A Failed Monopoly: Management of the Russian-American Company, 1799 - 1867

Andrei Grinev or Grinёv

This article explores the dynamics of barter/trade between Russians and Alaska natives under the Russian Empire. During the frst stage of colonization, the Russians (unlike the English and French) did not tend to barter/trade. They preferred to take the main riches of Alaska, especially valuable furs, on their own, or to obtain them by exploiting local people in hunting parties, deploying non-economic coercion to work and debt bondage. Moreover, the trade between the Russians and natives was complicated by the high cost of delivery, the chronic defcit of commodities, a relatively narrow assortment and the prohibition of selling frearms and alcohol (with a few exceptions). The paper demonstrates the formation of three diferent systems of barter/trade with their own dynamics during Russian colonization of Alaska. Though relatively proftable overall, the Russian fur trade in Alaska was less efective than similar operations run by their competitors, French, American and British traders. The development of the fur trade had a dramatic negative efect on the fate of many native peoples. Nevertheless, it improved indigenous standards of living through its infuence on material culture and contributed to a decrease it. The number of intertribal conficts.

With the formation of the Russian-American Company (RAC) in 1799, the company acquired a small flotilla of sailing ships that maintained communication between the Russian settlements in Alaska and the Aleutian Islands as well as connection of these colonies with Okhotsk and Kamchatka. This flotilla periodically lost vessels as a consequence of numerous shipwrecks in the first twenty years of the 19th century. For replacement of ships that were lost or discarded because of decrepitude the company built vessels at Okhotsk and in the colonies themselves or purchased them from foreigners. Ships were obtained primarily from representatives of the United States since American sailing ships and steamships were highly valued for their durability and good running qualities. Later, from the 1830s, sailing vessels for the RAC also began to be constructed in the shipyards of Finland, and from the 1850s in Germany as well. All the round-the-world ships of the company, which went from the Baltic to the Pacific Ocean, were without exception of foreign construction. A general trend was increase in the number of the company’s fleet from 5 or 6 to 17 ships at the beginning of the 1840s. Though later the number of ships and steamships of the RAC diminished to 10 or 12, their total tonnage sharply increased due to the acquisition of large ocean-going clippers and three-mast barks in the 1850s. It was three-mast sailing ships that became the basis of ship composition during this period, though before this, small two-mast brigs, hookers, and schooners had predominated. On the whole, for the 68 years of its existence the RAC fleet made its way from a small flotilla of small one- and two-mast ships to a small commercial fleet with more than ten vessels, including steamships and large ocean-going sailing ships.

In summing up the study of this theme it is possible to arrive at the following conclusions. Analysis of the presented mate¬rial shows that, beginning in the mid-1780s, foreign ships almost constantly entered the waters of Alaska, though the frequency of their visits was unequal in different years and in addition a sharp regional contrast was observed. Thus, the chief purpose of the visits by foreign ships at the end of the 18th and first half of the 19th century in the region of Southeast Alaska was trade between for¬eigners and the local Indians and Russians in Novo-Arkhangel’sk. From the 1840s to the sale of Alaska in 1867, numerous foreign ships, particularly whalers, began to appear in the region of the Aleutian, Commander, and Kuril islands, as well the waters of the Bering Sea along the western coast of Alaska. Consequently, it seemed as if two “waves” of foreign ships appeared in Alaskan waters: the first was connected with the development of the mari¬time fur trade in the 1790s–1820s, and the second with the active whaling trade in the 1840s–1860s. Concerning the nationalities, American sailing ships undoubtedly predominated, noticeably fewer were British, and even fewer were German (whalers and RAC charters). The remaining maritime nations (the Spanish, French, and others) were represented only by isolated ships. Addi¬tionally, in the composition of the foreign ships, merchant ones that belonged to private individuals and companies absolutely dominated. The naval ships made up an insignificant minority. They were primarily occupied with geographic surveys in the course of expeditions organized by the governments of Spain, France, England, and the United States.

18 Alaska History Vol. 27 The Russian central government in Petersburg controlled the Russian-American Company in far of North America. Monopolizing power proved to be a failure. Illustration by J. A. Atkinson courtesy of the Library of Congress. (LC-DIG-ppmsca-09540, detail) Spring/Fall 2012 A Failed Monopoly 19 A Failed Monopoly: Management of the Russian-American Company, 1799-1867 Andrei V. Grinëv Translated by Richard Bland The monopolistic Russian-American Company (RAC, 17991871) was one of the oldest and largest stock companies of Russia. It combined the functions of a hunting-trading organization and a state agency inasmuch as the tsarist government delegated to it the governance of the land and population of the Russian colonies in Alaska. Monopolistic rights and privileges were provided to the company for twenty years in 1799 and repeatedly extended until 1867, when Russia sold Russian America to the United States.1 Yet a persistent monopoly would doom the RAC’s ventures in America to failure. The management of the company relected its dual nature. On the one hand, its mission was to obtain maximal commercial proit; on the other, it was forced to supervise the administrative and social life of the colonies and their defense. All this led to large additional expenses and diiculties that were entirely or partially compensated for by privileges from the state. For example, in the mid-1840s the RAC had to spend up to 21,000 silver rubles per year toward maintenance of schools and hospitals in the colonies, while its annual trade return from sales of Alaskan furs amounted only to 200,000 silver rubles.2 Occasionally the government drew on the RAC to carry out their political and economic tasks (for example, opening up Primor’ye and Sakhalin in the midnineteenth century),3 which redirected the company’s eforts and capital from its primary sphere of activity: organizing the procurement and sale of Alaskan furs. And indeed the company had still other expenses: inancing the Orthodox Church in the colonies, payments for pensions and beneits, maintenance of fortiications, and other operating costs. For the leadership of the RAC, it was necessary to take into account the very considerable tax burden characteristic of Russia, Andrei Grinev is a professor in the Department of History at the St. Petersburg State Polytechnical University in St. Petersburg, Russia, and a frequent contributor to this journal. Richard Bland is an archaeologist with the University of Oregon Museum of Natural History and Cultural History at Eugene. 20 Alaska History Vol. 27 exceeding the level in European countries and greatly exceeding that in the United States. In a policy brief to the Emperor for 1856, the Russian economist, Actual State Councilor Yu. A. Hagemeister, stated: “In comparison with the state of the residents, probably nowhere are higher levies applied than in Russia.”4 All of this was compounded by the very slow—three to ive year—return of capital, the volatility of demand, and the luctuation in the value of furs. According to estimates by RAC employee K. T. Khlebnikov, the annual proceeds from the company fur trade had to be at least 200 percent of invested capital or it would be uneconomical. But business itself was unstable. The Native population, both those Aleuts, Koniag, Tanaina, and Chugach who were dependent on the company and the independent tribes (primarily the militant Tlingits), was critical to the RAC’s accumulation of furs. But the Native groups were varied and declining. The varied relations with numerous tribes complicated the RAC’s relations with their fur suppliers. And the Native population’s decline as a result of epidemics, starvation, and exploitation further hindered obtaining furs.5 Management and inancial problems connected with a bondage labor force in Russia also markedly complicated the position of the RAC. The company was required to hire qualiied employees and ordinary laborers for a period of ive to seven years and to deliver them to the colonies, then bring them back after the expiration of the contract period. Until 1835 the tsarist government, out of iscal considerations and fearing loss of control over its subjects in the transoceanic possessions, generally prohibited emigrants of the Old Country from permanently setling in Alaska. Company documents of 1845 noted that sending laborers and craftsmen to Alaska and then returning them to the homeland cost the RAC from 10,000 to 30,000 silver rubles annually.6 The great distance of Russian America from the European center of the Russian Empire created great logistical diiculties.7 Supplies for the colonies (particularly before the 1830s), shipment of colonial products to Russian markets, and administrative directions and reports from the colonies to headquarters in Petersburg required many months. The Chinese prohibition of Russian ships trading in Chinese ports, which was maintained until the end of the 1840s, also impacted negatively because the Chinese allowed the ships of the Russians’ American and British competitors. The RAC was required to take its furs to Kyakhta on the Russian-Chinese border, traversing huge Siberian expanses and spending no small amount of resources and capital on this. Considering all the above-mentioned factors, the RAC could not withstand economic Spring/Fall 2012 A Failed Monopoly 21 rivalry with American and British traders without direct support from the state, even with the most eicient management. The necessity for regular contacts with the government on various questions connected with the transoceanic territories was relected in