
techno-institutional revolution with the modernisation spurt during the reign of Nicolaus the II is
the state led technology import, that subjected Russia to “external invasion” (Boyer and Orlean
1993, Sztern 1997, Cracraft 2004) of European value systems (Fig II).
As technological innovation had been associated with the coercive absorption of foreign culture
(Hughes L 1998) as well as imposition and implementation of foreign formal institutions (North
1990, Cracraft 2004), the imported technology, in the folklore, became initially associated with
non Christian values. The latter, rendered, in the short run, transaction costs rising, which
necessitated the broadening of state entrepreneurship to achieve technological modernisation. In
the mindset of peasant Russia, Peter the Great constituted the embodiment of the Antichrist
(Raeff 1984 p.53) so did the import of the railroad technology during the nineteenth century
(Westwood J.1964). Following F.A. Hayek (1944) as well as Gerschenkron (1962, 1968),
combined with Coase (1937) state entrepreneurship, substituting for private initiative (Sztern
1997, ibid) due to high transaction costs, does not constitute a cost free adaptation. In addition to
the increasing risk of mistakes, that is rising transaction costs, due to excess centralisation
((applied analogically Coase1937), refer to Sztern 1997), the autocracy was burdened with the
costs of dictatorship (Gerschenkron 1962, 1968), entailing a resource allocation, guided by a
battle field priority (refer to Sztern 1994).
An additional vicious circle resulting in the short run in the widening rift between the tax exempt
elites and the non privileged population strata (Raeff 1984), in the Russian case, the tax paying
peasants, is illustrated in the following figure.
13
Figure V
Disharmony between the
informal and the formal
institutions⇒
Rising transaction costs
Rising State
Intervention /
Substitution of State for
Private Initiative
Source: Sztern (2008), based on North (1990), Nee, V (1998) (left hand side) and Gerschenkron
A (1962), Coase 1937 (right hand side ) in combination, (Raeff 1984).
The figure summarises an aspect of state entrepreneurship, representing in the Russian context,
the historically continuous vicious circle, whereby the institutions of backwardness, inherited
from the Mongol Horde, cause the for backward regions characteristic substitution of state
initiative for private entrepreneurship (Gerschenkron 1962), which rises the costs of transactions
due to excess centralisation (Coase 1937). The costs of dictatorship (Gerschenkron 1962)
additionally burden the system. The incoherence between the formal and the informal institutions
(Nee v 1998, North1990), in turn motivate the substitution of state entrepreneurship for private
venture.
This institutional incongruence is best specified by the historical position of raskol- Old Belief.
The “position of Old Believers within the body social of the country, their (antagonistic)
relationship to the State” (Gerschenkron A 1970 p. 21) plausibly resulted in their developing
alternative means of transaction costs reduction, along “mutal confidence and severe moral
discipline” networks, that connected their communities (Gerschenkron A 1970 p 19).
Paradoxically, state entrepreneurship increasing uncertainty, strengthened the pre modern,
kinship- (De Madariaga 1998), believe system- (North 2005), and negative identity-, based, risk
and uncertainty reduction mechanisms; commitment devices (Greif 2006).Thereby, had
unintentionally been enabled one of the manifestations of domestic entrepreneurship, which
enhanced the, transition to modernity. Fortune accumulations, within the ranks of the “merchant
dynasties” (Gerschenkron 1970) of peasant origin formed by the Old Believers, constituted one
of the few autonomous capital sources in the Tsarist Empire, available for modernising
14
investment (ibid., 1962). Old Believers’ mutual trust networks, in the high transaction costs
environment, constituted the vehicles of growth in pre industrialisation eighteenth century textile
as well as pre nationalisation, nineteenth century railroad industries (Gerschenkron A 1970 p.
20).
Generally the elitist and coercive character of Peters cultural revolution (Cracraft 2004), proved
one of its main weaknesses, as those social groups which were sympathetic to entrepreneurship
were also most severely alienated by the rule of the centralising West imitating government and
the increasingly militarising society (Hartley 1999, Raeff 1984, ibid.). The Old Believers
community constitutes a case in point (Gerschenkron 1970, Raeff 1984 p.36).
The Tsarist Industrialisation Motive - Continuity or Progress?
In Petrine times, social mobility had been possible through State service only (Raeff 1984 p 41).
According to the Imperators’ (De Madariaga 1998) institutional innovation; the Table of Ranks
of 1722, military service begot a higher status relatively any civilian endeavour (Hartley 1999).
This condition clearly indicated the “hierarchy of values” (Mokyr 1990) characterising the
institutional environment of Petrine rule, that proved persistent over time.
M. Raeffs (1982) proposal, that counters the “reform for the needs of war” (Raeff 1984 p.36)
understanding of the eighteenth century drive to modernise, must therefore be seen as
controversial, and refutable. Peter the Greats observation on economic affairs can be summarised
in a quotation of the monarch himself “money is the artery of war” (Hughes L 1998 p. 135).
From the institutional structures, particularly the distribution of allodial property rights within the
empire established during the reign of Peter the Great (Bartlett in Hosking & Service 1999),
which survived until Stolypins’ land reform of the twentieth century, it is easy to disclose the
hierarchy of exploitation, designed to serve the priorities of warfare. The source of the means for
warfare financing and conscripts was the indigenous peasant population (Hughes L 1998 p 135).
The Petrine drive to modernize Tsarist Russia entailed an institutional colonization of the peasant
estate (based on Frank P.S.1999), additionally strengthening the institutions of backwardness in
the name of progress, namely serfdom (Hoch 1986).
The distribution of state expenditures, in Peter’s time (Table II below), clearly indicates that the
resource allocation prioritised the needs of the war. Looking at the figures for 1704, the fourth
year of the Northern war with Sweden, it becomes evident that Peter I envisaged a relatively
secularised state (Cracraft 2004, Hughes L 1998), anchoring the legitimacy of absolutist rule in
the Empires ability to secure its territorial claims, and perform bureaucratic control, rather than in
the system of religious beliefs centred on the anointed person of the Tsar (refer to Sztern 1997,
applied North 2005). This suggestion is consistent with the efforts made during this period, to
establish “zakonnosc” the rule of impersonalised law in Russia (Yaney 1973, refer to Sztern
1997).
The progressive aspects notwithstanding, from the distribution of government expenditures ( see
tables I, II, III, below) , it is possible to challenge Marc Raeffs 1984 suggestion that Peters
objective, had been to modernise Russia, rather than to win the war with Sweden, which, due to
15
Russia’s (retarding) man power advantage and harsh climate, could, according to the source, be
won anyhow (Raeff M 1984). Government expenditure share devoted to education, and medicine
is negligent compared to the resources devoted to the military use (Table II). Moreover in the
Petrine Russian case, the education had been centred on forcing nobility to acquire skills in
navigation, navigational astronomy, geography, arithmetic, geometry, trigonometry, conducive to
the development of the navy and its command, by domestic Russian officers, aimed at displacing
the experts of foreign origin (Hartley 1999 p126, Cracraft 2004). Defensive and offensive warfare
must therefore be seen as the major and continuous modernisation motive, characteristic of the
Tsarist endeavour.
Additional indication of the establishment of war economy, induced by the Northern War with
Sweden, is the degree of centralisation as regards ownership of industries of development block
propriety. Thus for example shipbuilding complex, the Admiralty in St: Petersburg had been state
owned and state operated enterprise (Kahan A 1985). Peter’s concern for the commercial fleet for
civilian purpose, as opposed to the navy, had been relatively restricted (Hughes L 1998, Cracraft
2004).
A useful definition, as regards degree of state interference, is provided by Arcadius Kahan 1985;
“intensity of demand on the part of the government, for the output of a particular industry,
measured by relative shares of output purchased or otherwise acquired by the government”
(Kahan A. 1985 p.80). Thus, during the eighteenth century the Tsarist government purchased the
largest shares of output in precious metals, armaments and woollen cloth industry, an
intermediary share of output in copper and ironworks, and the smallest share in linen, cordage ,
silk, and cotton –goods industries (ibid.). This hierarchy clearly indicates that warfare
continuously constituted a prioritised government sector, structuring and preconditioning
(Hodgson 2004), economic activity in the Empire.
The Tsarist government systems centralization and orientation to the West, had been structured to
serve the needs of the war. Thus the most significant and viable tax reform, had as its main
objective “to shorten the route of the money from the pockets of the peasants into the regimental
cash boxes” (Hughes L 1998 p. 138).
The poll tax – podushnaya podat’ – soul tax imposed on each male head instead of taxing the
households, came into being through studying the Swedish system of levying taxes to support the
troops (ibid). The population census of 1722-3 in preparation of the tax reform had been carried
out by military commanders (ibid). The tax had been collected for the first time in 1724 at a rate
of 74 copecs per head. At this rate and the stage of military technology, it took 47 peasants to
maintain one infantrymen, and 57 to maintain one cavalrymen (Hughes L 1998 p. 138, North
1981). According to Lindsey Hughes 1998, the tax centralised recordkeeping. The social status of
various population strata within the Empire had been defined by the obligation to pay the tax
(Hartley 1999).
