Sergei Witte on foreign capital (1899)

In March 1899, Russia’s finance minister Sergei Witte presented to Tsar Nicholas II a manifesto outlining his economic policy. In this extract from Witte’s manifesto, he stresses the importance of foreign capital to the developing Russian economy:

“It is obvious that our domestic industry, no matter how extensively it has developed, is quantitatively still small.

It has not yet reached such proportions as to give birth to the creative forces of knowledge, the mobility of capital and the spirit of enterprise. It has not yet attained the pitch of healthy competition which would enable it to produce cheaply and repay the population for its sacrifices by the cheapness and abundance of its products. It is not yet an equal partner of agriculture in providing goods for export and bearing the tax burden. But that partnership must be accomplished, and in the shortest time possible.

Economic conditions in the past years have become very complex and the protective tariff has borne down extremely heavily upon the population. It has been too difficult for the population to provide for both itself and an almost monopolistic industry. The task of our present commercial and industrial policy thus is still a very difficult one. It is necessary not only to create industries but to force them to work cheaply; it is necessary to develop in our growing industrial community an energetic and active life – in a word, to raise our industries qualitatively and quantitatively to such a high level that they cease to be a drain and become a source of prosperity in our national economy.

What do we need to accomplish that? We need capital, knowledge and the spirit of enterprise. Only these three factors can speed up the creation of a fully independent national industry. But, unfortunately, not all these forces can be artificially implanted. They are mutually interconnected; their own proper development depends upon the very growth of industry…

The influx of foreign capital is, in the considered opinion of the minister of finance, the sole means by which our industry can speedily furnish our country with abundant and cheap goods. Each new wave of capital, swept in from abroad, knocks down the immoderately high level of profits to which our monopolistic entrepreneurs are accustomed and forces them to seek compensation in technical improvements, which in turn, will lead to price reductions.

Replenishing the poor store of popular savings by foreign capital makes it possible for all capital in the country to flow more freely over a broader field and to work up not only the fat but also the leaner sources of profit…”