the separate echelons of company authority. From 1801 its board of directors was located in Petersburg, where it occupied itself with resolving problems that arose with state authorities, “strategic management,” the functioning of oices in Russia, and general control. Direct management in the colonies was focused in the hands of the governor, who crowned the top of the local administrative pyramid. This situation caused discord in several cases and at times even concealed conlicts between the board in Petersburg and the leadership in the colonies, though it did not lead to actual confrontation since the governor was obliged to follow the decisions of the company directors. Having the directors in the capital substantially eased access to the tsar’s court and the government, making it possible to obtain necessary decisions of state agencies more quickly. However, the lack of a quick and reliable connection with the transoceanic colonies prevented eiciently solving many important economic questions. The colonial authorities had to wait no less than a year for decisions of company directors. The long delays in adopting the most necessary management decisions hurt the economy of Russian America. However, without the support of the highest oicials, successful enterprise in Russia or its American colonies was practically impossible, a dilemma that has not lost its relevance in today’s Russian economy. One of the characteristic features of RAC management, especially in the beginning stages, was a veil of secrecy, which was justiied by the execution of important state tasks. Enlisting the “highest patronage” in the person of the emperor, the directors of the company ceased reckoning with the Siberian leadership and in 1802 directed the governor of the colonies, A. A. Baranov, to send all correspondence directly to the capital and not to Okhotsk, “inasmuch as the company is in no way subject to provincial authorities, and with this, the time now comes to form in America many state circumstances that must be kept in great secrecy and you alone, as the governor, will be relied upon, and therefore there is no need to give this information to the authorities of the Irkutsk Province, where no secret can be kept.”8 The RAC board required secrecy not so much to keep secret the plans of government expansion in America as the desire to conceal the board’s own failures and abuses. Information was at times concealed even from their own stockholders. Collegiate Assessor Dmitri Sobolevskii complained about this to the Minister of 22 Alaska History Vol. 27 Commerce N. P. Rumyantsev in 1806. The problem atracted the atention of the emperor. In December 1811, Emperor Alexander I ordered the head of the Ministry of Internal Afairs, O. P. Kozodavlev, to give special atention to the company inasmuch, in the opinion of the tsar, it was created and always existed not just for the sake of income for the directors and stockholders but “also in general for the whole State.” Furthermore, the emperor noted that the RAC must have special supervision, and for this all information about its current operations “should be provided to ME by the government of the Company through the Ministry of Internal Afairs, so at all times all of its activities are known in detail.”9 Evidently desiring not to admit the actual strengthening of state control over its activities while striving simultaneously to obtain government support, the company in 1812 petitioned the emperor for the creation of a special council. In it would be, along with the directors, the highest oicials of the various ministries (Ministries of Foreign Afairs, Internal Afairs, Finance, and Navy). The creation of such a council responded to the need for more timely decisions on speciic (primarily political) afairs, which often lost their footing because of disunity and bureaucracy in individual departments. As the modern Siberian historian A. N. Ermolaev notes, the government did not approach the company, but rather the company’s leadership itself strove to “nationalize” the activities of the RAC. The tsar approved establishment of the council in December 1813, further splicing the RAC with the state structures.10 In practice the government refrained from active intervention in the afairs of the company, and the special council of the highest oicials and stockholders was not so much an institution of state control over the RAC as a deliberative body providing advice on the most important political questions. In the RAC’s early years, incomplete and distorted accounts marred the company’s management. Soviet researchers often noted that inancial accounts and documents of the RAC were falsiied during this period, or, speaking more tactfully, were not always characterized by great precision. There was nothing strange in this obfuscation. Company stock was not openly traded, fur hunting and trading success was subject to wild luctuation, and machinations and deception of some employees of the RAC (including part of the leadership) prevented objective accounting. It was almost a hopeless afair. Not until 1813 was relatively objective bookkeeping achieved. Finally, transparency in the inancial sphere came at the beginning of the 1840s, when the board of directors began to publish annual accounts of the results of the company’s economic activities. The Ministry of Finance forced the improved annual reports of the 1840s in Spring/Fall 2012 A Failed Monopoly 23 which RAC ships and other property were properly valued and nonrepayable loans were writen of. The company in 1842 conceded that arbitrary assessments and imaginary sums of the early decades of the RAC “did not signiicantly hurt the Company, [but] they nevertheless served to cause uncertainty and confusion in the accounts.”11 One of the reasons for the complexity in the inancial accounting of the RAC at the beginning stage of operation was the struggle for leadership in the company between the descendants of G. I. Shelikhov, the founder of the permanent Russian colonies in the New World, and Siberian entrepreneurs. The Moscow historian A. Yu. Petrov writes on this subject: “The atempts of merchant families to drag capital of the company into their pockets, their mutual distrust—all this led to signiicant errors in creating inancial documents. . . . Later, the Shelikhov family proposed increasing the issue of stocks, not backed by real assets, to 1,000 shares, leading to a large internal debt and insecurity of the assets with actual inancial content. The cost of the irst stocks was signiicantly increased. . . . In turn, this position brought on a crisis of the RAC that was relected in the inability to pay dividends to the company stockholders and simultaneously to pay [government] creditors.”12 This crisis was partially overcome by the transfer of the board of directors from Irkutsk to Petersburg in 1801 and the removal of the Siberian merchants from the company’s board of directors. The descendants and relatives of Shelikhov, led by his sons-inlaw – merchant of the 1st guild M. M. Buldakov (top director until 1827) and chamberlain of the tsar’s court Nikolai P. Rezanov Nikolai P. Rezanov. Illustration courtesy of the Alaska State Library. (PCA 20-82) 24 Alaska History Vol. 27 – seized hegemony in the company. Owing to the eforts of the later, the emperor himself appeared among the stockholders of the company, as did some members of his family, and Petersburg and Moscow dignitaries and entrepreneurs. At the same time, as A. Yu. Petrov correctly notes, the transfer of the board of directors to the capital and the arrival in it of people unacquainted with the speciics of fur hunting and trade changed the face of the company, turning the top managing agency of the RAC into a bureaucratic oice that actually worked only a few months of the year. Therefore, it could not be expected that such managers of the RAC would make sound decisions; this occurred, in particular, with the organization of the irst Russian round-the-world expedition (1803-1806) from Kronstadt to Kamchatka, to Japan, and to Russian America. This expedition was extraordinarily expensive, was unjustiied from the inancial point of view, and served as one of the reasons for the severe crisis in the company, which was especially exacerbated at the end of 1805. This fact was later relected in documents of the RAC: “In 1805 the Company was in a most impoverished position – its capital was scatered; debts were excessive; the colonies were without support; the turnover was in the loss – and if it did not collapse at that time, it was because of the personal credit of those who were then Directors and the capital of Shelikhov’s descendants.”13 The incompetence of the managing elite of the company was exacerbated by problems withdeception, corruption, and theft among the lower managers in Russia and Siberia. This impacted the supplying of the colonies in the most negative way. N. P. Rezanov wrote with indignation during his inspection trip to Russian America in 1805-1806 that the warehouses of the company on the islands of Kodiak and Unalaska were illed with every kind of unnecessary stuf, which no one bought because of the high prices. Having visited the future capital of Russian America, Novo-Arkhangel’sk, he continued his accusation of abuses at the RAC’s Okhotsk oice in a leter to the directors of the company: “I have already writen to you above about the Unalaska stores, but Kodiak stores are even more illed with trash and the Okhotsk oice, caring more about the distribution of style than about the delivery of vital supplies, has succeeded in loading the Port of Novo-Arkhangel’sk with earrings, cuf links, rings, fashionable buckles, silver watch chains, pins, ribbons, batiste, calico, lipstick, and the like. I wonder how, with its great care, it didn’t send even French women and hairdressers, since everything goes unpunished for them.” According to Rezanov, the vodka being sent to the colonies was diluted to such a degree by the thieving Siberian agents that only water arrived in Russian America.14 Spring/Fall 2012 A Failed Monopoly 25 In fact, the directors of the RAC and the oices of the company in Siberia often showed complete indiference to the needs of the colonies. The Captain of 2nd rank V. M. Golovnin reported, for example, that in 1810 Governor Baranov was forced to buy Russian canvas from the Yaroslavl factories from American sea captains! In vain he requested that the board of directors send him