As the direct result of the revisia - census- previously free people had been en-serfed to new
masters. The imposition of the poll tax created new taxpayers strata (A Kahan 1985 p. 331). As
regards the resulting actual economic burden upon the peasant population the calculations differ.
P.N. Miliukov, maintains that the tax burden upon the taxpaying population, rose by 61% as
result of the imposition of the poll tax (Hughes L 1998 p.138, A Kahan 1985 p 331).
16
According to Arcadius Kahan’s estimates, most of the increase in the budgetary revenue, due to
the imposition of the poll tax could be explained by the increased number of taxpayers, rather
than an increased tax burden on the pre reform individuals.
Even if contrary to the Gerschenkronian and Miliukovs estimates (Hughes L 1998 p 138) the
peasant populations direct economic burden, resulting from the transition from household tax to
soul tax - podushnaya podat’, decreased (Kahan A 1985 p. 331), the rising efficiency of the
Tsarist Government in the collection of the direct taxes, and the greater efficiency in the
mobilisation of conscripts following recurring censuses- revizii- increased per force the economic
hardships of the peasant population, even if the taxation level had become more predictable and
in fact lower (inspired by Hobson & Weiss 1995). Moreover, the tax structure inspired, material
egalitarianism may have contributed to the higher perceived discrimination level, within the ranks
of the peasant estate.
Arcadius Kahan maintains that the “myth” of the increased burden, due to the imposition of the
poll tax arose, because the reform coincided with natural calamity labelled the “Little Ice Age” –
a period of severe winters causing famine. The introduction of the poll tax had also been
contemporary with additional hardships in terms of restricted money supply due to the payment
of compensations to Sweden. Those conclusions are challenged by Boris Mironov, who points to
inflation at the beginning of the eighteenth century, advising that the tax “restored the peasant
obligation in real terms” (Hughes L 1998 p 139).
It could be surmised that, the imposition of a stable albeit predictable tax, in a highly fluctuating
grain yields environment of the Russian agriculture implied a de facto increased economic burden
at the times of crop failure (Scott J 1976, inspired by Milov 2001).
The Petrine poll tax constituted a dominating institutional continuity structuring the foundation of
the peasant economy during the eighteenth and the nineteenth centuries. The tax had been
abolished in 1887 (Hughes L. 1998).
Due to the favourable terms of trade, during the eighteenth century Russia’s foreign trade, linking
the Empire to Europe and the New World, increased fifteen fold, clearly manifesting the
commercial sectors development capability. Government interference in trade is said to have
ranged from trading monopolies in both exports and imports to privately run companies. In
accordance with mercantilist principles, export was to be stimulated, import of manufactured
product restricted, domestic import substituting industry protected through tariffs and direct
subsidies (Kahan 1985 p. 163).
A re- constituting thoughts habits (Veblen 1931, Hodgson 2004) continuity characterising the
Tsarist institutions, had been the heavy imprint of the Tsarist State control, resulting in an
expanding, centralising, militarising and more often than not expropriating structure (Kahan
1985,1989, Owen T 1995). The arbitrariness of its rule inhibited the long run development of
foreign and internal civilian purpose trade (Owen T1995). Although Peter the Great nominally
sought to promote the foreign trade sector, the credit institutions for this trade as well as
insurance, shipping and brokerage were insufficiently developed (Hughes L 1998 p. 149).
17
Foreign merchants are said to have commented upon the excessive state interest in trade and the
hampering capital accumulation, insecurity as to the rights to immovable property that permeated
the society (ibid.). The Tsar counter the boyars and the boyars counter the merchants living on
their land, related in a hierarchy of expropriation (ibid).“The picture is of a hierarchical society
with checks downwards on the amassment of power and wealth” (ibid).
Although the standardisation of weights and measures, undertaken during the Petrine era, through
the Moscow based Pomernaia izba, had a transaction costs reducing and internal trade enhancing
effect, (North 1973, Hughes L 1998 p 149), the State regulating the internal trade, collected
duties, for example, from the sale of grain, which restricted the development of a domestic grain
market (based on Hughes L 1998 p 149).
Thomas Owen (1995) advises that the substitution of state entrepreneurship for private initiative
in conditions of socio economic backwardness, according to the model proposed by
Gerschenkron 1962 underestimates the costs of state entrepreneurship in terms of the private
entrepreneurship forgone, due to excess control and expropriation through taxes, by the
centralising and politically, as opposed to economically, rational state structure (F.A. v Hayek
1994 the political rationality concept, Sztern 1997, Owen 1995). The Tsarist state is said to have
erected impediments to corporate entrepreneurship in stead of promoting it (Owen T 1995 p.16).
It should be added that the adverse state entrepreneurship effects were very long run, as the costs
of changing the general, structure determining the economic institutions are the highest (North
1990). More over institutions determine the economic behaviour of agents for generations to
come (based on Hodgson 2004).
During the reign of Peter the Great nine companies were founded. Of those, the Spanish Trade
Company chartered in 1724 aimed at implementing the Emperors nominal plan that was to
transform Russia into a significant maritime power. The company failed soon after receiving the
charter (Owen T 1995 p 18), which is a clear indication of an institutional environment in
conducive to private entrepreneurship, the declared government objectives not withstanding.
Restrictions on private entrepreneurship concerned as well the arbitrary signing of the charters by
the Emperor. So for example the Enlightened Catherine signed only four private company
charters (Owen 1995 p. 18).
The relative, its Canadian counterpart, lack of success of the Russian American company founded
in 1797, specialised upon exploiting the fish and animal resources in Alaska is explained by the
institutional differences between the British and the Russian entrepreneurial structures. Contrary
to the Hudson Bay Company which operated in a similar geographic environment in Canada, the
Russian company did not provide limited liability to its investors until 1821. It also served under
strict government control, both factors inhibiting its expansion and over time viability (Owen T
1995 p 18).
The corporate growth in the Russian Empire is said to have remained unimpressive until the
Crimean War. The 15 corporate charters approved in an arbitrary manner by the Tsarist
bureaucracy 1821-30 represented an increase compared to the 33 granted since 1700, but most of
the companies proved short lived, clearly indicating institutional environment deficiencies, or in
other words the long term costs of state entrepreneurship (Owen T 1995). The only company
that survived until the advent of the First World War was the First Russian Insurance Company,
18
founded in 1827, making the diversification from fire to transport and accidents insurance (ibid, p
19).
Thomas Owen 1995 identifies two recurring patterns of the Russian corporate development; the
geographical concentration of corporations to St: Petersburg , and the relative success of
insurance and textile manufacturing companies compared to private ventures in metallurgy and
transportation (Owen 1995 p 19). The concentration of corporations, that is of the approved
corporation charters, to the vicinity of the centres of administration and export ports, indicates a
preparedness of the Tsarist government to effectuate bureaucratic control (ibid.).
As regards metallurgy and transportation, the lack of success indicates the incapacity of the state
controlled institutional infrastructure to enable the development of those industries in a corporate
form. During the turn of the nineteenth century, when the Tsarist government ultimately
acknowledged that the railroads were vital for the economic development of the nation and had
strategic importance at the times of war, the industry had to be nationalised, as the institutional
infrastructure did not provide sufficient inducements for the success of the high risk venture in
the form of private corporation (Sztern 2008, Owen T 1991).
Thus the substitution of state for private entrepreneurship as means of internalising the costs of
transactions burdening backward societies (Gerschenkron 1962, 1968, applied Coase 1937) is not
costless. In the long run this strategy may prove self-defeating, as it will inevitably lead to statesociety conflicts, and vicious circles (Fig.I Fig III), retarding progress. Based on the quoted
sources, it is suggested that the ever present state intervention slowed down progress. Ultimately
however, the lagged reforms from above (Sztern 1997) will lead to an increasing credible threat
from below and the transformation of the autocratic entrepreneur into an interactive political
entity (Fig II).
Industrialisation under Peter the Great and Nicolaus II, continuity in numbers
The objective of this section is to disclose the coercive character of the militarised modernisation
process put in motion by the Tsarist autocracy in the reign of Peter the Great, and Nicolaus the II.
Rather than, as a historian would do, concentrate on the unique aspects of each period (Confino
M discussion 1997), the focus is on the institutional structure enforced by the rule of the “Tsar
Imperator” (De Madariaga1998 p.42), and its self perpetuating mechanism, rendering it over time
continuous. The modernisation including industrialisation spurts effectuated in the reign of
Nicolaus II, as to their character, did have a precedent in the “Big Bang” modernisation and
Europeanization process launched by Peter I.
The great formal institutional (North 1990) divide between those processes undoubtedly
constitutes the Emancipation of the serfs of 1861-63. Nevertheless, as regards the intensity of
autocracy’s economic intervention, there is a structural continuity, established 1700-1721 due and
during warfare, specifically the Northern War with Sweden. The modernisation spurts of the
eighteenth and the nineteenth century were dictated by the prerogatives of the war, (in the case of
Nicolaus the II, the Crimean war) structuring the set of priorities as regards resource allocation.
