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Norms in the Economic Evolution: Old Believers in the Russian Nineteenth-century Textile Industry∗ Danila E. Raskov1

Abstract This paper presents new historical evidence on the role of Old Believers in the Russian textile industry as well as providing an institutional explanation of their economic rise and relative decline of their economic activity during the 19th century. The synthesis of previously unpublished data on the merchant guild and industrial statistics allow to indicate the dynamics of such enterprises as spinning, weaving and bleaching which were owned by the Old Believers. This paper seeks to explain why Old Believers –“irrational adherents to letter and gesture”– became energetic modernizers and why they played such a crucial role in Russian textile industry in the middle of nineteenth century and a very modest one towards the end of the century. When the external economic environment changes social and cultural norms of small homogeneous group are sometimes crucial forces in the process of technological innovation. During an economic evolution norms may be rationalized giving comparative advantages at a certain period, but they may create obstacles at latter periods. Social norms rooted in core values helped the Old Believers to create networks, hire workers in a serfdom system, accumulate capitals and take advantage of external technological change in the labor-intensive textile industry. But, as time went on, new external environments caused the Old Believers to lose their comparative advantage because these changes often contradicted their core values. Thus, I find that the same norms can lead to quite different economic results in various external technological and political conditions.

Introduction In many cultures closed heterodox religious communities (such as Quakers, Mormons, Mennonites) made significant contributions to early capital accumulation and the introduction of commercial enterprises. Historians have observed this process in Russia with regard to the role of the Old Believers2 in Russia’s nineteenth-century textile industry. Referring to Old Believers Alexander Gerschenkron once stated: “The worshippers of religious immobility, the fanatical enemies of ecclesiastic reforms, the irrational adherents to letter and gesture appear as energetic ∗

I would like to thank Leonid Shirokorad and Lee Benham for initial encouragement and help, Benito Arrunada for his detailed comments and valuable advises, Nuno Garoupa for his suggestions for improvement, Jean-Philippe Platteau for helpful comments. Remaining errors and shortcomings are only my responsibility. 1 Assistant Professor of St. Petersburg State University. Address: 192286, Dimitrov 24-2-203, St.Petersburg, Russia; e-mail: [email protected]

modernizers in their very rational economic pursuits.” (Gerschenkron, 1970: 21)3 How can this phenomenon be explained and quantified? This practical issue in the economic history has long been in need of discussion. However, no less important is the theoretical question concerning the relationship between the economic and the spiritual lives of the human being and the society. The attempts to determine the relationship between the “picture of the world” and the material development of the society have been made over a relatively long period of time. Extreme positions on this case as some kind of milestones in the discussion have been set in the well-known argument on the relationship between the Protestant religious ethics and the origins of modern capitalism in Western Europe. Karl Marx was among the first to note that the 16th century served as the beginning of the capitalist era. Reformation, Marx maintained, followed the economic changes (Marx, 1949: 720, 722; Febvre, 1991: 204). Max Weber offered a no less entertaining but reversed formula, and deemed the Protestant ethics responsible for the roots of economic rationality, which transformed the Western civilization (Weber, 1990 {1905}). Weber did not meant to construct the universal theory. In contrast, he stressed in this ad hoc research exercise only the origins of modern capitalism rooted in Protestant ethics and underlined the temporal limits of this connection. Nevertheless, this study was followed by so called “Max Weber controversy” – pro (Tawney, 1937) et contra (Robertson, 1935; Samuelsson, 1961).4 This argument has since not been settled. It seems that there is indeed some kind of relationship between Reformation of Catholicism and the genesis of the modern economy and that beliefs

2

Old Believers are the descendants of Russian clergymen and laymen who refused to accept changes in the church missal and ritual in 1654-1667. The Russian church schism of the seventeenth century was the most powerful opposition movement, which united approximately 5-10 percent of the population. 3 Gerschenkron dedicated forty pages (Gerschenkron, 1970: 8-47) in two of his four lectures on economic history of Russia to the interpretation of Old Believers contribution to Russian capitalism. He found that “minority position” rather than peculiar characteristics of the beliefs (“Max Weber thesis”) was crucial in this process of early modernization. Our findings prove that this distinction is not fruitful in the perspective of new facts and economic evolution interpretation. Also he mentioned which is important for our article that for final judgments there were “no comprehensive studies of the Old Believers as entrepreneurs in trade or industry” (p.18). 4 See also Green, 1973.

and religious life directly or indirectly can influence group economic performance especially in traditional societies. This topic is worth to be reexamined by economists. It must be noted here that the new institutional economics does not avoid such complex problems on the verge of economics, sociology and history. Moreover, the theory aspires to find an answer of its own to these problems, by adding institutional variables to the economic analysis. Prominent scholars are looking at informal institutions – ideology (North, 1991), skills and routines (Nelson and Winter, 1982), cultural beliefs (Grief, 1994), moral norms (Platteau, 2000). For the purpose of this article we are mostly interested in the concept of economic system evolution, offered by Yujiro Hayami (1998). According to Hayami, the evolution of economic systems is viewed as a process in which various informal arrangements are experimented with for improving efficiency under changed economic environments. Social and cultural norms (standards of conduct and belief) of whole society and small homogeneous groups (such as Old Believers) play an essential role in the adaptation and in the creation of successful innovations under the changes in external environment (technological innovations, market growth, changes in tariffs policy in international trade). Given cultural and social norms may be rationalised in economic terms at certain period of time but, on the other hand, they sometimes create obstacles for other periods of time – when circumstances have changed. There is a general framework for the study of Old Believer’s Entrepreneurship. Although leading scholars such as Alexander Gershenkron (1970), William Blackwell (1965), Robert Crummey (1970) have pointed to the substantial contribution of Old Believers in the Russian economy but nobody performed a quantitative analysis.5 To do this, I exploit in Part I unstudied archival materials and the data of merchant guild collected for government census bureau. This latter source provides a list of more than one thousand Old Believer merchant families. In the next step I combine these data with industrial statistics. As a result, I was able to