ermine hides from Siberia for trade with the Tlingit. The Americans managed to buy them in Russia and thus looded the market with them, which made the value of ermines drop sharply. Later another governor, Captain-Lieutenant M. I. Murav’ev, reported to Petersburg in 1820 that the warehouses of the company were clogged with useless tobacco, sent from Russia, which neither the Aleuts nor the local Indians would take. Murav’ev had to create a special commission, which decided to throw all the low-quality tobacco into the sea.15 But the irresponsible practice of supplying the colonies with substandard goods and products continued, and in 1832 Governor F. P. von Wrangell, wrote with indignation to the RAC board of directors that the people who used bread baked from lour sent from Okhotsk sufered from stomach pains. And not surprisingly—the lour bags were dated 1826. Only after angry dispatches did the directors of the RAC promise Wrangell to suppress the abuses of the Siberian clerks and agents; in fact, they sent high-quality goods to the colonies in 1834 (but even with this, the Okhotsk oice assigned part of them arbitrarily). However, shipment of quality goods did not become the rule, and frequently not only low-quality but entirely unnecessary goods were delivered to Russian America. In 1847 Governor M. D. Teben’kov reported to Petersburg: “In 1846 Irish linen was not required, but 8,200 arshin [about 6,380 yards] were delivered. Out of their kindness it was not expensive, but it is for gentlemen and therefore it will take several years to use it up. Turpentine was not required, we requested terpentin [tar]. Smoking tobacco sent in cases without packing lost its value, and therefore will also be used up only in several years. Havana cigars are not used up because they are expensive” (emphases in original). N. Ya. Rozenberg, who replaced Teben’kov, wrote in 1851 to the RAC directors in Petersburg that only half of the required corned beef was sent from the port of Ayan, and even that was so roten that it had to be thrown into the sea. Ten years later the government auditor S. A. Kostlivtsov eloquently atested to the properties of goods brought to the colonies. The poor quality of “ready-made clothing and footwear for ordinary people surpass all probability, so that boots last only a few days and fabric clothing no more than two months.”16 26 Alaska History Vol. 27 In addition to poor quality, goods were periodically in short supply. This not only inhibited exchange operations with the Natives but also negatively inluenced the psychological climate of colonial society and afected turnover of personnel. As previously mentioned, Wrangell turned atention to this circumstance, reporting to the directors of the RAC: “Frequent changes of Oicials and Clerks and abandonment of Company service by promyshlenniki occurs in part from the fact that the stay in the Colonies is made painful by reason of continuous insuiciency in goods and their extreme expense, which in any other place are easier to bear than in this secluded region. Grumbling engenders unwillingness to continue service.”17 Poor RAC management existed in the colonies as well. A truly outrageous fact in the irst years of RAC existence was the predatory slaughtering of fur seals on the Pribilof Islands, inadequate drying of the hides, and improper preservation, causing large numbers of them to be damaged—up to 800,000 in one year in the early nineteenth century. In the face of such outrageous mismanagement the board of directors decided in 1804-1805 on a radical measure: defective hides were ordered burned, with a portion to be dumped into the sea. “By this order,” wrote K. T. Khlebnikov, “in Unalaska up to 700,000 hides of roten seals were burned and dumped, taken by baidar and thrown into the sea.” Properly treated, these hides might have instead brought the company about 800,000 rubles. Khlebnikov continued, noting that the order to destroy the spoiled hides also was much abused to the detriment of the company. “The hunters also rejected as defective seals that were in good condition and instead of eliminating them, used them for their clothing and other domestic requirements, and after returning to Okhotsk sold them to merchants not associated with the company,” a clear violation of the RAC monopoly. Ten years later the situation was repeated: part of the fur-seal hides were tainted from inadequate drying in baths, and in 1813 Chinese merchants in Kyakhta rejected several batches of furs, leading to another company loss of hundreds of thousands of rubles.18 The reason for this was the fact that the hunters were preoccupied with quantitative and not qualitative indices; indeed, their pay for work depended primarily on the number of procured hides and not on their quality. The sale of furs was the company’s responsibility. The failures and inadequacies of RAC management during this period were compensated for by various sources. Besides the personal capital of the company directors, substantial state credit played a role in the inancial support of the RAC in the mid-1800s. In addition, trade connections were strengthened at Spring/Fall 2012 A Failed Monopoly 27 this time with foreign traders, among whom Governor Baranov, obtained a substantial part of the necessary wares in a way that eliminated transportation expenses and the dangers of shipwreck, which almost annually destroyed company ships. Another factor was the expansion of the RAC hunting area in connection with the beginning of regular trading-hunting expeditions (often together with American sea captains) to the shores of California, where the dependent Natives procured sea oters, while the Russians obtained wheat, salt, and other products from the local Spanish setlers and missions. In 1812 the Russians built a fort in California, founding there an outpost not far from San Francisco, Fort Ross, where they tried to establish agricultural production but without substantial success.19 The primary result of the RAC’s struggles to overcome losses from ill-conceived management decisions was the overexploitation of Alaska’s natural resources and dependent Native population resulting in a constantly diminishing population of both wildlife and the human population. According to Khlebnikov, Baranov sent furs worth more than 15 million rubles to Russia in 1806-1818, obtaining in return goods totaling only 884,224 rubles. He governed the colonies with an iron hand, and his instructions were often made more oppressive by the abuses of clerks and local managers. Complaints about his governing and criticism by the visiting Russian America naval oicers of the orders prevailing in the colonies, as well as Baranov’s own requests dating from the late 1790s to be replaced, led to his resignation in 1818. Besides everything else, the company directors worried about the fact that from 1809 to 1816 Baranov did not provide the board of directors complete inancial reports; also, rumors about the “frequent tippling” of the aged governor disturbed the directors.20 The RAC board of directors replaced Baranov with CaptainLieutenant L. A. Hagemeister, commander of the ship Kutuzov. That it was a naval oicer who was placed in the key position in the colonies was not by chance. It strengthened state, as well as to some extent military, control over life of the colonies. The need to have a naval oicer at the head of Russian America was pointed out as early as 1805 by Baranov himself,21 who endured no small amount of trouble because of insubordination to him – a civilian oicial – by naval oicers in the service of the RAC. Finally, the transoceanic location of the colonies contributed to these problems. Therefore, all subsequent governors of Russian America were selected exclusively from oicers of the naval leet and were personally approved by the emperor. Thus began the replacement 28 Alaska History Vol. 27 in the upper management structures of representatives of merchant capital by state employees. On the one hand, leadership by the naval oicers permited establishing stricter discipline and accounting, reducing the number of malfeasances in oice, improving the life of the dependent Natives, and regularly practicing so-called “prohibitions” – bans on hunting in certain territories over the course of several years to aid recovery of the population of fur-bearing animals. However, on the other hand, being employed for a limited period and for a ixed wage whose size did not depend directly on the results of their activity, the naval oicers did not have efective economic incentive for the development of a colonial economy. Not all of them possessed suicient business acumen and enterprise so necessary for carrying out trade afairs.22 In large degree they were administrators rather than businessmen. Meanwhile, the RAC directors in Petersburg also practiced far-from-efective management. The board of directors in August 1820 prohibited colonial authorities from trading with foreign sea captains and instead sought to supply the colonies with European wares and products from Petersburg by sending ships around the world. However, some round-the-world expeditions organized by the RAC board of directors were either entirely unproitable or did not reach the Russian colonies at all. According to the accounts of company bookkeepers, the unsuccessful expedition of 1821 of the ships Elizaveta and Ryurik alone brought the company losses of 435,000 rubles. Nor did income from the colonies ofset the 2.4 million rubles spent on round-the-world voyages from 1819 to 1821.23 At the same time, due to lobbying by the company directors and the tsarist oicials (e.g., Count D. A. Gur’ev and Admiral N. S. Mordvinov) connected with them, Emperor Alexander I signed an edict in September 1821 prohibiting foreign mariners and merchants from approaching the shores of Russian America closer than 100 nautical miles under the threat of coniscation of the ships and cargoes. This edict, designed to eliminate competition by American and English maritime traders, not only led to a diplomatic uproar and helped prompt the Monroe Doctrine but struck a blow to the RAC itself, since the Russian colonies in America depended greatly on the supply of wares and products from American sea captains. As a result, the company received a serious inancial setback and was on the verge of bankruptcy. The situation was aggravated by scandal, into which the directors of the RAC were drawn, and particularly