Part I:
The History and Present State of Polish Industry

1.1 The Manufacturing Period, 1820-1850

Political events moved Poland into a completely new situation at the beginning of the nineteenth century. The partition brought it out of the peculiar natural-economic, feudal-anarchic conditions of the republic of the nobles which we find in the Poland of the eighteenth century, and placed it under the rule of enlightened absolutism and under the centralized bureaucratic administration of Prussia. Austria, and Russia. The Russian section of Poland, which interests us here, admittedly maintained its own corporative constitution while still the Duchy of Warsaw and later after the Vienna Congress. But it was as different from the old Poland as heaven from earth, and the whole administrative, financial, military, legal government apparatus was tailored to a modern centralized state. The latter found itself in the harshest contradiction with the economic relations on which it had been grafted.

Poland’s economic life, as before, was concentrated on land ownership. The development of urban handicraft begun in the thirteenth century had crumbled to dust by the seventeenth century; the attempt by the magnates to start up manufacturing at the end of the eighteenth century disintegrated likewise. The system of land ownership, however, was utterly unsuited to serve as the basis of a modern state organization. Its dependence on the world market, which dated from the fifteenth century in old Poland, drove it to an extremely extensive latifundia economy and the utmost exaction of forced labor; it became more and more irrationally cultivated and as a result more and more unproductive. The wars during Poland’s last epoch, then the Napoleonic system in the Duchy of Warsaw, the Continental Blockade and with it the decline of grain exports, the drop in grain prices, the abolition of serfdom in 1807, all these blows rained down on landed property in the course of approximately ten years and brought it to the brink of ruin. Since it wasmeanwhile the main source of revenue in the country, the relatively high cost of the country’s new administration had to fall on it full force. The ten per cent income tax on landed property, already introduced in old Poland but only now actually collected, was now to be raised to 24 per cent. The burden of quartering soldiers and providing supplies for the military in natura fell on the nobility in addition.

The result was that landed property soon fell into the clutches of usury. While old Poland possessed no urban capitalist class as a result of the decay of urban production and trade, such a class surfaced right after the partition of Poland. In part it consisted of immigrating officials and usurers, in part of Polish parvenus who owed their material existence to the country’s great political and economic crisis. This new layer of the population now supplied the needy nobility with capital. To a large extent, however, the beginning of the nobility’s indebtedness dated from the ten years of Prussian rule (1796-1806), during which an organized agricultural credit was widely offered to the Polish nobility for the first time.

For Polish landed property this meant a real revolution. What was accomplished in Western European countries during the Middle Ages through a slow and persistent process over centuries – the disintegration of patrimonial land ownership through usury – was now achieved in Poland, where landed property had kept itself free from usury until the end of the Republic, in less than 20 years. Already in the year 1821 it had to be rescued from downfall by the government of the Kingdom by means of an exceptional measure:the moratorium.

Under such circumstances, the deficit became a permanent phenomenon in the Kingdom’s budget right from the beginning. The creation of new sources of revenue for the exchequer and of new spheres of economic activity in the country therefore became a condition of existence for the Kingdom from the first moment. Following the example of other countries and driven by immediate needs, the government undertook the establishment of urban industry in Poland.

The decade 1820-1830 is the period of the rise of Polish industry, or, more correctly, of Polish manufacture.

It was quite similar in character to the earlier rise of Polish handicraft by the method of attracting foreign, mainly German craftsmen. Just as in the thirteenth century the Polish princes tried to entice foreign workers to Poland with a variety of privileges, so also the government of Congress Poland. A whole series of Czarist ukases relating to this were proclaimed in the years 1816 to 1824. The government provided houses and made building materials available gratis, gave rent exemptions, founded the so-called iron fund for the construction of industrial buildings and housing for industry. In 1816, immigrating craftsmen were promised freedom from all taxes and public charges for six years, their sons were freed from military service, and the duty-free import of their property was permitted. In 1820 the government granted the immigrants a free supply of building materials from the state forests and constructed its own brickyards in order to supply them with the cheapest possible bricks.

A law of the year 1822 freed all industrial enterprises from the obligation to quarter soldiers for three to six years. In 1820 and 1823 it was decreed that the cities were to hand over locations to these enterprises rent-free for six years. The industrial fund established in 1822 for the encouragement of industrial colonization amounted to 45,000 rubles at the beginning, already twice as much in 1823, and from then on 127,500 rubles annually.

