UNIT-4
Economic development of U.K, U.S.A, Russia and Japan
1917 was the year the Russian revolution changed the course of world history. Before the revolution, the Russian Tsar, Nicholas II, was the ruling the country while Lenin was in exile. However, after the revolution started taking its roots, Lenin started ruling the country and the Tsar was put into prison.
Under Tsar Nicholas II (reigned 1894–1917), the Russian Empire slowly industrialized. During the 1890s Russia's industrial development led to a large increase in the size of the urban middle class and working class. The rise in new sections of society provided a firm base for the development of an even more dynamic political atmosphere. The state of Russian economy was such that much of Russia's industry was owned by the state and foreigners.
In the twenty years from 1895 to 1913, the Russian economy had grown by more than 5% each year. However, there were regular interruptions, especially during the period of the 1905 revolution. But their economic growth had again returned to the same high levels between 1907 and 1914. During these 7 years (1907-1914), Russia started growing from a very low level (in relative terms), still Russia’s economy was one of the fastest growing in the world. The growth in the cities was on an even higher level. Growth in industrial output was quite high (between 6-8% per year).
Talking about the western Russia, markets were emerging which was seen as an “investment opportunity”. The conditions for investment were very appealing to European finance capital in search of new markets. Therefore, Russia became a key market. By the time of the revolution, foreign firms controlled half of all investments in Russia, with the allies like France and Britain. They held about 3/4th control of these markets.
Still, Tsarist power had control over all institutions and the major economic entities were concentrated in the hands of one man. The Tsar could personally guarantee investments into economic activities. It was under his hands to how to deal with any trouble from the trade union and Social Democratic movements.
Hence, Russia was seen as a stable power. With regards the performance of Tsarist Russia’s economy, people had no idea that the war, once started, would completely shake the political and economic structure of such a huge country as the USSR.
Just before the outbreak of the World War 1, Russian economy was performing quite well and it was constantly growing at round 5%. Availability of cheap labour, introduction of steam power in industries and developing industrial bases in Moscow and St. Petersburg was backing Russia’s economic growth tremendously. The army had been reformed and the autocracy regained confidence and a certain degree of stability after winning the 1905 revolution. Despite these strong factors, the fact that the position of the masses was dire was impeding the expansion of industrialization to some extent. Strikes and protests had been on the rise between 1912 and 1914. Even the ruling class (monarchists and liberal bourgeoisie)was also unhappy, although the reason behind their displeasure was different from that of the masses’ point of view.
World War I set up the conditions for its future leader, Vladimir Lenin to lead the country after the revolution of 1917. The Soviet Union initially attacked on East Prussia, which was held by the Germans. In 1914, Russia had the largest army in the world, standing at 1,400,000 soldiers. Hence, Russia was one of the superpowers of Europe at the time.
As the Great War progressed, Russia continually suffered heavy losses and when the war was over 2.5 million Russians were killed. Moreover, the economic losses were staggering and Russia was on the verge of complete collapse. These losses placed a great burden on the Russian government, pushed the Russiansinto famine conditions. In the end, Russia was destroyed and the desperation brought the country to rely upon Vladimir Lenin to bring back to its former power and strength.
During World War I, Russia’s economy was in great strain. The working conditions and the life of its lower class citizens were humiliating. Just like most industrializing countries of the time, the backbone of Russia’s economy was its working class. The war raged havoc on conditions of the people and they were forced to work inextremely difficult conditions. This was due to the fact that there was no system for the regulation of pay, work hours, or safety conditions for the worker. This meant that workers were forced to accept a below satisfactory amount of money and the workers were forced to work for as long as their employer told them along with already dipping low pays that they receive.
Further, the lack of safety regulations made working conditions potentially dangerous. The employerswere not, by any law, bound to have spent any amount of money on the safety of the facility within the factories. Hence, the lack of regulation proved to be a valid reason for the workers to revolt.