V. V. Kramer. He and his brother – American entrepreneur Sebastian Kramer – purchased the ship Elena in the United States for the RAC and took a 6 per- Spring/Fall 2012 A Failed Monopoly 29 cent commission. His next shady afair was the acquisition of the decrepit ship Elizaveta, which belonged to an insolvent debtor of Kramer. The resourceful RAC director purchased the halfroten old tub for the company for 30,000 rubles, which Kramer then pocketed from the debtor, while the company had to spend another 70,000 to repair the boat. Even so, the now-repaired Elizaveta nearly sank along the shores of South Africa during a round-the-world voyage to the Russian colonies. Its cargo had to be sold at a loss and some of the crew and passengers sent back to Petersburg. Kramer’s abuses led to his dismissal in shame from the post of RAC director in June 1824. In February 1824 the special council, together with the RAC board of directors conceded that “very unfavorable consequences have resulted from the universal ban on foreigners approaching our American ports.”24 It is not surprising that the prohibition of trade with foreign sea captains was removed that year. The government of Russia soon concluded a treaty with the United States (1824), and then with Great Britain (1825), on the setlement of trade relations and boundaries in the North Paciic. Nevertheless, the management of the RAC directors continued to be unsatisfactory. This was atested to in a personal leter, dated February 4 1834, from Wrangell to his old friend, the mariner F. P. Litke. This message is remarkable because in it Wrangell vividly portrayed the inadequacies of the management culture of the RAC board of directors; these are not relected in the oicial documents. Not suppressing his emotions, Wrangell wrote: Oh! This board of directors! It has put me in a bad mood, especially in the last mail, illed with hostile spirit against me, but most important is the damage that it inlicts upon the colonies, which makes me lose my patience. If I could be sure to avert upset of the Russian-American Company by cautioning the stockholders regarding the reprehensible actions of their directors, then I would turn to them with the following appeal. Dear Sirs! Whom did you entrust with the management of the vast afairs of the Company, entrust with the welfare of 10,000 residents and protection of your personal proits? Delve into the course of afairs of the Company and you will see everywhere evil, deception, ignorance, apathy with unbearable arrogance – the imprint of ignorance among your directors! Managing the colonies for 3½ years, I have encountered only problems and 30 Alaska History obstacles, especially more important ones where zealous and honorable cooperation of the directors is necessary toward precise and orderly establishment of colonial afairs. Instead of impersonally discussing my ideas and opinions, they subject these same to malevolent and ignorant trial, always inclining toward harm. If you bid your people with intelligence, integrity, and knowledge of the circumstances of colonial and oice afairs to examine the activities of the Board of Directors, you will be convinced of the necessity to require the complete reorganization in the management of your Company, if you do not wish to allow it to fall into uter chaos. Count the useless expenses in the oices and brokerages from Petersburg to Okhotsk, expenditures of large capital on reckless undertakings, as for example, on the construction of a new road from Yakutsk to the Sea of Okhotsk, the Shantarskii expeditions, the gold ields near Yakutsk, roundthe-world expeditions, and so on! There they throw away hundreds, thousands. Meanwhile, regarding the organization of the colonies, they don’t think about the need to give up even a tenth part of the capital being spent in vain in Russia. Compare the maintenance of oicials, storekeepers, oice managers, bookkeepers in the colonies and in Russia – and you will see the most unjust disproportion. I assure you, Russia throws out and conceals as much as ¼ part of what is necessary for the colonies, and the harm inlicted on the colonies will in time give a death-dealing blow to the whole Company. What is the welfare of your Company based on if not on the welfare of the colonies? Of course, there was a time when extraordinary abundance of the rich colonial products, so to speak, muted the incessant losses of capital and people (Aleuts) and instilled a kind of indiference toward the fate of the colonies among those members of the Board of Directors who remained conident that the sources of wealth brought out of the colonies annually would never run short. And now the circumstances have changed, have been changed for a long time. Prudence is required in the business of hunting, and the number of Aleuts – those unique miners of company wealth – has diminished to the Vol. 27 Spring/Fall 2012 A Failed Monopoly 31 Russian-American Company lag. extreme, their state in many regards is wretched, and the colonial leadership is deprived of the means to improve it. Your directors only have hearing and feeling when you write to them about sending out the furs; they are entirely deaf and insensitive as statues or dolts when it is a mater of improvements in the state of the residents here. For maintenance of some external form they, of course, say in their dispatches: “We will try in every way, and we are trying to use every means, and so on,” but in fact they act entirely in the opposite spirit. With a sort of greed they throw themselves at every reckless undertaking, squandering company capital, with the true calculation that part of it will fall into their wide pockets. And when they are presented the most useful opportunities for the Company that, however, do not promise personal proits for the directors, they indignantly reject such undertakings.”25 Nevertheless, the inclusion of Wrangell himself in the composition of the board of directors in 1842, and then his election as chairman in 1844, did not improve the situation much. In 1845 the RAC again entered a period of severe inancial crisis. It was brought on by internal circumstances. There was a sharp decline in prices of Chinese tea that the company was exporting to Russia as a result of sharp competition by Siberian merchants trading in Kyakhta. An increase in employees’ wages because of the growth of salaries in Russia and the increased competition for a work force in Siberia as a result of gold mining there strained inances. 32 Alaska History Vol. 27 In addition, during this period the cost of the social infrastructure in the colonies rose constantly, absorbing nearly a third of the company’s total income. As a result the RAC board of directors petitioned the government to grant the company new beneits and privileges. Otherwise, in the opinion of the directors, further functioning of the company and supplying of the colonies would be impossible and the Russian American possessions should be handed over to the treasury or ceded to some foreign power. They wrote about this directly to the Ministry of Finance on September 21, 1845: “The gradual depletion of present resources will inevitably bring disorder to the afairs of the Company, and then the government will either have to take management of the colonies upon itself and, being deprived of the proits at present being obtained by them from the Company trade, burden itself with the substantial expenses of their maintenance, or, inally, to give up the colonies and let them go to the use of other nations that crave such acquisitions for strengthening their rule over the seas. Guided by these considerations, the Company dares to hope for special atention to it from the government in those cases when, regardless of its requests, the very circumstances atest to the necessity for some relief in its favor.”26 Thus, by the mid-1840s the question of Russian America being ceded was for the irst time considered by the company itself. In order to pull out of the crisis, the RAC board of directors and the colonial administration resorted to various measures. One of them was an increase in the price of goods being delivered to the colonies. Simultaneously the company tried to intensify trade relations with the British Hudson’s Bay Company, which operated in neighboring British Columbia, and to enter with its aid into the London market. However, the English treated the RAC’s proposal without much enthusiasm. Also the RAC’s atempts to monopolize trade in Kamchatka in the mid-1840s failed. In the colonies themselves the directors of the company expected to improve their afairs by a reduction in administrative expenses. In 1847 the Atka and Unalaska oices were abolished and the staf of employees on Unga Island was reduced. This produced savings of almost 15,500 rubles . These measures did not save the company. Instead government approval after long bureaucratic negotiations of transporting Chinese tea by sea to Petersburg, which cost 30 percent less than delivery by land enabled the RAC to eliminate “the annual deicit of managing the Colonies, which never would have been atained in such short time by any other means, except by annual subsidies from the Government.” Regular delivery of tea by sea began in 1851 and the RAC was receiving a clear average Spring/Fall 2012 A Failed Monopoly 33 annual proit of 164,000 silver rubles. For nine years, until 1860, the total sum amounted to 1,475,000 silver rubles.27 In spite of this income, the RAC continued to experience chronic inancial diiculties and petitioned the government to provide it with new privileges. The lobbying bore fruit: by resolution of the Council of State, sanctioned by the emperor, from May 28, 1857 to January 1, 1862 the government reduced the customs tax for fur seal and beaver hides imported into Russia from Russian America by 25 percent. This saved the RAC about 9,000 silver rubles per year. In February 1858 the imperial Commerce Bank granted the company up to 250,000 silver rubles per year in credit. In September 1858 the government allowed the RAC to obtain up to 300,000 silver rubles from the treasury on terms that provided the company a 20,000 silver rubles beneit. In sum, by these means the company obtained annual indirect subsidies from the government in the sum of 193,000 silver rubles.28 The RAC intended to gain additional income through the development of coal in the colonies. Coal production was viewed not only from the point of view of