Peter, a man of simple tastes, was distressed and disgusted by the shameless rapacity of his. lieutenants clutching at every opportunity to rob the state. On all sides, he saw bribery, embezzlement and extortion, and the Treasury's money "flowing from everybody's sleeves." Once, after hearing a Senate report listing further corruption, he summoned Yaguzhinsky in a rage and ordered the immediate execution of any official who robbed the state of even enough to pay for a piece of rope. Yaguzhinsky, writing down Peter's command, lifted his pen and asked, "Has Your Majesty reflected on the consequences of this decree?" "Go ahead and write," said Peter furiously. "Does Your Majesty wish to live alone in the empire without any subjects?" persevered Yaguzhinsky. "For we all steal. Some take a little, some take a great deal, but all of us take something." Peter laughed, shook his head sadly and went no further.
Yet he persevered to the end. Now and then, as with Gagarin, he made an example of a prominent delinquent, hoping to deter the smaller ones. Once when Nesterov asked, "Are only the branches to be cut off or are the roots to be cut out?" Peter replied, "Destroy everything, roots and branches alike." It was a hopeless task; Peter could not compel honesty. In this sense, the Tsar's admiring contemporary Ivan Pososhkov was right when he wrote, "The great monarch works hard and accomplishes nothing. The Tsar pulls uphill alone with the strength of ten, but millions pull downhill."
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COMMERCE BY DECREE
In Russia, before Peter's time, there was little that could be called industry. Scattered through the towns were small factories and workshops for household implements, handicrafts and tools which met the needs of tsar, boyars and merchants. In the villages, the peasants made everything for themselves.
Upon his return from the West in 1698, Peter determined to change this and for the remainder of his life he labored to make Russia richer and its economy more efficient and productive. At first, with his country plunged into a major war, Peter's attempt to build industry related entirely to the needs of war. He developed cannon foundries, powder mills, factories to make muskets, leatherworks for saddles and harness, textile mills to weave woolen cloth for uniforms and make sails for the fleet. By 1705, the state-owned textile factories in Moscow and Voronezh were doing so well that Peter wrote to Menshikov: "They are making cloth and God gives excellent results, so that I have made a caftan for myself for the holidays."
After Poltava, the emphasis changed. As the demands of war diminished, Peter became more interested in other kinds of manufacturing, those designed to raise Russian life to the level of the West and at the same time to make Russia less dependent on imports from abroad. Aware that large sums were being drained out of the country to pay for imports of silk, velvet ribbon, china, and crystal, he established factories to make these products in Russia. To protect the fledgling industries, he placed high import duties on foreign silk and cloth which doubled their price for Russian buyers. Basically, his policy was similar to that of other European states at the time, which can generally be described as mercantilism: to increase exports in order to earn foreign currency, and decrease imports in order to stem the flow of Russian wealth abroad.
Peter's industrialization policy had a second purpose, equally important. His tax collectors were already wringing the Russian people lifeless to finance the war. The only long-term way to extract more revenue from his people, Peter realized, was to
increase the production of national wealth, thus increasing the tax base. To achieve this goal, the Tsar hurled himself and the power of the state into every aspect of developing the national economy. Peter viewed himself as personally responsible for the strengthening of the national economy, but at the same time he understood that private enterprise and initiative were the true sources of national wealth. His goal was to create a class of Russian entrepreneurs who would assist and eventually replace the sovereign and the state as producers of this wealth. It was not an easy task. By tradition, Russian noblemen looked disdainfully on any involvement in trade and industry and were determined not to invest their capital in commercial enterprises. Peter employed a combination of persuasion and force, preaching the dignity and usefulness of commerce and making trade and industry an honorable form of state service—like service in the army, navy or civilian bureaucracy. The government, through the College of Mining and Manufacturing, provided initial capital in the form of loans and subsidies, granted monopolies and tax exemptions, and sometimes simply erected factories at Treasury expense and leased them to private individuals or companies. These arrangements often were compulsory. In 1712, the state constructed a group of cloth factories to be managed by private merchants. "If they do not wish to do this of their own free will," declared the order, "then they must be forced. Grant them facilities to defray the cost of the factory so that they may take pleasure in trading."
Not all of the new enterprises flourished. A silk company formed by Menshikov, Shafirov and Peter Tolstoy was granted generous privileges and subsidies and still managed to fail. Menshikov quarreled with his partners and resigned, to be replaced by Admiral Apraxin. Eventually, having swallowed all of its original capital, the company was sold to private merchants for 20,000 roubles. Menshikov had better luck with a company formed to fish for walrus and cod in the White Sea.
The most productive partnership between state and private industry was in mining and heavy industry. When Peter came to the throne, Russia possessed some twenty small state and private iron foundries around Moscow, in Tula and at Olonets on Lake Onega. Declaring that "our Russian state abounds in riches more than many other lands and is blessed with metals and minerals," Peter began early in his reign to develop these natural resources. Among the foreigners employed by the Great Embassy for service in Russia were numerous mining engineers. Once the war began, the ironworks at Tula, founded by the Dutch father of Andrew Vinius and owned in part by the crown and in part by the ironmaster Nikita Demidov, were expanded to provide muskets and cannon for the entire army. The city of Tula became an immense arsenal, its various suburbs populated by different categories of armorers and smiths. After Poltava, Peter sent prospectors throughout the Urals looking for new deposits. In 1718, he established a College of Mining and Manufacturing, to encourage location and development of new mineral sites. In December 1719, a decree threatened with the knout any landowner who concealed mineral deposits on his lands or who obstructed prospecting by others. The rolling hills of the Urals, especially in Perm province, revealed themselves to be astonishingly rich in high-grade ores: the ore taken from the ground produced almost half its weight in pure iron. To help develop these rich veins, Peter turned again to Nikita Demidov. By the end of Peter's reign, a vast industrial and mining complex consisting of twenty-one iron and copper foundries had risen in the Urals, centering on the town of Ekaterinburg, named in honor of Peter's wife.* Nine of these works were owned by the state and twelve by private individuals, including Demidov, who owned five. Their production constantly increased, and by the end of the reign more than forty percent of all Russian iron was coming from the Urals. Within Peter's lifetime, Russian output of pig iron equaled that of England, and in the reign of Catherine the Great, Russia supplanted Sweden as the largest producer of iron in Europe. These flourishing mines and foundries made the state strong (16,000 cannon were in the arsenals at Peter's death) and Demidov enormously rich. On the birth of the Tsarevich Peter Petrovich, Demidov presented the infant with 100,000 roubles as "tooth-cutting money." In 1720, the infant's proud father made Demidov a count, a title which lasted until the end of the dynasty.