Lychakov, N. I., Saprykin, D. L., & Vanteeva, N. (2020). Not Backward: Comparative Labour Productivity In British And Russian Manufacturing, Circa 1908 (WP BRP 199/HUM/2020). National Research University Higher School of Economics. (h/t @devarbol)
Using data from official manufacturing censuses, we compare labour productivity in Great Britain and the Russian Empire around 1908. We find that Russia’s labour productivity was at 81.9 percent of the U.K. level. Russia’s productivity was on a par with France’s and significantly superior to Italy’s. We also find that the majority of Russian industries underperformed British ones. However, the industries that had been established or modernised during the state-induced industrialisation policies of the 1890s, such as the Southern metallurgy, performed on a par with their British counterparts. Russia’s alcohol, tobacco, and petrochemical sectors outperformed their British equivalents. Our findings suggest a revision of the view that, at the turn of the 20th century, Russian manufacturing was economically underdeveloped.
This recent paper says that the Russian Empire, far from being in a general sense of “economic backwardness”, was better viewed as essentially a two-tier economy:
- An industrial economy that was operating at West European productivity levels and close to the technological frontier;
- A near subsistence agricultural economy that was demographically much bigger, but feeding its labor surplus into the former.
However, even in absolute size, the labor force commanded by the former was bigger in absolute terms than in Britain or France, though smaller than in Germany.
There was increasing R&D, science was being harnessed in service of industry, and large investments were being made into modern industries.
What were the characteristics of the more labour-productive Russian industries? First, these industries were often highly export-oriented. The high-performing petrochemical, rubber, and butter industries exported a great share of their products, as can be seen from export statistics (Valetov, 2017). Second, these industries tended to invest heavily in research and development, as can be referred from the database of individual companies and the research centers they owned (MIPT, 2019). Successful firms collaborated with leading scientists, including Mendeleev, Ipatiev, Markovnikov, Lebedev, Ostromyslensky, and Byzov (Ostromyslensky, 1913; Ipatiev, 1945). The state often acted as a key facilitator of innovativeness. Authorities provided technical education, funded research projects and helped attract foreign investors(Kojevnikov, 2002). Third, the more labour productive firms often expanded into related industries (Gregg, 2020b). Such was the case with the firms owned by Nobel, Gukasov, Mantashev, Lianozov, and Shibaev, who had initially made large profits in the oil business (Kulikov, 2017; Kulikov and Kragh, 2019). These companies made large investments in electrical engineering, machine-building, shipbuilding, and chemical industries, as a result, forming large vertically and horizontally integrated industrial groups (Bovykin, 2001; Salomatina, forthcoming).
The manufacturing sector was 80% as productive as the British, about as much so as the French, and more so than the Italian:
(This is concordant with other things we know about the late Tsarist-era economy. By 1900, the Russian Empire had the world’s third largest stock market by market capitalization, only behind the US and Great Britain. It had Europe’s highest number of university students in absolute terms. At the more anecdotal level, there were Finnish Gastarbeiters in Saint-Petersburg offering horse sleigh rides to any part of the city for 30 kopeks. Finland was, of course, significantly more developed than than almost all of Russia outside the capital regions. But the latter were “First World” in a way it still wasn’t.)
It would also be cardinally different from, say, India, where there were many observations that manufacturing productivity was very low (e.g. see Gregory Clark’s “A Farewell to Alms”).
A 1929 report on the Indian industry in the Journal of the Textile Institute states baldly that “India is obliged to engage three persons in place of one employed in the Lancashire mills.”5 In 1930 Arno Pearse, the international textile expert, offered the opinion that “Labour in India is undoubtedly on a very low par, probably it comes next to Chinese labour in inefficiency, wastefulness, and lack of discipline.”
But it was much closer in that respect to Japan:
However, from 1907 to 1924 there was no increase, and perhaps a slight decline, in output per worker in Bombay. At the same time the Japanese cotton industry increased output per worker by 80 percent. By the late 1920s Japanese competition had eliminated all profits from the Bombay industry. As output per worker in Japanese mills marched ever upward through the 1920s and 1930s, Bombay mills were hardly able to cover their operating costs. By 1938 nearly 15 percent of the capacity in the Bombay mills had been scrapped.
Logically, it follows that if Russia was to urbanize those remaining peasants, drawing them into the urban high-productivity industries, you’d have had GDP/capita convergence with the “advanced economies”; perhaps not quite at German levels, but certainly France would seem to be within reason – and possibly ahead of Italy. (These would be results broadly congruent with what one might predict from average IQs under free market conditions).
The Soviets did of course urbanize at Russia – or, more precisely, they continued a pre-existing process, but at a much higher human cost than had been the case before them, losing half of Russia’s demographic potential in the thirty years after they seized power (Civil War famine, collectivization famine, Gulag, WW2 mismanagement, 1947 famine). However, during the Soviet period, manufacturing productivity relative to the developed world plummeted. As a consequence, these two things canceled out, so that by the 1980s Russians in the Soviet Union were no richer relative to the British than their predecessors had been in 1908.
In net terms, Communism and its consequences destroyed something like 75% of potential Russian GDP just within the borders of the Russian Federation. The best that Russia can realistically do within the next 30 years is reduce that to 50%.