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Images of Russia's Vanished Bourgeoisie
By James L. West, Iurii A. Petrov
PRINCETON UNIVERSITY PRESSCopyright © 1998 Princeton University Press
All rights reserved.
Doing Business in Merchant Moscow
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Thomas C. Owen
Photographs of the central business district in Moscow under the last tsar suggest, at first glance, that European capitalist institutions—industrial corporations, banks, department stores, and commodity and stock exchanges—had become firmly rooted in the urban landscape. Moscow seemed transformed as it became the commercial and railroad hub of the Russian Empire and the center of its textile manufacturing industry, which ranked fourth in the world after that of the United States, Britain, and Germany. The proliferation of factories, the increase in the number of hired workers, the emergence of industrial cartels, and the financial involvement of the major banks in giant manufacturing corporations provided some evidence that Russian capitalism was approaching maturity on the eve of World War I. Soviet historians saw in these economic trends a justification of Lenin's allegedly "socialist" revolution of October 1917, while Western liberal historians stressed the evolution of Russian politics toward a liberal system based on the rule of law, but both groups accepted the premise of the triumph of capitalism in Russia.
These photographs from the Moscow business world at the turn of the century can be subjected to a different interpretation, however. Historians skeptical of both teleologies, the Soviet and the liberal, have recently stressed the survival of traditional cultural patterns into the industrial age and the resistance of Russians to European institutions. The most promising hypothesis now guiding social and economic historians in this field is that capitalist factories, banks, and stock exchanges came to Russia bearing many features distinctive to European civilization, so that capitalism appeared to Russians as an essentially foreign, even alien (chuzhoi) force. They could not ignore it because the Crimean War (1853–6) had demonstrated the need to borrow modern technology for the sake of maintaining the power of the empire in a future war; but could they adapt it to the needs of their native land without surrendering the essence of their Russian culture?
Several patterns were clear in the late tsarist period. First, corporate capitalism remained weakly developed because it evolved in a more repressive political environment on the eastern periphery of European culture than in the lands of its birth and maturation. Second, Russian companies, especially in the key sectors of railroad management and banking, depended on foreigners for success because few Russian merchants were skilled in European business practices. This need to depend on foreign expertise heightened the sense of capitalism as an essentially foreign phenomenon. Third, the difficulty of creating the new corporate elite limited the geographical proliferation of corporations in Russia, as three-quarters of all corporate headquarters were concentrated in ten cities, of which Moscow ranked second after the capital, St. Petersburg. Fourth, as a foreign entity, corporate capitalism encountered suspicion and resentment at all levels of Russian society, not least among Russian merchants, who sought to meet the potentially fatal challenge from European corporations with the aid of special favors from the autocratic state. Finally, capitalist institutions succeeded best in Russia when they adapted to local realities, such as the cultural traditions of the semipeasant labor force.
The photographs suggest the difficulty of grafting European institutions onto Russian society What at first glace seems a rapid accommodation to the universal forms of modern urban life in Moscow, from gas and electric lighting systems to department stores and banks, on closer examination turns out to be an uneasy borrowing of European institutions. That is, the Moscow merchants appropriated some outward forms of European capitalism, but they sought to do so in ways that allowed the perpetuation of their traditional ways. These included the concentration of their entrepreneurial energies in family-centered firms and the use of explicit appeals to Russian nationalism to enhance their own social prestige and to win tariff protection and financial favors from the ministries in St. Petersburg. An enlightened, self-confident, and politically liberal bourgeoisie did emerge among the Moscow merchants, but only at a very late date and in such small numbers as to undermine the notion of universal progress common to both Marxist-Leninist and liberal historiography.
By the turn of the century, handsome cqmmercial buildings stood in the very center of Moscow. In 1888 and 1889, merchants founded corporations to build two arcades of shops opposite the Kremlin, called the Upper Trading Rows and the Middle Trading Rows. The view from Red Square down Ilinka Street (Kuibyshev Street in the Soviet period) juxtaposed visual elements typical of both European and Russian culture: modern shops and an onion-domed church (figure 1.1).
By the early twentieth century, many of the negative stereotypes of the Moscow merchants in the dramas and novels of the mid-nineteenth century—their lack of education, penchant for dishonesty, cruel treatment of subordinates, and devotion to excessive eating and drinking—had faded. The most prominent merchant leaders now had a university education, supported philanthropic organizations, patronized the fine arts, and occupied high elective office in the municipal government. The portrait of Petr M. Kalashnikov, president of the Upper Trading Rows Company in the late 1880s, exemplified the striving of the Moscow merchant leaders for dignity and prestige commensurate with their financial expertise and wealth (figure 1.2).