Talking about living conditions inside their homes, the workers lived in conditions which were not better either. They found themselves living in cramped and unsanitary conditions. The lack of space and sanitation made it so the workers found no peace inside their homes, where they did not have room for themselves. They would often get sick from the unpleasant conditions. Russia is located in the north where the cold winters could easily be fatal but there was no access to heat for the people. These serious conditions both at home and at work, were the basis for the Russian Revolution.
After the Revolution, there was an economic disaster. By 1919, average incomes in Soviet Russia had fallen to less than 600 dollars. Comparing to today’s world economy, this level is experienced in the poorest countries of the world. Further, the harvests failed and famine conditions began to appear in 1919-20. In many areas of Russia, the average worker’s daily intake was below 1,600 calories (half the level before the war began). Spreading hunger was one torment and a wave of deaths from diseases like typhus, typhoid, dysentery and cholera; another.
The government of the Soviet Union from 1921 to 1928 adopted an economic policy called “New Economic Policy” (NEP). This policy represented a temporary retreat from its previous policy of extreme centralization and doctrinaire socialism.
In 1918, Russia adopted the policy of War Communism. This policy brought the national economy to the point of total breakdown by 1921. In 1921 a rebellion, known as the Kronshtadt Rebellion, began. This rebellion pushed the Communist Party (lead by Vladimir Lenin) of the need to retreat from socialist policies so as to maintain their hold on power.
Finally in 1921 itself, the measures of the New Economic Policy were introduced. These measures included the return of most agriculture, retail trade, and small-scale light industry to private ownership and management while the state retained control of heavy industry, transport, banking, and foreign trade. Russian economy was reintroduced with money in the year 1922. Previously, money had been abolished under War Communism. Further, the peasants were allowed to own and cultivate their own land now but were subject to regulated taxes to the state.
Therefore, the New Economic Policy provided some stability to the economy and allowed the Soviet people to recover from devastating years of continued war, civil war, and governmental mismanagement. As the economy stabilised and grew, there was rise of many small businessmen and managers. These flourished people came to be known as NEP men.
However the NEP was merely a temporary experiment to help and support the economy to recover while the Communists kept solidify their hold on power. The NEP was resolved by the government’s chronic inability to procure enough grain supplies from the peasantry to feed its urban work force.
In 1928–29 there was a shortage in grain production and procurement. As a result, Joseph Stalin (country’s strongest leader) had to forcibly eliminate the private ownership of farmland and he had to bring back the agriculture under the state’s control so as to ensure the procurement of adequate food supplies for the cities in the future.
This sudden and major policy change, which destroyed millions of the country’s rich private farmers’ businesses, marked the end of the NEP. Finally, imposition of state control over all industries and commerce in the country was declared in 1931.
One of the crises that occurred during the NEP period that related to pricing was the Scissors crisis. It was called the scissors crisis because, like the blade of an open scissors, the prices of agricultural goods and industrial goods were diverging. It stimulated a rapid recovery in Russian agricultural production. Industrial production failed to match this growth, however, which resulted in significant shortages of manufactured goods. This, therefore, resulted in changing prices among both sectors, but in opposite directions.
Hence, the problem was that the farmers were able to get very low amount for their grain when they sold it on the open market but when they went to purchase industrial good, the prices were so high that they were unable to buy them due to their own low incomes. This prompted their unwillingness to sell their grains as they were not able to get fair prices for their grains.
By 1923, the prices of industrial goods were 213% higher than the 1913 levels, and agricultural prices fell by 89%. Further, the farmers resisted selling their produce and reverted to subsistence farming because they did not even have enough income to further invest to produce next crop and sell them into the market. This began a famine like situation in Russia.
Another factor that that caused this crisis was the fact that the state industrial syndicates demanded high prices for manufactured goods which the farmers neededover which the states enjoyed monopolistic approach. The state was also principal purchaser of bread grain and they bought it very low prices. So, even though the farming sector was private, the state pretty much decided the prices paid for their produce.
Therefore, Scissors crisis played a leading role in the abolishment of the NEP and the rise of communist approach again, in Russia in later half of the third decade of 20th century.
References
The Russian Revolution-Wall street journal.
World History, Norman Lowe
