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Russian Tariffs and Foreign Industries before 1914: The German Entrepreneur's Perspective

Published online by Cambridge University Press:  03 March 2009

Walther Kirchner
Walther Kirchner
Affiliation:
Professor emeritus, University of Delaware.
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Abstract

The present study dealing with Russia and Germany undertakes to investigate the practical effect of tariffs on business and entrepreneur rather than the oft-discussed role of tariffs in international politics. Evidence from German industrial archives demonstrates that businesses were less concerned with tariff issues than one might expect from firms depending on exports. It shows that impediments other than customs duties (expenditures for credit, service, freight, investment, marketing; and competition, restrictions imposed on government orders, subventions, production costs abroad, technological changes) by far overshadowed inhibiting effects of tariffs. Circumspect responses of the entrepreneur helped to minimize the economic role tariffs played.

Type
Articles
Information
The Journal of Economic History , Volume 41 , Issue 2 , June 1981 , pp. 361 - 379
Copyright
Copyright © The Economic History Association 1981

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References

1 Evidence has been drawn from more than thirty archives, which constitute a cross-section of major steel and iron works (Thyssen, Mannesmann, Gutehoffnungshütte), armament factories (Krupp), machine manufacturers (M.A.N., Humboldt-Deutz, Henschel), chemical (Bayer, BASF, Hoechst), optical (Zeiss), electrical plants (Siemens, AEG), and so on. Most of these firms belong to the heavy industries and are large enterprises. Together they are representative of those firms that provided the major share of German exports to establishments in Russia.Google Scholar

2 While many works occupy themselves extensively with German and other foreign capital and finance in Russia (e.g., Levin, Isaak, Germanskie kapitali v Rossii [Petrograd, 1918];Google ScholarMai, Joachim, Das deutsche Kapital in Russland, 1850–1894 [Berlin, 1970];Google Scholar and Crihan, Anton, Le Capital étranger en Russie [Paris, 1934]) virtually no thorough study takes industry, technology, and their transfer to Russia as its central concern. Some historians such as Mai do include information on industry in their studies, but often interpret it for ideological purposes. Little use has been made of the extensive material available in business archives. German archivists have done remarkable work in the field, but have focused on the activities of the individual firm whose archives they direct, rather than giving an overall, comparative picture, including other German and foreign activities in Russia.Google Scholar

3 The material surviving in the archives is disappointing insofar as detailed information is seldom given in the minutes of the meetings of directors and administrative or supervisory boards. Generally the minutes contain only the final decisions taken, and little about the discussions of the pros and cons. Occasionally we hear that opinions were divided (e.g., Archiv, Thyssen, Aufsichtsratssitzung, 18 08, 1886, Rheinische Stahlwerke, 1–23–00–5), yet even then the opinions are not specified. Exceptions occur when correspondence replaced oral deliberations. Alfred Krupp, sitting on the Hügel in Essen, sent hundreds of instructions by letter to his Procura in the factory; Carl Siemens discussed things with his brother Werner in his letters from St. Petersburg; Max Steinthal of the Deutsche Bank in Berlin wrote to Director Eich of Mannesmann in Düsseldorf.Google Scholar

4 German representatives in Russia sought to keep their firms informed. Thus Charles Winand, representative of the machine firm Humboldt-Deutz, reported in 1890 that the Russian Minister of Finance had decided not to raise customs dues because Russia's financial situation was favorable.Google ScholarKlöckner-Humboldt-Deutz, Archiv III, 10, 01. 18, 1890.Google Scholar

5 Russische Eisenbahnpolitik…1836–1881 (Berlin, 1903), p. 12.Google Scholar

6 The focus on the political side of the tariff question has also been observed by Webb, Steven B., “Tariffs, Cartels, Technology, and Growth in the German Steel Industry, 1879–1914,” this Journal, 40 (06 1980), 313–29.Google Scholar Among those who move the question of tariffs into the foreground are Vogel, Barbara, Deutsche Russlandpolitik (Düsseldorf 1973);Google ScholarStegmann, Dirk, “Wirtschaft und Politik nach Bismarcks Sturz,” in Geiss, Imanuel et al.,, eds., Deutschland in der Weltpolitik des 19. und 20. Jahrhunderts (Düsseldorf 1973);Google Scholar and Müller-Link, Horst, Industrialisierung und Aussenpolitik, Preussen-Deutschland und das Zarenreich von 1860–1890 (Göttingen, 1977).Google ScholarHentschel, Volker, Wirtschaft und Wirtschaftpolitik im wilhelminischen Deutschland (Stuttgart, 1978), likewise deals chiefly with this question, however, he is more critical, and though he does not use industrial archives, he notes that tariffs were of limited concern to the industrial entrepreneur.Google Scholar Cf. also Altrichter, Helmut, Konstitutionalismus und Imperialismus: Der Reichstag und die deutsch-russischen Beziehungen 1890–1914 (Frankfurt, 1977), pp. 115 and passim.Google Scholar