The endogeneity of autocratic, totalitarian government and territorial conflict, the successful inthe- field solution of which, constituting these structures’ main legitimacy base (Sztern 1997),
19
perpetuates the economy of war. The latter can be seen as represented in the proportions of state
expenditures devoted to military purpose during Nicolaus’ II and Petrine industrialisation spurts.
Table I Expenditures of Imperial government, 1913 prices re calculated.
1885
∆
1888
∆
1891
∆
1894
∆
1896
∆
1900
∆
1903
∆
1907
∆
1910
∆
1913
Administration
expenditure
( % share)
44 %
+ 5.2%
44.6%
+25 %
45.8%
+3.9%
43%
+16.6%
45.7%
+2.2%
41.2%
+24.5%
44.3%
-6.7
41.8%
+22.4
45%
+/-0%
34.%
Expenditures
for
education and health
(%share)
5%
- 7.7%
4.4 %
+ 26.9%
4.6%
+18.18%
4.9%
+2.5%
4.6%
+45%
5.9%
+25.8%
6.4%
-15.9
5.5%
+74.6%
8.6%
+40%
9.2%
Defence
expenditures
(%share)
51 %
+ 3.8%
51 %
+19%
49.6%
+16%
52%
+4.8%
49.7%
+20.9%
52.9%
+7.8%
49.3%
+6
52.7%
+/-0%
46.4%
+61.6
56.8%
Total
(%)
100
+3.8
100
+22.2%
100
+10.5%
100
+9.8 %
100
+13.5%
100
+15.7%
100
-0.7%
100
+13.5%
100
+32%
100
Source: Gregory R.P. 1982 Russian National Income 1885-1913 Appendix F. Table F.4 Expenditures of imperial
government , 1913 prices (millions of rubles) p. 256 and own recomputations. Rows in bold are calculated as shares
of the total absolute number , rows marked with "∆" are calculated comparing the absolute rouble values vertically,
so that each period relates to the preceding one. Italic is used for emphasis
Source Sztern 1997
Table II The approximate proportions for 1704 the fourth year of the Northern war.
Military Expenditures
State apparatus
Royal household
Diplomacy
The Church
Education , Medicine
Postal services
Sum total
Hughes L 1998
Hughes L 1998
Own calculation, based
on Hughes L 1998
absolute numbers.
1439832
1313200
156843
75042
29777
17388
40.9%
37.6%
4.4%
2.1%
0.8%
0.5%
47.5%
43.3%
5.2%
2.5%
0.98%
0.57%
Ca.
100%
roubles
roubles
roubles
roubles
roubles
roubles
3032082 roubles
Source: Hughes L. 1998 p 136 the table is constructed from the percentage shares in the text.
20
Table III Military Budget Expenditures, 1762-96 (in 1000 Rubles)
The reign of Catherine the Great
Year
Army
Navy
1762
1763
1764
1765
1766
1767
1768
1769
1770
1771
1772
1773
1774
1780
1781
1782
1783
1784
1785
1786
1787
1788
1789
1790
1791
1792
1793
1794
1795
1796
9.219
7.920
8.723
9.676
9.806
9.828
10.13
10.000
9.904
10.282
10.508
10.812
1.200
1.200
1.230
1.508
1.309
1.263
1.313
1.400
1.445
2.578
1.378
1.433
n.a.
10.600
10.800
13.720
14.320
16.400
19.110
21.060
18.690
20.170
21.620
24.590
23.100
23.300
21.600
22.200
21.000
n.a.
3.250
3.270
3.820
3.930
4.130
8.40
4.640
4.350
5.310
5.470
5.470
6.200
5.430
5.670
7000
6.680
Special War
Appropriation
1.300
1.800
7.600
9000
7.700
7.355
n.a.
5000
16.000
16.000
16.000
15.000
Total Military
% of Net
Revenues
10.419
9.120
9.935
11.184
11.115
11.191
12.626
13.200
18.949
21.860
19.586
19.600
% of Gross
Expenditures
63.15
52.92
46.12
49.44
46.14
47.60
50.61
49.48
54.11
56.62
49.85
50.27
n.a.
13.850
14.070
17.540
18.250
20.530
27.750
30.700
39.040
41.480
43.090
45.060
29.300
28.730
27.270
29.200
27.680
33.81
34.39
36.40
36.65
36.36
44.28
46.00
51.29
52.38
52.10
53.09
40.55
37.59
37.71
36.87
35.41
48.18
44.49
55.54
45.04
51.22
67.25
68.66
89.41
93.57
94.28
101.47
67.94
69.51
63.87
52.98
49.96
62.75
56.09
58.77
55.17
52.22
60.53
65.16
76.69
82.82
76.12
76.40
Source: Arcadius Kahan 1985 “The Plow The Hammer and the Knout” p 337
Although there are money value and computational differences between the referred to sources,
the institutional structure, that determined the proportions of state expenditures devoted to
military outlays and state administration, must have been roughly continuous over time. At least
40% of the extracted through taxes resources, had been allocated to the military expenditures, and
ca. 40 % had been devoted to the state administration during the reign of Peter I and Nicolaus II
(Table I , Table II). Table III covering a longer continuous time period during the eighteenth
century, in the reign of the enlightened Catherine the Great, is reproduced for comparison. The
military expenditures constitute on the average ca. 40 % of Gross Expenditures. During the
Pugachev revolt 1770-1773, the French revolution and First Turkish War this proportion exceeds
the average. Given this allocation structure, representing the continuous dimension of the
institutional structure, the economy under Peter I and Nicolaus II could be conceived of as
having a common denominator.
21
Both structures constituted the economies of war, whose elements could be understood as pre
cursors to the Soviet war economy of the modern time (derived from Anisimov 1989, refer to
Sztern 1994). It is especially important to emphasise that the proportions of state expenditures
devoted to the military apparatus are approximately continuous over war and peace time periods
(Kahan A 1989).
E.V.Anisimov 1989 maintains that, during the first quarter of the eighteenth century Russia
experienced an economic upswing comparable to the industrialisation spurt of the Soviet era
(Anisimov E.1989 p.121)2. 1695-1725 two hundred new manufactures were constructed,
constituting a tenfold increase in the number of manufactures relative the previous century (ibid.).
Characteristic of a war economy is the voluntary and the involuntary collectivist ethos mobilised
at times of the national conflict (Sztern 1994 ). In Petrine times the industries developed were
chosen according to the nationally, by the Tsarist government, defined perception of necessity
and “obshchego blaga”- “common good” (Anisimov 1989 p 122). The consequent classification
in “nuzhnye-“needed” i “nienuzhnye”-“superfluous” industries had been dictated by the
prerogatives of the Northern War (ibid p. 121). Moreover the ideas of mercantilism and
protectionism inspiring this period in the Russian history, were as regards the in voluntary
collectivism and un-freedom, intensity, congruent, with the idea of “nasilstvennogo progressa”“progress through coercion” (ibid. p.122), nurtured by Peter the Great. It should be emphasized
in this context that the ideas of a state-controlled, bureaucracy shaped, economic development
were in the Russian and the Soviet supra structures exceptionally long lived. This condition
structured the “habits of thought” (Veblen 1931) of individuals for decades upon decades to
come.
The Russian defeat at Narva, ultimately determined the type and the pace of the Petrine
industrialisation process, aimed at achieving the favourable for the Russian army and navy in-thefield result ( ibid.). The industries prioritized were the manufacture of armaments and clothing for
the military institutions in the Hodgsonian sense (Anisimov 1989, Hodgson 2004 ). Considering
the formation of development blocks (Gerschenkron 1962), the ironworks of Ural, and the St:
Petersburg Admiralty, (Kahan 1985), aimed at supplying the Russian navy (Anisimov, 1989,
p.122) constituted the heart of the war structured, industrialisation and modernisation process.
The textile industries of the Moscow region developed likewise to supply the combat forces
(Kahan 1985, Anisimov 1989).
The Russian elites ability to culturally compete for the internationally acknowledged Imperial
status (De Madariaga 1998, Raeff 1982) with the contemporary European elites of Britain, France
and Prussia, constituted a by product of the modernisation for the sake of the military victory
(Hughes 1998).
One of the pillars of the eighteenth century Europeanization and modernisation effort had been
the government sponsored, heavy penalties sanctioned, re orientation of the Russian commerce
and commercial fleet from the port of Archangelsk to the newly built St: Petersburg (Anisimov
1989 p.129).
2
All comments on Soviet growth should include an institutional and numerical evaluation of the GULAG, un-free
labor system, and its economic effects. Inspired by L.I.Borodkin lecture 19 November 2008.
22
According to the source, this process had been the most costly for the Russian merchant class,
whose tradition dependant trust networks were in the short run destroyed. The latter, and the
(through, monopoly, taxation, and licence) interventionist policy of the Tsarist government
resulted, during the Petrine era, in the drastic reduction in the number of “gosti” (Hartley J. 1999,
Anisimov 1989, Owen T 1995) the most well to do merchant strata.
