In fact, Witte very much believed in promoting people on merit and was a pioneer of modern business practice. He was at the same time both a modernist and a traditionalist, a man who wanted to see Russia develop and yet held firm to the concept of absolute monarchy. He realized the key to a railway’s profitability was the correct setting of freight tariffs – cheap enough to attract business, but sufficient to ensure profitability. As a result of combining his mathematical knowledge with economic theory, he designed an effective nationally-applied freight tariff. This enabled him to lower freight rates on the line, while increasing revenue, nearly doubling the value of the assets. He wrote a treatise whose title, Principles of Railway Freight Tariffs, suggests it did not attract a wide audience, but which was widely acclaimed among railway managers as the seminal work on the subject. Witte saw the potential to tailor railway tariffs to wider political objectives. Previously, the rates had largely been set at a standard rate per verst (a Russian unit of measure slightly longer than 1,000 yards), but to encourage the development of remote areas, Witte argued that the rate per verst should decline for long-distance carriage. This greatly helped the ironmasters in the Urals to make their products more competitive when they had to be shipped all the way to St Petersburg. In such a vast country a more intelligent approach to the pricing of freight was essential. It was, in effect, a way of bringing together the disparate parts of the Empire and would prove to be crucial to ensuring the development of Siberia once the Trans-Siberian was completed.
Witte was not without a sense of humour. In his memoirs he recalls his various predecessors and writes of Posyet: ‘He was very honest, but remarkably unintelligent. His ignorance of railroad matters was prodigious. He had a peculiar weakness. His inspection of [rail]roads was confined to an examination of the toilet rooms. If he found them insanitary, he was furious, but if they were clean he felt satisfied and looked at nothing else.’4
Witte’s ruthlessness was legendary and he was ever ready to put one over on his rivals. He had a network of informants throughout the rail industry, which meant that he seemed to know more about rival railways than did their own managers – a demonstration of the single-mindedness that would be needed to see through the project. Indeed, he was not averse to turning against former allies in order to achieve his aims.
Witte’s skills at running railway companies did not go unnoticed in government circles and, in particular, by Vyshenegradsky. In 1889 Witte was given the post of director of railway affairs in the finance ministry, a position deliberately created by Vyshenegradsky to try to impose financial discipline on the perennially overspending railways. The appointment represented a remarkable promotion for the former ticket clerk, who had jumped seven chin from his first role in Odessa to a position that conferred hereditary nobility on its post-holders.5 It was a power move by one government department against another that was typical of Russian administration of the time. Witte managed to wrest most of the responsibility of the railways from the transport ministry, much to the consternation of Hubbenet, the ineffectual minister, who became so angered by Witte’s encroachment into his territory that it almost resulted in a duel.
Witte was a conspicuous success. By then the crazy situation of the private railways milking the government had been ended. Instead, the government had begun to construct railways at its own expense, in the way that it would build the Trans-Siberian. It had also nationalized some of the private railways and strengthened its legal powers over the others in order to prevent the leeching of state funds. Despite the mixed pattern of ownership, the railway had, for the first time, become a unified network. Nevertheless, although the finances had improved thanks to these reforms, the system still lost money and Witte set about changing that. In fact, he managed, very quickly, to balance the books, ensuring the railway deficits which had long been a burden on state finances disappeared. He brought together most of the railway functions of government under his control, making the industry far more efficient. The railway deficits that had burdened the state budget soon disappeared, much to Vyshenegradsky’s pleasure. It became clear that when Hubbenet was forced to resign from his post because of the failure of the railways to deliver food quickly to the Volga area during the famine of 1891–2, Witte was the obvious replacement and took up the post in February 1892. He quickly began sorting out the mess on the railways left by his predecessor, and in the summer of 1892 he was despatched by the tsar as a troubleshooter to the Volga region, where cholera had taken hold among a population weakened by hunger. He organized the health services, calling on medical students to help, and mobilized the Jewish grain-dealers for the provisioning of the stricken areas. There was no doubting his diligence and courage. According to his own memoirs, he ‘travelled from town to town, from hamlet to hamlet, inspecting hospitals and dispensaries, coming in close contact with the patients’.6
When Witte was appointed as transport minister, Vyshenegradsky assumed he had now got his own man in the transport ministry, thereby further extending his control over it. He could not have been more wrong. Witte had his own agenda. During his tenure in the finance ministry, Witte had, indeed, robustly cut back spending at Vyshenegradsky’s behest, but now he was in a position to push forward the Trans-Siberian project that Vyshenegradsky had so long opposed. Vyshenegradsky’s days were, in any case, numbered. His dogmatic policy of maintaining the level of grain exports at the height of the famine in order to obtain hard currency attracted widespread criticism, as it had greatly exacerbated the effects of the famine. Suffering, too, from the after-effects of a stroke, he was forced out of office. In August 1892 Witte, recently returned from the Volga region, was appointed to replace him as minister of finance, a post he would hold for eleven years.