7 When Caprivi was German chancellor (1890–1894) vigorous attempts were made, but without lasting success, to coordinate agricultural and industrial interests. The same happened later. Cf. Stegmann, “Wirtschaft und Politik,” p. 166Google Scholar, who quotes Minister von Stumm that “the landowners, closely connected with the administration, army, and individual government officals, represented a real power in Prussia-Germany, something that cannot be said of heavy industry.” In any case, industrialists lacked a powerful lobby; ibid., pp. 131 ff. Cf. also Bueck, H. A., Der Centralverband Deutscher Industrieller, 1876–1901, 3 vols. (Berlin, 1902), vol. I, pp. 476 ff.Google Scholar

8 Pogge von Strandmann, Hartmut, Unternehmerpolitik und Unternehmensführung: Der Dialog zwischen Aufsichtsrat und Vorstand bei Mannesmann, 1900–1919 (Düsseldorf, 1978), pp. 66 f.Google Scholar

9 Kroker, Evelyn, “Das Rheinisch-Westfälische Kohlen-Syndikat,” Der Anschnitt, 32 (1980), 166, 168, 175, with valuable bibliographical and archival data;Google Scholar also Webb, “German Steel Industry,” pp. 311 ff.Google Scholar

10 “Backwardness” should not be exaggerated or generalized. Examples of Russian leadership can be found in the application of the Diesel engine and in the construction of locomotives. Stimulated by the particular geographic conditions of their country, Russian technicians introduced various innovations which were then imitated by other countries.Google Scholar

11 This issue is still widely debated. The relationship of state and industry, an issue colored in the literature by political and ideological prejudices, needs further study. Around the turn of the century articles in the American Machinist indicate that American producers “envied” the help German industrialists received from their consulates, complaining that they did not receive like support from American representatives abroad. (I thank Dr. H.-J. Braun of the Ruhr.Universität, Bochum, for this information.) And in the midst of the First World War the French historian Henri Hauser wrote that “L'industne allemande demande beaucoup à l'état; elle lui concède plus encore”; Les méthodes allemandes d'expansion économique (Paris, 1916), p. 258. Nevertheless, this position must be questioned. The industrial archives I saw yielded no confirmation. Official organs seemed to have helped business little, and German industry likewise gave little. At times it seems the government did not even want direct communication between consulates and business, for fear that this might undermine its exclusive control over the consulates;Google ScholarKaelble, Hartmut, Industrielle Interessenpolitik in der wilhelminischen Gesellschaft (Berlin, 1967), p. 171.Google Scholar By 1900 in only a few instances had trade experts (Handelssachverständige) been named in foreign cities, including St. Petersburg. At best, they served medium and small firms. In 1902 the German ambassador in St. Petersburg, Alvensleben, wrote that he attended “nur ungern” to wishes of industry, particularly because in business affairs all kinds of manipulations with Russian officialdom were necessary. Imperial German agencies were not appropriate for that, he felt, nor would their activities be useful for business; Vogel, Deutsche Russlandpolitik, pp. 52 f. Nor did the state want to become a “Handlanger” of private interests; Ullinan, p. 60. Exceptions certainly were made. When in 1905 the Rheinische Metallwaren und Maschinenfabrik sought acontract for military equipment costing over eleven million rubles, the embassy in St. Petersburg was willing to help; Vogel, Deutsche Russlandpolitik, p. 53. For another instance, cf. Bergbau Archiv Bochum, 4–5010–1, 10. 16, 1911.Google Scholar

