章節 9: Conditions for initiating industrialization
In terms of current European economic thought, classical liberal economics, represented by Adam Smith and David Ricardo, remains highly popular.
If one were to summarize the principles of this economics in a single word, it would be: laissez-faire.
Classical liberal economics decries monopolies and opposes state intervention in the economy. However, while this mainstream economic theory is in vogue, some non-mainstream economic theories are also emerging.
Friedrich List is one of these challengers.
List was born in 1789 in Germany, in a divided and yet-to-be-unified German region. Hence, his economic theories served the cause of a unified German state and nation, whereas classical liberal economics is a form of "cosmopolitanism," rising directly from the individual to all humanity without regard for national or ethnic layers.
Based on his critique of Smith and others, he developed the theory of "national economics," asserting that political economy or national economy is derived from the concept and essence of the state. It teaches how a nation, in the current global context and its unique international relations, should maintain and improve its economic status.
Compared to Adam Smith, his economic theory was less idealistic and more practically guiding for the then-backward Germany.
In the context of 1892, for the relatively underdeveloped industrial state of Russia, List's economic views also had significant merits.
After spending some time brushing up on contemporary economic theories, Nikolai eagerly discussed them with Witte during their voyage from Saint Petersburg to Riga.
"I do indeed agree with many of List's views. Russian economists who adhere to Adam Smith's doctrines have not served the interests of the Russian Empire well because they follow economic prescriptions meant for 'all humanity' and 'cosmopolitanism'."
Witte and Nikolai, standing on the deck of a ship sailing through the Baltic Sea under a clear blue sky, engaged in a spirited conversation. This was an area where only first-class passengers could move about.
Before departing, Nikolai had received some inside information about the current Finance Minister Vishnegradsky's deteriorating health due to a stroke.
Given his father's current favor towards Witte, it was likely that after this rural inspection, the title of Minister of Railways would soon change to Minister of Finance for Witte.
"Whether it's rapidly advancing industrial and commercial development or overcoming the country's backward state, it requires substantial financial investment. Is the Ministry of Finance prepared for this?"
Nikolai was not very knowledgeable in this area, but he did know about Stalin and the Five-Year Plans, agricultural collectivization, large-scale industrial machinery, and production competitions!
Thinking about the grand blueprint for industrialization made Nikolai excited, but he needed to understand what his future ministers and bureaucrats were thinking and planning.
"If we rely solely on Russia's weak financial foundation, initiating industrialization will be extremely challenging, and all the burdens will ultimately fall on the lowest-tier taxpayers."
Witte did not believe that Russia could achieve the industrialization feat independently with its own resources; it had to combine with the abundant resources of foreign countries.
"Foreign investment?"
Nikolai nodded in agreement with Witte's concept. Attracting foreign investment had indeed proven to be a successful strategy in post-war Japan, Park Chung-hee's South Korea, and post-WTO China.
"Yes, Your Highness. We must have a sound banking system and a stable currency to attract foreign investors to provide the capital Russia lacks. Only by significantly attracting foreign investment in industry can we overcome Russia's backwardness."
Nikolai was not particularly fond of the idea of borrowing money for industrial development; he himself came from a country that was often among the top three in terms of foreign capital inflows.
On the other hand, Witte was surprised that the crown prince had no reservations about foreign investment and fully endorsed his stance.
Foreign investment was a highly controversial topic within the Russian government.
Even proponents of foreign investment believed it should come with numerous restrictions to avoid competition with domestic entrepreneurs.
Opponents, mostly with a mix of conservatism, Slavophilism, and hostility towards finance and Jewish capital, saw foreign investment as a form of usury, extracting the blood of Russia's productive classes, and believed that future Russia would become a puppet of Western European financial capital, among other conspiracy theories.
"So what are you planning to do to attract foreign investment? Or what measures does the Ministry of Finance have?"
Nikolai found a wicker chair under a sunshade umbrella, had a waiter bring two cups of sweetened black tea, and, with the warm sea breeze on his face, leaned back in the chair, sipping tea he had acquired earlier during his studies in Hankou.
"Thank you, Your Highness." Witte awkwardly took the tea handed by Nikolai from the waiter, watching as he drank it down without savoring, like a hillbilly who didn't appreciate fine grain. "Developed Western European countries have generally adopted the gold standard. If we want foreign investors to have confidence, Russia must also adopt the gold standard."
"What system does our ruble currently follow?"
"In theory, it can be exchanged for silver, but in practice, it's just paper money. Whenever the Ministry of Finance's budget is short, more paper rubles are printed, and since our country lacks silver to support the currency value, the ruble fluctuates in actual value."
Witte spoke eloquently and even made a small defense of the currently troubled Vishnegradsky.
"Both Bunge and Vishnegradsky agreed on establishing a well-credited currency system in Russia. The only debate is whether to adopt the gold standard or a bimetallic standard."
"Ah..."
Nikolai sighed because he had also understood the substantive content of Vishnegradsky's policies in recent times.
Vishnegradsky had been appointed because his predecessor, Bunge, couldn't eliminate Russia's fiscal deficit.
Therefore, he employed far more measures than Bunge to eliminate the deficit, including reducing expenditures, encouraging exports, restricting imports, increasing taxes, raising tariff barriers, and expanding gold mining.
"But isn't it precisely the drastic fiscal measures that have led to our current predicament?"
Vishnegradsky's primary focus was to increase tax collection and not allow widespread tax evasion by farmers, forcing many to sell both surplus and seed grain.
