Part 2:
Russia’s Economic Policy in Poland

The picture given thus far of the development and present state of industry in Poland is completely different from that offered by the history of the urban trades in the Poland of the Middle Ages. Despite the identical nature of their origins – artificial, governmental transplanting from Germany – manufacture in Poland not only did not perish, as had urban handicraft earlier, but developed itself into heavy industry. And despite its foreign German beginnings, it not only drove deep roots into Poland’s national life, but actually became the ruling, tone-setting factor.

Only recently certain phenomena have appeared that have awakened fears on many sides about the continued future of Polish industry. It is clear that the market in Russia, and in connection with that the market opened up since then in Asia, forms the mainspring of Polish industry. In all these areas, however, Polish products are of course in competition with Russian goods. A natural conflict of interest between the Russian and Polish bourgeoisies over these markets appears at first glance to result, a conflict that must become harsher the more Polish industry grows. On the other hand, it seems to be just as natural for the Russian capitalist class to have the Russian government on its side against the Polish competition, that the government could use its power to the disadvantage of Polish industry, and perhaps erect a tariff barrier between Poland and Russia once more as the simplest and most ruthless means of effecting this. Such ideas have made themselves very much heard recently, and here and there the opinion is expressed that after the prevailing period of prosperity a period of persecution and punishment from the side of the Russian government has begun for Polish industry, which will sooner or later go under.

Therefore, before we conclude the description of Polish industry, we must go into the question of what significance the conflict of interest between Polish and Russian factory production in fact has, what the preparations of Polish industry are in its competitive battle with Russian industry, and what the position of the Russian government toward this struggle is. In this way, we will be in a position to complete the history of industry in Poland through a perspective on its future.

2.1 The History of the Struggle
Between Lodz and Moscow

Above all, it is totally untrue that the competition and the struggle between the central and the Polish industrial districts, the struggle about which so much fuss was made a few years ago, is a new phenomenon dating only from the 1880s, as is generally assumed. Quite the contrary: this battle is as old as Polish industry itself. Already in the 1820s the government was presented with petitions that from the Russian side concerned the increase of the Russian-Polish tariffs, from the Polish side the total abolition of the tariff barrier between Poland and Russia. Since then the rivalry has never really ceased. Excluding the year 1826, there were 1,831 petitions from Russian entrepreneurs sent to St. Petersburg – always with complaints about Polish industry and with demands for support for the “Fatherland’s” industry in its fight against the Polish. As one observes from the history of Polish industry, in the end the government not only did not fulfill the requests of the Russian entrepreneurs, but, on the contrary, abolished the tariff border between Poland and Russia in 1851 and so let the contest between the enemy industries take its own course. The battle flared up intensely and anew in the middle of the 1880s, first because Polish industry at this time – as was mentioned – took possession of a whole series of new market areas in Russia, in the south as well as the east, and second because, just at that time, the whole textile industry of the Sosnowiec district was seemingly conjured up out of the ground at the Prussian border. But on the other hand the price of goods, forced up suddenly and severely by the change in tariff policies at the end of the 1870s, had fallen somewhat toward the middle of the 1880s. The Moscow entrepreneurs, upset by this, began “to seek out the guilty party,” and found it, too: Polish competition. Here the battle was led chiefly by the Moscow cotton manufacturers, in the face of the conquest of Russian markets by Polish cotton goods.

A certain Sharapov led the first attack from the side of the Moscow entrepreneurs in a public speech which he gave in Moscow and in Ivanovo-Voznesenski in 1885 and which later appeared in print. From the start, Sharapov struck the keynotes and puffed up the whole campaign of Moscow cotton versus Lodz fustian into a historic duel between the Slavic and German races. He demonstrated that Polish industry in every way enjoyed more favorable conditions than Russian industry; for example, according to Sharapov, cheaper German credit was at Poland’s disposal – it cost 3.5 to 4 per cent, while the entrepreneurs in central Russia had to pay 7 to 8 per cent. Second, cheaper raw materials were available to Poland, which also had to bear far lower transportation costs than the Moscow districts lying far to the east. Third, Poland enjoyed more favorable railway rates, which it obtained as a result of the private agreement among the railway companies. Fourth and finally, it had significantly lower taxes to pay: in the central district amounting to 3,600 rubles per 1 million rubles of production; in Lodz, however, 1,400 rubles;, and in small Polish cities only 109 rubles.

Sharapov called the government to battle against the “German” industry of Poland and to the rescue of the Russian and Polish elements oppressed by it (!).

The next year, 1886, the Moscow entrepreneurs ordered a deputation to St. Petersburg with the “most humble and obedient” request to once again establish a tariff line between Poland and Russia.

The government, thus approached, formed a commission in the same year, 1886, consisting of Professors Yanshul, Ilyin, and Langowoi, which had the task of investigating the conditions of production of the Polish industrial districts and of checking into the claims of Moscow manufacturers and their correctness. The results of this investigation, carried out more seriously and more thoroughly than any other, was the following.