economics but also of politics. The directors wrote speciically to the governor of Russian America in a dispatch of November 10, 1852 that “coal in the colonies, if it turns out of good quality and inds substantial sale in California, should certainly be produced in large volume not only in view of inances but also for political considerations, in order not to deserve reproach from the Americans for the fact that the Russians do not use products found in their possessions and necessary for the markets of the Paciic.”29 It is evident that the RAC leadership was well aware of the inefectiveness of the Russian colonies in America, a problem that had not been resolved a decade later when the company’s coal efort struggled. In spite of all the labors of the RAC directors and of large investments, coal mining on the Kenai Peninsula turned out to be an unproitable afair. One of the reasons was revealed by the Finnish engineer Hjalmar Furuhjelm, who led the coal operation. In a message sent to the RAC directors on February 14, 1863 he wrote: “The reason for such insigniicant production can be explained by the fact that the Russian-American Company hires people for a certain period for an agreed ixed wage; consequently, they can never be forced to work for pay by the job. I know from experience that the result, insigniicant in comparison with work in other mines, cannot be increased even by means of the strictest supervision, in spite of the ease of breaking up coal in the Kenai. Working for pay by the job is particularly necessary in the mines to speed and reduce the cost of production.”30 34 Alaska History Vol. 27 Coal was the only useful mineral that the Russians tried to develop in Alaska. Neither the directors of the RAC nor the administrators of the colonies showed interest in the exploitation of other mineral resources, inasmuch as it required large capital investments and a substantial work force. By 1783 the Russians had learned about large copper deposits on the Copper River, but they did not seriously pursue them. The Russians did not even make much efort to search for gold, the irst signs of which were revealed in Alaska at the end of the 1840s.31 Meanwhile, in 1862 a gold rush began in neighboring British possessions in the Stikine River valley. The Russian colonial leadership sent an investigative expedition there in May 1863 under the leadership of an engineer, P. P. Andreev. An American geology professor, William Blake, accompanied the expedition. He recorded that Indians brought the Russians several rather large gold nuggets from the north – from the Taku River, which lows into the ocean in Russian territory. But these nuggets did not interest the administration of the Russian colonies. The Russians also knew about the presence of oil in Alaska, but this information mainly atracted the atention of the RAC’s American partners and not the company’s management. Representatives of the New York fur-trading irm Shepeller and Co. sent a special request in 1865 to the directors of the company in Petersburg, which they pursued repeatedly, asking for detailed information on the oil deposits there. The last governor of Russian America, Count D. P. Maksutov, in his report to the RAC board of directors of February 8, 1866 conirmed the presence of “black gold” in the Russian colonies.32 But the company made no efort to study or use the resource. Such lack of atention to mineral riches was partially caused by the RAC’s distraction, beginning in the 1850s, in selling Alaskan ice in California after the Gold Rush. The governor of Russian America, Captain of 2nd Rank N. Ya. Rozenberg, initially had no idea even how to begin this venture. “There is no doubt,” he wrote to the RAC directors in September 1850, “that geting ice by our own means and sending it to sell in California on our ships would be comparatively more proitable for the Russian-American Company, but this whole operation at present is still so new to us that we don’t even know how to begin it.” For their part the Americans could not ignore such a proitable business, and in 1852 the entrepreneur and banker Beverly Sanders of San Francisco created the American-Russian Trading Company. In 1854 it entered into a contract with the RAC to market ice in California for a period of twenty years. The agreement was very favorable to the American irm, which paid the RAC $35 per ton and sold it at $75. As the American researcher Ronald J. Jensen noted: “It was an especially Spring/Fall 2012 A Failed Monopoly 35 The Russian-American Company placed litle emphasis in exploring for gold. Harper’s New Monthly, April 1860. proitable contract for the Americans because the Russian company did all the work and absorbed most of the expenses. It cut the ice, carried it to San Francisco, and even paid for the ice house in that city. The California irm merely sold the product.”33 The management of the RAC was not, however, an uninterrupted series of bad decisions. In fact, both the board of directors in Petersburg and the administration in the Russian colonies in America often responded efectively and adequately to the changing economic, ecological, and political situation. RAC leaders, for example, sometimes prohibited hunting of some furbearers over periods of one to three years, thus helping preserve animal populations and the wealth of furs they provided. The breeding of valuable species of animals on islands formerly inaccessible to them was an economic success; this had been arranged by the RAC board of directors as early as 1819. In 1828, for example, the RAC released a pair of silver foxes on Amlia Island, and in 1846 M. D. Teben’kov ordered ground squirrels brought to Atu Island where they were used to make Aleut clothing. The signing of a neutrality pact with the Hudson’s Bay Company in 1854, on the eve of England’s entrance into the Crimean War kept Russian America from being devastated by an Anglo-French squadron during the course of a military campaign in the Paciic. At times the RAC directors and the colonial authorities atempted useful innovations, though not always successfully. Thus in the 1830s the board of directors hired the American harpooner Thomas Barton to instruct Kodiak Natives and Creoles in European skills for hunting whales in order to expand this kind of hunting in the colonies. The experiment did not always work, as Wrangell wrote to the RAC directors on April 30, 1830, “now the whales tore loose from the harpoons, now the lines broke and the whales escaped, now the hunted whale sank irretrievably into the depths.” In 36 Alaska History Vol. 27 the 1840s the directors of the company sent rubber, oil, and a “hydro-elastic machine” to Russian America for the production of waterproof rubber bags for protecting furs, but the novelty did not take root. The furs continued to be sent from the colonies in the old way and the machine itself, which cost over 11,000 rubles, was listed as dead capital in the accounts of the Novo-Arkhangel’sk oice.34 One of the unresolved problems of RAC management was the lack of efective motivation of the workers because of low income, especially among the Natives and Creoles, and debt bondage. Referring to the Creoles in the Kodiak Department, Wrangell wrote in 1832: “Because of their inadequate pay, the carelessness and invariable readiness of the former Heads of the [Kodiak] Oice to run them into debt to the [company] Treasury, people are forced into irredeemable debt, so they are killed in spirit and therefore of negligible beneit to the company, and it is impossible to use them as managers of Stores, Shops, and Artels.” Debt bondage was widely practiced by the RAC with Natives, Creoles, Russian promyshlenniki, and employees of the company. For example, promyshlenniki and company employees debt to the RAC in 1843 reached 380,000 rubles, a third of which was counted as worthless debts because the debtors were deserters, deceased, or retired residents of the colonies.35 Though the company took painful inancial losses as a consequence, it continued the policy of issuing credit and debt bondage up till the sale of Alaska to the United States. After all, this practice, while it may not have motivated workers to extraordinary efort, could ensure maintenance of a work force, and in particular, helped keep workers beyond their period of contract in the colonies. In 1818-1820 the RAC abandoned the practice of paying Russian promyshlenniki with a share of the procured furs and began paying them a ixed wage of 350 rubles. But this measure reduced the incentive for work. This was noted by the colonial administrators, who emphasized that a common salary of 350 rubles was unjust, since it did not permit distinguishing the diligent worker from the lazy one. RAC documents also indicate that as a result the practice “instilled only indiference toward the successes of the Company in the hunts. Each hunter is now convinced that he will receive without fail what he was assigned even though the hunts should be entirely unsuccessful.” Striving to compensate for this inadequacy, the RAC administration instituted bonuses, issuing oral and writen acknowledgments, and sometimes also promotions. In 1823 the RAC directors approved an increase in salary in the amount of 25 to 50 rubles per year to zealous workers (later the sum grew to 100 rubles) and urged punishment, includ- Spring/Fall 2012 A Failed Monopoly 37 ing corporal punishment and in extreme cases expulsion from the colonies.36 However, these measures had limited success. Dependent Natives had even fewer incentives to work. In the 1830s “employed Aleuts” in the service of the company had a salary of 100 to 180 rubles per year for men and 60 to 100 rubles for women. This was ridiculously inadequate. Wrangell pointed out that an Aleut needed clothing costing 180 rubles annually and asked, “with what is there to dress his wife and children, from where can he take what is necessary for a whim, tobacco and the like, when he obtains a salary of 120 rubles to 180 and rarely more?!” According to the calculations of the governor, each family of Kodiak Eskimos had an average annual income of 20 rubles 36 kopecks. However, the board of directors of the company saw the problem diferently. In a RAC Edict of 1844 a special paragraph was introduced mandating that the governor “pays atention to the fact that luxury not be introduced into the colonies.”37 The RAC’s market monopoly on furs discouraged efort by Native hunters. The