12 Cf. Kirchner, Walther, Studies in Russian-American Commerce, 1820–60 (Leiden, 1975), pp. 8 f.Google Scholar

13 Ibid., pp. 11 f.

14 The evidence is rather indirect. Lack of reference to customs affairs is noticeable in the firms' available business correspondence, in Vorstands- and Aufsichtsratsprotokollen, and in relations with government agencies, and this contrasts strikingly with the concern trade associations showed with these questions.Google Scholar

15 Besides the usual trade associations there were other groups active in trying to influence tariff regulations. Thus the Deutsch-Russische Verein zur Pflege und Förderung der gegenseitigen Handelsbeziehungen, Berlin, submitted on 09 28, 1901, a draft to the Imperial Chancellor and the Bundesrat for a new German-Russian customs agreement. It provided for keeping the existing dues for imported grain so that Russia would not hinder increased exports of industrial goods. No effect of the proposal can be traced. On 02 21, 1903, some of the leading chemical firms worked out a proposal about needed government action with regard to foreign tariff impositions;Google ScholarArchiv, Bayer, Akt. 27/7. No effect in connection with Russia can be traced here, either. Actually, the Minister für Handel und Gewerbe pointed out in 1909 that regardless of Russian tariffs the export business prospered, as demonstrated by the chemical and other industries (including bicycles); “Erhebungen,” Handelskammer Münster, 591, 04 1909, Westfälisches Wirtschaftsarchiv, Dortmund. The figures for German exports to Russia given in the Appendix support the view of the minister, just as, specifically, those of various chemical firms. Hoechst, which in 1907 asked for government help because of high tariffs and difficulties with patents in Russia, increased its sales largely because of the introduction of Ehrlich's Salvarsan; BASF's sales climbed from 1.9 million marks in 1890 to 3.2 million in 1904 and up another 145% by 1914; Walter Voigtländer-Tetzner, “Geschichte der BASF: Kaufmännische Entwicklung” (unpubl. manuscript, BASF Unternehmerarchiv No. 32, pp. 66/67 as corrected). In another branch of industry, the machine firm of Humboldt-Deutz shipped in 1903/04 engines for 807 thousand marks, in 1911/12 for 2150 thousand marks.Google ScholarKlöckner-Humboldt-Deutz, Archiv, I, 28. Except perhaps for the brief “tariff war” at the time of Caprivi's chancellorship, it would be difficult to deduce from the figures in the Appendix when Russian tariffs adversely affected German exports. The decline in the years 1883 to 1887 did not follow a change in tariffs; that of 1900 and 1901 was connected with a general recession; 1904 and 1905 were years of war and revolution.Google Scholar

16 The issue of the numerous chicaneries of the Russians, which indirectly affected the costs of customs dues, shall not be discussed here. For example, the Russians established customs offices in too few cities. As a result, all goods had to be shipped, and sometimes at considerable cost, to large centers where one did exist, such as Kiev.Google Scholar

17 Statistical distortions, deceptive in regard to the effect of changes in tariffs, may result when such changes were impending. Thus when in 05 1882 the tariff for Eisenwalzdraht was raised from 35 to 110 kopeks as of 11, Russian traders quickly started to buy up as much of it as they could get hold of, and imports and prices soared. The government put a limit to imports too late; prices and sales collapsed, and statistics reflect an exaggerated decline in imports. Parallel movements occured repeatedly; Jutzi, W., 50 Jahre Carlswerk (1924), p. 28; Stahl und Eisen, 23 (1903), 146.Google Scholar

18 Numerous changes in the construction of parts and of the machines themselves were worked out in Russia, sometimes with the help of foreigners. Thus Swedish technicians contributed to the development of the Diesel engine made by the Ludwig Nobel factory in St. Petersburg; other foreigners made improvements on the design of a Borsig locomotive at a factory in Libau. When he lived in Russia, the German engineer Meinecke, later professor at the Technische Hochschule in Charlottenburg, developed a naphtha (Mazut)-fired engine, which had the advantage that it did not spread sparks around.Google Scholar

19 The “first” sewing machine was introduced into Russia around 1860 by Julius Gutmann, partner in the machine shop of Gutmann & Moore, Berlin, after Moore had brought an American model to Germany and a Berlin mechanic, Rabe, had perfected it; Köhler, Walter, Die deutsche Nähmaschinen Industrie (Bielefeld, 1912), pp. 28, 275.Google Scholar According to Carstensen, Frederick V., “American Multinational Corporate Firms in Imperial Russia” (Ph.D. diss., Yale Univ., 1976), the Germans increased their sales between 1896 and 1903 from 1.5 to 5.5 million rubles, the English from 1 to 1.75 million. To be sure, neither could compare with Singer's tens of millions.Google Scholar

