When Rouble Was Golden – Russia that we lost in the ashes of WWI and the coup d’etats of 1914-1917

On the 6th of March (21st of February by the old style) 1917, the colour “bread” revolution was started, which heralded a great disaster, spanning a century…

In the years before Russia got drawn into WWI, it was displaying fabulous growth, both socially and economically. WWI, also known as the “War of 4 cousins” – as all heads of the warring states were blood relatives – was a disaster for Russia, and weakened it sufficiently to facilitate the second – internal – disaster of 1917, which all but destroyed it.

One of the contemporary writers said that “Pity that we have Nikolai the Second, and not the second Nikolai”, referring to the strong in the will Nikolai I. Nikolai II, while being praised by the Western (British) powers, delivered Russia on a platter, and then was dumped by the Brits to be executed by the followers of their agent – Lenin. There was only one other Russian ruler, who was praised as highly by the West – Yeltsin, who caused destruction of Russia almost to the point of no return in the “Wild 90s”.

In November 1914 the Austrian Foreign Minister Leopold Berchtold wrote: “Our main goal in this war lies in the long-term weakening of Russia.” Oh, how well they succeeded!

What did Russia lose? Marking the coming 100th anniversary of the two coup d’etats of 1917, Russian weekly “Argumenty and Fakty” publishes in 2016 a series of articles – “When Rouble was Golden” – showing some key points of Russian life before WWI. Here I want to present the translation of the series.

1Nemo1KPB8UjQjrURqn6V7Mscungx44XS2Please note that translating a documentary film or an article takes a lot of time and emotional effort. I am doing it on a voluntary basis, but if someone feels like supporting my work, a Bitcoin donation to the following address is appreciated: 1Nemo1KPB8UjQjrURqn6V7Mscungx44XS2




Publication of 03.02.2016, regarding the foundations of the Russian economics.


Harvest. Urals, 1907

What was the country, that lost forever? What was the foundation of its economy, when oil was not the main article of Russian exports nor the main source of state revenues? Argumenty i Fakty got at its disposal a unique booklet, first published in 1958 in New York City in 8 thousand copies. Edited by B. Brazol, it compiled statistics showing that over the last 15-20 years before the First World War, Russia made giant steps forward both in the economy, and in the development of the social and educational systems.

“AiF” starts a series of articles in which we will talk about how our country developed in the early twentieth century. In this edition we will focus on the golden rouble and gold reserves, revenues and expenditures of the state budget, taxes and savings.

A strong currency

During the reign of Emperor Nicholai II, by the law of 1896 Russia introduced the gold currency standard. That is, the issuance from each rouble was tied to the amount of gold reserves of the country. In case of emergency, the state Bank was granted the right to issue 300 million paper roubles not backed by gold, but it never used this right. The rouble was equal to 0,7 grammes of pure gold. As for the paper money (banknotes) and gold coins — they were equal in value. The content of the precious metal in the golden rouble surpassed the gold content of the coins of other countries. The rouble as the currency enjoyed a steady demand both inside the country and in the world.

In that period the financial system of all developed countries were also based on the gold standard — the amount of money had to match the size of the gold reserves of a country. Today the exchange rate is determined by its correlation with the dollar, while gold is a regular market commodity.

Positive budget

Russia of that time built its policy not only on a balanced budget, but also on the principle of substantial accumulation of gold reserves. Despite this and without any increase in the tax burden, the state income steadily grew from 1,410 billion in 1897, whereas the government spending remained more or less on the same level. Over the last ten years before the First World War, the excess of government revenue over expenditure amounted to 2.4 billion roubles. This amount is all the more impressive if one remembers that during the reign of Nicholai II, railway tariffs were lowered, redemption payments for land ceded to serfs from their former landlords in 1861 were abolished, as well as some taxes were cancelled.

Infographics: Budget of the Russian Empire by year

Legend: Blue sack – income; gold coins – expenditures; in the circle – income over expenditure surplus; in 1912: * in squares – converted to 2016-roubles.
млн – million; млрд – billion; трлн – trillion

Low taxes

Total sum of taxes per capita in Russia was more than twice lower than in Austria, France and Germany, while compared with England it was four times lower.

Infographics: Total sum of taxes per capita in roubles

Legend: in the circle – roubles; white square* – converted into 2016 roubles (20700p).

The welfare of the citizens

In 1914, the State Savings Bank had deposits for 2,236 billion roubles. From 1904 accumulation of the Russians on savings accounts was steadily increasing — with the exception of 1905, which coincided with the Russian-Japanese war and the revolution.

