By K. Papadimitriou
Economic prowness is a key component to the evolution of any political entity to the status of a great power. Economic prowness is intimately linked to domestic production, especially in the industrial sector, as being evident from the example of all past mega-powers, as the British Empire. The development of a diverse and advanced industrial base is essential for economic and military growth. The United States of America became a global power in the 20th century largely due to its vast industrial capacity, pre and paste WW II, while China’s rapid industrialization and expansion of domestic production since the late 20th century, paved the way to its rise as a global power.
The most important prerequisite for the development and expansion of domestic industrial production is the existence and immediate availability of raw materials at cheap and competitive prices. During the 18th and 19th centuries, the British Empire was transformed into the world’s leading producer of industrial goods, due to its unhindered access to inexpensive raw materials from her colonies. When domestic industrial production growth is combined with the existence and availability of these necessary raw materials, the required labour force and technological evolution, the recipe for success is given, and the state has the prospects of becoming a global power.
Russia is a typical example of this decisive role of the existence and exploitation of the aforementioned factors on the course of a state towards the goal of becoming a global power. The Russian Empire and subsequently the Soviet Union experienced a dramatic process of indusrial growth from the late 19th century into the second half of the 20th century. At the end of the 19th century it was evident that Russia had the prospects to become soon the great competitor of the Agglo-Saxon race for the commercial and military supremacy of the world ( Charles A. Conant, 1899, p. 190), although she was already considered the leading power of Europe (B. J. Ramage, 1899, p. 305).
The industrial growth of the Russian Empire emerged from the 1880s, although the first initiatives and attempts to create industry date back to the 18th century, by Peter the Great and his successors. The Russian defeat in the Crimean war led to the realization of the necessity for the development of the Russian economy, technology, and creation of an industrial base, leading to a slow but accelerating process of economic change, punctuated by several periods of slowdown, that lasted to the Bolshevic Revolution. According to available data, the growth rate of per capita industrial output from 1860 to 1885 was 2.7%, and from 1885 to 1913 was 4.3% (Andrei Markevich and Steven Nafziger, 2017, p. 33-37). Industrial growth during the 1890s derived mainly from the government’s railway construction and armaments building programs, and possibly to a lesser extend to domestic civilian demand (Peter Gatrell, 1982). The period from 1913 to 1921 is characterized by a significant decrease in industrial output of 15.6%, due to social unrest, participation in the Great War and, above all, the Bolshevic Revolution (Andrei Markevich and Steven Nafziger, 2017, p. 37).
But this was not the only problem caused by the First World War and the Bolshevic Revolution. As Taylor claims, war and communism had erased in the early 1920s the surplus-export productivity of the Russian Empire and her export functions had been taken by other, mainly oversea, countries, creating a substantial problem to the economy of the European states and especially Germany, which had the largest commerce with Russia. According to Taylor, Russia was the natural market for the manufacturers of central and western Europe, which was a huge importer of food, feeds and raw materials mainly from Russia and overseas. In the five years before World War I, Russia's exports of commodities to Europe averaged $988 million, while imports into Russia from European countries averaged $421 million, with a positive trade balance for Russia 567 million dollars (Alonzo Englebert Taylor, 1922, p. 448-450 and 456).
In the early years of the Soviet era a substantial industrial recovery was achieved under the New Economic Policy (NEP), which allowed for some private enterprise and helped stabilize the economy before the shift back to state control. Between 1921 and 1928 the growth rate of per capita industrial output was 21.9%. But the dual nature of the NEP mixed economy - where both state policies and market relations contributed to reconstraction – created crises in the relations between the state and private producers, which led to the NEP’s replacement by Stalin’s command economy in the late 1920s ( Andrei Markevich and Steven Nafziger, 2017, p. 42).
Stalin's command economy, a system that replaced markets with a centrally planned and coercive economy, entailing enormus human loses and welfare costs, marked a dramatic shift towards industrialization through a series of Five-Years Plans, starting in 1928. Moreover, the collectivization of agriculture in 1929, with a harsh state control over grain production and distribution, allowed for the redirection of surplus to finance industiral investment. This system generated industrial growth from 1928 to the post-war period, leading to rapid convergence of the Soviet economy to the developed West. From 1928 to 1940 the Soviet Union experienced unprescedent industrial growth, becoming on of the largest producers of coal steel and oil in the world. During this period the growth rate of per capita industrial output was 9.8%, while from 1946 to 1970 amounted to 7.7% (Andrei Markevich and Steven Nafziger, 2017, p. 38 and 42). The industrialization laid also the foundation for a powerful military – industrial complex, which proved crucial during World War II when industry redirected towards war-time production.
The abundance of raw materials in the Russian territory was a decisive factor, contributing to the effort to increase domestic production and industrialization. The vast and inexhaustible natural wealth of the Russian Empire, which place her in the front rank of the wealthy nations of the world, is vividly described by E.K. Reynolds (E.K. Reynolds, 1916). However, natural resources are useless without the necessary technological background. Technology is a critical factor for their expoitation. Without the appropriate technological capability accessing and exploiting natural resources is difficult, or even impossible. The existence and proper exploitation of the country’s scientific human capital allowed the rapid and widespread development of technology. Since the last decades of the 19th century, technical education has been a basic goal of Russian’s government policy. In 1896 there were twelve higher technical schools in Russia, containing 5.916 pupils (Charles A. Conant, 1899, p. 185). The rapid increase in industrial output of the Soviet Union, was due to the application of modern techniques which made possible to overcome many of the handicaps imposed by the location of the deposits of Russian natural resources, in remote and dispersed areas, as well as the technical difficulties of extraction and processing (Alexander Baykov, 1954, p. 143-146).