Such manifold attractions did not fail to have an effect. Soon German craftsmen trooped into Poland and settled down. Approximately 10,000 German families immigrated in a few years at this time. In this way, the most important industrial cities of today soon arose: Lodz, Zgierz, Rawa, Pabianice, and others. In addition to craftsmen, the government of Russian Poland called in prominent foreign industrialists to direct its enterprises: Coqueril from Belgium, Fraget, Girard, and others. Russian Poland’s government did not content itself with the granting of privileges to immigrants and the establishment of German manufacturing towns, however. Unlike the handicrafts of the Middle Ages, manufacturing could not content itself with the narrow circle of consumption and circulation within any one city; to start with, it required a wholesale market and, further, commodity circulation embracing the whole country at least. Together with the foundation of manufacturing colonies, the government had to undertake a whole series of administrative and legislative reforms which were to unify the country economically into one complex and create the necessary legal forms for internal commodity traffic. The greatest breach in the property relations and especially the landed property relations of old Poland had already been forced by the Code Napoleon introduced in the Duchy of Warsaw in 1808. It had grafted the legal forms of a modern bourgeois economy in quite finished form onto the economic conditions of a purely feudal natural economy. Unable to reorganize the means of production as such in the slightest, it had nevertheless severely violated the old property relations and so hurried their disintegration. With the abolition of perpetual rent, entail, etc., landed property was torn out of permanence and catapulted into circulation. At the same time, the Code Napoleon supplied commerce and the commercial courts with legal standards. In 1817, furthermore, chambers of commerce and manufacturing were established and the regulation of trade was brought to a close; in the following year, deed registries were introduced; in 1825, the Agricultural Credit Association was founded. In 1819, the building of highways and the regulation of waterways were begun by order of the state, and in 1825, the construction of the canal between the Niemen and the Vistula.

Finally, the government also took the lead – as in other countries at the beginnings of manufacture – with its own industrial enterprises, and established model factories, model sheep-raising, and so on. But it gave the strongest foothold to budding manufacturing by establishing the Polish Bank, which was called into existence by the Czarist ukase of 1828 and organized after the model of the German Seehandlung and the Belgian Société generale. This was an issuing, investment, deposit, mortgage, commission, and industrial bank all at once. Initially endowed with a fund amounting to 3 million rubles, it also obtained deposits, securities, ecclesiastical funds, fire insurance, pensions, and other capitals on deposit, which by 1877 represented 282 million rubles total. The bank offered credit to industry as well as to agriculture. In the period of 50 years since its founding, it had given commercial and industrial enterprises alone credit to the amount of 91 million rubles. The activity of the bank was extremely diverse. It not only established factories itself and carried on mining and agriculture, but also attended to means of transport. The first Polish train line, Warsaw–Vienna, of 1845 was chiefly the work of the Polish Bank.

The activity of the government sketched above was the first important factor in the development of industry in Russian Poland. Whatever other circumstances may have additionally influenced its history, it unquestionably owes its existence to the initiative and efforts of the government.

We see of course – as was said – that in other countries, for example France and Germany, governments stand by the cradle of manufacturing and take hold of its destiny with energetic hands. But there the governments offered their help only to a natural development of urban production, which moved of itself and by virtue of objective factors such as the accumulation of trading capital, the widening of markets, and the technological development of handicraft toward transformation into manufacturing production methods. In Poland, manufacture, like urban handicraft earlier, was a foreign product imported in finished form, which could develop neither a technological nor a social connection to Poland’s own economic development. Here, then, the activity of the government was the only positive factor in the rise of manufacture, and this explains to us the predilection which Polish economists and publicists have for reverting to this point; thus its significance is on the whole only too often overestimated. Above all, they forget that the autonomous Polish government, in the activity that they describe, acted in the most intimate agreement with Russian Czarism, which was guided by intentions which were in national terms nothing less than friendly toward Poland.

Furthermore, from the first, the assistance of Russian Poland’s government fell on the most favorable soil: Poland’s tariff relations. The Vienna Congress Act resulted in two important measures for Poland in this connection: First, it was united with Russia. Second, free trade with the other sections of what was formerly Poland, or what in fact meant the same thing, with Germany and Austria, was secured. As far as the union with Russia is concerned, the trade relations between the two countries were regulated by the tariffs of 1822 and 1824 so that their products were exchanged with each other almost duty-free.

The meaning of this new regulation for Poland only becomes clear, however, if it is kept in mind that since the year 1810, and especially under the administration of Kankrin, Russia adhered to an extreme prohibitive policy toward Europe, often bordering on absurdity, and was protected on all sides from foreign manufacture by an unbreachable tariff wall. Through the unification with Poland, Russia was now made accessible to German goods from this side, because of the above-mentioned tariff. The result of this for Poland was that it became the workshop for the processing of half-finished German goods, most of which were imported into Russian Poland duty-free, finished in Poland, and which then found their way into Russia as Polish products, again almost duty-free. By such means Poland’s large cloth industry, in particular, came into full bloom in only a few years.