analyze the dynamics (1843-1890) of enterprises owned by Old Believers in various branches of the textile industries (spinning, weaving etc.) Moreover, I was able to evaluate their relative proportional weight according to the quantity of labor input and the total output. Their participation in cotton manufacturing and wool-weaving industries was especially remarkable. My empirical research tends to substantiate the hypothesis that Old Believers played a significant role in the first stage of Russian textile industry modernization (1812-1860). On the other hand, the analysis of data has demonstrated that towards the second half of the 19th century the importance of Old Believers in the Russian textile industry and economy as a whole had declined.6 The rise and fall of Old Believers economic activity has to be explained. In Part II I focus on the evolutionary explanation of this process in the perspective of New Institutional Economics. Two parameters are most important in my main hypothesis. The comparative advantages of Old Believers that were rooted in their cultural and social norms (eschatological beliefs 7, special attitude to rites and letter, stateless culture that made them different from official Orthodox followers; also asceticism, hard work, thriftiness, literacy, strong community ties) helped them to employ workers in a serfdom system, to develop credit bearing no interest and to be trusted among population. I regard these comparative advantages as the stable parameter. Then I examine changes in external environment that faced Old Believers – political and technological. Liberalization of internal policy and tariff protection in foreign trade helped for Old Believers to realize their comparative advantages during 1820-1860, but government intervention starting from 1880 in the development of railroads, metallurgy, banking system shadowed their position in the economy. Great gains and losses of comparative 5

On the economic activities of Old Believers also see (Haxthausen, 1856: 272-277; Melnikov-Pechersky, 1909; Liprandi, 1900; Andreev, 1870: 149-165; Leroy-Beaulieu, 1898: 358-359, 389-394; Rustik, 1934; Ryndzunsky, 1950; Beliaeff, 1974, Benham L. and Benham A., 1997; Hohlova, 1997, Stadnikov, 1999, Kerov, 2000) 6 This result shows that Old Believers relatively declined in their economic activity. Collected data only partly take into account the shift of Old Believers to official Orthodox Church and Edinoverie. It is important that even without this conversion information the data remains reliable. Edinoverie – part of official Russian Orthodox Church established in 1800 in order to attract Old Believers and unite them in one church with unique hierarchy. Followers of Edinoverie could use Old Orthodox missals and rituals that were before the Nikon reform of 1654-1666, but obey the Synod.

advantage were occurred in external technological change. While in the first half of XIX century textile industry required small amount of capitals and developed gradually, in the second half of XIX century it required certain sets of big investments in production facilities, distribution network, management organization etc. Thus, I find that the same social and cultural norms can lead to different economic results in various historical conditions. This main hypothesis (comparative advantage – political and technological change) is accompanied by and compared with secularization hypothesis that regards the correlation of wealth with the decline of religiosity among believers.

Rise and Relative Fall of Old Believer’s Economic Activity in Russian Textile Industry: Evidence

“Schism of Old Believers” united those Russians who refused to accept changes in the church’s rituals and liturgy introduced in 1654-1657 by Patriarch Nikon. First four decades was marked only by persecution and punishment. Regent Sophia in 1685 sanctioned burning at stake and death, Old Believers began to flee away from the country beyond the boundaries of Russia. Peter the Great was more pragmatic. The Old Believers received the right to live openly in villages and towns in exchange for registration and double taxation. But only by the end of the 18th century, during the reign of Catherine the Great (1762-1796), a number of conditions for development of Old Believer entrepreneurship are created as Old Believers

obtain equal rights with other

citizens of the Russian Empire. Concurrently the government refuses privileges and monopoly to industry. The imperial decree of 1775 announced that “all and everyone is allowed hereby to establish on his own will any kind of factories and stationary shops and he shall not require any permits from high or low authorities”. Merchant titles were no longer inherited, merchant 7

Eschatology is a Christian teaching about the last times, about the final destiny of humankind.

privileges (such as emancipation from head tax and military service) were now bought rather than inherited. It was at that time that conditions were set for Old Believers to emerge from religious and political opposition and become a notable economic power in the Russian society of the early 19th century. Like in Britain, the textile industry in Russia serves a vehicle for market reforms and economic growth. Especially dynamic, in comparison with broadcloth and linen sectors, was the development of a new cotton sector, with its spinning, weaving and dyeing shops.

P. I.

Lyaschenko gives a fair assessment of cotton manufacturing, when he calls it “the most typical branch of industry, free from serf labor and state privileges, and based on free men’s labor and capitalist technology”(Liaschenko, 1952: 526). In the 1880s the textile industry is responsible for over a half of all Russian industrial output, although by the beginning of the 20th century the share shrinks to 30%. Textile manufacturing was mainly placed in the Central Industrial District, covering Moscow and Vladimir Regions. It must be emphasized here that Moscow and Moscow Region had played a leading role in the development of Russian industry, as the data available to us showed. For instance in 1870 Moscow Region came in first with its annual industrial output figures, bringing some RUR 90 mln of Russia’s total RUR 340 mln and leaving Vladimir and St. Petersburg regions lagging behind with their numbers twice as low. The wool sector was the most densely involved with its share of RUR 28 mln. Moscow Region had some 56% of total Russian wool manufacturing output, plus cotton manufacturing facilities (Timiryazev D.A., 1869). In 1890 Moscow Region continued to lead the rest of the country with RUR 246 mln worth of product, significantly higher than in other regions (e.g. RUR 177 mln in St. Petersburg, RUR 117 mln in Vladimir, and RUR 77 mln in Kiev) (Orlov P. and Budagov S., 1894: VII). In order to present a whole picture of Old Believer entrepreneurship naming the most popular names like Morozov, Guchkov, Ryabushinsky shall not suffice as it usually does in