Businesses took several forms under Russian law, ranging in complexity from single proprietorships to partnerships and giant corporations. The sign of "the manufacturer Sytov" in the Middle Trading Rows indicated that he sold brocades from his shop. As a single proprietorship, his business operated with a minimum of formality under Russian law: the purchase of an annual business certificate. The owner-manager bore personal liability for all debts of the business, which ceased to exist in the eyes of the law on his bankruptcy retirement, or death.
Much of the crucial role of coordinating economic activity lay with unincorporated firms, called "trading firms" (torgovye doma), such as that of A. I. Abrikosov's Sons, which occupied the stall on the ground floor of the Upper Trading Rows across from Sytov's. Trading firms took two forms: the "full partnership" (polnoe tovarishchestvo), in which the owners managed the business; and the "limited partnership" (tovarishchestvo na vere, literally, "partnership based on trust"), in which nonmanaging investors held shares under the principle of limited liability but did not participate in the management of the firm. The managing partners in trading firms did not enjoy limited liability; in other words, the debts of the firm became their collective responsibility. Strictly speaking, any change in the composition of a trading firm—through the death or departure of a partner or the admission of a new partner—required the dissolution of the firm and the creation of a new one, but many firms kept the same name for generations as one partner replaced another.
A handful of hardy trading firms survived for many decades despite the hazards of unlimited financial liability and impermanent organizational structure. Such longevity implicitly reassured customers of the acumen and trustworthiness of the firm's managers. Only a solid firm could survive amid the unfavorable financial conditions prevailing in Russia, particularly the lack of commercial credit at reasonable interest rates, the weakness of the contract law, and the danger of a contraction of the domestic market whenever a bad harvest deprived the peasantry of cash. For example, the firm of Pavel Sorokoumovsky and Sons, which specialized in the sale of fine furs, had existed since 1809 (figures 1.3–5).
Foreigners exercised great influence in the economy of the Moscow region through several small but powerful trading firms. Perhaps the most important trading firm in Moscow was that of Wogau and Company. In the half-century prior to 1914, the names of the Wogau firm's partners—Wogau (Vogau), Marc (Mark), and Bansa (Banza)—figured prominently in the lists of corporate founders and managers and on the roster of the Moscow Exchange Committee. Corporations in which the firm had an interest on the eve of World War I included the Anchor Insurance Company, the Kolchugin Copper Company, the Moscow Electrolytic Company, and the Beloretsk Iron Company. Another German, Ludwig Knoop of Bremen, equipped over a hundred textile mills in central Russia with English machinery from the 1840s onward, and his sons, Andreas (Andrei) and Theodor (Fedor), controlled the Russian market for raw cotton and cotton textiles at the turn of the century. Wogau and Company, Ludwig Knoop and Company, and the other foreign firms in Moscow prospered not only because of their massive financial power, although they did enjoy easy access to European money markets. The key to success lay in their superior ability to unite capital, raw materials, labor, and managerial expertise in profitable combinations, especially in fields requiring knowledge of high technology imported from Europe. Consequently, the business publications of the late tsarist period were filled with advertisements for foreign products (figure 1.6).
The largest capitalist institutions were, of course, corporations. Several flurries of corporate entrepreneurship in the Russian Empire—in the late 1850s, early 1870s, late 1890s, and 1908–13—created a modest network of companies: 1,354 corporations in 1905, and 2,167 (plus 262 foreign corporations authorized to operate in Russia) in 1914. The Russian corporate law promulgated in 1836 stipulated the familiar structural elements of the corporation, borrowed from European practice. Large undertakings in industry, transportation, and finance required the contributions of many investors. The shareholders elected the board of directors (pravlenie) and, in the largest companies, a supervisory council (sovet). All participants enjoyed limited liability, so that,, in the event of the liquidation of the enterprise, investors and managers lost only their invested capital. Shares circulated on the stock market in the exchange (birzha, from the French bourse, via the German Borse). Unlike the major European states, however, the tsarist government retained the principle of incorporation by concession, which required the approval of the tsar (or of the minister of finance in the case of small banks and pawnshops) instead of incorporation by registration. This restrictive system kept the numbers of corporations in Russia far lower than in Europe.