company set the prices, controlled products that were traded to the dependent population, and artiicially limited the demand for what the company considered “luxury” items. At the beginning of the 1860s the auditor of RAC activity, P. N. Golovin, atested: “The Aleuts do not have the right to sell their catches to anyone whomsoever except the company, or likewise, to buy anything other than from the company stores. From this it happens sometimes that an Aleut asks for tea and they give him a blanket; he asks for red material and he is given blue; he asks for lour and they ofer him footwear” [emphasis in original text].38 The RAC’s total monopoly inevitability gave rise to lowquality products, especially furs. They lost quality from the start through clumsy, hasty, and careless work—a consequence of uninterested workers. As the Russian missionary in Alaska, Abbot Nikolai, wrote in the 1860s: “The whole operation of trade is in company hands, for which the natives unwillingly hunt and are dissatisied with the pay for their goods. . . . For example, sables [martens] are plentiful and good here, but they seldom hunt them. Instead only boys catch them for fun, they sew themselves parkas with the good ones, and the worst ones they take to the company. They say: ‘All the same, they give a ruble, the company has no eyes.’”39 The low quality of furs obtained in Russian America made it inevitable that the primary markets for the sale of RAC furs were China and Russia, whose consumers did not expect high-quality products. Nevertheless, the RAC board of directors, citing a report from the Kyakhta oice on the Chinese border, pointed out 38 Alaska History Vol. 27 to the governor in a dispatch of March 23, 1828: “The oice uniformly observes that the working of our river beavers is not very good because of haste and lack of skill, and often there were cuts on the hides and roughness left, from which many of our beavers have lost their value in comparison with foreign beavers, which are always worked much beter, in comparison with our working.” But this helped litle, and on March 22, 1850 Governor M. D. Teben’kov issued a special circular that ordered more atention be devoted to the proper cleaning and dressing of hides. Still, a substantial part of the hides received from the Unalaska Department in 1851 were damaged from careless work, and some were moth-eaten. Thus, the new governor, N. Ya. Rozenberg requested that the Unalaska manager tell the local Aleuts that, if negligent removal and dressing of hides continued, he would resort to corporal punishment. In the 1860s, when the RAC tried to enter into the European and American markets, it had to face constant complaints by its trade partner about its bad quality in processing hides as well as improper packing and storing in the holds of the ships, resulting in deterioration of the furs.40 The system of administrative distribution that formed in the colonies—in contrast to a free market goods-for-currency relationship—provided the opportunity for RAC managers to obtain monopolistic super-proits owing to the price gap, between what the monopolistic RAC would distribute and what a competitive market would yield for purchased goods. In addition, the company could artiicially boost proits through various additional charges and the use of special colonial “currencies,” so-called marki, which were made of seal hides or thick paper with the stamp of the RAC and a corresponding face value. Auditor P. N. Golovin noted: “These marki are issued from the Main Oice of the RAC and everything is purchased with them at a store owned by the company, since no outsider can bring anything into the colonies for sale. . . . This is very favorable for the company: it pays for any kind of work in marki, issuing goods for them, to which of course it applies a certain percent, so that in essence it pays nothing for the work” [emphasis in original].41 Naturally, the top management of the RAC lobbied in every way to keep such a company store system, every time stubbornly defending the company’s monopolistic rights and privileges rendered to it in its charters. Central planning of the economy of the Russian colonies was the inevitable consequence of the RAC’s monopoly. A prime manifestation of this central planning was the governor’s directives, approved by the RAC board, for the annual summer sailings of the RAC’s lotilla. The directives marked out its route and the sending out hunting parties. The directives dictated every step Spring/Fall 2012 A Failed Monopoly 39 of the subordinates to the smallest detail. A special “regulation” for Native leaders of Kodiak Island, approved by Governor A. K. Etolin on March 22, 1841, stated: “An elder shall always have an accurate lists of all people of both sexes in the village entrusted to him and the same with all Aleuts, promyshlenniki, and those capable of company work, so that on his arrival in Pavlov Harbor (which happens annually, usually in the month of March), on demand from the head of the Kodiak oice, he can present these lists for the necessary distribution of people to serve on hunting parties and at company work, for which, if the elder himself is illiterate, he will be given one Creole who can write.”42 Another oversight function was the constant accounting for “company property and capital.” An entire staf of bookkeepers and clerks was employed, and the governors regularly sent trusted employees to audit all departments of the colonies. And with good reason. In 1830 alone, according to an audit, a debt for shortages amounting to 29,571 rubles 39¾ kopecks had accumulated among the stewards and managers of the hunting artels. Embezzlement, theft, and misrepresentation in RAC lower management in the colonies were chronic occurrences. Sometimes abuses were also commited by higher-level managers. Checking accounts at the Atka oice of the RAC in 1846 revealed a shortage of goods worth 12,000 rubles, whose responsibility was borne by P. F. Vykhodtsev, head of the Atka Department. Toward the end of the existence of Russian America, the corruption of management became especially noticeable. The RAC directors wrote to D. P. Maksutov in a dispatch of December 10, 1864: “The board of directors recently notes that some of the people, who are named in the colonies as honorable, return to Russia with credits that they could not have raised even if they ate and wore nothing in all the time of their residence in the colonies; this compels the conclusion that they obtained the credits through less than legal means.”43 Detailed accounting was one of the methods of struggling against abuses. The widespread bureaucracy in the colonies logically lowed from the very nature of the economic relations developed there. It was relected in the names and structure of the managing agencies: the vast administrative territories of Russian America, which symbolically were called “departments” and were managed by “oices” of the RAC. Governor N. Ya. Rozenberg had a special love for paperwork, repeatedly requiring from his subordinates the most detailed accounts of activities. Thus in a message of April 17, 1851 to Troim Dushkin, the head of Belkovsky village, Rozenberg wrote: “Former Manager of Unga Island, Fëdor Gudkov, reported to me that you, Dushkin, begin to perform your duty in the service badly; especially on the writen 40 Alaska History Vol. 27 part you have much disorder and many oversights. For example, in the past year you did not present to the Management either service records, or an award list, or a human census, or a list of Colonial supplies. I announce to you, Dushkin, for such reprehensible carelessness toward the execution of your duty, my strict reprimand, and I demand that in the future you submit to the Management all required accounts and documents without fail and in a timely manner, according to the instructions charged to you and the strictest mandate of the laws, and at peril for failure, for nonexecution of orders or the violation of the resolutions of the Authorities.”44 Complaints, petitions, and denunciations also informed RAC leadership of the performance of the company’s bureaucracy. In a system of administrative control without an independent judiciary, colonial authorities were atentive to these signals that appeared “from below.” Many managers of hunting artels and trading posts lost their positions because of complaints by subordinates. For example, in 1845, due to numerous complaints by the Chugach Eskimos, Pëtr Naumov, the head of Konstantinovskii Redoubt, was removed from his post, and in 1846 Maksim Smolin was removed from the duty of steward at the trading shop in Novo-Arkhangel’sk “for repeated complaints about him and based on accusations of his dishonesty.”45 As diicult as administration of the colonies had been earlier in the nineteenth century, the RAC’s challenges only became greater in the 1860s. In 1862 the company’s charter expired and with it went government beneits worth approximately 200,000 rubles annually. A drop in fur and tea sales in 1863 greatly aggravated the situation. In that year an economic crisis in Russia left the company with no buyers for 3,000 sea oter hides. Legal tea imports from England and contraband tea delivered through revolt-racked Poland substantially lowered company proits from the tea trade. In 1863 the company was unable to sell a single case of tea, and in 1864 it succeeded in selling tea only at extremely low prices. In addition, the head of the Navy Department, General Admiral Grand Duke Konstantin Nikolaevich (brother of Alexander II), launched a campaign to discredit the RAC. His goal was to sell the Russian colonies to the United States. At the same time, American and British whalers, traders, and gold prospectors began ever more actively to penetrate Alaska and the seas washing its shores. The RAC could not compete with foreign traders because of higher transportation expenses and a poor assortment of trade items, especially a lack of irearms and alcohol because of the prohibition of such trade in the RAC’s charters before 1830. The RAC did not sell arms to the Natives prior to 1830 for several Spring/Fall 2012 A Failed Monopoly 41 General Admiral Grand Duke Konstantin Nikolaevich, the brother of the czar, sought to undermine the Russian American Company. Photograph courtesy of the Library of Congress, George Kennan Papers. (LCUSZ62-128137) reasons. Because the RAC relied more on compulsion than on cash or trade