2.2.3.1 Imperial Policy
After annexing large portions of Poland in the late 18th century, Russia became home to the largest Jewish diaspora in the world. By the decrees of 1791, 1804, and 1835, the government restricted their legal residence to the Pale of Settlement. AsGessen (1911) wrote, “the Pale of Settlement was the result of the lobbying efforts of Moscow and Smolensk merchants who feared competition with Jews” (p. 91).
Imperial policy towards Jews was not coherent nor consistent, while its enforcement was not thor ough and instead was arbitrary. On multiple occasions, certain tsarist ministers attempted to improve the status of Jews, or weaken the enforcement of the previously passed discriminatory laws. The most important for the subject of this paper is the decree of 1859 that allowed Jewish entrepreneurs— merchants of the first guild—to permanently reside in any imperial city outside the Pale.8 As a result,
7Owen(1991) seems to disagree with our assessment of the role played by the finance ministers: “The most enlightened
ministers, including Reutern, Bunge, and Witte, all preferred the old way: rigid laws tempered by arbitrary exceptions for favored petitioners” (p. 210).
the two centers of Russian commerce, Moscow and St. Petersburg, experienced a dramatic increase in the Jewish population (Nathans,2002).
In 1862, Minister of Finance Michael Reutern introduced a new legislation advocating for an even more comprehensive equalization of rights of Jews and nonJews. In particular, he questioned that Jews were driving the Russians out of commerce. Instead, “society would be better off under the improved allocation of human capital, decreased smuggling, with simultaneous growth in the manufacturing sector.”9 Such initiatives, though often futile, were not uncommon among highlevel officials even at the height of the “official” antiSemitism in the 1880s (during the reign of Alexander III). In other cases, legislation that sought to soften discrimination was lobbied by local administration due to the negative economic consequences of antiJewish restrictions (Raskin,1993, p. 70). Figure 2.5 depicts the overall dynamics of imperial legislation pertaining to Jews from 1810–1917.
2.2.3.2 Jewish Entrepreneurship
Who were Jewish entrepreneurs and how did they differ from the average inhabitant of the Pale of Settlement? Rubinow (1975) points out that “notwithstanding a few individual cases, the number of great Jewish capitalists [in the Pale of Settlement] is small, and that the majority of the Jewish manufacturers are people of moderate means” (p. 541). Since only relatively wealthy individuals, regardless of their background, could become members of the first guild and establish corporations, these are the “individual cases” that we focus on in this paper.
Despite the unfavorable legal status of the Pale of Settlement, where Jewish entrepreneurs accumu lated capital initially, its geographic proximity to Western Europe was advantageous: “NonRussian merchants not only reaped commercial and investment advantages from their close and constant con tact with foreigners in the ports and frontier towns but also benefited from easy access to Western technology and knowhow” (Rieber,1982, p. 75).10 Kahan(1983) argues that foreign trade was one of the major sources of Jewish capital, at least in the first half of the nineteenth century (p. 108). External
and secondguild members were able to obtain an honorable citizen (pochetnyi grazhdanin) status, which also gave the
0 2 4 6 8 10 12 1 8 1 0 1 8 2 0 1 8 3 0 1 8 4 0 1 8 5 0 1 8 6 0 1 8 7 0 1 8 8 0 1 8 9 0 1 9 0 0 1 9 1 0 Year Number of laws
Softening discrimination Perpetuating discrimination
Figure 2.5: Laws concerning the status of Jews, passed by different branches of the central government between 1810 and 1917. The plot is constructed based on the information in Table 1 inRaskin(1993).
financing was also crucial:
[T]he Jewish banks made a special effort to attract savings from nonJews and to bor row from Jewish banks abroad […] the banks were capable of paying high interest and dividends and their connections with the Jewish banks in Germany and later in France, resulted in capital imports and transfers to Russia. (Kahan,1983, p. 110)
Over time, Jewish banking grew so important for attracting foreign capital that in 1913 Trade and Manufacture Minister Sergei Timashev warned of the possible harmful impact of antiJewish discrim ination:
[B]anning Jews from boards of directors would be quite harmful as corporations not only would be able to attract less Jewish capital […] but less foreign capital as well. The latter is invested in our manufacturing sector not directly but via private banks, whose directors, in many cases, are Jews. Therefore, prohibiting Jews to oversee individual corporations [in the capacity of members of boards of directors] would decrease foreign capital attracted by the affected corporations. (Quoted inShepelev,1987, p. 206)
Historians have pointed out that entrepreneurial activity of Jewish capitalists was not confined to few industries, both in the Pale and beyond (Rubinow,1975;Kahan,1983).11
2.2.3.3 Jewish Entrepreneurs in Moscow
To illustrate the complex relations between the central government, local authorities, and Jewish en trepreneurs, we consider the case of Moscow in the 1890s.
In 1891–1905, the governor general of the Moscow region was Grand Duke Sergei Alexandrovich, who was the brother of Tsar Alexander III and uncle of his successor, Nicholas II. Historians have argued that, unlike his predecessor, Sergei Aleksandrovich had strong prejudice against Jews (Aizen berg, 2003, p. 337). Shortly after taking office, in 1891–1892, the general governor issued a decree
that prohibited Jewish artisans from residing in the Moscow region. By some estimates, 86% of Jews were expelled from Moscow over the course of few months (Aizenberg,2003, p. 338). Jewish guild merchants, including owners of factories and corporations, were allowed to stay. Moreover, during the 1890s the number of Jewish merchants in Moscow’s first guild increased steadily, reaching 267 (30%) in 1898. Supported by Russian guild members who feared the growing (albeit exaggerated) influence of Jews, in 1899 the Moscow general governor lobbied the tsarist government to impose a 33% cap on Jewish membership in the first guild (Aizenberg,2003, p. 354). This restriction remained in place until the 1917 Revolution.
2.2.3.4 AntiJewish Clauses in Corporate Charters
Jews that moved from the Pale to the “interior” provinces of Russia following the liberalization in 1859 “met with the resistance of entrenched economic interests. […] There were indeed complaints about the new ways of doing business introduced by the Jews, which did not sit well with old regulated forms of trade stemming from a corporate organization and many local regulations against the Jews applied” (Löwe,1993, p. 58).
Starting from 1890, upon approval by the government, certain corporate charters received addi tional clauses that restricted management and ownership of the respective companies and their prop erty by Jews. Even if such clauses did not ban Jews altogether, they often made their participation economically meaningless. For example, e.g., if a textile company owned by Jews was not allowed to purchase or lease property in rural and/or cottongrowing areas, it could not successfully compete against corporations that did not face such restrictions. The first charter issued with such discrimina tory clauses was that of the Zarozhan Mfg. Co. (1890), headquartered in Odessa. It said, “Jews can be neither shareholders, nor members of the Board of Directors, nor real estate managers. This condition must be indicated on the shares” (as quoted inLevin,1902, p. 223).
Not all Jewish entrepreneurs faced discrimination. Wealthiest entrepreneurs, such as Goratsii Günzburg, were creditors to the Tsar and were granted a nobility status.