20 SAA (Siemens Archiv), Görz to von Siemens, Karl, 11 17, 1899, “Die russische Elektrotechnik am Ende des XIX. Jahrhunderts.”Google Scholar

21 During early industrialization German goods did not have a reputation for quality, but owing to the efforts of firms like Krupp, Loewe, the Solingen factories, Siemens, and Zeiss, this changed entirely. By 1880 a number of German manufactures were renowned for their high quality, as were the German machine and machine tool industries by the time of the Chicago World Exposition of 1893.Google Scholar

22 Elektrotechnische Zeitschrift, 07 29, 1915, No. 30.Google Scholar

23 Ibid.. Shipping on Russian carriers had still other disadvantages besides price; e.g., owing to carelessness, much costly breakage occurred.Google Scholar

24 Krupp expressed his appreciation of Russian work, abilities, and suggestions during the 1860s (HA Krupp, WA VII f 1562; HA VII f 638) and in the 1870s felt impelled to refuse the Russians inspection of his factory lest they adopt too many of his ideas (WA IXa 124). But upon the death of General Barantsov he acknowledged once more his debt to the Russians in a letter addressed to the German Emperor Wilhelm I; Briefe, 19 (01. 1, 1881).Google Scholar

25 Besides Carstensen, see also Davies, Robert Bruce, Peacefully Working to Conquer the World: Singer Sewing Machines… 1854–1920 (New York, 1970), p. 244 and passim.Google Scholar

26 Through the device of tariff protection the International Harvester Company was to be induced to establish a factory in Russia. In 1905 the Russian Minister of Commerce Timiriazev indicated “that he was an advocate of high tariffs and would put one on harvesting machines if International Harvester established a factory there”; Wilkins, Mira, The Emergence of Multinational Enterprise: American Business Abroad (Cambridge, Mass., 1970), p. 102.Google Scholar See also McKay, John P., Pioneers for Profit: Foreign Entrepreneurship and Russian Industrialization, 1885–1913 (Chicago, 1970).Google Scholar

27 According to information kindly given me by Dr. H. J. Braun, Bochum, American economic and engineering journals praised foreign, particularly German, marketing efforts for efficiency, and they contrasted them with the “listless” efforts by Americans, except for some outstanding firms like Singer.Google Scholar

28 Though poorly protected in Russia, trademarks, many of them illustrated, were the more important as many customers could not read. Seeing others making gains in marketing, Americans indulged in, or were at least accused of, unfair competition; besides others, they disparaged German goods (Stahl und Eisen, 18 [1898], 240).Google Scholar

29 Koslow, Iwan, Das russische Patentgesetz, Riga, 1898 (as of 05 20, 1896).Google Scholar See also Pipes, Richard, Russia under the Old Regime (London, 1974), p. 284: “Corruption of public servants was not an aberration … it was part and parcel of the regular administration. … A distinction was drawn between ‘innocent incomes’ (bezgreshnye dokhody) and ‘sinful incomes’ (greshnye dokhody). … Innocent incomes included … tips to expedite a citizen's business with the government.”Google Scholar

30 Kirchner, Studies in Russian-American Commerce, pp. 71 f.Google Scholar

31 Horst Müller-Link mentions that for heavy industries tariffs were less important than government purchases; Industrialisierung, p. 77.Google Scholar The importance of government orders extended even to musical instruments and the success of a firm like the music shop and publisher Zimmermann. Kirchner, Walther in Hermann Kellenbenz Festschrift, Wirtschaftskräfte und Wirtschaftswege III: Auf dem Wege zur Industrialisierung, ed. Schneider, Jürgen et al. (Stuttgart, 1978), III, 578–79 note.Google Scholar Barbara Vogel likewise calls tariff barriers less influential than other factors; Deutsche Russlandpolitik, p. 182.Google Scholar

32 American railway equipment was at that time very successful. The Baldwin locomotive firm received large orders, because at $13,400 their engines were not only less expensive than French ($16,200) and Russian ($18,642), they were also better; and they could be delivered quickly. The tight situation led in 1898 to a relaxation of the Russian rule that railways were only to buy Russian products; see Queen, George Sherman, The United States and the Material Advance in Russia, 1881–1906 (New York, 1976), p. 166.Google Scholar