inducements to acquire furs and other goods from Natives, arming Natives seemed dangerous. Russians also were reluctant to put irearms in Native hands because they believed the sound of gunshots frightened furbearers and because irearm use during intra- or inter-tribal strife could reduce the Native population upon whose labor the Russians depended. The unlimited sale of alcohol among Natives also undercut the eiciency of this critical workforce.46 The refusal of the RAC to sell irearms and drink to Natives put the company at a disadvantage, since its foreign competitors ignored the colonial authorities’ prohibition of such sales and international agreements between Russia and England and the United States prohibiting the sales. In the face of these diiculties, RAC managers strove to preserve the company. The company reduced its own management apparatus. Thus in 1864 it abolished Old World brokerages in Kazan, Tyumen, and Tomsk, and closed the brokerage on the Amur. It also transferred the Ayan oice to Yakutsk in 1865, where is replaced an existing smaller brokerage. Payment of pensions to former RAC employees was suspended. Concurrently the directors recommended that the governor of the colonies discontinue mining coal on the Kenai Peninsula and instead undertake trade in Alaskan timber with Chinese ports. The board recommended suspension of shipments of furs to Shanghai in exchange for tea “because of a drop there of prices for fur goods.” The RAC 42 Alaska History Vol. 27 directors hoped to expand fur sales to markets in Europe and the United States. In March 1865 the RAC leadership informed the governor of Russian America about a contract signed with the furtrading irm of Oppenheimer & Co and instructed the governor to send large shipments of fur-seal hides to the company in London. However, neither this measure nor the developing trade in Alaskan ice to California was able to improve the inancial indices of the company: in 1866, on the eve of the sale of Alaska, its expenditures exceeded its income by more than 200,000 silver rubles, which had to be covered by state subsidies.47 RAC management was unable to efectively respond to the changing market conditions, to reorient itself from the procurement and sale of furs and tea to a more proitable business, or to reduce costs and improve the quality of its products. The strategic miscalculation of the RAC board of directors in the 1850s, in the opinion of A. Yu. Petrov, was focusing predominantly on the development of the tea trade; further diversiication of sources of income was not even examined by the directors. However, this is not entirely true since as early as the beginning of the 1850s the RAC directors had demanded that Governor N. Ya. Rozenberg establish “wholesale trade with California and the Sandwich [Hawaiian] Islands . . . irst with two articles: salt ish and timber in round form, if not in the form of boards.” But, the RAC board of directors rejected Rozenberg’s proposal of sending an additional eight hundred Russian workers to the colonies to develop the timber, ishing, and coal industries and the preparation of Alaskan ice for delivery to California. The directors considered the expense too great. The RAC was unable to turn itself into a large provider of timber, ish, or coal. As P. N. Golovin noted later, the company missed a favorable moment for seizing monopolistic positions in the timber trade in the San Francisco market during the California Gold Rush. “Meanwhile, the English,” wrote Golovin, “were not dozing and the Oregon forest found a huge and permanent demand in California.” The choice of a RAC agent for California was also unfortunate: the aged employee P. S. Kostromitinov was not noted for great business acumen and did not even speak English. Golovin also noted other blunders by RAC managers: they did not hire experienced salters for the ish, and thus its quality left much to be desired and elicited litle demand. Similarly, the company did not sort the coal it mined with care, and consequently its quality and sales sufered.48 An inadequate management culture and incompetence on the part of the RAC were manifested in the weakness of strategic planning and the adoption of resolutions not thought through, as well as by the striving of several directors and ordinary agents Spring/Fall 2012 A Failed Monopoly 43 to improve their own inancial positions at the expense of the company through various machinations, deceptions, and simple commonplace theft. All these manifestations of poor management cost the RAC millions of rubles and undermined Russian colonization in Alaska. Poor management by the RAC leadership revealed itself in poor motivation of workers, administrative excesses, and lack of lexibility to respond to changing economic and political realities. Beginning in the 1840s the RAC also sufered from the defeatist atitude of the company directors, who were pessimistic about the colonies’ future. All this, without doubt, negatively inluenced the state of Russian America and pushed the government toward its sale to the United States. Of course, RAC mismanagement was only partially to blame for the loss of the colonies. The company’s failure was inextricably linked to tsarist Russia’s social, political, and economic structure. Merchant capital was obliged to serve the interests of the supreme state and not the reverse. The tsarist government simply inserted the RAC into the general system of management of the empire, and its representatives adopted the authoritativebureaucratic leadership style typical of the empire. Its own monopolistic position and absence of internal competition corrupted the management of the RAC, discouraged it from seeking optimal management decisions, and set it on a course to rely on periodic petitions to the state for support and additional beneits. For its part, the government saddled the company with maintaining the social infrastructure of the colonies, making it uterly uncompetitive in the world capitalistic market that was forming in the second half of the nineteenth century. Thus the general backwardness and inefectiveness in the socioeconomic system of the Russian Empire predetermined the failure of its colonization in the New World. This very fundamental reason ensured the weakness of the RAC management, which in turn served as one of the indirect reasons for Russia’s abandonment of its transoceanic possessions to the more successful capitalistic competitor, the United States. Notes 1. Rights and privileges of the RAC, signed by the Emperor on July 8, 1799, Polnoe sobranie zakonov Rossiiskoi imperii [Complete Collection of Laws of the Russian Empire] (hereafter PSZRI and year), (St. Petersburg, v Gosudarstvennoi tipograii, 1830), 19.030: 700-4. 2. F. Gl. Arkhiv II-3, 1835. Op. 77. D. 7. L. 22, 29, Arkhiv vneshnei politiki Rossiiskoi imperii [Archive of Foreign Afairs of the Russian Empire], Moscow (hereafter AVPRI). From the beginning of the 1840s RAC accounts within Russia were conducted in silver in accordance with the reform of the minister of inance E. 44 Alaska History Vol. 27 F. Kankrin. In the colonies all inancial operations were conducted in paper rubles. Paper rubles were much less valuable than silver rubles; approximately 3.5 of paper rubles equaled one silver ruble. Unless silver rubles are speciied, all references to rubles in this paper are to the less valuable rubles on the RAC books. 3. The opening up of Priamur’ye and Sakhalin brought the RAC substantial losses in the amount of 151,619 silver rubles, of which the treasury covered only 50,000 rubles, and the fur trade with the natives of the Primor’ye District provided the RAC an income of about 9,500 silver rubles. P. A. Tikhmenev, Istoricheskoe obozrenie obrazovaniia Rossiisko-Amerikanskoi kompanii i deistvii eia do nastoiashchago vremeni [Historical Survey of the Formation of the Russian-American Company and Its Activities to the Present Time] (St. Petersburg: E. Veimar, 1861-1863), 2:7478, 105-111. 4. Sud’by Rossii. Doklady i zapiski gosudarstvennykh deyatelei imperatoram o problemakh ekonomicheskogo razvitiya strany (vtoraya polovina XIX v.) [The Fortunes of Russia. Reports and Notes of State Representatives to the Emperors about Problems of Economic Development of the Country (Second Half of the Nineteenth Century)] (prepared by L. E. Shepelëv. St. Petersburg: Liki Rossii, 1999), 12. 5. Kirill T. Khlebnikov, Russkaya Amerika v “Zapiskakh” Kirilla Khlebnikova: Novo-Arkhangel’sk [Russian America in the “Notes” of Kirill Khlebnikov: NovoArkhangel’sk], S. G. Fedorova, comp. (Moscow: Nauka, 1985), 106; A. V. Grinëv, “Tuzemtsy Alyaski, russkie promyshlenniki i Rossiisko-Amerikanskaya kompaniya: sistema ekonomicheskikh vzaimootnoshenii” [The Natives of Alaska, Russian Promyshlenniki, and the Russian-American Company: A System of Economic Relationships], Etnograicheskoe obozrenie [Ethnographic Review] 2000 (hereafter EO), 3:74-88. 6. A. V. Grinëv, “Kolonial’nye grazhdane Russkoi Ameriki: problema formirovaniya postoyannogo russkogo naseleniya v Novom Svete” [Colonial Citizens of Russian America: The Problem of Forming a Permanent Russian Population in the New World] Amerikanskii ezhegodnik 2006 [American Annual] (hereafter AE) (Moscow, 2008), 179-210 [See in translation “ ‘Advanced in Age, Decrepit and Unit’: Colonial Citizens and the Formation of a Permanent Russian Population in Alaska” Alaska History 24:2 (Fall 2009):30-60]; F. Gl. Arkhiv II-3, 1835. Op. 77. D. 7. L. 23-24 ob, AVPRI. 7. For details see Gibson, J. R. Imperial Russia in Frontier America. The Changing Geography of Supply of Russian America, 1784-1867 (New York: Oxford University Press, 1976). 8. Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 1799-1815. Sbornik dokumentov [The Russian-American Company and the Study of the North Paciic Ocean. Collection of Documents] (Moscow: Nauka, 1994), 36. 9. Rossiiskii gos. istroicheskii arkhiv [Russian State Historical Archive]. F. 13. Op. 2. D. 1243. L. 10-15; F. 40. Op. 1. D. 10. L. 142 ob-143. 10. A. N. Ermolaev, “Vremennyi Komitet i osobyi Sovet Rossiisko-Amerikanskoi kompanii: kontroliruyushchie ili soveshchatel’nye organy (1803-1844)?” [The Interim Commitee and Special Council of the Russian-American Company: Controlling or Counseling Bodies (1803-1844)?] (AE 2000. Moscow, 2002), 232-49; A. N. Ermolaev, “Glavnoe pravlenie Rossiisko-Amerikanskoi kompanii: sostav, funktsii, vzaimootnosheniya s pravitel’stvom, 1799–1871” [Board of Directors of the Russian-American Company: Composition, Function, and Relationship with the Government, 1799–1871] (AE 2003. Moscow, 2005), 279; N. N. Bolkhovitinov, Russko-amerikanskie otnosheniya: 1815-1832 [Russian-American Relations: 1815-1832] (Moscow: Nauka, 1975), 138. 