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Dilemmas of Russian Capitalism: Fedor Chizhov and Corporate Enterprise in the Railroad Age

Author(s):Owen, Thomas C.
Reviewer(s):Nafziger, Steven

Published by EH.NET (June 2005)

Thomas C. Owen, Dilemmas of Russian Capitalism: Fedor Chizhov and Corporate Enterprise in the Railroad Age. Cambridge, MA: Harvard University Press, 2005. xvi + 275 pp. $49.95 (hardcover), ISBN: 0-674-01549-5.

Reviewed for EH.NET by Steven Nafziger, Department of Economics, Yale University.

How do corrupt and arbitrary bureaucracies, weak legal systems, and autocratic leaders impede economic growth? While the counterfactual (that better institutions lead to higher growth rates) has received much attention by economists in the past thirty years, showing exactly how bad bureaucrats, bad courts, and bad rulers hurt growth is perhaps just as important as a research agenda. No where may this be truer than in the case of Russia, where corruption and random state intervention have long been identifying features of the economic system. And no scholar has done as much to outline these possible impediments for entrepreneurial activity as Thomas C. Owen, the Kathryn, Lewis, and Benjamin Price Professor of History at Louisiana State University.

Owen’s previous research documents the ideology and activities of the Moscow merchant elite over the nineteenth and early twentieth centuries, the underdevelopment of corporate law throughout Russian history, and the persistence of policy arbitrariness and anti-capitalist beliefs under both the Tsarist and Soviet regimes (Owen, 1981; 1991; and 1995). This scholarship is squarely against the Gerschenkronian view that the Russian state played a positive role in overcoming economic backwardness and sparking industrial growth in the late nineteenth century (Gerschenkron, 1962). Further, Owen’s publications have emphasized the intellectual foundations of Russian entrepreneurship in the Slavophile movement of the mid-nineteenth century. This influential group argued for a uniquely Russian path of development and against both Western participation in the Russian economy and prevailing notions of free trade and economic liberalism. Such a belief system persists within large sections of Russian society today.

The monograph under review here pursues these themes further by focusing on the thought and career of one member of the Russian industrial elite — Fedor Vasil’evich Chizhov (1811-1877). From his birth as a relatively impoverished member of the gentry, Chizhov wore many hats over his lifetime: mathematics professor, European traveler, amateur historian, internal exile, silk cultivator, economic journalist and journal editor, and the founder and manager of several railroads, a bank, a mutual credit society, and a steamship company. As a key early advocate of nationalistic Slavophile capitalism Chizhov was closely allied to the Moscow merchants.[1] In writings and letters, Chizhov argued sharply against corruption and autocratic state interference and for the encouragement of ethnically Russian entrepreneurship. Thus, Chizhov serves as an exemplary figure through which Owen explores the themes of his earlier works.

Dividing the book into an introduction, four chapters, a concluding section, and a bibliographic essay, Owen draws heavily on a thorough reading of the unpublished and voluminous diaries Chizhov kept from the age of fourteen until his death. In addition to this key primary source (which took over twenty years to fully collect due to the vagaries of Soviet and Russian archival policies), Owen utilizes a wide variety of other materials. These include the published editorial work and writings of Chizhov; documents from various Russian archival holdings; letters, memoirs, and works of friends and contemporaries; and a secondary literature on the Russian economy and business elite in the nineteenth century.

Owen begins in the introductory section by arguing for the importance of biography in the study of entrepreneurship. Then the first three chapters proceed roughly chronologically through Chizhov’s career. Chapter one focuses on Chizhov’s early life as an academic, his long stint as a European traveler, and, rather unconvincingly, tries to link his personality in this period to his later career as an entrepreneur.