From the economic and social sacrifices demanded of the population, it is evident that the
involuntary, collectively mobilising, war economy had been put in place to transform Muscovy
into a major European military superpower, rather than a thriving individualist capitalist entity.
The price or the social cost of State entrepreneurship in the case of the Tsarist autocracy, had
been the continuous physical and human resource re allocation from the civilian to the military
sector of the economy.
The coercive character of Petrine Europeanisation, is manifest in the practice of “prinuditelnye
pereselenia” = “forced resettlement” a continuous, violating individual rights policy, aimed at
supplying skill and labour to the targets and the centres of modernisation. Following a series of
decrees Ukases in 1711, the most successful of merchants were forcefully resettled in St
Petersburg (Anisimov 1989 p. 131). The new capital city had been built by 40 000 peasants,
annually resettled in such manner. Undernourished, settled in mud huts, they perished en masse
(ibid), whilst constructing the “pyramides” of Imperial splendour. Their conditions of life
(Veblen 1931) were comparable to those of the serf labour employed in the construction of the
first railway lines in Russia in the reign of Nicolaus the I . Working, whilst half their body buried
in the mud, the serf railway workers were offered alcoholic beverages (Westwood 1964). This
Tsarist strategy was aimed at neutralising revolt (ibid).
According to Anisimov 1989, the Petrine Victory in the Northern War had been secured
increasing the fiscal burden of the peasant population. The structure of obligations all under
collective responsibility “krugovaya poruka” included obligations to supply the state with people
(recruits), labour, horses, obligations in natura, and monetary dues (ibid. p.134). The source links
the Bulavin revolt plaguing the Petrine times 1707 to the high rate of exploitation, the degree of
degradation and un-freedom, which befell upon the peasant population, at the times of the
Northern War (ibid. p.139). The implications following thins link, render this interpretation not
entirely uncontroversial; In face of the sacrifices extolled from the civilian population and the
expropriation effectuated by the Soviet State, during the War Communism era of the twentieth
century, the lack of organized revolt, could be explained by superior propaganda capabilities, as
well as relatively more efficient mechanisms of repression characterising the Soviet State.
The common denominator undoubtedly linking the modernisation spurts under Peter the Great
and Nicolaus the II had been the role, foreign human capital, played in the institutional
revolution. The development of the Baltic fleet, “chief component of the Russian navy”, (Cracraft
2004 p.80) in the Petrine modernisation and the initial nineteenth century railways construction,
constituted cores in development blocks. Formation of the latter affected the economic and the
cultural system as a whole (Gerschenkron 1962, Schön L 2006, Cracraft 2004).
The role of the British expertise engaged in the establishment of the prestigious Russian
institution (in the Hodgsonian sense); Shkola Matematicheskich I Navigatskikh Nauk- School of
Mathematical and Navigational Sciences, which contributed to the eighteenth century, navy
23
related “cultural revolution” (ibid), is comparable to the, role 1834 Viennese professor von
Gerstner played in the importation of railway technology into Russia (Westwood 1964 p. 22).
The, in the Petrine times, imported maritime technology and naval statues, although easily
applied for peace time endeavour, did not contribute to the capacity of the Russian commercial
fleet (Cracraft 2004, Hughes L 1998). Thus technology diffusion from the military to the civilian
sector could, in the case of the tsarist autocracy, not be taken as given. Rather the contrary
proved continuously true. In this context the emphasis is therefore on the Gerschenkronian 1962
identification of “the costs of dictatorship”, rather than the great Economic-historians focus on
the positive long term effects of State entrepreneurship. The latter proved deficient as regards the
fostering of the value systems and the skills necessary for increased industrial production
(Gerschenkron 1962) for civilian purpose.
The Tsarist enthusiasm for von Gerstner’s suggestion to link by rail the “two capitals to Volga
system” (Westwood 1964 p. 23) emanated from military considerations. Russia would be able to
compete with Britain over the access to the Persian Gulf and through the option of swift troops
transfers deter future Polish uprisings (ibid). The Military purpose not withstanding it must be
agreed with Alexander Gerschenkron, that the state led technology import brought with it
progressive institutional adaptations. Those were however more often than not, unintended
(inspired by Lal D 1998). The Tsarist autocracy retarded but did not preclude institutional and
economic civilian progress.
The reform “from above”and the rail-road to progress.
It should be asked in this context whether the most progressive of the Tsarist reforms; the
Emancipation of the serfs of 1861-63 had been motivated by, the increased transaction costs of
the serfdom system (Leonard CS 1990), the import of Enlightment ideas in the reign of Catherine
the Great that whilst institutionalised, a century latter, rendered the ownership of man by man
socially costly, the due to population increase (Kahan 1985) falling land labour ratio (Kolchin P
1987), or factors in combination (Sztern 2007)?
The perceived relative urgency of the reform , clearly indicates the validity of the
Gerschenkronian analysis (Gerschenkron 1968). The debacle in the Crimean war 1854-56,
actualised to Alexander the II, that the reform could not be additionally postponed for two
reasons; geopolitical competition with Western rivals, where the resort to un free labour and
soldiering had been abolished, and the ever present risk of internal upheaval, intensifying in face
of the Crimean defeat. Edward Radzinskij (2005) quotes the Tsar Liberator in explaining that the
Great Reform was actually a pre emptive measure unavoidable; “if freedom will not be given the
peasants from above they will take it from below” (Radzinskij E 2005 p.116) Figure II, above, is
justified by this quotation. Alexander Herzen, one of the contemporary leading intellectuals urged
Alexander II to spear the peasants the inevitable revolution; “Smoite pozornoe piatno z Rossii.
Zalechte rubcy ot platei na spinach vashych bratev. Izbavte krestian ot krovi kotoruju im
nepremenno prijdiotsja prolic…”- “Wash out the shameful stain of Russia. Heal the traces of the
knout on Your brothers’ backs. Save the peasants from the blood that they will inevitably be
compelled to spill….”(Radzinskij E 2007, p.145)
24
The denouncing of the degrading treatment of the individual, including the prohibition of torture
is incorporated in Catherines Instructions (De Madariaga 1998). The Pugachev revolt, 1770-73,
making the Tsarist Empire exceptionally dependant upon the loyalty of the Nobles (Pipes 1994,
1995 ), brought about the Charter to the Nobility of 1785, freeing the Russian elite from the
degrading corporal punishment, compulsory State service, and guaranteeing it allodial property
rights in land (Bartlett 1999 in Hosking & Service, Hartley 1999). The same dependence retarded
the liberation of the serfs, a process that had been left on the level of social debates until the
second half of the nineteenth century (refer to Sztern 1997, De Madariaga 1998, Pipes 1995). In
face of the Enlightment inspired reforms “from above”, and the Judeo-Christian values, since the
9 th century continuously (Blum J 1961) imbued, the peasant attitude to equal individual’s rights
could not have been entirely ambivalent. As regards land ownership rights, 85% of the peasants,
agreed upon redemption-“vykup” of the previously collectively used land, from their creditor; the
Tsarist state (Zakharova L.G. 1992).The sheer proportion of peasants, voluntarily participating in
the redemption process indicated, enthusiastic attitude to land ownership, albeit on obshchinacommune village basis, present already in 1881, 25 years before the Stolypin Land Reform (ibid.
p. 36).
Zakharova L.G. 1992 advises that the institutionalised preservation of the village commune
“obshchina“, including its collective control mechanisms, had not originated within the ranks of
the peasantry. The empowering of the skhod- obshchina assembly with the legal capacities
previously held by the landlord (Atkinson D 1983), including the implementation of the formal
(North 1990) restrictions upon freedom of movement (Gerschenkron 1962) could be understood
as the Russian disadvantages of institutional backwardness3. Studying the Western experience
and, Western ideologies (Marxism), Tsardom feared massive exodus from the rural sector,
proletarianization and revolution.
Contrary to the analysis of J Pallot 1999, and consistent with the Gerschenkronian analysis,
Zakharova L.G. 1992 maintains that, the nineteenth century collectivism- village commune
control had been imposed from above and supported by the Tsarist State. Thus the historical
viability of “obshchina”, can only partially be explained by the climatic conditions of the Russian
agriculture (Milov 2001, Sztern 2007). Although the foundation of the commune, the ethos of the
Tsarist Russian collectivism- “krugovaya poruka” was kinship based (De Madariaga1998), the
viability of the commune can not be sufficiently understood without due account of Russia’s
institutional backwardness relatively the West European Imperia, such as Great Britain,
interdependent with its historically high land to labour ratio (Kolchin 1987 applied) and geo
political vulnerability, manifest in face of the frequent invasions from the West (Sztern 2007).
