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The economic history of Russia is as fascinating and varied as the country's political history. Russia after taking possession of Ukraine from Poland (17th century) controlled a large part of the world's most productive agricultural land. Ironically, Russia would also acquire much of the world's least productive land--the vast Arctic tundra. Tsarist agriculture was a major asset. For millennia, multicultural productivity was a major factor in great power competition. At a time when agriculture was the primary base of economic production, this made Russia potentially the dominant European power. This potential power was enhanced by Russia's large population, The country advanced into central Europe as a result of the Great Northern War (17th century). The backward social structure and poor utilization of human resources, however, meant that Russia could not develop and project its potential power. Serfdom meant that a substantial part of the Russian population had not access to education or an opportunity to develop their innate capabilities. Thus other European imperial powers (Britain, France, and Prussia/Germany) except Austria, could compete with Russia. This essential political balance was undermined by the Industrial Revolution. For the first time in human history, agriculture was replaced as the primary economic base and because of Russia's conservative social system as well as serfdom, Russia which continued be primarily an agricultural country, fell behind the other European powers. This was first observed in the Crimean War (1846-48). As might be expected, in the world's largest country, transports and communication was a major issue, especially in a relatively backward country like Russia. Russia had unique serious problems of its own. It as relatively land locked. Much of the country was covered by inhospitable Arctic Tundra and unlike many counties, the rivers cold not be of much use. Most ran due south rather than east-west and thus could not be used to create a unified economic system. This could not have been more different than say the United States, another large country and in the 20th century a primary competitor. The invention of the railroads helped address a huge problem for Russia. This of course was true for other countries, but nowhere on the scale of Russia. The railroad solved the east-west problem. And notably, the longest rail journey in the world is the east-west oriented Trans-Siberian Railway. And the largely flat terrain of Russia was tailored made into solve Russia's transportation/communication problem. Notably even in the 20th century, Russia's major cuties were not connected by improved roads. Something the Germans to their detriment only discovered when they invaded the Soviet Union. The Russian rail system led the country into the modern age. Tragically for several reasons, it did not occur as rapidly as in Western Europe. And the weaknesses first observed during the Crimean War, in World War I (1914-18) resulted in the defeat of the numerically superior Russian Army by the better armed and equipped German Army. At the time of World War I, Russian industry was rapidly growing, but still well behind that of Germany. In the ensuing chaos of the collapsing Tsarist regime, Bolshevik revolutionaries seized power and replaced capitalism with the still untried Marxist socialist theories. The combined impact of World War I, the Civil War, and War Communism resulted in the near collapse of Russian economy. Lenin was forced save it with of all things capitalism--the New Economic Program (NEP). Stalin did away with that and many of the people who participated with the First Five Year Plan. One part of that was Stalinist collectivization. As a result, the agricultural productivity of the new Soviet Union plummeted to levels far below that of Tsarist Russia and no longer produced harvests permitting grain exports. Soviet Five Year Plans significantly expanded the country's industrial capacity, although the pre-War Tsarist growth rates suggest that this could have been achieved without the horrors of Stalinism. The Soviet industrial power in World War II along with assistance from American Lend Lease enabled the Soviets to prevail over the NAZIs. Soviet industry, however, proved hopelessly inefficient. In the noncompetitive Soviet system, most companies produced products that were worth less than the value of the labor and raw materials used to produce them. And the Soviet Union was never able to repair the damage done to Russian agriculture by collectivization. The Soviet Union did create an effective education system turning out well-trained scientists and engineers. Our section on the Soviet Union includes a great deal of economic information. After the dissolution of the Soviet Union, this became apparent when Soviet state industries were simply unable to compete with foreign firms. Russian economic planners have not yet made the reforms needed to develop a modern free market economic system to harness the enormous potential of Russia's well-educated population. The Russian economy is today based primarily on the export of oil and other raw materials, essentially the same as Third World countries with uneducated populations. Russia today with the exception of military weapons does not produce industrial or technological products which can compete in world markets.
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