First established in the years 1817 to 1826, it had already, in 1829, reached the for that time considerable amount of 5,752,000 rubles’ worth of production. That this surprisingly rapid growth was almost entirely thanks to Russian consumption is shown by the following table of exports of wool products to Russia, in thousands of rubles:

If the value of exported products according to this table exceeds the value of that produced in the country, this is because of the fact that, along with goods finished in Poland, German finished products smuggled into Poland were massively exported to Russia under Polish labels.

But this tariff relationship had still another important side for Congress Poland. It opened to her a free trade route to China, where Polish cloth was likewise exported in large quantities. This export specifically amounted to (in thousands of rubles):

Although Poland’s whole export trade in the first decade of its industrial development really extended to only one branch, the wool industry, yet its importance for the country was great, for it also had invigorating repercussions on other branches of production and strongly encouraged the immigration of German craftsmen. A historian of the Polish textile industry center, the city of Lodz, calls Poland’s cloth trade of that time with Russia and China “the mainspring of the development of industry.”

Yet in 1831 this trade came to an end. The Polish uprising, which paralyzed the development of manufacture in the country for some time, in addition had as a lasting effect that in this year the tariff between Poland and Russia was significantly increased. The competition of Polish cloth in Russia and China had been a thorn in the side of Russian manufacturers for a long time. Their repeated petitions to increase tariffs at the Polish border remained unsuccessful, however, until the uprising of 1831 and with it the standstill of Polish cloth exports to Russia. This furnished the Russian manufacturers with the opportunity to quickly take the deserted field by expanding their own production and so prove to the government with figures how much the “Fatherland’s” industry had suffered from Polish competition until then. With the raising of the tariff and, at the same time, the abolition of free transit to China, Polish exports sank rapidly:

In 1834, they amounted to a total of 2,887,000 rubles, of that manufactured products 2,385,000 rubles. In 1850, they amounted to a total of 1,274,000 rubles, of that manufactured products 755,000 rubles.

For Polish wool production, this was a hard blow. After its value had reached, in 1829 – as we saw – the height of 5,752,000 rubles, it sank in 1832 to 1,917,000 and rose only little by little to 2,564,000 rubles in 1850, that is, to half of the earlier amount.

Yet the closing of the Russian border could have no great significance for the further destiny of Polish manufacturing as a whole. The conditions for a growing demand for manufactured goods did not then exist in Russia itself, nor were the means of transport adapted to mass transport. The large cloth export trade can be explained in the main only by the needs of the Russian Army. Moreover, Polish manufacturing had still not even had time to provide itself with an internal market. So after the closing of the Russian customs border, it slowly set out to get a foothold within the country, with favorable government measures and supported in particular by the Polish Bank. In the next two decades many branches of production developed well: in the 1830s tanning and soap-making, in the 1840s sugar production, also mining in the 1830s and similarly paper manufacturing. But the country’s social situation drew rather narrow bounds for the growth of industry. Totaling only the tiny number of 4 to 5 million people, the population of Russian Poland moreover lived in large part within a natural economy. Despite the abolition of serfdom in 1807, forced labor remained the predominant mode of labor in agriculture and as a result the property owners, just like the peasants, were cut off from commodity and money exchange to a great degree. The cities grew only slowly and, poor and underpopulated as they were, could not provide a strong demand for manufactured goods either. This development is thus really a very slow one. Thirty years after Polish manufacture arose, after a period in which it had been mainly directed toward its own internal market, we see that it is still restricted to quite dwarfish dimensions. The most advanced of all industries, textiles, was still mainly run with manual labor in the 1850s, without steam power, and therefore only by skilled master craftsmen and journeymen and without a trace of female labor. On the whole the fragmentation of production points to its predominantly craft character, for in the year 1857 we still see 12,542 “factories” in Poland with 56,364 workers and 21,278,592 rubles’ worth of production: on the average, four to five workers and 1,700 rubles’ worth of production per “factory.”

Corresponding to this situation, urban industry also played only a secondary role in Poland’s social life until the 1850s and even the 1860s. Landed property still set the tone in the economy as well as the politics of the country. Indeed, the broad mass of middle landowners, those who at the time represented public opinion, regarded budding urban industry and with it the capitalist economy as a foreign and poisonous weed, as a “German swindle” that bore the guilt for the desperate condition of landed property and of the whole country.