Vyshenegradsky had, ironically, paved the way for the construction of the Trans-Siberian. Thanks to his transfer of powers over railway building from the transport ministry to the finance ministry, Witte was now in control of the process. He had no illusions about the calibre of many of the aristocrats who sought to obtain concessions to build railways or who held government positions thanks to their noble blood. He described them as being made of ‘inferior stuff’, whose chief characteristic was ‘unlimited greed’: ‘For many years some of these scoundrels and hypocrites have been holding the highest Court positions and, at least outwardly, they have been intimate with the Imperial family.’7 Consequently, he realized he had to create his own structure to bring about the construction of the line. Work had started the previous year, but it had stopped once the scale of the Volga famine became clear. There was, in any case, no money, thanks to Vyshenegradsky.
For Witte, the construction of the railway was far more than a transport project. He recognized that it would not be a profitable enterprise, at least for many years. No matter. It was an undertaking of overriding national importance that offered huge financial benefits in the long run, both for Siberia and for Russia as a whole, because the line’s superior speed would allow the railway to take much of the east–west seaborne freight traffic. The Trans-Siberian was bound up with the wider project of Russia’s industrialization. The advantage of improved transport would bring about economic prosperity across a wide range of industries. Russian textiles would be sold far more easily to China, given the proximity of the rails, and Chinese products would cost less in Russia because of the reduced cost of freight carriage. The Trans-Siberian, he pointed out, would also transport Siberian grain, timber, hides, butter and minerals, stimulating Russia’s overall economy. They were all the same free-trade arguments that are used today to justify globalization. Witte did not emphasize the military usefulness of the line, which, as we have seen, was a key driving force behind the project, but did say that it would help service Russia’s Pacific Fleet and assure amicable relations between Russia and both the Orient and the United States.
The Trans-Siberian was not just about Siberia. Railways were perceived by Witte as the engine for growth of the whole wider economy, and therefore th
e Trans-Siberian, as the biggest project by far, was its most important driver. The logic of what was effectively a model of state capitalism went something like this: railway construction would stimulate the growth of the heavy metallurgical industry, providing rails and other equipment, protected by tariffs on imports. This, in turn, would stimulate the growth of smaller and lighter industry. This would revitalize the whole economy, especially in urban areas, which, in turn, would raise rural production and prosperity as well, because the wages of industrial workers would be sent back to their families living in the countryside: ‘Railroad construction thus served as the flywheel for the entire economy.’8 Certainly, the railways were by far the country’s biggest industry, employing 400,000 people by the turn of the century. Witte waxed lyrical about the effect of the iron road, seeing it as not just an economic force but a cultural one: ‘The railway is like a leaven, which creates a cultural fermentation among the population. Even if it passed through an absolutely wild people along its way, it would raise them in a short time to the level prerequisite for its operation.’9 Witte saw economic success as vital for the stability and long-term future of Russia, and he saw the railways as the essential catalyst for the growth of the economy. The monarchy, which he greatly supported but realized was threatened by revolutionary forces, would be saved if Russia prospered. Whereas in Europe the factories had sprung up first and the infrastructure in the form of railways had followed, in Russia it was the other way around. Railways were laid down to stimulate the development of heavy industry, a perfectly acceptable economic model.
Put simply, therefore, Witte saw the railways as the key to economic success, and the Siberian railway, by far the longest and biggest project, was an essential part of the network’s development. To Witte the Trans-Siberian ‘not only served the obvious political needs of the state, but also provided a foundation on which to build devotion and respect at home and abroad’.10 Above all, Witte was desperate to demonstrate that Russia was the equal of the great powers of Europe, able at last to compete with them. It was, in short, ‘a quest to satisfy the amour propre of his nation’.11 Witte promoted the railway to foreign leaders, both to demonstrate its commercial potential once completed, but also simply because it showed that Russia was the equal of – or even better than – its European counterparts.
It was not just Witte’s direct influence on the railway which allowed its construction. As Finance Minister he brought stability and growth to the Russian economy, and in many ways was responsible for kick-starting its development as a major economy. He restored confidence in the rouble by linking it to gold, allowing Russia to make large foreign loans to stimulate growth. He promoted the long-delayed industrialization of the country by encouraging manufacturing through reduced tariffs on imported machine tools, while raising tariff barriers on domestic goods in order to protect the nation’s fledgling manufacturers. He also, interestingly, created a state liquor monopoly with the ostensible purpose of reducing drunkenness; but, as it turned out, this resulted in a huge rise in tax income for the government, which helped balance the books. The success of his economic policies was such that in the 1890s Russia averaged an 8 per cent growth – albeit from a low base – which was far higher than other European nations at the time. Without that growth, the Trans-Siberian would have remained a pipe dream.
Witte was really not exaggerating when he summed it up as a project ‘to occupy one of the first places in the ranks of the most important undertakings of the nineteenth century, not only in our Motherland, but also in the whole world’.12 That was not much of an overstatement. Nor was his rather immodest suggestion in his memoirs that ‘It will not be an exaggeration to say that the vast enterprise of constructing the great Siberian Railway was carried out owing to my efforts, supported, of course, first by Emperor Alexander III and then by Emperor Nicholas II.’13 There was, in truth, probably no one in Russia at the time better equipped to oversee the project than Witte with his experience of both railway matters and government.