Industrialization led to the rapid urbanization in the Soviet Union, with millions of people moving from rural areas to cities to work in factories. In addition to internal migration, there was a significant contribution of both skilled and unskilled labor from abroad. The Great Depression during the dark 1930s resulted in the emigration of thousands of people from the United States to the Soviet Union. Seeking a better life and with communinsm promising dignity for the worker, racial equality, and a honest employment, thousands of Americans turned away, according to Tim Tzouliadis research, ultimately ending up either in the gulags or in death, with few surviving. In the first 8 months of 1931 alone, Amtorg - the Soviet trade agency based in New York - received more than 100,000 applications from Americans for emigration to USSR (Tim Tzouliadis, 2008, p. 6).
After the Great Patriotic War, the Soviets undertook massive reconstruction efforts with the fourth Five-Years Plan (1946-1950) focused on restoring damaged industries, and industrial modernization. Stalin returned to massive investments primarily in heavy industry and defence, as well as in producer goods, to enable recovery. During the Cold War, the Soviet Union made significant technological stirdes, including achievements in space exploration and nuclear technology. The 1950s and early 1960s were the “golden years” of the Soviet economy, closing the gap with Western economies. The golden period did not last long and by the 1970s and 1980s the Soviet industrial machine began to stagnate. Growth rates of industrial production were steadily decreasing, becoming negative in the 1980s. From 1980 to 1991 the growth rate of per capita industrial output was -1.4% (Andrei Markevich and Steven Nafziger, 2017, p. 47). Lack of incentives, bureaucratic management, lack of innovation, inefficiency and overemphasis on quantity, led to declining productivity.
The dissolution of the Soviet Unin in 1991 generated the need for economic reforms. The Russian industry faced profound challenges and underwent significant transformations. The transition from a centraly planed to a market economy along with the political instability and the loss of a part of the Soviet industrial network, had deep impacts on the industry of the Russian Federation. There was a significant decline in per capita industrial output of approximately 40% between 1992 and 1998, while the total value added generated by the industrial sector steadily eroded from 50 to 37%, reflecting the sharp end of the Soviet emphasis on industry over other economic sectors (Andrei Markevich and Steven Nafziger, 2017, p. 51-52). Despite these difficulties the Russian Federation retained key industrial sectors, especially in energy, defense, and heavy industry.
The first decade of the 21st century was marked by growth in industrial output for the first time since 1980. From 2000 to 2010 the growth rate of par capita industrial output amounted 3.7% (Andrei Markevich and Steven Nafziger, 2017, p. 37). By the 2000s, the Russian government reasserted control over the energy sector, consolidating state ownership and influence over strategic industries like oil, gas, and electricity. Russia became a “petro’state”. While the energy sector brought wealth and political influence, it also signaled Russia’s increased dependence on natural resource related sectors. The sharp downturn in demand for Russian oil and natural gas due to the global crisis of 2008-2009 constituted an enormous negative shock to all parts of the Russian economy (Andrei Markevich and Steven Nafziger, 2017, p. 55).
The Russian Federation remains a significant and massive industrial power. Having recognized the need to diversify its economy and reduce its dependence on energy exports, it has undertaken efforts to modernize industries, to develop high-tech sectors and foster innovation. Russia inherited a massive military-industrial coplex from the Soviet Union and her defense industry, after its recovery in the early 2000s, is robust producing advanced military technology and ensuring its autarky. The state’s strategic focus on military – industrial capabilities contributes to its status as a major power. Moreover, Russian Federation is the world’s largest producer of metals and minerals, essential for various sectors including costruction, automotive, aerospace industries. In the digital and tech sectors, Russian remains a major player, particularly in cybersecurity and software development, and continues to play a crucial role in space industry.
Russia’s industrial base, particularly in defense and energy is central to its geopolitical strategy. It is a basic instrument for influence exertion to its near abroad and to Eurasian environment. Despite the limitations and difficulties due to the states involvement in a war - after its invation of Ukraine in violation of international law – and the western economic sanctions, it has developed a war-time economy ensuring the state’s autarky.
Today, while the vast majority of Western countries have passed into the post-industrial era with a continuous contraction of their domestic production, other countries such as Turkey, India, Iran and China, following Russia’s strategy, are intensively developing their industrial and technological sectors. These states are achieving economic growth and strategic autonomy, constantly improving their status in the international system, and increasing their influence by projecting power in the world stage. For example, Turkey managed during the last two decades to develop its domestic production with emphasis on the defense industry, and other export-based activities. In contrast, Greece has been transformed into a service economy, having become the Thailand of the European continent, with its unjustifiable reliance on the tourism sector. The brain-drain due to this orientation of the state’s economic activity is heartbreaking. The results of Greek de-industrialization on its growth prospects have been simply disastrous.
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