11. V. F. Shirokii, “Iz istorii khozyaistvennoi deyatel’nosti RossiiskoAmerikanskoi kompanii” [From the History of the Economic Activity of the Russian-American Company], Istoricheskie zapiski [Historical Notes] (1942), 13:207- Spring/Fall 2012 A Failed Monopoly 45 21; Semyon. B. Okun’, Rossiisko-Amerikanskaia kompaniia [The Russian-American Company] (Moscow-Leningrad: Gos. Sotsial’no-ekonomicheskoe izd-vo, 1939), 62-65f [See in translation as: The Russian-American Company, translated by Carl Ginsburg, edited by B.D. Grekov (Cambridge: Harvard University Press, 1951)]; “Doklad direktora Rossiisko-amerikanskoi kompanii V. V. Kramera obshchemu sobraniyu aktsionerov, 22 avgusta 1813 goda (publ. i vstup. st. A. Yu. Petrova)” [Report of the Director of the Russian-American Company V. V. Kramer to a General Meeting of the Stockholders, 22 August 1813 (published and introduced by A. Yu. Petrov)] (AE 2001, Moscow, 2003), 220-22; Otchety Rossiisko-Amerikanskoi kompanii Glavnogo pravleniya za 1840-1863, 1867-1869 gg. [Accounts of the RussianAmerican Company by the Board of Directors for 1840-1863, 1867-1869] (St. Petersburg, 1842-1871); Razr. 99. Op. 1. D. 125. L. 1-4 and Op. 1. D. 131. L. 1, Arkhiv Russkogo geograicheskogo obshchestva [Archive of the Russian Geographic Society] (hereafter ARGO), St. Petersburg; microilm Roll 14, p. 358 ob., Records of the Russian-American Company, Records of the Former Russian Agencies, Record Group 261 (hereafter NARA RAC Records). On March 30, 1843 the board of directors of the RAC authorized the cancellation of 503,928 rubles from the company capital: this sum, as the document states, accumulated “from improper markdown of ships.” Roll 14, p. 583, NARA RAC Records. 12. A. Yu Petrov, “Finansovo-khozyaistvennaya deyatel’nost’ Rossiiskoamerikanskoi kompanii (1804-1820)” [The Financial-Economic Activity of the Russian-American Company (1804-1820)] (AE 2001. Moscow, 2003), 115. 13. Petrov, “Finansovo-khozyaistvennaya,” 116-17, 119-20; Ermolaev, “Glavnoe pravlenie Rossiisko-Amerikanskoi kompanii,” 274-75; Razr. 99. Op. 1. D. 134. L. 20, ARGO. 14. F. Gl. Arkhiv 1-7, 1802 g. Op. 6. D. 1. Papka No. 35. L. 8, and L. 5 ob., AVPRI. 15. V. M. Golovnin, “Zapiska kapitana 2 ranga Golovnina o sostoyanii Rossiisko-Amerikanskoi kompanii v 1818 godu” [The Notes of Captain of 2nd Rank Golovnin on the State of the Russian-American Company in 1818]. Materialy dlya istorii Russkikh zaselenii po beregam Vostochnago okeana [Materials for the History of Russian Setlements along the Shores of the Paciic Ocean] (St. Petersburg: V tipograii Morskogo ministerstva, 1861), 1:103; Roll 27, p. 128 ob-129, NARA RAC Records. 16. Roll 34, pp. 80 ob.-81 and 383 ob., Roll 8, p. 10 ob., Roll 37, pp. 62 ob.-63, and Roll 57, p. 198 ob., NARA RAC Records; F. RAK. Op. 888, D. 125, L. 252-54, AVPRI; Prilozheniya k dokladu Komiteta ob ustroistve russkikh amerikanskikh kolonii [Supplements to the Report of the Commitee on the Arrangement of the Russian American Colonies] (St. Petersburg: V tipograii Departmenta vnieshnei torglovi, 1863), 106. 17. Roll 37, p. 117, NARA RAC Records. 18. Kirill T. Khlebnikov, Russkaya Amerika v neopublikovannykh zapiskakh K. T. Khlebnikova [Russian America in the Unpublished Notes of K. T. Khlebnikov] compiled, authors’ introduction, and comments by R. G. Lyapunova and S. G. Fedorova (Leningrad: Nauka, 1979), 106, 193, 214; Shirokii, “Iz istorii khozyaistvennoi deyatel’nosti Rossiisko-Amerikanskoi kompanii,” 210. 19. In 1841 Fort Ross was sold to John Suter, a Mexican citizen of Swiss origin. 20. Kirill T. Khlebnikov, Zhizneopisanie Aleksandra Andreevicha Baranova, Glavnogo pravitelia Rossiiskikh kolonii v Amerike [Biography of Aleksandr Andreevich Baranov, Chief Director of the Russian Colonies in America] (St. Petersburg: Morskaya Tipograiia, 1835), 188 [See in translation as: Baranov, Chief Manager of the Russian Colonies in America, translated by Colin Bearne, edited by Richard A. Pierce (Kingston, Ontario: Limestone Press, 1973)]; F. RAK, Op. 888, D 420, L. 1-2, AVPRI. 21. F. RAK, Op. 888, D. 251. L. 34 ob, AVPRI. 46 Alaska History Vol. 27 22. For example, Governor M. I. Murav’ev admited in a dispatch of January 19, 1821 to the directors of the RAC, that he was ignorant of commercial afairs: “I know very litle about trade turnover.” Roll 27, p. 143, NARA RAC Records. 23. Razr. 99, Op. 1, D. 29, L. 5 ob.-8 and D. 134, L. 20 ob., ARGO. 24. T. 37, No. 28.747, pp. 823-32, PSZRI; Bolkhovitinov, Russko-amerikanskie otnosheniya, 132-307; Razr. 99, Op. 1, D. 29, L. 7 ob., ARGO; Okun’, RossiiskoAmerikanskaia kompaniia, 69; F. RAK, Op. 888, D. 314, L. 3, AVPRI. 25. Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 18151841 [The Russian-American Company and the Study of the North Paciic Ocean, 1815-1841] edited by N. N. Bolkhovitinov (Moscow: Nauka, 2005), 285. Reference to the Shantarskii expeditions refers to several years of failed eforts in islands in the western part of the Sea of Okhotsk. 26. Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 18411867: sb. dok. [The Russian-American Company and the Study of the North Paciic Ocean, 1841-1867: Collection of Documents] (Moscow: Nauka, 2010), 126-28. 27. F. Gl. Arkhiv II-3, 1835, Op. 77, D. 7, L. 32 ob. and 56-70 ob. and L. 127, AVPRI; Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 88, 114-15, 119-20, and 128; Roll 52, p. 475, NARA RAC Records; Doklad Komiteta ob ustroistve russkikh amerikanskikh kolonii [Report of the Commitee on the Arrangement of the Russian American Colonies] (St. Petersburg: V tipograii Departmenta vnieshnei torglovi, 1863), 389. 28. Doklad Komiteta ob ustroistve russkikh amerikanskikh kolonii, 390-91. 29. Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 247. 30. Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 372. 31. A. V. Grinëv, “Zoloto Russkoi Ameriki: nesostoyavshiisya Klondaik] (AE 2001. Moscow, 2003), 138-62. [See in translation “The Gold of Russian America: The Gold Rush That Didn’t Happen” Alaska History 21:1 (Spring 2006):15-36. 32. V. P. Blek (Blake), “Opisanie reki Stakhin [Description of the Stikine River],” Morskoi sbornik [Marine Collection] 78 (1865), 5:95-96, 105, 110; Roll 25, pp. 311-12 and Roll 65, p. 11, NARA RAC Records. 33. Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 18411867, 215-16; Ronald J. Jensen, The Alaska Purchase and Russian-American Relations (Seatle: University of Washington Press, 1975), 4-5. 34. Roll. 27, p. 23 ob., Roll 32, pp. 24-24 ob., Roll 34, p. 185, Roll 52, pp. 71 ob.-72 and 384, Roll 35, pp.10 ob.-11, 83 ob., and Roll 37, p. 76, NARA RAC Records. 35. Roll 34, pp. 171 ob.-172 and Roll 15, pp. 41-41 ob., NARA RAC Records. 36. Roll 27, p. 292, Roll 28, p. 43, and Roll 3, pp. 283 ob.-284, NARA RAC Records; Razr. 99, Op. 1, D. 29, L. 5 ob., ARGO. 37. Kirill T. Khlebnikov, Russkaya Amerika v neopublikovannykh zapiskakh K. T. Khlebnikova, 144; Roll 37, p. 80, NARA RAC Records; Ustav RAK 1844 g., §176 [RAC Edict 1844, §176] in Tikhmenev, Istoricheskoe obozrenie, Appendix, 44. 38. Tikhmenev, Istoricheskoe obozrenie, 230-32; Johan H. (I. V.) Furuhjelm, Otchet po upravleniiu Rossiisko-amerikanskimi koloniiami s 1859 po 1863 god Kapitana 1 ranga Furugel’ma [Report on the Management of the Russian-American Colonies from 1859 to 1863 by Captain of the 1st Rank Furuhjelm] (St. Petersburg: Tipograia Eduarda Treimana, 1864), 37; Pavel N. Golovin, “Iz putevykh zametok P. N. Golovina s predisloviem V. Rimskogo-Korsakova” [From Travel Notes of P. N. Golovin with a Foreword by V. Rimskii-Korsakov], Morskoi sbornik [Maritime Journal], 65:5 (1863), 180. 39. Cited by O. D. Yakimov, “Nikolai Militov – igumen kenaiskoi pravoslavnoi missii” [Nikolai Militov – Father Superior of the Kenai Orthodox Mission]. Russkaya Amerika i Dal’nii Vostok (konets XVIII v.-1867 g.). K 200-letiyu obrazovaniya Rossiisko-Amerikanskoi kompanii [Russian America and the Far East (End of the Eighteenth Century to 1867) On the 200th year of the formation of the Russian-American Spring/Fall 2012 A Failed Monopoly 47 Company] Materials of the International Science Conference (Vladivostok, 11-13 October 1999) (Vladivostok, 2001), 227. 40. Roll 6, p. 61 ob., Roll 57, pp. 179 ob.-180 ob., 286-286 ob., and Roll 25, pp. 228228 ob., 294-294 ob., 356, NARA RAC Records. 41. Golovin, “Iz putevykh zametok,” 180-81. 42. Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 18411867, 34. 43. Roll 34, pp. 137-137 ob., Roll 52, pp. 211 ob., 451, and Roll 25, p. 174, NARA RAC Records. 44. Roll 57, pp. 59-63, 107, and 411 ob.-412, NARA RAC Records. 45. Roll 51, p. 208 and Roll 52, p. 112 ob., NARA RAC Records. 46. Doklad Komiteta ob ustroistve russkikh amerikanskikh kolonii, 391; Otchet Rossiisko-Amerikanskoi kompanii Glavnago pravleniya za 1863 g. [Accounts of the Russian-American Company by the Board of Directors for 1863] (St. Petersburg: V tipograii E. Treimana, 1865), 8-11; Roll 25 p. 230, NARA RAC Records; A. V. Grinëv, “Velikii knyaz’ Konstantin Nikolaevich i prodazha Alyaski (k 175-letnemu yubileyu velikogo knyazya Konstantina Nikolaevicha)” [Grand Duke Konstantin Nikolaevich and the Sale of Alaska (On the 175th Birthday of Grand Duke Konstantin Nikolaevich)] Peterburgskaya istoricheskaya shkola [The Petersburg Historical School] (St. Petersburg: Nestor, 2004), 3:157-179; Andrei V. Grinëv, “Problema rasprostraneniya p’yanstva sredi tuzemtsev Russkoi Ameriki” (EO, 2010), 1:131141 [See in translation “The Distribution of Alcohol among the Natives of Russian America” Arctic Anthropology 47(2):69-79. 2010. 47. Roll 25, pp. 20-23, 125, 140-43, 178-80, 190, NARA RAC Records; Furuhjelm, Otchet po upravleniiu, 13; Rossiisko-Amerikanskaya kompaniya i izuchenie Tikhookeanskogo Severa, 1841-1867, 392-94. 48. A. Yu. Petrov, Rossiisko-amerikanskaya kompaniya deyatel’nost’ na otechestvennom i zarubezhnykh rynkakh (1799-1867) [The Russian-American Company: Activity in Russian and Foreign Markets (1799-1867)] (Moscow, 2006), 214, Roll 19, pp. 32, 565-66, 910, NARA RAC Records; F. 224, Op. 1, D. 304, L. 41 and L. 42ob-43, Rossiiskii gosudarstvennyi arkhiv voenno-morskogo lota [Russian State Archive of the Naval Fleet], St. Petersburg.

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