The first aspect of Witte’s commercial policy that must be addressed is that of trade tariffs, as this was one of the first problems addressed during his Ministry. In a report to the Tsar Nicholas II the Minister of Finance accepted that there were “very weighty arguments against the protectionist system and high tariffs” but as List taught this was a sacrifice that would have to be made by the peoples of Russia for the good of the nation. In fact this was a system that was already being employed by Witte’s predecessor Vyshnegradski, and therefore it was easy for Witte to “favour a system already existing…. to which the country’s economy [was] already adapted’. However Witte did make changes to this policy and extended its influence further, this was potentially costly though. This was because in previous years Germany had been exporting large amounts of industrial products duty free into Russia, when Witte entered office he imposed duties on iron, steel, and their manufacturers. He believed “free trade did not permit our industry to develop calmly”. This displeased Germany who threatened tariffs on Russian agriculture and raw materials; but Witte claimed Germany had long before been extracting duties on agricultural goods. What ensued was an “extremely bitter tariff war” in which Germany and Russia virtually ceased mercantile relations and set-up minimum and maximum tariff scales against one another. The Imperial Council had grown nervous at the prospect of a breakdown in diplomatic ties between the two powers, and forecast military action. However Witte maintained his nerve and with the support of the Tsar his debut on to the stage of world politics was an eventual success as Germany agreed to his demands. In fact with an agreement for both countries to pay the minimum trade tariffs this commercial treaty proved successful and formed the basis for many more. Russia had proved that she did not want to be treated like a colony in relation to the other Industrial powers, exporting high volumes of cheap grain in order to pay expensive prices for industrial goods. As Witte said, “Russia is an independent and strong power” protectionism was seen as an act of economic independence. However Russian production could still not fulfil domestic demand, and so consumers had to buy foreign goods, thus protectionism also had the benefit of providing the government with more capital.
The population was not just hit by high tariffs on goods imported though; there were also high domestic taxes to pay. Witte’s policies were thus oppressive on both the rural and town population, as compared with the industrial and commercial groups. However for Witte high tariffs and high taxation went hand in hand if the country was to accumulate the vast amounts of capital they needed. Russia did not just need to industrialise, the country needed to industrialise fast. Therefore indirect taxes were installed on household goods like kerosene, matches, sugar, and salt. By 1900 5/6 of all taxes raised were taken from essential household items like these, sugar duties had raised 100 percent, and kerosene by 50 percent. The accumulation of these taxes can be seen in Table 1, and demonstrates that these taxes overtook redemption payments as a source of revenue for the government. Witte also introduced a state spirit monopoly, however this was done under the request of Tsar Alexander III who wanted to see high amounts of drinking curbed. The production and sale of vodka and other alcoholic products thus came entirely under state control. Whether the policy had its desired effect or not is debateable as it proved to be one of Russia greatest revenues, and became one of Russia’s greatest industries. Thus with Witte implementing high tariffs and taxation more could be invested in industry, however there were also other ways of obtaining money that Witte exploited.
Foreign loans meant that Industrialisation would be paid for by someone else, Witte borrowed as much as he could. However in order to obtain as much as possible Russia had to make itself appear to be a good investment with a stable economy, hence it became a primary concern of Witte to stabilize national credit. The solution to this was seen as the Gold Standard and it was implemented in 1897. Witte himself believed “This measure definitely established Russia’s credit and put her financially on an equal footing with the European powers”. Infact he believed without the Gold Standard the Russian economy would have collapsed during the Japanese war. In order to create the conditions for entry in to this monetary system state debt had to be increased and there was the amortization of the debts of the Imperial bank. However it does appear that entering the Gold Standard was not a new idea enforced by Witte, his predecessors Bunge and Vyshnegradski had both prepared the country’s finances for its introduction. Witte simply had to elaborate upon the reform, although he did have to overcome a lot of criticism and anti Gold Standard thought, and there was also pressure from France to join their Bimetal-Standard. Nevertheless, again on the international scene Witte held his nerve and chose the best route for Russia. In having the Bill passed Witte came up against fierce competition in 1896 but with the support of the Tsar it was installed in 1897. Witte himself goes as far as to admit, “It may truly be said that Russia owes the Gold Standard solely to Nicholas II”. The Gold standard made the rouble easier to convert for foreign investors, and made international transactions easier. In Table II this foreign investment in Russia can be seen to be increasing sizeably in to the 1900s and beyond, French investment increases from 67million roubles in 1890 to 226million by 1900. Thus the success of this policy is easily established, Witte wanted more foreign money and he got it, he cleverly had someone else pay for industrialisation in Russia.
With Witte obtaining so much capital it could be spread across improving growth and expansion in Russia, but as Witte stated, “It is necessary not only to create industries but to force industry to become prosperous”. This demonstrated a different objective Witte felt this money achieved, this was that with each new wave of foreign capital and the state acting as competition to industry; this would force Russian capitalists to seek compensation in technical improvements, which in turn would lead to price reductions. In total it is believed Russia secured several billion roubles of foreign capital, in his memoirs Witte claimed he secured 3 billion roubles. Table III shows that this money came from the major industrial countries like, Germany, France, the USA and UK, and between 1890 and 1900 it increases enormously. Whereas there was criticism about the level of this borrowing amongst his contemporaries the Minister of finance believed it necessary to industrialise and would have borrowed more if it were possible. With this money Russian industry was able to grow, infact the economy grew incredibly fast, during the 1890s this rose as high as 8 percent, making her the fastest growing economy at this time in the world, this can be seen in Table IV. Industry was facilitated by the establishment of state investment especially in areas such as the railways, one of the best examples of this was the Trans-Siberian Railway made possible by French banking interests. Railways became a big part of the capital spending in Russia, it stimulated the iron and steel industries aswell as their manufacturers and allowed better communication and mobility of goods in the nation. Between 1860 and 1900 railway mileage increased by approximately 2300 percent, see Table V. Money was also spent on schooling of the future industrialists and commercial schools were established. This would mean that aswell as putting the facilities in place for industry; Russia would also have a new breed of industrialist who could take advantage of the situation. Banking was also another area of importance and the state bank funded private banks and joint stock companies giving the population confidence, and encouraging them to pay their profits in to an account.
