The great famine that began in 1891, along with the subsequent food crisis, has been a persistent jolt to Russian society, with its effects continuing to be felt even in 1895.
It can be said that after the accession of Nicholas's father, Alexander III, who had managed to suppress and silence the unrest in Russia, the country was now reawakening with new vigor.
While the catastrophic consequences of the famine might appear abstract and distant in far-off St. Petersburg, local administrative bodies faced the immediate reality: bloated bellies, emaciated yellow faces, feeble pleas for help, and the slow arrival of death.
This disparity meant that while the central government—such as the Ministry of Internal Affairs, the Ministry of Finance, and the Ministry of Transport—debated the severity of the famine, local authorities were already engaged in saving the lives of millions, as these bodies were deeply rooted in grassroots communities.
"The government will be unable to maintain sufficient funds to advance the most critical policies," emphasized an increasingly serious Witte.
"I believe that allowing local use of these funds will yield better results."
"Your disregard for the autocratic system might lead to significant upheaval in Russia," Witte said bluntly, but Nicholas merely smiled noncommittally, avoiding the topic.
Only Witte would dare to speak so frankly, as their relationship was both intimate and unfamiliar. Intimate in that Witte felt deeply supported by Nicholas, which moved him greatly; unfamiliar because Witte was puzzled about Nicholas's true vision for Russia's future.
Witte only vaguely sensed that Nicholas was indifferent to Russia's autocratic traditions.
"So the Ministry of Finance's provincial tax offices will retain a tenth..."
"No, no. At least two-fifths."
"…"
Witte looked visibly pained, but Nicholas's will was stronger than his reluctance.
"Yes, Your Majesty."
"Good. Then let's settle on the liquor monopoly for now."
The liquor monopoly was one of the few reforms with minimal internal contradictions in Nicholas's reports and could be implemented relatively quickly. In contrast, the other two reports hinted at major upheavals Russia would face in the final five years of the 19th century, as foreseen by Witte: the gold standard and land reform.
"Are you planning to pursue both of these reforms simultaneously?"
Even Nicholas was somewhat surprised, as both the gold standard and land reform would involve profound social implications and extensive impacts.
"I have been waiting for this moment for a long time. The late Emperor also had high expectations for me."
Witte's confidence was even higher than Nicholas's.
"Then let's start with the gold standard."
Given that both past emperors had entrusted such important tasks to Witte, Nicholas had no reason to delay.
"In March of this year, the Ministry of Finance accumulated sufficient gold reserves. This reform proposal is the same one I submitted to the Finance Committee."
Sergey Witte was not starting from scratch. His predecessors, Finance Ministers Vishnegradsky and Bunge, had already set the stage for monetary reform, and the accumulation of gold for the gold standard was one of the contributing factors to the famine of 1892.
"Why the gold standard? What about silver currency? Or a bimetallic standard? I am not very familiar with monetary theory, Sergey Yurievich. Please explain."
Nicholas, unfamiliar with monetary theory, knew only that in his previous life, currency was based on credit, and in Russia, he had encountered a similar system. His only understanding of monetary theory was that dollars were linked to oil.
"Currently, Russia uses a credit currency convertible into silver rubles. However, due to persistent deficits, our currency has been in a state of overproduction, rendering the exchange channel with precious metals virtually meaningless. Furthermore, the price of silver on the world market has been consistently low, making it an inadequate measure of value."
Witte first dismissed the silver standard as a relic of the past.
"Therefore, Russia's credit currency is essentially a silver standard. I propose eliminating it in favor of either the gold standard or a bimetallic standard."
"I see. Please continue."
Nicholas began to understand Witte's explanation: gold is valuable, silver is not, so paper currency can be exchanged for gold, making the currency valuable. Value attracts trust and usage.
"However, if a bimetallic standard is adopted, any significant fluctuations in the gold-silver price ratio—something that has happened many times in the past—could cause the actual value of gold and silver coins to diverge from their nominal values, leading to financial speculation."
The Russo-Turkish War of 1877, which cost Russia 1.4 billion rubles, directly led to 1.4 billion rubles in debt, causing an overproduction of currency that halved the Ministry of Finance's gold reserves, which were then bought up by foreign speculators.
This war also instilled a deep aversion to conflict among successive Finance Ministers.
"In summary, the gold standard is the best option."
"Yes, I remember you mentioning this before."
Nicholas referred to a conversation from about three years ago when, although Witte was not yet Finance Minister, he had already gained considerable insight into the gold standard reform discussed among technical bureaucrats.
"As such, Your Majesty, you must not view the gold standard merely as a measure to stabilize Russia's market. That is the most superficial understanding."
Witte referred to opponents of the gold standard, mostly landowners and exporters, who feared that adopting the gold standard would lead to the ruble appreciating and reducing profits from exports.
"I understand, foreign capital, right?"
A memory surfaced, and Nicholas responded instinctively.
"Yes, Your Majesty is correct."
Witte's views had not changed much over the years. He firmly believed that only foreign capital could accelerate Russia's economic growth and industrial development.
Nicholas shared a similar perspective. He believed that Russia's greatest resource was not its vast natural lands but its people.
Russia needed to develop from human resources, using foreign capital to strengthen labor-intensive industries and eventually transition into capital-intensive industries.
"If Russia's currency is unstable, no foreign investor will dare to enter the market, and Russia's industrialization will be impossible."
"I supported your view then, and my stance remains unchanged."
"To have Your Majesty's support is a great fortune for Russia."
Witte was deeply moved.
To him, receiving full support from a great ruler was a reflection of greatness itself!
And vice versa.