popular literature. There is a need to study all available sources and put together a detailed list with enough parameters to determine the actual influence Old Believers had had on the Russian economy of the 19th century. The only exception is the list that of 178 Old Believer families in Moscow of the 19th – early 20th century, published by Anton Stadnikov (1999). His work, however, left out the materials of 9th merchant census, as the author deemed using these data “unsuitable” since the census listed no information on the merchants’ religious affiliation. On the contrary, it was with the 9th census that the confession of the respondents among merchants was first recorded, and the information for the year 1850, the year the census was taken, shows more complete data on Old Believer merchants (Report, 1889a). The materials of the census contain information on religious affiliation, the guild of the merchant (1st, 2nd, or 3rd), place of residence, and family household (wife and children). The information in the Report was structured into 33 sections depending on geographical region and represented simple unsystematic list that was worked out by the author. These data are especially more valuable, since all the family information allows to trace the approximate route of development for Old Believer entrepreneurship in later years. Upon study of the lists I found that as of 1850 there were 561 Old Believer merchant families in Moscow, which amounted to almost 15% of the total number of merchants (for more details see Table 1). If we consider that there were about 5% of dissenters in Moscow, the business activity coefficient of Old Believers amounts to 3, which means that they were three times more active in business then the rest of the population. Materials of the10th census confirm that during persecution times of Nicholas I many Old Believer merchants switched to Edinoverie8 and Orthodoxy. In 1857 there were 360 Old Believer merchant families officially registered in Moscow, which amounted to less than 9% of all merchants in the capital (Materialy, 1889b).

8

See footnote 6.

Table 1. Confessions of Moscow merchants in 1850 and 1857 Confession

9th Census (1850)

% 10th Census (1857)

%

Orthodox

3009

79,37

3328

83,43

Edinoverie

2

0,05

77

1,93

Old Believers

561

14,8

360

9,02

Protestants

127

3,35

136

3,41

Armenian Church

6

0,16

3

0,08

Moslems

10

0,26

9

0,23

Catholics

67

1,77

76

1,91

3791

100

3989

100

TOTAL

Sources: Extracted and calculated by the author ( Report, 1889a, 1889b)

The priestists and the priestless were accounted for separately in the censuses. The priestless numbered 106 of 561 Old Believer merchants in 1850 (19%), and 55 of 360 in 1857; the rest of the merchants were priestists. This figure reveals that Old Believer merchants of Rogozhsky Cemetery had absolute dominance. They kept their priesthood and were more loyal to the government. Both factional streams, however, were represented in the Merchant Guild in proportion to their total quantity. Statistical information on manufactures and factories of the 19th century necessarily included full names of the owners with rear exception of joint-stock companies. Comparing the materials of the census and the data on factory industry allowed us to assess the role of Old Believer entrepreneurs in different industrial sectors of the Moscow Region. We will now turn to considering two major sectors of textile industry, namely cotton and wool manufacturing, wherein Old Believers had been especially successful. Cotton industry became widespread later than broadcloth and flax sectors, and unlike those sectors, used imported raw materials. By 1830s cotton industry took the first place among all sectors of textile industry (Pazhitnov, 1958). The cycle of cotton manufacturing (cotton – yarn

– fabric – printing and dyeing) developed in Russia in the reverse order. Printing and dyeing came in first in 1753, weaving developed next, and spinning factories were the last to appear. Weaving. The role of Old Believers in the development of this sector is remarkable. In 1840-50s over 30 owners of weaving factories were Old Believers. Table 2 shows the dynamics in the number of factories, number of employees and total output in 1843-1879 in Moscow and Moscow District (uezd). Absolute figures are complemented with relative figures, and the percentage of Old Believer weaving business in the total of Moscow and Moscow District sector is also shown.

Table 2. Old Believers in Cotton Weaving Industry in Moscow and Moscow District Year

Number of

%

Number of

%

Output in Russian

% of

Factories

of total

workers

of total

Rubles

total

1843

31

20,8 %

3303

16,2 %

981800

12,8 %

1853

36

24,8 %

3766

24,8 %

1255109

17,8 %

1867

11

39,3 %

2660

53,1 %

1110828

55,7 %

1871

13

36,1 %

2493

47,1 %

1266547

50,8 %

1879

6

16,7 %

785

14,3 %

541000

13,4 %

Sources: (Confession data was extracted from – Report, 1889a, 1889b; Industrial statistics from 1843 – Samoilov, 1845; 1853 – Tarasov, 1856; 1867 – Timiryazev, 1869; 1871 – Matisen, 1872; 1879 – Orlov, 1881). According to all relative parameters the peak of Old Believers’ participation in this sphere of business was in 1867 when 11 factories employing 2660 workers put out RUR 1,110,828 worth of products, which constituted 55.7% of all manufacture in Moscow and Moscow District. In Moscow Region as a whole Old Believers controlled manufacture of at least one third of rough and delicate fancy fabrics. Further on, the share appeared to start going down gradually and reached 15% of the original share by 1879 both in number of factories and employees, and the amount of manufactured goods. Further on we will discuss the reasons for such decrease of Old Believer contribution to Moscow industry.