The historical, kinship based obshchina had been an organic unit, its consolidation during
serfdom, and viability from the Emancipation of the serfs 1861 until the Stolypins land reform
1906, can be explained by state initiative, aiming at the reduction of transaction - and surveillance
costs, of the Tsarist tax extraction (derived from the Slavophile and the Westernizers debate, refer
to Sztern 2000, 2007).
Zakharova L.G. 1992 brings into attention that following the Crimean debacle, Russia’s
vulnerable position had been manifest in the increasing internal “concern about the European
3
Adwantages of backwardness is a Gerschenkronian 1962 term
25
public opinion”- “zabota o Evropeiskom obshchestvennom mneni” (Zakharova L.G. 1992 p.25)
which intensified the attention of the Imperial government to the plight of the peasants. The
“humiliation that autocratic Russia endured at the hands of the democracies England and France
during the Crimean war” (Gatrell P 1994 p.13) and the Empires debtor position (Sztern 1997),
actualised the necessity of libertarian reforms in general and peasant Emancipation, from the
yoke of serfdom, in particular.
Thus, historically the Russian defeat at Narva brought about the intensified importation of the
Swedish, the Dutch and the British institutions into the Euroasian Empire (Hughes L 1998,
Cracraft 2004). The unfavourable for Russia terms of the Paris Peace, concluding the Crimean
War, resulted likewise in an intensified importation of the European institutions, including the
negative European attitudes to the ownership of man by man.
The Russo-Japanese war of 1904, aimed at pacifying and diverting the internal discontent with
the deficient civil rights, including the rights of association, ended in a for Russia shameful
demise, additionally intensifying civil society’s demand for institutional transformation (Ascher
1988, Sztern 1997, Borodkin L discussion 2008). The revolution of 1905 could in this context be
understood as an outspoken cost of dictatorship (Gerschenkron A 1962), that could have been
saved, had the autocracy agreed upon the concession demanded; the constitution based decision
power delegation to a publicly elected body the Duma (refer to Sztern 1997).
Paradoxically it could be argued that the preparation for the clash of powers in the battlefield and
the on Russia’s part lost battles brought about the technology import and the progressive
institutional adaptations, whilst the victories continuously consolidated the autocracy, having a
retarding effect. Although following the Victory in the Northern war the Petrine economy,
restructured to allow private initiative, encouraging private commerce, freeing the latter from
state monopolies, Anisimov 1989 refers to those measures as the historical NEP (Anisimov 1989
p. 279). The latter constituted a merely temporary tolerance for private entrepreneurship, leaving
the economy’s Commanding heights (Gerschenkron1962, 1968) in state control. The
consolidation of autocratic power, increased and intensified governmental control over the
production processes, channelling the resources to achieve ”samoobespechenie armii i strony,
promyshlennymi tovarami” – “selfsufficiency in supplying the army and the state with
manufactured goods” (Anisimov 1989 p. 279). Thus, the resource flow from the civilian to the
military sector of the economy under state entrepreneurship, did not cease in peace time. The
West imitating “commercial company” was to supply the state with manufacture for military use
(ibid). The economy was not to be left without full bureaucratic control (Anisimov 1989 p.281).
The problem of integrating “industrialism with imperialism”, writes Peter Gatrell 1994 had been
solved by maintaining a high level of “direct and indirect” state control over the industry (Gatrell
P 1994 p. 15). This condition must be seen as a self perpetuating continuity. It is important to
emphasise that the costs of imperialism (ibid), were not only and not primarily the higher taxes
and recruitment obligations, but the deceived expectations of reform causing internal upheaval
(derived from Simms Y, J , Gregory P 1994, 1982, Sztern 1997).
After the Crimean war, the Russian empire constituting a strategic interest for France, greatly
benefited from peace time French capital flows that set in motion the industrialisation spurt of the
1890 (Gatrell P 1994 p 16).
26
The growth of nineteenth century industrial production centred upon the programme of railway
construction “induced and financed“ by the tsarist government (Gatrell P 1994 p.14). 1880-1900
the length of track grew from 30.600 to 56.500 km (ibid).
Table IV
The growth of the Russian railway network 1860-1916
Year
Length in km
Volume of freight
(million ton km)
1860
1865
1870
1875
1880
1885
1890
1895
1900
1905
1910
1913
1916
1.626
3.843
10.731
19.029
22.865
26.024
30.596
37.058
53.234
61.085
66.581
70.156
80.139
571
2.404
5.146
8.000
11.238
14.925
22.615
38.869
45.109
60.594
69.731
No of Passengers
(Million passengers
–km)
3.929
5.013
7.581
13.003
19.467
23.229
29.312
Total Employees
(yearly average in
1000)
213
248
344
554
751
772
815
Source: Kahan A 1989 “Russian Economic History the Nineteenth century” p 30
Focusing on the dramatic 51% increase in the number of passengers during the last five year
period of the nineteenth century, a movement additionally verified through the increase in the
sale of tickets and passports (Kahan 1989 p.4 Table 1.2) it may be argued that, the railways
constituted the most progressive, peace-time applicable, and freedom enhancing- of the
governmental entreprenades .
Unlike the massive investments in the development of the Baltic fleet, during the reign of Peter
the Great, the purpose of which had been solely military, (the acquired from Britain technology
had not been diffused to civilian commercial endeavours) the railways from the outset, had a
“dual purpose”; political (including military) and economic (Kahan 1989 p 28). Indirectly,
through guaranteeing the railroad bonds at the unprecedented 5 %, (ibid. p. 29, Westwood 1964,
Borodkin L. 2008 discussion) thereby en masse attracting foreign direct investment, the
autocratic government per force set in motion an “external invasion” (Boyer and Orlean 1993)of
libertarian value systems, prevalent in the West, thereby creating multiple institutional structures
(Sztern 2005). Moreover, rural-urban migration and the associated cultural exchange, weakened
the rural institutions of collective control (Smurova O.V. 2003, Burds J 1998, Crafts EHES
conference, Sztern 2005, 2007, 2008) . Otkhodnichestvo – wage work in the urban industrial
centres, constituted the core in this process (Smurova O. V. 2003).
Arcadius Kahan 1989 points out that without the railroads, the commercialisation of the Russian
agriculture would have been much slower, and the GNP would have risen much slower (Kahan A
1989 p. 31). The rising productivity in gentry as well as peasant agriculture resulting in rising
27
living standards of the latter constituency (Gregory P 1994, 1982, Simms J. Y, Sztern 1997,
Kahan 1989 p69; Table 1.36, p128; Table 3.7) can partially be explained by the direct and
indirect stimulation, railroads construction provided to the expansion of the ferrous and the
machine industries (applied Kahan A 1989). Growth of the rail, contributed to the structuralentailing institutional change of the whole regions. So for example writes Halin 2007 from the
middle of the 1860 the growth of machine construction industries emerged as the result of the
structural transformation processes of parts of the Povolzhe region.
Railway construction boom during the 1890s revived the whole host of engineering industries,
(Gatrell P 1994 p. 53) not least through skills training, including the undersupply chains.
Production for the railway transport sector explained the growth at 9.7 % per annum of the
market for Russian built machinery (ibid.). The falling labour/capital ratio, within larger more
capital intensive production units (consistent with the Gerschenkronian predictions) and the rising
productivity of labour are reflected in the structural changes in the engineering industry depicted
in the table V below.
The double increase of the agricultural machinery share, in the gross output of machine building,
may indicate that increasing mechanisation of agriculture and the ensuing rising productivity of
land and labour explain the rising peasant living standards (based on Gregory P 1994,
1982,Simms Y, Bideleux R 1990 ), preceding the revolution of 1905.
It is plausible to assume that the railroads contributed to the sharp rise in land prices along the
lines, making investment and therefore the exclusion of others profitable (Hesse G 1993). It is
therefore a testable hypothesis whether the railroads contributed to the transition from
collectivism to individualism in the land holding system (Sztern 2008).
Thus, as regards the risk to perish of starvation, that is assumed to partially have induced rural
collectivism (Scott 1976, Sztern 2007, 2008), the hypothetical impact of the railroads is triple;
indirect and direct institutional; constituting the engine of machine building industry (Gatrell
1994), the latter resulting in rising factor productivity and living standards of the peasantry
(Gregory P 1994, 1982, Simms IY) the rural collectivism is diminished; opening up the access to
the urban market, (Kahan A 1985) and the opportunities of wage work the industrial centres,
(Johnson 1979, Burds J 1998) the risk to perish is lowered and with it the level of collectivism
(Scott 1976, Sztern 2000, 2007,2008). The, due to the railroad building, rising return on
investment in land, rendered individualism increasing (Hesse G 1993 applied) spurring faster
additional exodus from the collectivist “obshchina” structures (Boyer and Orlean 1993).
