Economic history of Russia under czarist rule

Russian Economy Under Czar and Today

The economy of Tsarist Russia was a mixture of different philosophies and influences that generally performed poorly. As a general rule, the Russian economy lagged behind the leading nations by a generation or two. Approaching the First World War, the Russian economy showed signs of promise, but these merely veiled the underlying weaknesses. When the war exposed these weaknesses in the most brutal fashion, Tsarist rule came to an end.

The Russian Empire began life essentially as a feudal state. The economy was largely agrarian, with serfdom being commonplace, and this being the replacement in the early 19th century for slavery. The disparity of wealth was high. As other European nations were entering the Industrial Revolution, Tsarist Russia was barely throwing off the shackles of serfdom, in 1861.

However, they merely replaced on set of economic shackles with another. The serfs were forced to pay heavy taxes to their former landowners for what was often marginal land. The result of this policy was the perpetuation of economic stagnation and vast income disparity. It wasn't until the later part of the 19th century that Russia began to move into the Industrial Revolution.

One of the country's most significant infrastructure development projects was the Trans-Siberian railroad, which opened up the east to economic development. However, the costs to the Empire for the building of the line were high, and the expected benefits failed to materialize in the timely fashion. Industrialization, however, had some to European Russia by the time of Nicholas II's ascension. As the economy slowly lurched out of agrarianism, income disparity continued, with industrialists holding the bulk of wealth at the expense of workers, who were paid poorly, working in unsafe and substandard conditions and lived in poverty.

These conditions remained through the early part of the 20th century. The discovery of mineral wealth in Siberia gave cause for optimism. Under the far-reaching reforms of Sergei Witte, Russia has adopted the gold standard and encouraged foreign investment. The Baku oilfields had been developed and the agricultural sector had seen improvements since the former serfs were no longer required to pay their land tax. Production of steel, oil, coal and iron had tripled between 1890 and 1990.

However, the economy was weak, hobbled by corruption and poor management. Exports were being reduced and imports increased. Grain production stagnated. Inflation was high, which reduced real incomes dramatically. Food shortages become rampant, especially in Petrograd. The outbreak of war exacerbated all of these problems, and the high death toll demoralized the country. The economy all but collapsed, and with it went the Tsar and the Russian Empire.

The economic chaos that ushered in the Soviet Union met the Russian people on the way out of the Soviet Union as well. Despite the problems in the 1990s, ranging from massive unemployment to currency collapse, the Russian economy today is showing signs of improvement, modernization and stability.

Since the currency collapse, Russia has posted consistently high GDP growth figures and ranks first in GDP growth in the G8. Macroeconomic indicators are consistent with an emerging economy. The economy today is based around natural resources, especially oil, and there is an emerging high-tech sector that is capitalizing on Russia's stock of experienced technical and scientific staff. The economy is being opened to investment, which along with oil revenues has fueled the strong growth. Foreign direct investment has risen from $14.6 billion in 2005 to $45 billion in 2007. Exports are significantly higher than imports.

The rate of poverty remains higher than found in the West at 15.8%. This is particularly evident outside of the major cities (an estimated 90% of the country's wealth is in Moscow). The country remains highly dependent on the resource sector, and needs to rebuild its manufacturing base. Russia's banking system is weak compared with those in many other emerging markets, much less developed markets. Inflation remains high, at 12%.