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regard for their personal interests or wishes. The history of the Moscow Woollen Manufacture (Moskovskii Sukonnyi Dvor) during his reign may serve as a case in point. This enterprise, founded by Dutchmen in 1684, was a major supplier of cloth to the army. Displeased with the high costs of its operations and the low quality of the product, Peter decided on the advice of his Scottish friend, la. V.Bruce, to transfer its management into private hands. To this end he created a 'Commercial Company', the first chartered business enterprise in Russia. Knowing how unven-turesome Russian traders were, he appointed the members of the Company by picking names from lists of the Empire's leading merchants. This done, he sent soldiers to fetch the victims and bring them to Moscow on 'temporary exile' (vremennaia vysylkd) 'whether they wished to or not'. They were given by the treasury some capital without interest, and told that they had to deliver to the state, at cost, whatever woollen cloth it required; the remainder they could sell for their own profit free of sales tax. As long as they operated the enterprise satisfactorily, the manufacture was their 'hereditary property' (!); should they fail, the state would claim it back and punish them to boot.1* The first business company in Russia thus came into being as a result of the government literally dragooning the entrepreneurs. The model for such procedure was clearly Muscovite state service, not western capitalism. Little wonder that under Peter instances of requests by private persons for the privilege of operating manufactures and mines were rare; the risks were great and the profits uncertain. It is only under the more favourable conditions established by his immediate successors, Anne and Elizabeth, that merchants and manufacturers began to display greater initiative. During these two reigns (1730-61), the practice of instituting crown monopolies on objects of trade and manufacture, and then farming them out to private persons reached its peak.

To provide labour for the manufactures and mines, Peter at first relied on the impressment of subjects not attached to any of the regular estates, such as convicts, vagabonds, prisoners of war, soldier wives and prostitutes. When this source proved inadequate, he transferred whole villages of state peasants from central Russia to the Urals. In the end he had no choice but to break with precedent which limited possession of serfs to the state, its service class and clergy, and in 1721 issued an edict granting merchants the right to purchase villages for the purpose of acquiring serfs for industrial and mining enterprises. The 'possessional serfs', as bonded industrial labour came to be known, were attached by an ukaz of 1736 with their families and descendants 'in perpetuity' to the factories and mines in which they were employed. These people - an industrial counterpart of rural serfs - formed the nucleus of Russia's working class.

The industrial development launched by Peter, though new in spirit was entirely traditional in execution. The state owned the means of production, set the prices and absorbed nearly all the output; the management was on good behaviour; the working force was enserfed. Assured of bonded labour and a market, the state-appointed or state-licensed entrepreneurs had no incentive to rationalize production. In short, though there was industry under Peter, there was no industrial capitalism. The greatest break in the economic policies of Russia prior to the industrial drive of the 1880S-90S, occurred in 1762 during the brief reign of Peter in and the first few months which followed Catherine's accession. Inspired by Physiocratic ideas, the new administration dismantled the old, elaborate structure of state-run commerce and manufacture,with its network of concessions and licences, and threw both open to free public participation. The first step in this direction had been taken a decade earlier, in 1753, with the abolition of all internal tolls and tariffs in Russia. On 23 March 1762, Peter m did away with many of the royal monopolies and opened to general commerce all but a few commodities; cereals, traditionally one of the regalia, were among the items in which free trade was allowed. Catherine, who in an expansive mood once claimed commerce as 'her child', confirmed this edict upon her accession. By virtue of these laws, merchants retained the exclusive right to trade and manufacture granted them by the 1649 Code; dvoriane and peasants were permitted to sell only that which they themselves produced in the villages. But since the bulk of merchandise traded in Russia had always consisted of agricultural produce and items of household industry, the distinction had little practical significance. It meant, in effect, the introduction of freedom of trade in Russia. Even more consequential in the long-run were two edicts issued that same year concerning manufacture. On 29 March 1762, Peter m revoked the decree of his grandfather, Peter the Great, which authorized merchants to purchase serfs for use as labourers; henceforth, they could hire labour only for wages. The ownership of serfs from now on was restricted to dvoriane.* On 23 October 1762, Catherine gave permission to all the estates to found manufactures anywhere except in Moscow and St Petersburg; a Manifesto of 17 March 1775 gave Russians the right to establish every kind of manufacturing facility.

The cumulative effect of this legislation, designed to stimulate the economy, was to deliver the coup de grace to Russia's ailing middle class. With one hand, the government deprived merchants of access to serfs, the principal source of labour then available in Russia and certainly the

* Paul I in 1798 temporarily returned to merchants the right to own serfs, but his son, Alexander I, abolished it permanently.