Vyshenegradsky’s parsimony and opposition to construction meant that Witte needed every means at his disposal to overcome the enormous obstacles to financing and then building the line. Given the situation Witte found when taking over at the ministry of finance, it seemed highly likely that the project would remain stalled for years, even though work had started briefly and then stopped in 1891. Money, of course, was the top priority. In fact, to this day there remains some mystery about precisely how the line was paid for, because the government economy was operated on the basis of what is called a ‘single till’ system – in other words, all revenues, including loans, were pooled together, and therefore it is difficult to ascertain which funds went towards paying for the railway. By stabilizing the economy, Witte did manage to obtain foreign loans, especially from France, and there seems to have been a considerable sleight of hand – familiar to the modern reader – about his claims that the government’s books were in the black, when, in fact, the opposite was the case. The railway was ‘financed out of the surpluses of the ordinary budget, which supposedly had accumulated thanks to its “favourable implementation” in 1894 and yearly thereafter’,14 according to Steven Marks, but as he implies there was an aspect of smoke and mirrors, which we will never be able properly to fathom.
Finding the money was not, however, the only problem or even possibly the main one. As we have seen, the administrative systems of the Russian government were rooted in eighteenth-century practices, rather than those of an industrialized economy. Almost as soon as Witte took over the finance ministry he set about creating a structure that would enable him to drive through a project on the scale of the Trans-Siberian and related schemes. Witte wrote a paper setting out how the project should be taken forward through the creation of a powerful committee that would run and oversee its construction; and, indeed, would have a wider remit that encompassed not just the railway itself, but other matters in Siberia, such as immigration and town planning, which were inevitably influenced by the advent of the line.
Witte’s predecessor, Hubennet, had already mooted the idea of creating a ‘special central managerial body’ for the development of the project, but it was Witte who ensured that it became a powerful organization able to override, day to day, any doubts raised by opponents. In a masterstroke, Witte suggested the chairman of the committee should be the heir to the throne, the tsarevich Grand Duke Nicholas, who had already played a role in the development of the scheme and would become Russia’s last tsar. When Tsar Alexander first gave the go-ahead for the line’s construction, the tsarevich was on a grand tour that encompassed Greece, Egypt, India and Japan. The tsar had the clever idea of getting his son to inaugurate the scheme at its eastern terminus, Vladivostok, as a brilliant PR exercise. Consequently, in March 1891 he wrote to his son, in the pompous manner that royals communicate with each other, complete with inappropriate capital letters and long sentences:
Your Imperial Highness, having given the order to begin the construction of a continuous railway line across the whole of Siberia, destined to unite the Siberian lands, so rich in natural endowments, with the railway network of the interior, I entrust You to proclaim My will on this matter upon Your return to the Russian land after Your inspection of the East. At the same time, I desire You to lay the first stone at Vladivostok for the construction of the Ussuri line, forming a part of the Siberian railway, which is to be carried out at the cost of the State and under direction of the Government.15
Tsarevich Nicholas, a man of just twenty-three – whose nerves had recently been shaken by an assassination attempt in Japan, when a crazy police agent attacked him with a sabre – was therefore given the task of inaugurating work at the eastern end of the line. In a brief ceremony on 31 May 1891 he wielded a shovel to fill a wheelbarrow with clay soil, emptied it on to an embankment of what would become the Ussuri line and later laid a stone on the site of the station. Vladivostok at the time was not a prepossessing place and was, as Harmon Tupper desc
ribes it, ‘a slatternly town of muddy, unpaved streets, open sewers, grim military barracks and warehouses, unpainted wooden houses and hundreds of mud-plastered straw huts of the Chinese and Korean settlers, who comprised about a third of the port’s 14,000 inhabitants’.16 Today the station at Vladivostok still recalls this momentous event with images of Nicholas ‘the miracle worker’ in the waiting room. Once the railway had been given the tsarist imprimatur in such a powerful way, there was no stopping it. The idea, which had been so long the source of debate and controversy in government circles, now attracted popular appeal.
However, as we have seen, the famine and lack of money meant little work was carried out and construction had come to a halt by the time Witte took over at the finance ministry in August 1892. Witte’s proposal for a committee of the Siberian Railway with a membership of key officials from across various government departments was accepted by the tsar and effectively had carte blanche to access sufficient funds to see through the project. Witte argued strongly that the Trans-Siberian should be co-ordinated with other projects, such as the building of the Yekaterinburg– Chelyabinsk line, so that metal products from the Urals could be easily brought to the construction sites. He also ensured that the waterways intersecting the Trans-Siberian route were improved to facilitate the supply of building materials during its construction. Since attracting settlers was a key part of the purpose of the line, Witte proposed that this migration should be planned with the establishment of medical – both human and animal – services, churches and other facilities for the incomers. Crucially, too, a land-distribution scheme had to be created to attract them.
To the Edge of the World Page 7