22 - State finances

Summary

In 1898, Sergei Witte, the Russian minister of finance, wrote to Emperor Nicholas II:

The French state budget is 1,260 million rubles for a population of 38 million; the Austrian budget is 1,100 million rubles for a population of 43 million. If our taxpayers were as prosperous as the French, our budget would be 4,200 million rubles instead of its current 1,400 million, and if we matched the Austrians, our budget would be 3,300 million rubles. Why can we not achieve this? The main reason is the poor condition of our peasantry.

While the minister of finance bemoaned the poverty of the Russian population and the consequent low level of taxation that it produced, the Russian state’s overall financial performance had proved to be relatively successful. Although it had faced financial difficulties, Russia had avoided the type of financial crisis that had made a major contribution to the collapse of the French monarchy at the end of the eighteenth century, and had given the Habsburg state such difficulties during the eighteenth and nineteenth centuries. Witte’s analysis identified low per capita yields from taxation as the fundamental weakness of the Russian state’s financial system and he laid the blame for Russia’s inability to generate a sufficiently large state budget firmly at the door of the peasantry. But Witte, Imperial Russia’s most successful and influential finance minister, failed to recognise that the tsarist regime had proved adept at both avoiding fatal financial crises and at overcoming lesser problems.