In the second chapter, Owen explores Chizhov’s efforts at advocating Slavophile capitalism. After ending a period of internal exile and failed silk cultivation at a small estate near Kiev, Chizhov returned to Moscow in the 1850s to take up editorial positions with a series of Slavophile scholarly and business publications. Owen does an impressive job of describing Chizhov’s emerging economic nationalism. This ideology was based on ethnic Russian ownership and management of railroads, provision of investment capital to Russian-owned enterprises, tariff protection for emerging industries, benevolence towards workers, and patriotism in undertaking economic activities. Owen seems to argue that this system was a unified whole that the Russian state could have adopted if it had more open to change.

In the third chapter, Owen explores how Chizhov then attempted to apply the tenets of this Slavophile capitalism to a succession of entrepreneurial efforts from the 1850s to the 1870s. Beginning in railroads, Chizhov and a small group of like-minded merchants and industrialists founded the Moscow Merchant Back and the Moscow Merchant Mutual Credit Society and engaged in a number of other business endeavors in transportation and finance. Owen’s knowledge of corporate practices and the intricacies of doing business in nineteenth-century Russia is without peer and it shows in this chapter. Especially impressive is his description of the complicated financing of the railroads Chizhov helped found and played a key managerial role in.

In the fourth chapter, Owen addresses the failure of Chizhov to bring his vision of Russian development to fruition. This is largely based on the argument that the difficulties Chizhov faced in his business practices were evidence for the poor institutions of the Russian economy. Although this is a key issue in Russian economic history and Owen argues forcefully, it is sometimes unclear whether the examples he gives from Chizhov’s career and writings are representative or simply the grumblings of one industrialist. Chizhov often complained about the corruption or stupidity of different government figures, but this does not necessarily mean that it would have been economically more efficient for him to get his way, or what the counterfactual actually should be. Also, it is sometimes difficult to distinguish Chizhov’s voice from the wording of Owen’s argument, which makes the empirical support for these themes less convincing, especially since these counterfactuals are not fully formulated or tested. Although important headway is made in this book, the notion that nineteenth-century Russian institutions were especially bad for growth remains a critical open question.

The concluding section documents the death of Chizhov and the legacy he left in business, the arts, and philanthropy. There is a brief attempt to compare his experience with the career of Eiichi Shibusawa, a Japanese entrepreneur in the Meiji era who successfully advanced a Confucian variant of corporate capitalism. This fascinating sketch could have been drawn out into a fully comparative chapter on the interactions between cultural and economic nationalism in the nineteenth century. Detailed notes and an excellent bibliographic essay end the monograph.

Owen offers the tale of Chizhov’s intellectual and business activities as a window into the ideological and entrepreneurial foundations of early Russian industrialization. In this way, he has written a valuable biographical work that will appeal to economic and business historians interested in the Tsarist economy, corporate practices in nineteenth-century Europe, and the ways in which institutional inadequacies may undermine the efforts of the entrepreneurial classes. Indeed, as Owen notes in concluding, such lessons may be valuable for the new capitalists of post-Soviet Russia.

Note:

1. “Slavophile capitalism” is Owen’s shorthand for the interconnected movement of Slavophile intellectuals and (mostly) Moscow merchants who argued for tariff support and the subsidization of ethnically Russian business by the state.

References:

Alexander Gerschenkron. Economic Backwardness in Historical Perspective. Cambridge, MA: Harvard University Press, 1962.

Thomas C. Owen. Capitalism and Politics in Russia: A Social History of the Moscow Merchants, 1855-1905. Cambridge: Cambridge University Press, 1981.

Thomas C. Owen. The Corporation under Russian Law, 1800-1917. Cambridge: Cambridge University Press, 1991.

Thomas C. Owen. Russian Corporate Capitalism from Peter the Great to Perestroika. New York: Oxford University Press, 1995.

Steven Nafziger is a doctoral student in the Department of Economics at Yale University. His dissertation utilizes household and village micro-data to study the long-run implications of serfdom and the functioning of rural Russian factor markets in the period 1861-1905.

Subject(s):Markets and Institutions
Geographic Area(s):Europe
Time Period(s):19th Century