Capitalism in Moscow reflected the uneasy accommodation of traditional Russian culture to European business methods. Moscow ranked second among cities in the empire as a corporate center, with 329 in 1905 and 507 in 1914, but its corporations tended to have smaller capitalization amounts than in St. Petersburg because of the relatively simple technological requirements of textile production and the city's isolation from European capital markets. Even the largest textile companies in the central region had originated as family-owned firms and remained in the hands of a family for generations. Founders of such family-centered corporations typically set the price of shares very high—between one thousand and five thousand rubles each—to limit the circulation of shares on the open market. Indeed, the charters of such corporations often required shareholders to offer shares for sale to other shareholders before selling to outsiders. Typically, such family corporations took the name "share partnership" (tovarishchestvo na paiakh). In 1896, Nikolai K. Krestovnikov, one of the leading Moscow manufacturers, wrote that "the majority of our corporations retain their family character and can be considered corporate only in form; in essence they are run by individuals." Had Russian corporate law contained a provision for the limited liability of managers in a partnership like the German Gesellschaft mit beschrankter Haftung, many family-owned companies in Moscow would probably have taken that form, but the tsarist government never authorized it.
Despite the formal distinctions in law, the line of demarcation between the trading firm and the corporation was not always clear. For example, the Abrikosov Manufacturing Company, producer of fine candies and jams, had two founders in 1880: the Abrikosov trading firm and Aleksei I. Abrikosov himself. This corporation fit the typical profile of a Moscow merchant's enterprise in light industry: a modest capitalization of five hundred thousand rubles of basic capital and shares (called pai) priced at one thousand rubles each to discourage circulation on the market. Proof of the family-centered nature of the corporation lay in the fact that as late as 1914 two of its six managers were still members of the Abrikosov family. In this case, it was hardly possible to distinguish the trading firm from the corporation that it had engendered. Likewise, the brothers Aleksandr and Vladimir G. Sapozhnikov founded several corporations in the 1870s, but the silk and brocade enterprise bearing their name did not become incorporated until 1912. Its capitalization of 2.5 million rubles reflected the substantial growth of the enterprise as a trading firm before incorporation. As in most family-owned companies in Moscow, the shares of this company bore a high face value, five thousand rubles, which limited their circulation.
The technical and entrepreneurial expertise of Europeans continued to give capitalist institutions in Moscow a distinctly foreign complexion. As the percentage of ethnic Russians among corporate managers in Moscow fell from 62.7 to 57.3 between 1905 and 1914, those of German subjects of the tsar rose from 15.4 to 17.0. Among the statistically significant ethnic groups were Jews, whose percentage rose from 4.4 to 9.1, and foreign citizens, whose role remained important despite a decline in this period from 7.5 to 4.5 percent. For example, the Siou Perfume Company, a share partnership founded and managed by Frenchmen, typified the several small corporations that provided European luxury goods to wealthy Muscovites (figure 1.7).
To be sure, the very largest corporate enterprises—railroads, banks, and insurance companies—could not amass the requisite amounts of capital by appealing to a narrow circle of family members and friends. Even in Moscow, therefore, these large enterprises issued shares with a relatively low face value—between 150 and 500 rubles—to attract hundreds of investors. Typically, a low-priced share was called an aktsiia (from the French action; cf. German Aktie), and the corporation that issued aktsii generally bore the name "joint-stock company" (aktsionernoe obshchestvo, from the French société par actions).
Excerpted from Merchant Moscow by James L. West, Iurii A. Petrov. Copyright © 1998 Princeton University Press. Excerpted by permission of PRINCETON UNIVERSITY PRESS.
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Table of Contents
Merchant Moscow in Historical Context 3
A Note on Old Belief 13
A Note on Photography in Russia 19
About the Photographs 25
Maps of Merchant Moscow
1 Doing Business in Merchant Moscow 29
2 Moscow's Commercial Mosaic 37
3 "Moscow City": Financial Citadel of Merchant Moscow 45
4 Caftan to Business Suit: The Semiotics of Russian Merchant Dress 53
5 Old Believers and New Entrepreneurs: Religious Belief and Ritual in Merchant Moscow 61
6 Daily Life among the Morozovs 73
7 Peasant Entrepreneurs and Worker Peasants: Labor Relations in Merchant Moscow 85
8 Daughters, Wives, and Partners: Women of the Moscow Merchant Elite 95
9 Commercial Education and the Cultural Crisis of the Moscow Merchant Elite 109
10 Aesthetics and Commerce: The Architecture of Merchant Moscow, 1890-1917 119
11 Merchant Moscow After Hours: Voluntary Associations and Leisure 133
12 Merchants on Stage and in Life: Theatricality and Public Consciousness 147
13 Visions of Russia's Entrepreneurial Future: Pavel Riabushinsky's Utopian Capitalism 161
The Fate of Merchant Moscow 173
Suggestions for Further Reading 179
List of Contributors 181