33 Bovykin, Valery I., “Probleme der industriellen Entwicklung Russlands,” Wirtschaft und Gesellschaft im vorrevolutionären Russland, ed. Geyer, Dietrich (Köln, 1975), pp. 191 f.Google Scholar

34 Much of its enormous success the Singer Sewing Machine Company owed to its introduction of sales on credit (part payments). Between 1911 and 1914 the credit difficulties for Russian firms were discussed by the directors of Humboldt-Deutz; Klöckner-Humblodt-Deutz Archiv, “Vorstandssitzungen,” 1911–1914. Poor crops and Balkan wars were among the reasons given.Google Scholar

35 Simundt, S., Denkschrift betr. Hebung … durch Einrichtung von Handels-Consulaten … (Preussisch-Russischer Handelsverkehr) (Berlin, 07 1861), pp. 6, 11.Google Scholar

36 Manufacturers who engaged themselves in Russian Poland, many of them domiciled in German Silesia, will not be included here because archival sources requisite for ascertaining the businessmen's views are not available. Moreover, special conditions prevailed for Russian Poland: separate Russian legislation, not applicable to the whole empire; intimate interconnections between neighboring production centers; geographical links; border trade, including extensive smuggling; and so on.Google Scholar

37 Westfälisches Wirtschaftsarchiv, Dortmund, K 2, 646, 03 23, 1903. The St. Petersburg factory was erected in 1897 with an initial capital of 750,000 rubles. Contrary to expectations, a second firm, Svet, was founded in 1899 in St. Petersburg with a capital of 1.5 million rubles. For his kind information I thank Professor Erik Amburger of Giessen.Google Scholar

38 Krupp, HA, “Alfred Krupps Briefe und Niederschriften,” 03 9, 1841, 10 30, 1841; WA II 150 (1863); WA IXa (1868); passim.Google Scholar

39 Carstensen, pp. 30 f. In connection with the establishment of staple facilities and harbor installations at Nikolaev, the board of directors of the Zeche Deutscher Kaiser and Gelsenkirchen Bergwerks A.G. also discussed Russia's complex and rather irregular method of levying income taxes.Google Scholar

40 Cf. Laves, Walter Herman, German Governmental Influence on Foreign Investments, 1871–1914 (New York, 1977). Laves mentions only bank, not industry investments.Google Scholar

41 Handelssachverständige and other officials in St. Petersburg showed their concern early in the century. They realized that German plants in Russia meant competition for the mother houses in Germany; Vogel, Deutsche Russlandpolitik, pp. 59 ff.Google Scholar

42 Higher costs of production, from which all Russian firms suffered, whether native-owned or foreign, were not the only disadvantage that tariffs were supposed to equalize. There were also less obvious ones, among them legal impositions, which made the conduct of corporations difficult.Google Scholar

43 Cf. Braun, Hans-Joachim, “Gas oder Elektrizität… 1880–1914,” Technikgeschichte, 47 (1980), 3 ff. The article goes far beyond technical aspects and shows the wide social and entrepreneurial ramifications.Google Scholar

44 Kirchner, Walther, “Bayer in Russland,” Osteuropa in Geschichte und Gegenwart: Festschrift Günther Stökl, ed. Lemberg, Hans et al. (Köln, 1977), pp. 159 f.Google Scholar The sales of the Russian department of Bayer climbed from 5 million marks in 1903 to over 13 million in 1912. The Hoechst branch in Ivanovo increased its production between 1902 and 1905 from 179 to 243 thousand rubles, yet during that same period purchased more from the mother house (1560 as against 1190 thousand rubles). Total Hoechst sales in Russia in 1904 were 2111 thousand rubles (over 4 million marks). [Dr. F. Spoun] Hoechst, Dokumente aus Hoechster Archiven, No. 43 (Beiträge zur Geschichte … Hoechst), 1970, pp. 29 f., 37. For BASF, see note 15. With regard to manufacturing even highly protected products in Russia, the chief difficulty for foreign firms remained the higher costs in Russia, which for the most part absorbed R & D and travel expenses at home. Comparative price calculations by Bayer show the following:Google Scholar

45 Vogel, Russlandpolitik, pp. 59 f. I am currently preparing a comprehensive study of this problem.Google Scholar