Published by EH.NET (April 2006)

J.T. Kotilaine, Russia’s Foreign Trade and Economic Expansion in the Seventeenth Century: Windows on the World. Leiden: Brill Academic Publishers, 2005. xvii + 611 pp. $198 (hardback), ISBN: 90-04-13896-X.

Reviewed for EH.NET by Val?ry Lazarev, School of Business, University of Houston, Clear Lake.

This book by Jarmo Kotilaine offers a comprehensive study of the development of Russian foreign trade in the seventeenth century. The 600-page volume has absorbed an immense amount of material from both primary sources and non-English language research literature, often completely inaccessible in the West. The author worked through numerous archives in fourteen countries — from England to Russia — and hundreds of titles in eight (or more? — I lost count) languages to create a study that expands the literature on seventeenth-century Russia tremendously — not only its trade but also its government, diplomacy, and economic development in general.

The economic history of pre-Petrine Russia is largely unexplored territory (the work of Richard Hellie is a notable exception), in part due to the perception of the “old” Russia-Muscovy as a stagnant and autarkic entity that was passively waiting for the great czar-westernizer Peter I (1689-1725) to come and — as the famous Pushkin’s verse puts it — “cut the window into Europe.” The book’s title suggests immediately that Kotilaine is going to assail this stereotype: it was international trade that created Russia’s “windows” — and not only on Europe but on Asia as well — in the seventeenth century. In fact, points out the author, “the Petrine transformation was only possible after some of the key developments described here” (p. vii). Seventeenth-century Russia appears in an unusual perspective in this book: as a vibrant proto-industrial economy increasingly integrated into the European economy.

The “Windows on the World” metaphor organizes the heterogeneous information collected by the author in an efficient and reader-friendly manner. After a brief introduction, Chapter 2, “Russia’s Outlets to the World Markets,” takes us on a tour along the Russian border starting with the North — the sea routes originating in Arkhangelsk — and going counterclockwise all the way to Eastern Siberia — the overland routes between the expanding Russian frontier and China. While the purpose of this chapter is primarily to present the geographical background of the study, Chapters 5 through 8 repeat the same movement describing the evolution of trade in the North (Ch. 5), the Baltic trade (Ch. 6), the cross-border trade with Poland-Lithuania (Ch. 7), and growing commercial interactions with the Ottoman Empire, Persia, Central Asian khanates, and Qing China (Ch. 8). In addition to foreign trade per se, we learn about the growth of the nationwide domestic trade network that connected the key producing regions with Arkhangelsk in the North, Baltic ports in the West, and with Astrakhan in the South. The author aptly connects the dots to make far-reaching conclusions. The patterns of trade, he argues, suggest that the North-South axis (Arkhangelsk-Astrakhan) was critically important for Russia’s integration into the world economy. This is to a large extent due to the importance of Russia’s role as intermediary in trade between Asia and Europe, which arguably lies behind its Siberian expansion. At the same time, it was the growing importance of Western (Baltic) trade routes in the later decades of the seventeenth century that prompted Peter I to attack Sweden in 1700 and eventually defeat it, ending the Swedish domination in Northern and North Central Europe — not the other way around as the traditional view holds. Merchants therefore “can claim a great deal of the credit typically attributed to Peter I for opening Russia’s window on Europe” (p. 354).

Chapters 3 and 4, as well as the concluding Chapter 9, which largely elaborates on the themes of the former two chapters, fall out of the “windows” structure and present the evidence to support the major interpretative statement of the study, reiterated throughout the book in various contexts: Russia’s trade was driven by the growing international (primarily West European) demand for certain commodities that were or could be produced in Russia; this demand fueled the economic expansion in Russia in the seventeenth century, causing the domestic “supply response”; the engine of change was the entrepreneurship of foreign merchants. In the last chapter, the latter are nominated as the “midwives of an empire” for their decisive role in the integration of “the Muscovite economy in a global system of commerce” (p. 504), stimulating Russian manufacturing, supplying the Russian government with specie and arms, and helping to monetize the Russian economy on the whole. The instrumental role of Western merchants (primarily Dutch, thanks to their weaker attachment to silver than that of their mercantilist English competitors) is demonstrated convincingly in the book. However the inferred explanation of Russia’s economic expansion as driven by the growing world demand is deficient in a number of ways.

