19 - The Russian economy and banking system

Summary

Introduction

The beginning of the eighteenth century was a period of radical change in Russia’s economy. These transformations are connected with the name Peter I, but they proved possible thanks to the development of trade and the accumulation of capital by the Muscovite government in the sixteenth and seventeenth centuries. The main sources of this capital growth were domestic and foreign trade, salt mines, fishing, payments to the treasury, customs duties and income from taverns. Capital was concentrated in the merchant class, the state and monasteries. Monasteries sold bread, salt and fish, and to a certain extent performed the functions of banks, undertaking credit transactions. Economically, Russia lagged behind the leading countries of Western Europe, where developed banking and stock markets already existed and where concepts such as bills of exchange and promissory notes were widespread.

In many ways, Peter I’s transfer of the Russian capital to St Petersburg and his declaration of a Russian ‘empire’ predetermined the later development of the Russian government and economy. Peter’s ‘Europeanisation’ of the country occurred during wars and was accompanied by the breakdown of old customs and societal structures. The foundation of the empire was an enormous financial burden on peasants and urban dwellers, and limited their freedom of movement as well. Peter I introduced a poll tax, military conscription and internal passport system. But the decisive role in Russia’s economic development belonged to the government and state enterprises.