When modernization began in the 1860's with a vigorous program of railway construction, the necessary machinery and railway equipment had to be purchased on credit from foreign suppliers. To pay back these loans, Russia increased taxes on the peasant sector in grain for sale on the international grain markets. The result was that Russia became a grain exporter at the same time that the already low per capita food consumption among the peasants was dropping. The results were frequent rural famines amidst plenty in the storehouses of the tax collectors.

The industrial "take-off," when it began in the late 1880's was accompanied by even worse dislocation and misery than had been common elsewhere, while the official government policy was to support and subsidize private capitalism. A severe shortage of entrepreneurial talent made for inefficiency and heavy government involvement in the process. There was a heavy dependence on foreign, particularly, French capital in both private and public enterprise. This had significant foreign policy implications in the First World War and provided Lenin and his Bolsheviks with a potent argument in the revolution of 1917.