Wool industry. Starting in 1830s, wool industry grew rapidly. From 1820 to 1856 the number of enterprises more than doubled from 304 to 627, while the number of employees in the sector doubled also from 52703 to 111827 (Pazhitnov, 1955: 72-74). Moscow gradually becomes the center of wool industry. Especially fast is the growth of wool yarn manufacturing. The above sources (industrial output indicating owners of factories and shops and religious affiliation information on merchants) allows us to conclude that Old Believers in Moscow controlled nearly a half of all wool weaving industry in Moscow and Moscow District. In 1867 this figure reached its peak and amounted to 43.8%! Given the place of the Moscow Region in this sphere we conclude that Old Believers in Moscow owned over 35.7% of all wool weaving enterprises in the Russian Empire. General statistics are presented in the following table:

Table 3. Old Believers in Wool Weaving Industry of Moscow and Moscow District. Year

Number of

%

Number of

%

Output in RUR

%

Factories

of total

Employees

of total

1843

12

17,9 %

1979

20,3 %

1448394

28,7 %

1853

10

17,2 %

2743

22,6 %

1404109

24,2 %

1867

27

29,0 %

6385

35,5 %

4487010

43,8 %

1871

20

16,4 %

5126

24,2 %

3812158

27,8 %

1879

15

12,1 %

4117

20,9 %

3751950

19,1 %

of total

Sources: (1843 – Samoilov, 1845; 1853 – Tarasov, 1856; 1867 – Timiryazev, 1869; 1871 – Matisen, 1872; 1879 – Orlov, 1881). Advanced technologies appeared faster on Old Believer factories, and these factories quickly became national leaders both in terms of output and development rates. However, as in other sectors, by 1880 the number of factories owned by Old Believers went down, while the remaining enterprises retain their leading position. The largest and the most advanced wool yarn manufacture belonged to the Guchkovs, curators of Preobrazhensky Cemetery. Factory owners were enterprising enough to monitor all innovations. It is a well-known fact that in the first half of 1840s Efim Guchkov traveled to

Germany, France and England, where he ordered RUR 300,000 worth of spinning and combing machines and founded a wool weaving facility in Moscow to produce worsted and spinned yarn (Obozrenie, 1850: 95-96). It was the Guchkov factory that was the first to turn to Russian-made and not imported wool. Tarasov, in his survey of Moscow Region’s industry is enthusiastic and exhaustive in his description of the Guchkov Factory, when he says: “… the Guchkov Brothers’ manufacture is in every way utilizing the best foreign practices of weaving and printing fabric; it is mechanically superb and the goods they manufacture are of great variety”(Tarasov, 1856: 1415). In the opinion of contemporaries, dresses and kerchiefs sent by Guchkov brothers to exhibitions were always in “fine taste, brightly colored, and amusingly patterned” (Tarasov, 1856: 16) Numbers-wise, the factory also showed amazing performance. By 1843 there were 964 employees on the factory manufacturing some RUR 516,000 worth of products. By 1853 the number of workers nearly doubled and the output increased to RUR 700,000. Back at the time Old Believer merchants even received governmental awards. In 1841 five prominent merchants, which belonged to Rogozhskaya Priestist Community were awarded medals for providing Moscow with food. Fedor Rakhamov, Honorary Citizen, “given the commendable character of his service,” was awarded a gold medal on a St. Vladimir ribbon, with the inscription “For Acts Useful”; Yartsev, Merchant of the First Guild, was awarded his second gold medal with the inscription that read “For Diligence” and cited for “exceptional service for common good,” and Commerce Councilor Shelaputin and Honorary Citizens Alexei and Vasily Rakhmanov were honored by “His Imperial Majesty’s Benevolence” (Sobranie, 1858: 387-389). What is the dynamics of Old Believer entrepreneurship? Data show that the best period to describe the Old Believer involvement in entrepreneurship in the second third of the 19th century. It was when this phenomenon provided support to gradual on-going grassroots capitalist changes, which did not, at the time, affect the traditional way of life. This period is what we hold to be the peak and culmination of Old Believer entrepreneurship, which was then inevitably

followed by stagnation and then by gradual decline. In other words the end of the 19th century and the beginning of the 20th century were not typical for Old Believer entrepreneurship as it was not longer a large-scale phenomenon and no longer reflected socio-economic and cultural processes of the time. Direct and indirect evidence suggests that Old Believer entrepreneurship was most largescale and typical in 1830-60, when the industry was going through the first stage of modernization, which mostly affected the textile industry. It’s a well-known fact that in 1850s over 1,000 merchant families in Moscow belonged to Old Belief. With the help offered by communities and their fellow worshippers peasants developed trade and then spent the proceeds on building factories and manufactures. Mihail Tugan-Baranovsky, brilliant scholar who researched Russian factories, noted that Old Believer merchants mostly developed peasant factories, which was an inalienable component of public life and in no way could be called an “artificial” event, as was the creation of large factories one hundred some years ago. Thus, comparing the shares of Old Believer entrepreneurship in Moscow industry we can stipulate that starting in 1870s the number of Old Believer merchants went down, as did the number of factories associated with Old Believer capital. According to the available data, this process affected cotton and wool industries, as well as beer brewing, pottery, brick manufacturing and many other industrial sectors. A logical question to ask is: why did the peak of Old Believer participation in industry take place in the second third of the 19th century, and why did it decrease by the end of the century? What is the reason for this process?

