15
Fiscal Policy and Trade
In the eighteenth century money was constantly on rulers’minds, except when it
wasn’t. They spent without regard to income, until pressing need (war expenses,
foreign debt) forced drasticfiscal measures. Challenges were many, but resources
were also potentially available. Domestic and European population growth and a
rising European economy spurred demand for Russian products; warfare stimu-
lated production; expansion brought new resources. Across the century Russia
responded less with innovation than with traditional practices (direct and indirect
taxes). Responding reactively to budgetary crises meant thatfiscal reforms were
aimed more at revenue than at broader visions, but ideology including both
mercantilist controls and Physiocratic liberalization shaped goals and reforms.
TOWARDS FISCAL POLICY: CATHERINIAN
FISCAL INSTITUTIONS
There was plenty to spend money on for eighteenth-century European absolutist
rulers. Throughout the century in Russia, as in France and Great Britain, military
expenditures were the bulk of state budget: in Peter I’s reign they rose from about
50 percent in 1701 to about 70 percent in 1724. Governments of Peter’s imme-
diate successors Catherine I (1725–27), Peter II (1727–30), and Anna Ioannovna
(1730–41) ratcheted back by slashing local administration, curtailing foreign wars,
and neglecting the military. Rulers also continued, and went far beyond, Peter’s
expenditures on the court, sparing no expense on building and furnishing palaces,
churches, state buildings, gardens, and parks, and in constructing rich programs of
culture and entertainment at court. Isabel de Madariaga reminds us that one of the
pillars of legitimacy for absolute rulers was display (of culture and civilization, of
wealth, of power) and rule by display was being done across Europe. Empress
Elizabeth (1741–61) excelled in both sorts of expenditures: she rebuilt the military
and paid for a very expensive Seven Years War (1756–63), while also constructing
ornate rococo palaces and churches around the realm. Budgetfigures tell the tale: in
1744 the army consumed 80 percent of state revenue, but by the end of Elizabeth’s
reign, in 1762, its share had fallen to 74 percent with the increase going to court
expenses. Not surprisingly, deficits grew in her era as well, from about 8 percent of
the budget in 1733 to about 40–45 percent in 1760.
Even more than in Elizabeth’s time, under Catherine II warfare (Ottoman
empire, Poland, Sweden), palace and garden ensembles, art collections, largesse