Table V
Gross output of machine- building, 1900-1908
Units
Roling -stock
Vessels
14
32
1900
Output
(Million
Roubles)
92.0
6.1
% share
Units
46
3
18
18
1908
Output
(Million
roubles)
85.3
4.6
% share
41
2
28
Boilers
Agricultural
machinery
Other
Total
52
162
24.6
12.1
12
6
56
216
11.7
26.5
5
13
279
539
67.1
201.9
33
100
244
552
83.3
211.5
39
100
Source Gatrell 1994 p.55
As Alfred Chandler 1977 and Arcadius Kahan 1989, explain, growing with 283% from 1885 to
1913 labour force of the traffic service acquired and disseminated skills vital to the institutional
development of the economy as a whole (See also Sztern 2008). Through their extensive use of
the telegraph, and improving the national postal service, the railroads contributed to the
intensified information flows, rendering the cultural level of the population increased (Kahan A
1989 p35, Table1.18). Embarking upon the industrialisation process, particularly constructing the
railways that set in motion the cultural-cognitive exchange (Smurova O.V. 2003, Boyer and
Orlean 1993, Martens B 2004), creating multiple institutional structures (Sztern 2005), the
autocratic government unintentionally brought about the democratisation process, entailing the
demand for parliamentary structures, present in the revolution of 1905 (Ascher 1988, Martens B,
2004 Sztern 2005).
Thus the pre emptive libertarian reform “from above”, interacting with the state led technological
innovation, intensified the credible threat form below, forcing additional concessions and reforms
from above Fig II. State entrepreneurship manifest through railways construction, partially for
military purpose, contributed to bringing about progressive civilian institutions as an unintended
side effect of the endeavour. It can in this context be summarised that the effect of the virtuous
circle (FigII), depicting the unintended consequences (Lal D 1998) of state entrepreneurship in
the long run is more decisive than the continuity of the vicious circle of the costs of dictatorship
burdening state entrepreneurship. Thus, the “credible threat from below” constituted the vehicle
of progress whilst the self perpetuation of autocracy, both promoted progress through the lagged
reforms from above and retarded the same burdening institutional innovations with the costs of
dictatorship.
29
The Tsarist State and the Mir4 – Four mutually complementing roads to
progress in late Tsarist Russia
Fig:VI
State
Collectivism
Climate,
Topography
Industrialisation
A
Baltic Fleet
Railroad
Tax
IV
C
B
The Mir
*Enabling
Innovation- A’
risk sharing
*Unit of
subversion
The Mir
*Inhibiting
Innovation
*Violating
individuals
rights
II
I
Individualism
III
This figure is based on the sources referred to in the text below.
Figure IV above focussed on the transition from collectivism to individualism during the
nineteenth century, summarises the progressive mechanism, identifiable in the interaction
between the climate, the State effectuating the technological innovation, and the Mir leading to
rising individuals rights including the rights to immovable property.
4
Volyn L 1970. The term Mir means ”the world” and ”peace”. During the nineteenth century the concept “mir”
defined a community of former serfs or state peasants , settled as a rule in a single village, although sometimes a
village included more than one mir and conversely several villages could combine in a single mir.
Burds J 1998 p.18 The “obshchina”,- village commune “ is a composite juridical person. It…is composed from the
aggregate of the community’s juridical persons- the domokhoziaistvo”
30
“From the beginning” there was the high land to labour ratio, the harsh Russian climate resulting
in the low yield to seed ratio, and unpredictable yield (Kahan A 1989, Appendix p 139, Table 3
B p 142, Milov 2001) fostering the initially kinship based mutually ensuring, risk-sharing,
collective survival strategies, (Scott J 1976, Moon D 1999 Sztern 2000, Sztern 2007, De
Madariaga 1998, Eggertsson T 1990). The unit of collective control- the mir- had organically
been created (Barzel Y 2002, Sztern 2007, Blum 1961) constituting the potential mechanism of
subversion relative the despotic sway, over the Russian plain, of the Tsars (applied Montesquieu
in Durkheim Montesquiu & Rousseau 1960, Sztern 1994).
Following Esther Kingston Mann 1991 the risk sharing mechanism structuring the mir, enabled
innovation (deduced from Deidre McCloskey, Economic-history seminar the 23 of February
2009, Hodgson G 2004). The latter contributed to the long run increasing independence of
individual households and the transition to individualism (derived from Hesse G 1993, Boyer and
Orlean 1993) (left hand side of the figure road I).
The harsh climatic conditions of the Russian agriculture (Chubarov A 1999, Milov 2001), the
high frequency of natural calamities (Kahan 1985, 1989) necessitated landlord and ultimately
state intervention, in the form of loans, grain storages and other forms of famine relief. The latter
had also indirectly been effectuated by the Tsarist government in the form of public works
available to the peasants, and prohibitions to export grain during the famine years (Kahan 1989 p
136). Those measures enhanced the centralisation and through sheer peasant dependence,
broadened the encroachment of the state in the economic sphere of the peasantry, consolidating
autocratic rule (derived from Kahan 1989). The harsh climatic conditions of the Russian
agriculture in combination with Judeo-Christian values would in the short run produce
collectivist state structures (derived from Milov 2001).
In the long run the ever present credible threat from below, interacting with the technology and
value systems importation (Boyer and Orléan 1993) during the nineteenth century, embodied in
railroad construction, would result in the government codifying ex post the individualisation
processes, launching the Land Reform named after Stolypin (road IV).
Railroad construction , the core in the Tsarist industrialisation of 1890, 1907 had a dual purpose
(Gerschenkron 1962, 1968, Kahan 1989). In its capacity as an instrument of warfare, simplifying
the transport of troops (Westwood 1964), the railroad may have in the short run encouraged
collectivism on both the state and village level making the recruited soldier families dependant on
the commune (Worobec 1995) simultaneously strengthening the mechanisms of state control over
the society as a whole (Hobson & Weiss 1995).
In the long run, due to the improved transportation technology, enabling government
systematisation (Yaney 1973) the implementation of the demanded from below individualising
reforms would be facilitated (arrow A road IV).
The Tsarist taxation system relying heavily on collective responsibility- “krugovaya poruka” for
obligations formally consolidated the village commune (Gerschenkron 1962, 1968),
simultaneously strengthening the unit of subversion, that intensified the credible threat from
below (Greif 2006, Barzel 2002, Sztern 2007) challenging the Tsarist autocracy on individual
freedom (Sztern 2007) (arrow B road III).
31
Within the village commune the discontent of the well to do individual households and
individuals with collectives’ violations of individuals’ rights, and the perception of obstacle to
innovation, spurred the transition to individualism (Hoch 1986, Worobec 1990, Boyer and Orlean
1993) (road III). This, is expected especially in face of the civilian, developing propriety of the
railroads, which enabled the transport of grain and people. The railroad served as an instrument
of famine relief, rendering the households independent of each other (Sztern 2008). The railroads,
conceived of as insensitive to the climatic conditions relatively water transport, routes (Fogel R
1964) weakened in the long run the collectivist strategies of the mir, rendering those latter
strategies redundant (right hand side of the figure arrow C road II ).
The roads are marked in chronological order; I the village commune as an enabling (applied
Hodgson 2004 and McCloskey D 2009, Kingston Mann 1991 ) innovation institution in the
Hodgsonian sense is assumed to have dissolved due to skill accumulation (applied Hesse G 1993)
facilitated through risk sharing (Moon D ), in the long run leading to increasing mutual
independence of the householders. The interaction of the communal institutions with the state led
industrialisation process centred on railroad construction road II (Sztern 2000, 2008, 2007)
catalysed the atrophy of the collectivist practice. In this interaction the railroads- the extended
hand of the Tsarist government-, would ensure the peasant household against starvation
substituting for the pre modern collective risk insurance and sharing mechanism of the commune
(Sztern 2000, 2007, 2008).
The simultaneously, present inhibiting mechanisms of control inherent in the commune would
alienate the well to do households, wishing to rid themselves of the collective responsibility for
the poorer fellows (Worobec 1990 ). Wealth accumulation made possible by the mechanisation
and commercialisation of agriculture induced by railroads construction, would then following the
Hesse G (1993) and Boyer Orlean ( 1993) hypothesis, increase the exodus from the commune,
road III.
With those mechanisms at interaction with the intensity of pecuniary and non pecuniary
obligation and coercion levels, the reforms from above must be seen as codifications ex post of
on going processes and as concessions to the plight of the Russian society in its demand for
institutions of civil control (road IV).
32
Was Stolypin right or wrong assuming that the peasant mir atrophied?
B N Mironov vs. Nefedov C.A.
It is of ultimate importance to bring the attention to the explanations of the institutional
discontinuity, i.e. institutional innovations implemented, following the post Emancipation
revolution of 1905. Is there a sufficient reason to assume that the First Duma of 1906 and
Stolypins Land Reform of the same year, entailing the individualisation of the right to land
holding and the transformation of communal use right in land to household heads property right,
indeed were the concessions demanded by the peasantry, the intelligentsia, and the peasant
workers (Sztern 1997, Johnson 1979, Ascher 1988)?
