In the second half of last century a revolution was brought about in the manufacturing industry generally by the emancipation of the serfs, the rapid extension of railways, the facilities for creating limited liability companies, and by certain innovations in the financial policy of the Government.  The emancipation put on the market an unlimited supply of cheap labour; the construction of railways in all directions increased a hundredfold the means of communication; and the new banks and other credit institutions, aided by an overwhelming influx of foreign capital, encouraged the foundation and extension of industrial and commercial enterprise of every description.  For a time there was great excitement.  It was commonly supposed that in all matters relating to trade and industry Russia had suddenly jumped up to the level of Western Europe, and many people in St. Petersburg, carried away by the prevailing enthusiasm for liberalism in general and the doctrines of Free Trade in particular, were in favour of abolishing protectionism as an antiquated restriction on liberty and an obstacle to economic progress.

At one moment the Government was disposed to yield to the current, but it was restrained by an influential group of conservative Political Economists, who appealed to patriotic sentiment, and by the Moscow manufacturers, who declared that Free Trade would ruin the country.  After a little hesitation it proceeded to raise, instead of lowering, the protectionist tariff.  In 1869-76 the ad valorem duties were, on an average, under thirteen per cent., but from that time onwards they rose steadily, until the last five years of the century, when they averaged thirty-three per cent., and were for some articles very much higher.  In this way the Moscow industrial magnates were protected against the influx of cheap foreign goods, but they were not saved from foreign competition, for many foreign manufacturers, in order to enjoy the benefit of the high duties, founded factories in Russia.  Even the firmly established cotton industry suffered from these intruders.  Industrial suburbs containing not a few cotton factories sprang up around St. Petersburg; and a small Polish village called Lodz, near the German frontier, grew rapidly into a prosperous town of 300,000 inhabitants, and became a serious rival to the ancient Muscovite capital.  So severely was the competition of this young upstart felt, that the Moscow merchants petitioned the Emperor to protect them by drawing a customs frontier round the Polish provinces, but their petition was not granted.

Under the shelter of the high tariffs the manufacturing industry as a whole has made rapid progress, and the cotton trade has kept well to the front.  In that branch, between 1861 and 1897, the number of hands employed rose from 120,000 to 325,000, and the estimated value of the products from 72 to 478 millions of roubles.  In 1899 the number of spindles was considerably over six millions, and the number of automatic weaving machines 145,000.