Infographics: Saving deposits by the population

Legend: млн – million; млрд – billion; трлн – trillion
White square* – converted into 2016 roubles
1 golden rouble was equal to 0.774235 gramme of pure gold, ad at today’s (2016) Central Bank rate would have cost about 2282 roubles.

Bread and Tariffs

The Treasury of the Russian Empire is the dream of any Finance Ministry: minimum os social spending, — said Sergei Bespalov, historian, senior researcher of the Ranepa.

— Russia in the XIX-XX centuries was more fortunate than in the beginning of the XXI century — it’s the Ministry of Finance was successively headed by several talented administrators. First N. Bunge, then I. Vyshnegradsky, and finally, S. Witte. They were engaged in the replenishment of gold reserves, while Vyshnegradsky began preparation of the currency reform, which was conducted by Witte. The reform not only made the rouble convertible, what’s more important, it was valued internally. In addition, Witte cleverly borrowed from foreign banks at low interest rates. Re-borrowing, he managed to reduce payments on previous debts.

Vyshnegradsky is credited with the phrase: “we’ll eat less, but will export”, which refers to the export of bread. he could have well said it, because the export of grain for the Russian Empire was the most important source of income for the Treasury — almost like oil today. And the volume of grain exports had to be maintained at a high level. Exporters of bread were mostly not the peasants, but the large landlords farm — the agricultural firms of today.

The flourishing economy of Russia in the early XX century was carefully prepared. A major achievement of the Ministry of Finance, besides the gold rouble, can and should be considered the Customs Tariff of 1891 which was developed by Dmitri Mendeleev. There is a legend that it was the Customs Tariff, and not the periodic system of chemical elements, that he considered to be his main achievement. Mendeleev was a close ally to Sergei Witte. Customs Tariff helped to protect the market from cheap imports and to develop domestic industry. At the same time, high tariffs led to a rise in import prices, resulting in the Tariff having many opponents.

A major source of revenue waere taxes. It is believed that they were lower than in other countries. However, the standard of living in Russia in the early XX century was also lower. With this in mind, it turns out that the tax burden was comparable to other countries — there no difference “in magnitudes”. In addition to taxes, the Treasury was receiving “redemption payments” — the peasants up to 1905 paid for the purchase of the land from the landlords during the abolition of serfdom.

Government spendings were by a degree smaller — there were almost no social expenditures, pensions were paid to a narrow group of the population. But when they were paid… The whole of his numerous family, including the future leader of the proletariat, lived for many years on the pension, received after death of the Director of public schools in Simbirsk province, Ilya Ulyanov (Lenin’s father).




Publication of 15.02.2016, regarding the development of the industry.


The view from Dorogomilovo to partnership calico factory of Albert Hubner in Moscow.

In this edition we will focus on the development of industry and entrepreneurship, the construction of railways and the already establishing social legislation.

Industrial growth

In the period between 1890 and 1913, the productivity of Russian industry by grew four times. Its revenues not only nearly equalled to the income from agriculture — the produce covered almost 4/5 of the domestic demand for manufactured products.


Upper left corner: value, produced by the Russian factories in billions of roubles
Upper right corner: Construction of agricultural machinery in million of roubles.
Table with comparison of production between 1895 and 1914, top to bottom, in [млн – million / тыс. – thousand] of tonnes: coal, oil, gold, copper, magnesium, cast iron, iron/steel, salt, sugar.

Protection of workers

Industrial development caused a rapid increase in the number of factory workers. It should be noted that the laws relating to the protection of labour, were first published in Russia in the XVIII century, during the reign of Empress Catherine II. In the reign of Nicholai II were issued the laws to ensure the safety of workers in the mining industry, on the railways and in factories, constituting particular danger to life and health, such as gunpowder factories.

Child labour under 12 years of age was prohibited, minors and women were not allowed to work in night shift. Fines were not to exceed one third of the salary. In 1912 there was adopted the law on insurance payments due to illness, for child birth and accidents. Workers unions were recognized by law, strikes were allowed.

Development of entrepreneurship

During the 4 years before the First World War, the number of newly founded joint stock companies increased more than 2-fold, and the capital invested in them — by almost 4 times.

The number of new stock companies and their capital in million of roubles:

The construction of railways

Railway length in thousand of kilometres, 1917 and 2016.

The Great Siberian Railway was the longest in the world.

