Russia: A Mercantilist Economy

Posted on

Dr Nadia Vanteeva, Senior Lecturer in Economics at the Bristol Business School, gives this abstract from her latest research project.

The rapid Russian industrialization at the end of the 19th century took place behind high tariffs, protecting nascent firms against foreign competition; such firms also enjoyed protection against domestic competition through state-imposed entry restrictions. Furthermore, firms enjoyed state-subsidized capital loans, state-supported cartel pricing and wage controls. This led to the characterization that Tsarist industrialization policy was a classic example of List’s infant industry hypothesis. However, the new industries at the time were concentrated first in railroad construction, followed by the iron and steel, coal mining and machine tools.

All of the above industries were chosen by the state for development and were also under its close governance. Under a comparative advantage hypothesis, none of the above capital-intensive industries were likely candidates for success, given Russia’s then economic and technological backwardness. Gerschenkron hypothesized that the motivation for the Tsarist industrialization plan was to provide industrial support to develop a modern military. If Gerschenkron’s hypothesis is correct, then direct state involvement in industrialization is not a temporary phenomenon as the case in many countries, but a more permanent feature of Russian economic model. Thus Tsarist industrial revolution may be a better example of a mercantilist economy spanning Russia’s large contiguous empire area in much the way described by Heckscher’s continental system. It might explain not only the peculiar emphasis in Russia for the capital goods rather than consumer goods industry, but also where such industries may be located, and why some regions are more favoured for industrial development over others.

Leave a Reply

Your email address will not be published. Required fields are marked *