Social and Cultural Norms of Old Believers in a Changing Economic Environment

Norms and Comparative Advantages. Let us now turn to the evolutionary model of new institution development, which shows how search for and selection of social institutions takes place. Changes in the environment of the traditional way of life led to the situation when other cultural and social norms were in demand. The character of these changes further determined the qualitative parameters of the worldview and behavior standards most fitting to new economic conditions. At the same time the economic benefit of traditional behavior standards weakened as compared with the effectiveness of the latter in the previous stage of historical development. Economy could not be a goal-in-itself in traditional societies: values and ethics of the time comprised the stable and change-resistant “core” of social life. In order to preserve the system in relative imbalance there must be an unchangeable element, which would serve to consolidate the remaining elements of the system. Otherwise, the system would either transform into a different system or deteriorate altogether. The “core” of Old Believer way of life had been formed long before the 19th century. Obviously this lifestyle was first and foremost religious and economic axioms and ethics of modern entrepreneurship remained exterior in relation to this “core”. We can outline and distinguish following traditional cultural and social norms of Old Believers, which formed the comparative advantages of “ancient piety” adherents in business: 1. “Worldly Ascetism”. Secular life of Old Believers was centered around the austere Christian monastic ascetics. This presupposes that entrepreneurship and daily routine were viewed as sacred. Work required the same kind of seriousness and dedication as did religious rites. Secular ascetics dictated to be more self-control than that of the rest of secular population, Christian life canons guiding entrepreneur effort. Old Believers were better organized and rational. In what concerned consumer behavior, secular ascetics imposed strict limitations: luxury and “joys of life” were forbidden, and sensuous art was discouraged. Secular ascetics led to two other norms in consumption and production activity: 2. Hard work and little rest (small ratio “leisure-labor”). This social norm is briefly described in the Old Ritualist belief as “idleness teaches evil”. Discipline and higher productivity were the features, which characterized Old Believers and distinguished them from the rest of the society. The same qualities were helpful for managers, as well.

3. Thriftiness. As consumers Old Believers limited themselves when it came to “ordinary joys of life,” and practiced stricter morale. Squandering money and spending it in vain were not accepted, and so as consumers Old Believers were less inclined to spend much. Thriftiness aided them in accumulating wealth that was later invested in new industries and development of trade networks.

Austere life and ascetic consuming were descriptive for merchants

dynasties, such as Ryabushinsky and Morozov family, et al. 4. Trust and Community Help. Old Believers recognized that they were chosen people, and thus put more trust in their fellow worshippers than in the rest of the world. The synergy of this homogeneous group was further enhanced by the Church’s teaching on Doomsday (eschatology) and Salvation, and the persecution the Church community had faced. Intensive communication inside the group and cohesion of the faithful lowered the expectations of ex post opportunism. That, in turn gave an opportunity to establish long-term trust and thus limit expenses on preparation, drafting and monitoring of contracts, i.e. the transaction costs (especially in trade). Within a cohesive group such bounded rationality and the degree of egoism and altruism lead to easier understanding and better reliability of economic relations. It must be noted here that Old Believer entrepreneurs were trusted not only by their own kind, but by the Orthodox population as well. 5. Imperatives of Community Survival and Strengthening, and of Charity. Wealth was not viewed as goal-in-itself, but served only as a means to keep and strengthen the community and to serve. This norm dictated the distribution of wealth within the Old Believer community. Often large gifts or all of a person’s money were bequeathed to the community or charity. Old Believer merchants added to museum collections, built retirement homes and hospitals, and later even supported theater arts. These are, briefly described, major peculiarities of cultural and social norms of Russian Old Believers in production (hard work), consumption (thriftiness) and distribution (community help). All these are interrelated and are expressed at three levels of economic relations, namely, motivation (the feeling of being the chosen people), cooperation within the confession group (corporativism), and economic ties with the society at large (closeness). Obviously, cultural and social norms were formed both under the influenced of the changed worldview and immanent logic of ethics development, and under the influence of external social and political circumstances.

What was the difference in beliefs between Old Believers and established Church? At first superficial glance there were not any fundamental doctrinal divergences like filioque and “ex cathedra” between Orthodox and Catholic churches, or like absolute predestination between Catholics and Calvinists. Nevertheless, the huge difference was observable. First of all, Old Believers were more faithful, they really try to follow Christian commandments. These norms underlined before are common for all Christian confessions but there is the difference in enforcement of these norms. Beside it is possible to distinguish at least two peculiar features in their beliefs – eschatology and special attitude to the ritual that have also economic consequences. Apocalyptic fears supported discipline, formed mentality of chosen people, the feelings of moral superiority, justified economic activity that can save the community. The view of spiritual Antichrist was spread first of all to the official church and the state. In this respect this belief formed stateless culture of Old Ritualists. The special attention to the form and external world led to more careful attitude to the material things. Literacy in order to read books and to prove their rightness was also important. Beliefs were the fundamental clue for the existence of organized group of Old Believers. Those beliefs were crucial for the formation of Old Believers comparative advantages in trade and organizing textile mills realized in the first half of 19th century. Why success? There are institutional explanations to the success of Old Believers in Russian textile industry. It is not by chance that Old Believers showed skill in new ways of organizing production, hiring, introducing innovations, etc. Changing conditions gave everyone an opportunity to express himself or herself in creation and strengthening of textile manufactures, but it was cultural and social norms of Old Believers that allowed them to use favorable external circumstances to succeed in creating economic well-being of Russia. Cotton fabric sector did not depend on the state demand but on the large consumer market. Initially it developed on the traditional peasant fabric manufacturing. Canvas buyers