The author provides data on the growing volume of trade in certain commodities. But how can we tell whether this quantity growth was due to a shift in demand or supply? By looking at prices: the rising prices of Russian exports would support the thesis of the “demand-driven trade,” while the opposite dynamic would suggest that a positive supply shock underlies the expansion of trade. However discussion of prices is practically absent from the book. If reliable price data are unavailable, indirect evidence of the growing world demand for Russian products would support the author’s thesis. Chapter 3, “Demand-driven Trade,” is the place where we would expect to find it. It provides, indeed, a lot of valuable information on the parties involved in Russian trade with the rest of the world, trade-related diplomacy, and the policies of Russian government, but it turns out that the main indicator of the “growing demand” is the increasing volume of goods shipped by foreign merchants. From the standpoint of economic theory, this is irrelevant. If foreign merchants chose to naturalize in Russia — that is what increasing numbers of them were doing starting in the late seventeenth century — or if Russian-born merchants took over from the foreigners, would that automatically make Russian foreign trade “supply-driven”? Of course not. It was probably the government’s demand for revenue that resulted in pro-trade policies, no matter who the agents were. In some cases, the government found it convenient to sell licenses to foreign merchants; in others, it resorted to the tax farming services of domestic agents. The only instance of growing world demand discussed at length in the book is the demand for Russian grain resulting from the rising grain prices in Europe in the 1620-30s, but it does not yield support to the demand-side hypothesis: the author shows that Russia did not become a significant grain exporter. Production and exports of some commodities such as tar and potash was stimulated indeed by the demand of West European manufacturing, but the data provided by the author show that these goods did not account for a large share of Russian exports.

The lack of price data is probably the major shortcoming of the study, and this is very unfortunate since such data should be present in or at least could be estimated from the sources used by the author or may be available elsewhere. The author mentions in passing “extensive price data collected by R. Hellie” (p. 507; no citation is provided), which show that the “expansion of export trade resulted in virtually no inflationary pressures, suggesting that supply managed to keep up with demand.” This is certainly a possibility but other explanations are possible as well. First, the extent of foreign trade may have remained too low to affect domestic prices substantially. The author emphasizes the cases when export-oriented enterprises were launched, but there is no evidence that exports claimed a substantial share of output in many industries. Even in what seems to be the quintessential Russian exports — furs — the author estimates that only about one-third of the total was exported. Second, and more importantly, a supply shift is as likely to drive a constant-price economic expansion as a demand shift. Clearly, Russia was not the land of innovation, and foreign investment remained very limited throughout the century, and yet positive supply shifts could be realized in seventeenth-century Russia.

The seventeenth century was a period of sweeping political-economic change in Russia. A group of related institutional factors could have contributed substantially to cost reduction in many industries and the national economy on the whole. First, the enthronement of Mikhail, the first Romanov, in 1613 ended the turbulent decade of Smuta (“Times of Troubles”). In fact, the country rapidly reached the level of stability it had not seen for half a century since Ivan IV (“the Terrible”) had engaged in disastrous military adventures and domestic policies. The author shows that the costs of doing business in Russia had been almost prohibitively high for foreign merchants during Smuta due to robbery and government defaults, while the situation improved significantly afterwards. The stabilization, beneficial overall, could have had a profound impact on “high-tech” domestic industries such as the manufacturing of quality leather, iuft, which is shown to be the single largest export item (in value terms) in Russia’s Baltic trade. The author describes the iuft production as a success story that resulted from the increase in export demand. There is no obvious reason, however, why the European demand for this peculiar Russian product should have increased in the seventeenth century. At the same time, it easy to observe that a production process that takes weeks to complete is associated with high risk, and therefore political and macroeconomic stabilization in seventeenth-century Russia might have been the primary factor responsible for the expansion in this industry. Second, the seventeenth century was the time when serfdom was consolidated in Russia. Unlike the slave-like condition in which Russian serfs found themselves by the late eighteenth century, the milder seventeenth-century serfdom, by reducing transaction costs in agriculture without immobilizing labor completely, could have resulted in a growing supply of Russian export staples — flax and hemp. Finally, possible changes in Russian supply conditions should be considered against the backdrop of production possibilities that existed elsewhere. In other words, a discussion of Russia’s comparative advantage is needed. The author touches upon this matter, for example, when mentioning that the relative deforestation of Western Europe was adding to Russia’s comparative advantage in forestry-related products but a systematic discussion of this important issue is lacking. In fact, I never came across the term “comparative advantage” in the pages of the book.

It is impossible, therefore, to substantiate one of the central conjectures of the book without a more rigorous analysis of Russian markets, complemented by a discussion of contemporaneous market conditions in Western Europe. It is noteworthy, however, that despite the apparent strong belief in the demand-side interpretation, the author takes care to delineate historical evidence and the interpretation. Kotilaine supplies us with an enormous amount of information, which we are free to process ourselves and agree or disagree with the author. In two respects, the author leaves probably too much for the reader to accomplish: literature and data presentation. Readers of the book, especially students, would certainly benefit from a literature review in the beginning. Some sort of aggregation of trade statistics for the whole country — rather than just raw data by “window” (port or customs) — would clearly help the reader to see the big picture.

Summing up, this book by Jarmo Kotilaine is an outstanding piece of scholarship that has no analogs. Certain problematic positions notwithstanding, it is a great contribution to the economic history of Russia and has a broader relevance as a study of the role of international trade in modernization. This is a must-read for anyone interested in the history of trade, economic history of early modern times, and, of course, Russian history.

Val?ry Lazarev is Assistant Professor of Economics in the School of Business at the University of Houston, Clear Lake. His recent publications include The Economics of Forced Labor: The Soviet Gulag (co-editor and contributor) and articles in the Economic History Review, the Journal of Comparative Economics, and Comparative Economic Studies.