If the peasantry revolted in 1905, setting the landlords demesne on fire, as the result of excess
exploitation through the fiscal system, the latter financing the industrialisation, (Gerschenkron
1962, 1968), which resulted in pauperisation, the logic in this thesis would advise, that the
collectivist practice within the realm of the village commune – the mir- would during the post
Emancipation period intensify. The peasantry would then attempt by all means to resist the
individualising Land Reform, named after P.A. Stolypin. The peasant dependence upon the
mutual safety mechanisms of the commune would grow, necessitating coercion on the part of the
Tsarist state in the course of Reform implementation. Such conception of the effect of the
industrialisation interacting with the population increase, upon the living standard of the
peasantry (Nefedov C.A.), would vindicate Judith Pallots 1999 analysis of the Land Reform
1906-1917 emphasizing peasant resistance to the individualising measures.
Contrary to professor Pallots proposition, Klimin 2002 reveals that P.A. Stolypin himself lived
amongst the peasantry and observed that the collectivist practices in fact atrophied. The peasant
mir, Stolypin concluded, played out its roll, the peasants preferred to work for the prosperity of
their own households rather than ensure their fellows. Engelgardt P.N. eye witness account
observes as well the ever present and during the post Emancipation period rising individualism
within the peasant milieu (Sztern 2007).
The latter observations, as well as Worobec’ (1990), indicate rising peasant living standards, and
consequently increasingly more independent of their fellows peasant households, leading the
rural constituency during the post Emancipation era. The revolution of 1905 should in such case
be understood as a battle for civil rights including the rights to property in land rather than a
desperate peasant protest against immiserization and hunger. Stolypin’s land reform could then
be conceived of as a demanded, Tsarist concession and not as a measure implemented through
pure coercion, aimed at administratively creating a well to do peasant strata loyal to the Tsarist
Crown ( based on Ascher 1988, Klimin 2002). The former interpretation is congruent with the
expectations in the model, where the railroad contributes to the lowering of the risk to perish of
starvation, thereby intensifying the peasant demand for the legalisation and enforcement of
household heads property rights, i.e. the disintegration of the village commune. (Sztern 2008)
The work of the modern Russian scholars B.N Mironov , Davydov M.A.2003 complementing the
findings of Paul Gregory and Simms J Y is put against the traditional work of Nefedov C.A. The
latter scholar emphasized the occurrence of a Malthusian crisis interacting with the Tsarist
aspiration to industrialise backward Russia.
33
This process, according to the source, resulted in an impoverishment of the peasantry. Thus
Nefedov C.A. gives the revolution of 1905 a materialist explanation.
Mironov B N writes that in Soviet historiography the occurrence of the Peasant Movement, as
well as the revolutionary situation in 1905 is as a matter of tradition explained by the
pauperisation of the peasantry due to the high rate of exploitation by the Tsarist Sate. The source
quotes N. M. Druzhynin 1946 who saw the accumulation of peasant tax arrears – “nedoimok” as
an evidence of this constituency’s deepening impoverishment (Mironov B N p.2). Increasing
obligations burden and decreasing level of agricultural entrepreneurship, in combination caused
the peasant plight.
Other quoted by Mironov modern Russian sources conceptualise the peasant pauperisation as
ultimately determined by the Russian climate, which chronically caused relatively Western
Europe, low surplus levels (Milov 2001). As regards the reform terminating serfdom in Russia,
Mironov referring to the traditional historian, Litvak 1972, summarises that it had been believed
that despite the Emancipation Act of 1861, the peasantry continued to be exploited by the Tsarist
State in place of the landlords.
The notion of “hunger exports” of grain, “golodnyj export”- with quotations of finance minister
Vyshnegradzky 1887-1892 “Sami neoedim a vyvezem” “- “We will starve but go on exporting..”
inspired the Soviet and partially the post Soviet sources. This inspiration diffused to Western
sources as well for example Atkinson D 1983. Conforming to the traditional interpretations
Nefedov C.A. focussed on the demographical- structural conditions. This source maintained that
the peasant constituency had been impoverished during the entire Imperial period (Mironov B N).
Ryndzjunski 1978 summarises the post reform period according to the traditional Soviet
interpretation:“Utverzhdenie kapitalisticheskogo stroja dostigaetsia cenoj razorenia I
poraboshchenia naroda”- “ The establishment of the capitalist system, had been achieved paying
the price of the peoples bankruptcy and enserfment” (ibid.).
In the West, Simms Y J as well as Paul Gregory 1982, 1994, and Bideleux R 1990, the latter two
sources, quoted in Sztern 1997, challenge the agrarian crisis hypothesis. Simms Y J argues
convincingly that the accumulation of tax arrears suggested an unwillingness rather than inability
to pay. Thus, the arrears accumulation indicated low legitimacy of the autocratic government
rather than peasant poverty. The increase in peasant consumption of the indirectly taxed items
such as tea, vodka, matches, kerosene, as represented by the rising indirect tax receipts, indicate
increased purchasing power and rising living standard of the peasantry. The quoted by the source
publications of the Ministry of Agriculture of 1894 as well as the Zemstvo publications of 1894,
1895 record the improvements in the rural sector. A correspondent in the Korochansk District
conveyed during this period that “The bread the peasants eat is pure and in abundance” (Simms
I Y p.394 Slavic Review).
Among the modern Russian Economic-historians M.A Davydov 2003 challenges the thesis on
“hunger exports” of grain convincingly demonstrating that the internal Russian grain shipments
grew faster than the export grain shipments (Davydov M.A. 2003) indicating a growing national
grain market
34
The available data suggest that during the period 1801-1850 compared to the eighteenth century
the peasant tax burden in real terms had been falling (Mironov B.N. p.7.p. 11). Thus whilst the
Bulavin, and the Pugachev revolts may have partially been set in motion by the peasant material
impoverishment, it seems that for the peasant war of 1905 other reasons for the mass discontent
should be sought (refer to Sztern 1997). The Emancipation Statutes of 1861-1863, constituting
merely an intermediary stage relative peasantry’s full citizenship status, paved the way for
additional discussions within the ranks of the Russian Nobility on the equalisation of the Nobles’
and the peasants rights to landed property (Macey D 1987 p.46). The Great Reform
simultaneously increased the expectations of success (refer to Sztern 1997) triggering resistance
to the old order within the ranks of the peasantry (Mironov 1999). The Emancipation reform
freeing the peasant from serfdom rendered patriarchalism, which supported and had been
supported by serfdom, considerably weakened. The individual peasant was increasingly
conscious of his personal right vis á vis other family members (Burds J 1998, Mironov 1999).
The crucial factor enhancing the dissolution of the extended patriarchal family structure
(Worobec 1995, Frierson C 1990) i.e. the individualisation process, had been the peasant rural –
urban migration for side earnings – otkhod (Burds J 1998 p 34). The growing frequency of
household divisions “semeinye rozdely” indicates a “cultural crisis” triggered by the waves of
migrant workers commuting between the urban and the rural milieus (ibid, Smurova O.V. 2003).
Data gathered by the Ministry of Internal Affairs, during the period 1861-1882 inform of, on the
average per annum 116.229 household divisions in European Russia (Burds J 1998 ). 1874-1884
this number increased to 140.355 (ibid). At the end of the investigated period 1884 more than
half the households in thirty seven provinces of European Russia made the transition from the
extended to the nuclear family structure (ibid., Worobec 1995)
It is of special interest to note in this context that according to the study made by Cathy Frierson
1990, proximity to the railroad points resulted in increased family divisions frequency, that is
rising individualism. Rising family divisions frequency could be explained by intensified otkhod
facilitated by the proximity to the railroad points (MSU Lomonosov Economic History Seminar).
Whilst the first generation of otkhodniki had to be forced by the parents to leave for side earnings,
its successor saw a “huge wave” moving towards the capitals and other cities (Burds J 1998 p
38). Smurova O.V. 2003 investigated the clash of the rural culture with the dressing and worship
habits of the secularised pitershchiki- otkhodniki that worked in St: Petersburg. The latter were
considered attractive marriage partners relative their introvert rural brothers (Smurova O.V.
2003) indicating the trends of the future, that is the dissolution of the Greek Orthodox
patriarchalism structured village commune- obshchina .
Besides secularisation, otkhodnichestvo brought about an additional revolutionizing challenge to
Greek Orthodoxy, legitimizing the Tsarist autocracy. The flight from the Orthodox Church
consolidated obshchina structure, towards raskol-Old Belief (Burds J 1998), could be seen as the
result of the “working on the side” facilitated by the railroad construction. The active choice of
the religious institutions entailed per force an individualisation process (based on ibid.). The
peasant flight into Old Belief, concerned, the mainstream Orthodoxy sanctioned obligation of
otkhodnics - wage workers, to repatriate the funds earned in the industrial sector to the village
commune. Thus, the adherence to mainstream Orthodox Church relatively Old Belief,
strengthened and perpetuated the rural –urban ties.
35
In effect mainstream Orthodoxy legitimized the communes wage repatriation claim on the
otkhodnics, thereby inhibiting the formation of a genuine proletariat in pre revolutionary Russia
(ibid). Thus, not only secularization, but also the increasing adherence to Old Belief, had an
individualising effect as regards the commune village structure.