turned it in to be dyed (printed). Printed cotton sector was the first to be developed, fabric manufacturing from imported yarn came next, and finally, a considerable time later, weaving. The tariff of 1822 introduced high fees for import of ready-made fabric, and lower fees for yarn, but there were other reasons for this development trend as well, as new technology developed on every stage of the manufacturing process. “The major reason for cotton industry development in the 19th century not only in Russia but in other civilized countries as well,” Mihail TuganBaranovsky, an expert in factory development in pre-revolutionary Russia, states. “It was because machines were used in weaving and spinning of the cotton, cotton became cheap material for clothing. The poorer the population in the country, the more demand there is for cotton fabric” (Tugan-Baranovsky, 1997: 125). Import of raw cotton into Russia increased from 5,000 poods in 1812-1815 to 262,000 poods in 1856-1862; cotton yarn import remained unchanged, and the sale price for a pood of English cotton yarn decreased nearly twice in the period from 1822 to 1845 (Tugan-Baranovsky, 1997: 123). The important issues for the purpose of this research are as follows. Firstly, textiles manufacturing was concentrated within separate family businesses, which span, weaved, and dyed their cotton in one location. As manufacturing grew, relatives and friends were brought in to help (Schulze-Gaevernitz, 1899: 22-23). The family continued playing an important role in the Russian cotton industry throughout the 19th century. It is enough to remember numerous Old Believer clans (dynasties), such as the Morozovs, the Ryabushinskys, the Khludovs, and the Shelaputins. This industry sector continued to develop fast due to natural business qualities of the people, of Russian peasants. Secondly, the technical progress after the invention in 1794 of the machine to separate cotton seeds made raw materials for silk and cotton fabric less expensive, and the textile industry moved from using flax and hemp to using cotton and silk (Syromiatnikov, 1925: 70). Arkwright and Watt inventions have been the beginning of new era in the economic history of the world.

Social norms of Old Believers were put to use here, as work days continued for 10-12 hours; thriftiness was a must because finances were mostly spent on expanding the business; and fellow villagers trusted the business and lent money at low interest rates. All this allowed concentrating resources for modernization of textile manufacturing. Savva Morozov, for instance, grew his business at head-spinning speed, moving from being a serf to the largest factory owner in Russia. It becomes clear that it wasn’t by chance that Old Believer merchants became leading industrialists in the relatively new cotton industry. This sector later became the vehicle of Russian industrial development. To sum up, the economic evolution of Russian textile industry in 1820-1860 was characterised by substantial changes in technical, political and organisational environment that allowed to Old Believers realise their comparative advantages. The inventions of cotton and wool machines in Britain and Continental Europe together with severe protective tariff system (1822-1844) that allowed tax free import of machines and imposed huge taxes on yarn and fabricated goods both created good perspective for the development and imitation of textile mills. In the same time the organisational structure of textile industry had a tendency to shift from landlord (“pomeschik”) to merchant and peasant manufactures, from serf labour to hired capitalist labour respectively (for example, in 1815 only one quarter of workers in wool industry were free). The government in this period did not take direct essential role in the development of textile industry. The growth of demand for textiles was observed. The textile industry in this period can be characterised as labour-intensive. In this environment the comparative advantages of Old Believers received an economic returns. Why fail? It is quite obvious that the peak of the economic activity very often became the starting point for the decline. The sunset follows the dawn. But the causes of this process are valuable to know. A good insight for the relative decline of Old Believers can be obtained from comparisons of the decline of British economic power that was based primarily on textiles. In the

19th century British firms were comparatively simple, run by owner-proprietors of close family associates, had small managerial staffs, specialized in particular product (Lazonick, 1986: 3, 1850). As a result antiquated technologies dominated in British production, they still used mule in spinning industry and failed to develop the modern corporate enterprise. As Alfred Chandler concludes organizational capabilities of personally or family managed firms were insufficient for economies of scale and scope that required more funds and specialists and in every case “changing technologies and markets constantly make both existing facilities and skills obsolete” (Chandler, 1990: 332-334, 594-595). The decline of Old Believers economic activity in the end of 19th century has many features in common. Old Believers retain to traditional way of organization and were not ready for the integration of financial and industrial capital, for systemic research and development, for joint stock companies and for intense collaboration with authorities. But the corporate capitalism required these characteristics in order to be successful.

All changes need additional resources. The majority of textile mills owned by Old Believers worked like 30-40 years ago. They very often conserve labor-intensive production and even manual labor without huge investment into facilities. In 1859 the average spending for equipment in wool industry per one worker was estimated in 115 rubles, in 1900 it this spending quasi tripled – 329 rubles (Pazhitnov, 1958: 153). Famous Morozov and Riabushinsky families were brilliant exceptions, typical was much different. The descendants of Savva Morozov owned four huge cotton mills. In 1890 these four manufactures gave 7 % of Russian cotton production (Orlov, 1894). But massive typical Old Believers behavior was much different from these rare examples. Government subsidized railways and other branches of industry connected with it, protected domestic enterprise, encourage foreign investments. Government became much more active in economic life. But Old Believers had stateless culture in which government was

associates with spiritual evil. In addition to active state role in economy, foreign capital became more actively involved during that period. In the assessment of P. V. Ol, in 1867 annual foreign capital investment in Russian economy amounted to RUR 18.9 mln, by 1890 the figure was RUR 214.7 mln, and by 1914 – an amazing RUR 2 bln (Ol’, 1925: 11-13). B. F. Brandt assessed the stock capital invested in Russian metal and coal industries alone at RUR 167 mln in 1897, while the industries total capital amounted to a little over RUR 223 mln (Brandt, 1889: 235). Mining industry grows especially fast during that time, and active railroad construction aids in this development. All these large factories get orders from the state and use foreign capital. Vestnik Finansov wrote thus on Southern Russian Plants: “Only two of modern enterprises can be called purely Russian: Sulinsky Plant owned by Pastukhov and Alexandrovsky of the Bryansk Society. The others are either completely owned by foreigners, or there are both foreigners and Russians on the board. For instance the Novorosiisk Plant belongs to Use (England), Gdansk Plant – to the French, Dnepropetrovsk Plant of the Southern Russian society – to the Belgians, and Druzhkovsky Plant of the Donetsk Society – to the French” (Tugan-Baranovsky, 1997: 340). Banking also grew rapidly along with stock capital, and the center of business moves gradually from the Central Industrial District where Old Believers had always had a considerable influence, to St. Petersburg in the North and new metal and processing plants in the South. The share of St. Petersburg banks in all Russian credit institutions amounted to 20.8% in 1893, 23.3% in 1900, 34.7% in 1908, and 43.7% by 1914 (Crisp, 1967: 192-195). Fast growth of credit and finance institutions geared towards state orders and speculation, growth of mining and metal industries and railroad construction was virtually not affected by Old Believers.