On the side of Polish industry we see cheaper fuel, smaller fixed capital, lower taxes, a better labor force, and more advantageous spatial concentrations of firms in a few spots. On the side of Russian industry, on the other hand, cheaper labor power, smaller transportation costs to the markets (Caucasus, Volga region, Asia), smaller outlays on the workforce (hospitals, schools, etc.), profits from the factory stores, finally a surplus of water to run the cotton weaving and spinning mills. In conclusion, the commission came out against the introduction of a tariff line between Poland and Russia, and likewise against a differential tariff on raw cotton directed against Poland, first because the government “would hardly deem it possible to treat Poland as a foreign country in trade and industrial relations,” and second because a higher differential tariff “would appear to the inhabitants of Poland, Russian subjects, as an injustice against them and would doubtless give rise to great dissatisfaction.” The commission considered the only just measure to be an increase in the prevailing taxes on Polish industry sufficient to equalize them with Russian taxes.

In 1887 the Moscow entrepreneurs once more presented a petition to the Finance Minister at the annual fair in Nizhni-Novgorod in which they requested an increase in the duties on cotton and the introduction of a higher differential tariff at the Polish border. Now the Lodz manufacturers also entered the fray. They answered the above-mentioned document with a counter-petition, in which they sought to prove that they suffered significantly less advantageous conditions of production than their Moscow competitors, that the cotton mills of the central district yielded up to 8.4 per cent profits while those in Poland yielded only 7.5 per cent, that transport of raw cotton from Liverpool to Moscow cost 35.77 kopecks per pood but from Liverpool to Lodz 37.10 kopecks per pood, that therefore a further worsening of their situation by the introduction of a differential tariff on cotton would make cotton production extremely difficult for them.

In 1888 a commission was once again set up under the chairmanship of Ber to investigate the dispute. Its conclusions this time were very much to Poland’s disadvantage, and the commission called for a series of measures to protect the Moscow industrial district against better-situated Polish industry. Meanwhile the Moscow industrialists again submitted a petition to the Finance Minister in 1888, in which they complained about their pressing situation and demanded measures from the government against “parasitical” Polish industry.

The Lodz industrialists published an agitational piece in 1889 under the title Moscow’s Battle with Lodz, in which they attempted to show through the mouth of “an impartial, nonpartizan observer” that Lodz had to pay more for raw cotton than did Moscow, that the advantage of cheaper fuel which Lodz had over Moscow only came to the negligible amount of 0.2 kopecks per arshin of material, that the origins of Moscow’s more expensive credit lay with Moscow itself, and that it is was because of insufficient organization that Lodz suffered from a shortage of water, paid more for labor, and, finally, made smaller profits than central Russian industry.

In 1890 the organization and nationalization of the railway tariff system undertaken by the government gave rise once more to the convocation of a new commission. This commission was to investigate, for the xth time, what the state of the competitive conditions of the Polish and central Russian industrial districts was, and how, relative to this, the railway fares for the lines of importance to the competitors should be figured. This commission, which functioned under the chairmanship of the representative of the railway department, Lazarev, again came to no conclusion. The representatives of the Lodz and Moscow industrialists gave their well-known arguments and counter-arguments as best they could. Two arguments from the Polish side were the only new additions, namely, their reference to the use of cheap naphtha residue as fuel in the Moscow industrial district, and the claim that the tax burden was greater in Poland than in central Russia, specifically 5.82 rubles per member of the population in the latter, but in the former 6.64 rubles.

However the next year, 1891, a well-known economist, Belov, was authorized to investigate the conditions of production in Poland and central Russia. This too came to the conclusion that all the disadvantages were on the Lodz side, while all the advantages were on Moscow’s: specifically, cheaper labor power, longer labor time (Moscow 3,429 hours a year, Poland 3,212), cheaper fuel (naphtha residue costs 6d per cwt, whereas coal for the same amount of heat is significantly more, 10.25 per cwt), cheaper raw cotton, and, finally, more favorable railway fares. The same Shaparov who had sounded the first alarm against Lodz in 1885 now claimed as a result of the Belov investigation that the situation had completely changed since 1885 and that Lodz now absolutely did not deserve to be punished in any way.

It was necessary to treat the various stages of the dispute between Lodz and Moscow so thoroughly in order to show how difficult it is to form an unbiased opinion on this question, and how carefully claims about this point usually must be taken. For there is not a single argument which was not brought up by both parties, with directly contradictory figures as proof, and it is only too easy to unconsciously become a mouthpiece for one of these two industrialists’ choirs.

Now that we have become acquainted in brief with the story of the Moscow-Lodz dispute and the main points around which it centers, we ourselves will compare the competitive conditions of the two industries with each other in all the main points, in order to achieve an objective grasp of the problem on the basis of quantitative evidence.