58,2 thousand km of railways were built in 1880-1917 (1600km per year in average).

In 1916, that is in the midst of the war, Russia built more than 2 thousand km of railways, which connected the Arctic ocean (port Romanovsk, now Murmansk) with the centre of Russia.

On the eve of the war, more than 4/5th of the payments on external and domestic debt were secured by revenues that the state received from the operation of railways.

Russian railway for passengers was the cheapest and most comfortable in the world. Train rides through the Siberian railway.

The price of the growth

Russia in the early XX century made a sharp spurt in industrial development, but became – as is in our time – directly or indirectly owned by foreigners, says Vasily Simchera, former Director of the Institute of State Statistics Committee, the author of the work “Development of Economy of Russia over 100 years.”

Cast iron, steel, gold

— In the early twentieth century, Russia played a prominent role in the extractive industries, production of iron, steel, gold, furs, building materials, military equipment, machine building. According to the total volume of technical and economic development, the country was on the 5th place in the world (after the USA, Germany, UK and France). The volume of national property (60,3 billion gold rubles, while the United States had 397,4 billion in terms of gold roubles) also at the 5th place (in the domestic Russian market, the gold rouble was equal to paper rouble, while on the foreign market it cost 1.85 U.S. dollar to 1 rouble, though the paper rouble was not convertible. — Ed.). At the same time, judging by the production of iron, steel, metal, copper, gold, platinum, locomotives, wagons, grain, sugar and other 27 key indicators, Russia is among the top three countries in the world. Today (2016) it is not included even in the top ten.

Industrial production grew due to the measures of the tsarist government — the domestic manufacturers were provided with incentives, loans and allowances. Metallurgical factories were generously paid for railroad tracks by the Treasury. For the first 13 years of the XX century the volume of production in the country almost doubled, while foreign trade rose by 2,5 times. On the advice of Witte and Mendeleev, Nicholai II imposed significant restrictions on the export of crude oil in 1896 – to secure the development of domestic refining and engineering. Major industrial regions were formed: Central, Urals, St. Petersburg, Volga. Only during the years of Russia’s participation in World War I (1914-1917), the indicators of industrial production decreased, although individual industries (military equipment, food, import) on the contrary showed rapid development.

And whose is the money?

The flip side of acceleration was the increase of Russia’s dependence on foreign (mainly French, Belgian and British) capital. Witte and Stolypin strutted, but not all was good — the economy lacked money. The construction of railways — Caucasian, Chinese — underwent on foreign loans. Even the money of the Russian Industrialists were borrowed. Foreigners were especially eager to invest in the primary sector. Thus, the Donbass and Baku oilfields in fact belonged to the British. In general the foreigners owned at least 70% of its assets in commodities in the heavy and, to a lesser extent, in light industries. This dependency was the reason for the involvement of Russia into a world war it did not need, and the ensuing collapse of the Empire.




Publication of the 17.02.2016, second part regarding the economic foundations of Russia.

Recently, the United States acknowledged that this year (2016) Russia will be able to come out on top in the world in grain export. In the beginning of XX century our country has also fed the world with its bread.

Bread with butter

Agrarian reform of the early XX century wasleft unfinished, but its interim results gave birth to another 40 million Russians, believes Alexander Bessolitsyn, Professor at the Department of Economics, Ranepa:

– 1891-1892 was the last hungry years in the Russian Empire (later the famine only happened after 1917: in 1921-1922 in the Volga region, and in 1932-1933 as a result of collectivization). Harvests increased, also grew the export of grain from Russia. The government stimulated it through the banks – for example, the Russian-Asian, which invested the mostly borrowed from the Western bankers money into the export, built elevators, including offshore in the Azov and Black seas, tankers. There arose grain exchanges, bread was sold to the dealers both by the landlords and the peasants.

The Russian food exports of the beginning of the XX century is called by some experts “a hungry export”, while others say that the excess was exported. Both assessments are unfair. In 1913 the population of the Russian Empire had reached 166 million: in 15 years it grew by 40 million people – mostly rural residents. Per capita consumption of bread in this time was only a little below the norm of 500kg per year, and amounted to 459kg. But such a gap may not lead to starvation. Rapid population growth confirms that the life of the peasants was relatively stable.