Cautious and slow in their business, their type, in the words of Vladimir

Ryabushinsky “was slowly dying in the rotten and stagnated atmosphere of St. Petersburg (Ryabushinsky, 1994: 136). The type of a Russian “muzhik” which was the center figure in Moscow, lost his way in banking and official circles of the capital and was squeezed out by

foreigners and adherents of other faith. Arcadius Kahan, American economic historian, notes, for one, that industrialization in Imperial Russia opened new business opportunities for Jews (Kahan, 1982: 3). Study of reference materials on St. Petersburg merchants who were issued their licenses in the first and second guilds from November 1, 1882/1892 to February 1, 1883/1893, as summed in Table 4 below, can serve a good illustration. It shows that the share of Old Believers was relatively stable and amounted to 1.2% of all city merchants (to compare, the 9th census in Moscow showed the share of Old Believers at 15%!)

Table 4 . Confessions of St. Petersburg Merchants Year Confession Orthodox

Persons

1893 % Persons

Business % Activity index∗

3154

66,0

3174

65,1

0,77

56

1,2

57

1,2

4,26

Protestants

1106

23,1

1150

23,6

2,62

Jews

195

4,1

266

5,5

3,42

Karaites

13

0,3

10

0,2

8,93

Armenians

18

0,4

20

0,4

6,07

Skoptsi

8

0,2

5

0,1

Moslems

4

0,1

8

0,2

0,42

Catholics

228

4,8

183

3,76

0.99

4782

100,00

4873

100,00

Old Believers

Total

1883

(Based on: Spravochnaia, 1883, 1893; Porkrovsky, 1894) ∗ Business activity index is relation of confession proportion in merchant guild presented in columns to the share of this confession in all population.

Most capital was concentrated in the Protestant circles (mostly Lutherans), and Jews. This tendency prevailed in the future as well with 56.3% in 1883, and 59% in 1893 for First Guild Merchants of Protestant and Jewish confessions together. Confessional differences are seen in specialization of the Jews in banking (as the Hinzburgs), pawn shops, drug stores, commission

services, and jewelry trade, while many First Guild merchants served as subcontractors for the state. Moslems held cafes, buffets, restaurants; Armenians traded wine, Karaites in one way or another were involved in tobacco farming and sales (e.g. Saatchi and Mangubi Tobacco Factory); Lutherans, most of them European, were either professionals (engineers, master workers, teachers) in the 2nd Guild, or shareholders and owners of factories and plants (such as Knopp, Nobel, Wogau), in the First Guild. Old Believers played a modest role in St. Petersburg economy. They were mostly involved in trade at Apraksin Dvor and Gostiny Dvor (the so-called St. Petersburg Moscow), less known markets, such as Novo-Alexandrovsky, Sytny, Andreevsky, Panteleimonovsky, Yamskoy and Mariinsky. Many traded in their own stores and shops. Overall in the last decades of the 19th century St. Petersburg Old Believer merchants were mostly involved in manufacture, ready dress sales, and grocery sales (such as meat, fish, and colonial products). In industrial production those merchants who claimed to be Old Believers, were only peripheral in their importance to the economy. They owned about 27% of lacquer manufacture and 10% of leather manufacture in St. Petersburg (Fabriki, 1863-1870). The role of Old Believers was thus minimal. By the beginning of the 20th century the Russian business elite was comprised of entrepreneurs with different religious views and ethnic origin. Most prominent entrepreneurs were foreign or represented the Jewish community. The St. Petersburg business style was alien to Old Believers. New men came, free from tradition, eager to work with the government authorities. The great spurt of Russian industrialization had to do without the Old Believers. In the capital the hierarchy determined the business practice, while Old Believers were more capable of self-organization and grassroots initiative, which the Russian market economy lacked so profoundly. Technical progress, changes in government policy and organizational innovations lead to a new economic situation in which Old Believers plaid less important role.

The explanation of the dynamics of Old Ritualists would be incomplete without understanding of one more question. Why Old Believers having had trade-off between religious right life and economic expanding choose in majority of cases to remain Old Believers. Secularization hypothesis. During all periods of history religiosity was thought to decline as societies became richer and better educated. Even monasteries had this controversial problem. Ascetism and labour produced wealth but wealth deteriorated faith. It is important to see that Old Believers have choice – or to be more successful in business and forget about beliefs, or to remain Old Believer but forget about best strategies. Internal reasons for relative decline of Old Believers had played in Russian economy by the end of the 19th century included social heterogeneity of the faithful. Understandably, a simple worker and a large factory owner with considerable power, a tax agent and a successful merchant saw the same events differently, had different goals or differed in the ways they wanted to achieve them. We must admit here that often social group interests superceded the idea of religious equality. The social position determined the degree of radicalism. The higher the social status the more moderate Old Believer entrepreneurs were. The third generation of merchants gladly accepted the norms of their social group. Tuxedoes came to replace peasant jackets. Societal entertainment, such as horse-racing, or theater, also entered their world. Often the new class went abroad for education. Secular culture squeezed out the religious one, and that came to be one of the contradictions for the relationship between secular and religious life. Communities survive and avoid persecution largely due to the merchants’ capital. The merchant becomes the center not only of material and organizational life, but of the spiritual life of the community as well. However, at a certain point in time they have to choose between secular economy and religion, between God and Mammon, and the compromise in such issues turns into slacking faith on the one hand, and less effective management on the other. This is why some become only nominal Old Believers, and some even become officially Orthodox, the other group