"...Yes, Your Highness."
Even the usually bold and confident Witte remained silent on this politically correct issue. Facts had shown that the strict tax collection and forced exports by the Ministry of Finance had weakened the fragile rural ecology, making it vulnerable to natural disasters.
"We need to find another way."
Nikolai believed that short-term pain was acceptable, but perpetual suffering was not.
The first stop for Nicholas and his entourage was Riga, the Baltic Sea's jewel and the third largest city in the Russian Empire, after Moscow and St. Petersburg.
They arrived in Riga two days after Edgar's group but just in time to coincide with the arrival of the steam cargo ship "Missouri," which was transporting free supplies of food and money gathered by the Atlanta Transport Company for Edgar.
This port city is located at the mouth of the Western Dvina River, or Daugava River in Latvian, on the Gulf of Riga in the Baltic Sea. It lies at the crossroads between Eastern and Western Europe, and between Russia and the Scandinavian Peninsula.
Although Riga is not an ice-free port, it almost never freezes. Combined with its wide and deep harbor and favorable geographic location, it is one of the busiest timber ports in the world.
Like its geographical position, Riga has a unique charm that Nicholas could see from the deck. The city's architecture blends Eastern European and Nordic styles, with generally low houses, narrow streets, and roofs covered with red tiles.
Riga was festively decorated when Nicholas arrived, not just for the crown prince's visit but also to celebrate the arrival of relief supplies.
Russian soldiers stationed at the port carried the disembarking American crew members on their shoulders. Amidst the cheering and joy, workers were tirelessly unloading supplies from the ship.
The joyous atmosphere affected Nicholas, too. This was a pure and sincere act of charity that transcended borders, languages, and races, though the small flickers of light were not enough to illuminate the dark world.
After disembarking, Nicholas was greeted by representatives of the Riga City Council. From his observations, these individuals held noble titles; some were lifelong nobility due to their honors, offices, and contributions, while others were hereditary nobles with lands and estates.
The first day passed quickly. It was already noon when they reached Riga, and in the afternoon, Nicholas only visited St. Peter's Church in the city.
This Gothic structure in the city center features a Baroque-style green clock tower, built 300 years later in 1690, and was the tallest wooden church tower in the world at the time.
Climbing to the top, Nicholas found that the view was indeed spectacular. It was probably the best spot to appreciate the full panorama of Riga, especially on such a clear day. The blue Daugava River and the ancient city of Riga, with its red-tiled roofs and white houses, formed a picturesque scene.
The evening banquet was lively. Nicholas toasted Edgar and his group with traditional Riga liqueur, a vodka mixed with various herbs, which had a distinct bitter flavor.
The banquet was a buffet with a variety of dishes and delightful desserts. Local specialties included braised pork knuckles, cheese-covered mashed potatoes with minced meat, grilled skewers, and baked potatoes.
"At the current loading speed, the first train will depart three days after the 'Missouri' arrives."
Boblinsky and his colleagues from the Relief Committee's sub-office were efficiently organizing the transport plans and distribution schemes.
Nicholas and Edgar's party were pleased with the progress during their inspection of Riga's train station.
"The faster we work, the sooner the suffering of the disaster victims will be alleviated."
Nicholas intended to say something impressive, knowing Edgar was recording his observations for a report back to the United States.
"Shall we visit the disaster area after all the supplies are unloaded and the trains have departed?"
Nicholas asked Edgar about their itinerary. Nicholas's English was excellent, taught by a British tutor who had a penchant for English Romantic literature and had even written letters to Queen Victoria.
"Yes, Your Highness." Edgar paused to jot down notes. "We need to gather the most accurate information."
Thus, Nicholas and Edgar's group waited two more days until all supplies were unloaded and loaded onto trains. Upon returning to the train station, they found it adorned with both American and Russian flags, symbolizing friendship.
"The relief supplies filled 241 carriages, weighing 5.4 million pounds."
Boblinsky and his team, showing signs of fatigue after intense work, reported to the crown prince.
"How many people will these supplies help?"
Edgar scrutinized the transport manifest but, unable to read Russian, sought Boblinsky's assistance.
"The supplies will be sent to 75 villages across 13 provinces, saving at least tens of thousands."
"A little goes a long way." Nicholas patted Boblinsky's shoulder, praising him and invigorating his spirit. "You all deserve a good rest."
Afterward, Nicholas's and Edgar's parties diverged in their missions.
Nicholas focused on investigating rural systems, conditions, and historical issues, while Edgar concentrated on the distribution of supplies, the real situation in Russian villages, and the impact of the famine.
In other words, Nicholas sought to uncover the core issues of Russian rural life, while Edgar examined the surface conditions caused by the famine.
"Regrettably, our schedules differ, so we must part ways for now."
Edgar, as an American, often exhibited either overly formal or informal manners when dealing with Nicholas, reflecting a more egalitarian demeanor.
"What a pity."
After shaking hands with Edgar, Nicholas shrugged. He, too, found the formalities cumbersome, preferring the more straightforward American style.
"Your Highness seems to appreciate this American?"
Watching Nicholas gaze at the departing train, Witt waited a moment before speaking to the crown prince.
"I admire his energy and humanitarian spirit."
"Your Highness's kindness is commendable."
Witt had heard rumors of Nicholas's change in demeanor after an assassination attempt. However, he found the crown prince's benevolence unchanged.
"Let's prepare to depart as well."
"Yes, Your Highness."
Through Nicholas's conscious and unconscious actions, a new branch in the river of history began to form.
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