On the formation of the phenomenon of the economic lag of Russia in the first half of the 19th century

Abstract

The article is devoted to the analysis of the reasons for Russia’s economic lagging behind during the Great Divergence. The author tests the well-known hypotheses that industrial development was hampered by the opposition of the nobility and the cheap labor of serfs. Upon closer examination, these assumptions are not confirmed. The economic lag was primarily due to the lag in railway construction, which in the 19th century was the main driver of the development of heavy industry. The article analyzes the policy in the field of railway construction during the reign of Emperor Nicholas I (1825–1855). It is shown that the formation of this policy took place in a conflict between the emperor and the ministerial bureaucracy, headed by the Minister of Finance, Count Kankrin. While Nicholas I was guided by military-strategic considerations, the ministers proceeded from economic interests. Economic calculations pointed to the unprofitability of railways compared to transportation by waterways. The technical conservatism of the bureaucracy did not allow adequately assessing the prospects for new technology and the possibility of reducing the cost of transportation in the future. The article analyzes the difference between economic policy in Russia and in England, the United States, France and Germany, which led to the lag of Russia. In the West (with the exception of France), economic policy developed spontaneously on the basis of private initiative. The Russian bureaucracy blocked private initiative, it sought to preserve the capital stored in state banks to finance the great power politic. On the other hand, the railroad “mania” in England was accompanied by a speculative boom and the ruin of many railroad companies. For the Russian bureaucracy, this was another argument in favor of refusing to attract private capital. Meanwhile, “mania” promoted the mobilization of capital from small shareholders for railway construction and spurred the development of industry. Another way of using controlled private initiative was possible, which was implemented in France in the “Legrand project”. But the Russian bureaucracy refused to use private initiative, which doomed the country to an economic lag.