Egypt, Turkey and other countries in the Middle East and the Northern Mediterranean were those countries that purchased Russian grain the most. Although it is believed that Russia fed Europe, our grain was mainly shipped to the colonies. It was the cheapest (a pound of rye in 1913 cost 91 kopecks) and was considered low quality – too diverse and clogged. Europeans looked upon it with disdain. Germany bought Russian rye for processing and then sold the flour back to us.

Eggs and butter were more valued – two of the main Russian export product of the period. We started to produce butter only in the 80-ies of the XIX century, but already in the beginning of XX century it was considered the best in the world. Belgium, France, Germany and the UK were eager to buy it.

Agriculture was considered by the Head of the Government, Sergei Witte, as a source of funds for industrialization. Later on the Bolsheviks treated it in the same way. Still, the Imperial government saw agriculture not only a cash cow. Witte announced a program of replacement of grain export by flour: Russia, being one of the leaders in the export of grain, controlled only 3% of the world flour market.

But landlords and peasants, together with the foreign bankers, did not support the idea – it was easier to ship out the grain, while the foreigners did not want to let Russia to a more lucrative market. This problem is not resolved till this day.

Agrarian reform, called after Stolypin (from translator: the fact that there were made 11 assassination attempts over 5 years on the Interior Minister Petr Stolypin speaks volumes! He was ultimately murdered on the 14th of September 1911 in Kiev.), was also developed in the period of the Witte government. It remained unfinished. But the interim results were impressive. The main rise of agricultural cooperation, resettlement of peasants to Siberia and its development.

The government stimulated the development of the village, but the Russian agricultural sector, even in this period of rapid development, all the time suffered from lack of money. Just as the rest of the Russian economy of the early XX century.

Crops

In 1913 the harvest of the main cereals in Russia was one-third higher than in Argentina, Canada and the USA combined. Our country was the main bread supplier for the Western Europe.

In the 20 years preceding the First World War, the harvest of bread almost doubled.


Infographics block by block:
Upper left: Average grain productivity of a “tenth” (1,09 hectare), in hundredweigt; Area of planting of sugar beets, in thousand of hectares.
Upper right: Yearly harvest of the cereals, in million tonnes. Note! In 2015 Russian Federation harvested 104.3 million tonnes grain – not much more than in 1913. In 2012 the harvest was even lower than in the pre-revolutionary Russia, when mainly horses were used in agriculture – 70.9 million tonnes.
Middle: Harvest of cotton, in thousand of tonnes. In 1913 cotton harvest fully covered the needs of the Russian textile industry.
Bottom: Harvest of flax, in thousand of tonnes. Comparing France, Autro-Hungary and Russia. Russia produces 80% of the world flax harvest before WWI.

Stolypin’s agrarian reform (started in 1906)

The peasant was allowed to leave the community and become individual and hereditary owner of the land. In 1913 already 2 million families have received plots. By the beginning of the First World War, 13% of communal land passed into individual ownership.


Infographics: Peasants owned in million of hectares.

The State Farming Bank was buying out landlord estates and giving them to the peasants on favourable lending (up to 90% of the land cost) low-interest terms (4.5%). As a result, in 1917 the peasants owned up to 90% of arable land in the European part of Russia and 100% in the Asian part.

Peasants were moved from European part of Russia, where there was not enough land, in Siberia. Migrants were exempt from taxes, given land (15 hectares for the head of the family, plus 45 hectares for the whole of the family), provided with an allowance (200 RUB) and transported with the whole economy at state expense. In Siberia the settlers were supplied with agricultural machinery.

One hundred years passed, and now in 2016, the Russians are again given free land in the Far East, but only 1(!) hectares per person. Feel the difference…


Infographics: Animal husbandry.
Cattle, in million heads. Note! In 2014 there was only 19,2 million heads of cattle in Russian Federation!
Horses, in million heads.
Export of eggs: 1908 2.59 billion for 54.8 million roubles, and in 1909 2.84 billion for 62.2 million roubles. Russia stood for 50% of world production of eggs.




Publication of 24.02.2016, regarding the state of education.


Nikolai Bgdanov-Belskij. “Schoolgirls”. 1901.

Russia has enough universities, but it “is in need of opening of higher schools, and even more so, in secondary technical and agricultural schools.” This phrase belongs to Emperor Nicholai II. 100 years passed, and our country again lacks engineers and farmers.

In early 1913, the total budget of national education in Russia reached colossal figures by those time – 0.5 billion roubles in gold (1,14 trillion 2016-roubles).

In 2016, the Russian Federation Federal budget spendings on education amounted to 578 billion roubles.