However it should be noted that the increasing otkhod as well as the resettlement of the whole
families in the city centres, put a heavier fiscal burden on the remaining commune members as
all obligations were collectively defined, and all in the commune registered members were
collectively responsible – krugovaya poruka, for their fulfilment (Burds J 1998 p. 38). Whilst
the leaving members could experience an increased level of personal rights, those remaining
behind were in the short run more dependent on the risk sharing mechanisms of the commune.
This dependence may have retarded the transition to individualism. Moreover the commune
constituted a means of old age insurance seeing the “peasant proletarians” (Johnson 1979) that
reached the age of 40 returning to their native rural villages (Burds J 1998,).
Nevertheless, the research of Jeffery Burds 1998, Cathy Frierson 1990, Mironov 2000, 1999, and
others clearly indicates that P.A. Stolypin may have been right assuming in a future oriented
evaluation that the commune played out its role, as a survival strategy, as assessed by the
peasants themselves.
Otkhodnichestvo- wage work in the industrial centres weakened the authority of the bolshak- the
head of the household, which in turn implied weakening authority of the commune assembly
skhod, and the atrophy of the collectivist coordinating and at times repressive mechanisms of the
collective.
The concluding causal chain is presented in the figure below; The Emancipation of the serfs
“from above” as a pre emptive measure, constitutes a fulfilled by the Tsarist state pre condition
for genuine modernisation (Rostow WW 1960, Cracraft 2004). The process of reconstitutive
downwards causation (Hodgson 2004) ensures the change in the “habits of thought” (Veblen
1931) of the peasant population increasingly demanding personal rights (Burds 1998, Mironov
1999, Frank S 1999). Moreover, state entrepreneurship (Gerschenkron 1962) as manifest in the
construction of the railroads sets the whole nation in motion. The growth of internal passports
(Burds J 1998 Table 1.2 and 1.3 ) indicates an increasing mobility of labour the formal
restrictions (Gerschenkron 1962, North 1990) not withstanding. The massive migration wave
(Burds J 1998) following the legal logic, of the time, is in itself an indication of the weakening
patriarchal authority (derived from Gerschenkron 1962, 1968). The dissolution of the extended
family structure carries with it the atrophy of the commune as this unit had historically been
kinship based (De Madariaga 1998).
36
Fig VII
Crimean War
Industrialisation
Railroads
Emancipation of the serfs 1861-1863
Otkhod
Urban wage work
Cultural revolution
A.Transition from
extended to nuclear
household
B.Increased demand for
personal rights
C.Stolypin Land reform
Individual rights to land
This figure is based on: J. Burds (1998), Smurova OV (2003), Sztern (2005, 2007, 2008,)
Hodgson (2004), North (2005), Frierson C (1990), Worobec (1990), Cracraft (2004)
Concluding remarks
The combined “top down”- “bottom up” perspective, enabled by the complementarity between
NIE and Evolutionary Institutionalism, fills in important aspects, in the Gerschenkronian
“substitution for missing pre requisites for industrialisation” argument. The latter, explains the
substitution of state entrepreneurship for the deficient market mechanism in backward
economies.
The above overview is focused on the continuous over time, institutional proprieties of the Tsarist
Russian state, proposing that state entrepreneurship in the case of an autocratic, totalitarian
government is in the long run profoundly costly to the society. The Gerschenktonian concept “the
costs of dictatorship” (Gerschenkron 1962) is crucial in this context. The institutions of a
totalitarian state, per force structured to prioritize the interests of the collective on all hierarchy
levels, whilst repressing individual’s claims to absolute life and property rights, constitute the
ultimate source of institutional backwardness and the congruent economic pauperisation.
37
The political supra structure follows a political rationality (F.A.v Hayek 1944) determined
pattern. The totalitarian state will aspire to maximally control social and economic activity in
order to further its perpetuity of rule goal. The economic equilibrium scope of state interference
in the economy will be systematically surpassed (Sztern 1997). The modernizing and developing
reform will constitute a lagged response to geopolitical vulnerability expressed as a military
debacle. The reform will also constitute a concession, forced through an internal revolt as well as
the credible threat from below of future such revolt (Greif 2006). In the absence of other
legitimacy base than a set of religious beliefs depicting the ruler as an intermediary between the
divine and the human, as the nations anointed patriarch, battle field success, becomes the second
main autocratic rule legitimizing factor (derived from G.L.Freeze 1996).
Thus the since the rule of Peter the Great, ongoing relative weakening of the Orthodox Church’s
political influence (Hartley 1999, Hughes L 1998) structuring and preconditioning the Russian
society (Hodgson 2004), rendered territorial defence and conquest cardinal as the legitimization
ground for the perpetuation of autocracy (derived from Freeze G.L. 1996). As typical of other
totalitarian structures, the Empire of the Tsars engaged in endemic territorial conflicts, whilst
establishing a war economy, where the resources available were allocated according to the
prerogatives of war (Tables I, II, III). As characteristic for systems of this type, the national
collective’s rights is by the ruler conceived of as superior to individual claims.
Referring, to the work of Anisimov 1989 the above argument emphasize that the Tsarist
autocracy had been, burdening the Russian civilian economy with the “costs of dictatorship”
Gerschenkron 1962. Those costs are identified as; the long run invention, and innovation,
forgone due to the degrading treatment of the individual, causing extreme risk aversion (based on
Poznanski K1985, 1992, Mokyr 1990, North 1990, Hodgson 2004). This condition rendered
Tsarist Russia historically dependant on technology import continuously additionally
consolidating the totalitarian state structure, which repressed individual creativity and talent over
time (Fig III). T Owen 1995 defines the costs of excess centralisation of economic activity, i.e.
state entrepreneurship substituting for the market, as the private entrepreneurship forgone due to
the Tsarist state’s encroachment, despotic and arbitrary interference in the economic sphere.
Autocratic state structure forcibly enforced rural collective responsibility for all obligations krugovaya poruka - units, fostering “habits of thought” (Veblen 1931, Hodgson 2004) in
conducive with divergent behaviour, private risk taking and entrepreneurship (based on
Gerschenkron 1962, De Madariaga 1998, Wood 1990, Worobec 1995, Hoch 1986).
Examining the “other side of the same coin” it is argued that pursuing military-strategic and
geopolitical objectives, the Tsarist autocracy unintentionally brought about genuine
modernisation (Fig. IV). The “from above” effectuated, technology import, per force implied the
import of institutions. In the Tsarist Russian case the importation concerned politically pluralist
and relatively increasingly democratic state structures (Boyer and Orléan 1993 applied, Sztern
1997, Zakharova L.G. 1992). This process in the short run deepened the inter estate cultural rift
(Raeff 1984) thereby increasing the costs of transactions including uncertainty within the Tsarist
economy (Nee V 1998, North 1990), which necessitated additional encroachment by the Tsarist
state. The thus created vicious circle (Fig. V) continuously retarded socio economic progress.
38
Nevertheless the long term effect of the importation of Western institutions, hastened the
translation of the rural material egalitarianism (Atkinson 1983, Worobec 1995) into an effective
demand for the implementation of the abstract equality before the law principle (applied Boyer
and Orléan 1993, Sztern 1997). The latter process heralded the gradual power transfer from the
state to the civil society.
Enforcing the initially organic, collective responsibility based, obshchina – commune village –,
autocracy unintentionally strengthened the unit of subversion, and the actual vehicle of
modernization in Tsarist Russia (Based on Gerschenkron 1962, Barzel 2002).
The continuous from the times of Peter the Great institutional structure, underwent a
transformation process, during the nineteenth century, under the pressure of the institutional and
technological change, entailed in the peasant Emancipation from serfdom 1861-63, which paved
the way for the industrialisation spurt of the 1890th. Both modernizing processes as a matter of
historical continuity, constituted the Tsarist responses to the Russian military debacle concluding
the Crimean War.
As regards the Tsarist industrialisation effort, railroads construction constituted the heart of the
process. The “iron horse” (Fogel 1964) served not only as an instrument of troops transfer, but
also of famine relief. The latter function played a decisive role in the transition from collectivism
to individualism on all hierarchy levels.
Through the absorption into the Eurasian Empire of already applied in Europe technology ;the
construction of railroads, the Tsarist state contributed to the lowering of the risk for the rural
population to go under of starvation at times of crop failure, simultaneously opening up
additional opportunities for wage work in the industrial centres. The latter, enabled subsistence
risk diversification for peasant households and cognitive-cultural exchange between the rural and
the urban milieus (Martens B 2004, Smurova O.V. 2003) . The mutual insurance mechanism –
krugovaya poruka - (Egertsson T 1990) organically consolidating the rural village commune
atrophied, as the households became increasingly independent of each other. This informal
(North 1990) transition, anticipated the individualisation of the peasant land holding, the Land
reform of 1906 named after P.A. Stolypin. The latter reform enhanced the democratisation within
the Euroasian Empire ( based on Pipes 1994).
39
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