What was sergei witte's economic policy?

Answer 1

Witte believed the only way to modernise Russia and 'play catch-up' with the West was through State Capitalism (control of the economy by the government). The country needed to raise capital for investment in industry, which he did in several interlinking ways:

-large foreign loans:

brought money into the country.

-heavy tax and interest rates in Russia:

more money for the government

-Tariffs:

while bringing money into the country, Witte protected the small developing industries of Russia by limiting imports (but risked other countries doing the same to Russian goods in retaliation)

-1897, put Russian currency on Gold Standard:

this created financial stability and in turn encouraged huge foreign investment in Russia. Conversely, the higher-value roublle helped increase the prices of goods.

Witte's main method for raising the capital and modernisation would be the Trans-Siberian Railway, which from 1881 to 1900 increased from 13,000 to 33,000 miles. It was hoped it would encourage East to West migration of workers, to feed in to industry, however this did not happen. Instead, it helped growth and exports of Russia by making transportation of materials far easier. On the other hand, the growth in population compared with national output shows less production per head, and therefore less efficient production.

His policies did little for agriculture considering 80% of the population were rural peasants. It is thought he focused too much on heavy industry, neglecting others Ike light engineering. Finally, Russia became overly dependant on foreign loans (never good if a financial crisis were to occur and foreign loans have to be repaid). Tariffs making goods scarce, and heavy taxation meant prices for Russian consumers increased, whilst their wages stayed low. Workers had poor living and working conditions, and their discontent was severely repressed. Peasants' outdated farming methods led to less food for all. The increasing population gave peasants less and less land, and worsened food shortages.