Infographics: Budget of the Ministry of Education above; and the number of literate conscripts below.

Elementary school

Zemskaya (rural) schools of the Ministry of National Education (MNE)

Free education.
Duration: 3-4 years
Subjects: basic – the Law of God, reading, writing, arithmetic. In schools with two classes – also history, geography, natural sciences, Church singing and drawing.


Infographics: 1914: 123.7 thousand schools, giving education to 30% of all children between 8 and 11.

Parochial schools

Duration: 3-4 years
Subjects: basic – the Law of God, Church singing, reading, writing, arithmetic. In schools with two classes – also history.

City schools

Duration: 4 years
Subjects: the Law of God, reading, writing, arithmetic, geometry, sketching, drawing, history, geography, natural history, physics, gymnastics.

High schools

Classical gymnasium
* Men’s
Duration: 8 years
Subjects: the Law of God, Russian and Church Slavonic languages, ancient and foreign languages, philosophy, mathematics, physics, history, geography, science, art, jurisprudence.

* Women’s
Duration: 7 years
Subjects: The same as above, but with a simplified program, plus crafts and pedagogy.

* Real school (with natural-mathematical bias)

Duration: 7 years
Subjects: the Law of God, Russian and foreign languages, geography, history, mathematics, physics, natural history, drawing, sketching, calligraphy, jurisprudence.

In 2014-2015 there were 950 high schools in the Russian Federation. Authorities are trying to reduce their number, closing inefficient ones.


Infographics: Number of High schools on 1913-1914. Total: 63.
The list from top to bottom:
Engineering-industrial: 15
Universities: 10
Military/Navy: 8
Church: 6
Agricultural: 6
Jurisprudence: 4
Pedagogical: 4
Veterinarian: 4
Eastern Studies: 3
Medical: 2
Art: 1

The lessons of the century

The reform of public education in Russia of the beginning of XX century remained unfinished, but the pre-revolutionary system made possible the scientific and technological breakthroughs of the Soviet era, says historian and teacher Yevgenij Spitsyn.

Hordes of illiterates

– The development of the education system in the Russian Empire was consistent and continued on the basis of the democratic principles of classlessness and universality, established in 1803. However, the law on universal primary education did not come into force – on June 6, 1912 it was ultimately dismissed by the Council of State.

It is generally believed (including in the Soviet historical science) that the main contribution to the increase in the number of educated people in Russia was made by “Zemstvo” (country schools), but it is not so. The parochial schools, which constantly created be the statesman in the reign of Alexander III, the chief Procurator of the Holy Synod K. Pobedonostsev, helped more in the education. It is customary to call parochial schools for the “hotbeds of obscurantism”. Pity. The children learned not only to read, but the main skill – the ability to learn, helping them further in the gymnasium or real school. Furthermore the population of Russia has grown very rapidly in this period, so a new “hordes” of illiterate people came to replace the educated ones, thus the number of schools had to increase rapidly and by much.

When mathematicians knew Latin

Russia lagged behind. By 1914, on 1000 people of the population, students accounted for: in Russia – 59, Austria – 143, UK – 152 in Germany – 175, USA – 213, France – 148, in Japan – 146. However, the primary school attendance of children of 8-11 years by 1914 constituted 30.1% in the whole Empire, including in the cities – 46.6%, and in rural areas – 28.3% (see: Russia in 1913. Statistical and documentary Handbook. SPb, 1995). And according to some sources, in the central provinces and in the big cities the education of children of school age was universal.

The Empire’s scholl helped to educate scientists, engineers and designers, who then, in Soviet times, made many discoveries and inventions. The gymnasium included study of Greek and Latin, gave a strong mathematical training. Mathematician could read in Latin, and a philology scholar possessed the knowledge on the natural Sciences. The classical school provided the opportunity to give a really higher education people with a broad outlook, who posessed three ancient as wells as 2-3 modern languages, were familiar with the scientific picture of the world.

Higher education evolved as intensely as secondary and primary – by 1914, there were 63 state-owned, public, private and departmental educational institutions of the higher school, where there studied 123532 students (of those, 71379 in public universities). Self-financed and state-financed students were approximately equal in numbers.

The aim of the pre-revolutionary education was not the economics, but the development of the harmonious human personality. But, as happens in such cases, the rapid economic development of the country became a “by-product” of the creation of schools, colleges and universities.

One thought on “When Rouble Was Golden – Russia that we lost in the ashes of WWI and the coup d’etats of 1914-1917

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