gives up their profitable enterprises to remain traditional and keep the old way of life, with the entrepreneurship activity being only a part thereof. Both processes lead to weakening of Old Believer entrepreneurship. Founders of entrepreneur dynasties, themselves of peasant origin can continue going on strong in matters of faith and keep their business blossoming, too. To the end of their lives they consider themselves peasants and are not ashamed to do so. To illustrate, we can turn to the life story of Petr Egorovich Bugrov, a prominent merchant from Nizhny Novgorod. He was brought out as merchant (tysiachnik) Potap Maximovich Chapurin in P.I.Melnikov-Pechersky’s “In the Woods” and “In the Hills.” Serving as subcontractor and selling bread, Bugrov managed to become a millionaire, but that never changed his character. P.I.Melnikov wrote thus in his Report on Modern Dissidence on this typical Old Believer trait: “This is completely alien to the way of life of the new generation: Bugrov lives the way he used to before he became a capitalist like now, like when he had been a peasant in Popovo village… He has several large stone houses in Nizhny Novgorod, a large mill in Semenovsky District, and owns considerable credit monies, he lives worse than an average Philistine, and that is not because he is greedy or a hypocrite; there is no calculated attitude at all, he is just used to living simply”(Usov, 1897: 153154). Bugrov was equal with the Governor and the worker, “when he went around on business, he took a third class seat on the boat, took his bread with cucumbers and onions along, and ate that never using the services of the ship’s restaurant. His clothes, fairly worn out, were quite fitting for the way of life he was leading”(Usov, 1897: 153-154). Fedor Guchkov, one of the most prominent curators of Preobrazhenskoe Cemetery, and the wealthiest Fedoseevets of the early 1840s, came to the city from his serf village in Kaluga Region when still a boy, and got a worker job on a textile manufacture. Then he created his own shop, and acquiring one production line after another turned it into a large manufacture. Guchkov worked in manufacturing himself for quite a while: first out of need, and then out of

habit and thriftiness that he developed. When he was already a large Moscow industrialist, Guchkov amazed others with his look and his dwelling: “he lived in a small and dirty place, collected bent nails and straightened them out, wore a simple shirt and a coachman’s hat so dirty it was scary to look at”(Istoriia, 1954: 317). The austere way of life and low demands were distinguishing features of merchant dynasty founders, such as Ryabushinsky, Morozov, et al. Many contemporaries noted that private life of Old Believers as they became rich was characterized by giving up the strict rules of Old Believer communities. Seniors noted with regret that their flock were not able to resist the temptations of the secular world. A. A. Titov published notes on I. F. Guchkov and his wife, and in the entry dated 22/01/1848 therein it was stated: “they sin by going to theater and dancing Herod dances, and looking at racing horses.” Bavykina, daughter-in-law of Petr Davydov, factory owner and member of Preobrazhenskoe Cemetery congregation, was noted “riding horses, smoking cigars and wearing men’s dress with Satan’s tail.” P. N. Rogozhin was guilty in “attending Anti-Christ gatherings called clubs, playing cards and smoking cigars”(Titov, 1885).

These examples show once again the inner

contradictions in Old Believer entrepreneurship and set limits on business development in Old Believer faith. The Old Believer social norms were in less demand in the new economic situation in the country, which changed not only the textile industry. By the end of the 19th and the beginning of the 20th century the state began to play an ever-increasing role. In fact, construction of railroads and development of mining and machine engineering made the state a principal player in the economy to say the least. The state distributed orders and issued permits and licenses. Old Believers in their majority were used to acting alone and had hard time following official orders.

Conclusion The combination of confession data from merchant guild and archival materials with industrial statistics made it possible to reconstruct the dynamics of the amount of Old Believer’s enterprises in various textile industries and to evaluate their relative proportion in these industries according to the quantity of labor and the output. These data demonstrated the significance of Old Believers’ contribution to the textile industry, until the great spurt, the most important industry of the country. Their participation in paper and wool weaving industries was especially remarkable. My empirical research substantiated the hypothesis that Old Believers played a crucial role in the first stage of Russian textile industry modernization (1812-1860), but the importance of Old Believers in the Russian textile industry and economy as a whole had declined towards the second half of the 19th century. Social and cultural norms of Old Believers in a changing environments helped to understand the rise and relative fall of Old Believer’s activity in Russian 19th century textile industry. Hard work in production sphere, thriftiness in consumption habits, community institutions and help allowed them to accumulate huge capitals and run new industries. Old Believers could use such favorable external circumstances as new tariff, new technology, machinery import and as a result immense profitability of textile industry in the second third of 19th century. But the same social and cultural norms can lead to different economic results in various historical conditions. Thus, changes which were external to Old Believers, such as growth of credit and financial institutions, dominance of stock capital and schift of the business center from Moscow to St. Petersburg, influence of foreign capital and broader diffusion of secular ethics, led to creation of new factories wherein the Old Believer traditional faith could not foster the strengthening of contracts and arrangements. Other social and cultural norms were in demand now. The new Russian capitalist movement and the Old Believer “picture of the world” were no longer “selectively similar”(Die Wahlverwadschaften) (Weber, 1990: 106).

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