Monopolization, dictated by the imperial economic model, already hurt Ukraine back in the 19th century as clearly evidenced by sugar production, one of its most developed industries at that time
In addition to “salo” –pork fat, sugar is known as “our everything” in Ukraine. Most Ukrainians, especially of the older generation, will never forget Soviet queues and ration cards. Even today sugar is an indispensable part of “gift packages” with which MP hopefuls are trying to bribe the electorate on the eve of parliamentary elections. It appears that this staple has never been out of the people’s varying rations in the past 100 years, and the government continues to measure the efficiency of the national economy by the volume of its supply. Periodic shortages, however, are somewhat paradoxical, considering that Ukraine has been one of the world’s biggest sugar producers for over two centuries.
FROM SUGARCANE TO SUGAR BEET
Indiais traditionally considered to be the country of origin for sugar, or sucrose in scientific terminology. This is where this crystalline product (Sanskirt śarkarā for sweet) was allegedly obtained for the first time. Through Arabs, who called sugar sukkar, the word found its way into all Europeans languages, including Ukrainian.
In truth, as archaeological and ethnographic studies show, the sweet sap of sugarcane was known to residents of New Guinea back in the 8th millennium BC. From there the technology was transferred to Polynesia and then through the Philippines, reached China and India, where manufacturing technology was developed and trade grew in the 8th to the 6th century BC. European civilizations used honey as the only sweetener for most of their history. It was only during the Hellenic era, after the conquests of Alexander the Great greatly expanded the horizons of the European world, that Europeans learned about sugarcane and sugar itself.
Curiously, this expensive sweetener was initially used largely as a pharmaceutical ingredient (considered to be a valuable aphrodisiac) and less so as a food additive. Arabs, who developed sugarcane plantations in the Middle East, helped sugar become more common in Europe, but cane sugar was virtually inaccessible to average consumers throughout the Middle Ages and the early Modern Age. To a certain extent, great geographical discoveries transformed the situation, as Europeans established high-yielding, extremely profitable (due to slave labour) plantations of sugarcane in the New World. Middle Eastern monopolist sugar producers were replaced by their West European counterparts: the Portuguese, Spaniards and in time, the British and the French.
Nevertheless, cane sugar was an exclusive product in Central and Eastern Europe until the mid-19th century. In Cossack Ukraine, a sugar loaf was a worthy and expensive gift for Christmas or a family celebration. It was added to dishes (and not only desserts) served to senior officers and the nobility, while ordinary people continued to use honey.
The slow decrease in the price of cane sugar and unstable the saturation of the market with sugar due to monopolist cartel deals and natural factors, led to Europeans being increasingly forced to look for possible replacements or alternative raw materials to produce sugar. Ordinary beetroots, the sweet characteristics of which were described by Renaissance scholars, proved to be the most promising. In 1747, Andreas Sigismund Marggraf (1709-1782), a Prussian chemist, carried out a series of experiments which showed that beets had the highest sucrose content of all root crops. And although these results were only of use to the manufacture of sugar four decades later, it signaled the beginning of the end of the monopoly enjoyed by colonial sugar producers. Prussia, which had few agricultural resources, was the first to pay attention to the discovery. Within several years, beet sugar production became one of the economic priorities of Napoleon, whose empire was suffering from a continental blockade imposed by Great Britain, possibly the largest European importer of sugar at that time. These are the countries of origin for two famous companies, Vilmorin and Rabbethge & Giesecke (later Klein Wanzleben), which were the pioneers of sugar manufacturing technology and quality standards for many years.
Ukraine’s first sugar beet processing sugar plant was founded in Bershad, Podillia, in 1827 by Polish nobleman Maszkowski, who had previously closely studied the latest technology in France. With time, the number of such plants steadily grew: 6 in the 1830s and 229 in the mid-19th century, which was 60% of the total capacity in the Russian Empire)
Two factors contributed to the rapid expansion of sugar production in Ukraine. First of all, favourable natural and climatic conditions enabled the growth and selection of varieties of beets with a high sugar content; secondly, the specific economic system prevalent in the region, whereby most of the land was in the hands of large landowners who exploited serfs at no cost to themselves. Remarkably, by the end of the century the majority of sugar plants were concentrated in Right-Bank and Left-Bank Ukraine where the percentage of land owned by large landowners and worked by serfs ranged from 35 to 80. The sugar industry did not take root in southern regions despite equally favourable natural conditions. Low prime costs and stable demand for sugar led to a situation whereby for a long time, plant owners refrained from implementing technological innovations and expanding production. Sugar plants worked on a seasonal basis (starting in autumn) using very primitive technology: tin graters with weighted levers were installed in what were once stables or barns, with which sap was squeezed out of grated beets. The sap was then pressed through sackcloth and crystallized in pans.
PROGRESS TO NOWHERE
The government acted favourably towards the first promoters of sugar production: imposed high import duties, allowed the tax-free distillation of molasses into alcohol and offered other tax benefits. The situation changed dramatically with the beginning of the industrial boom in the 1860s-1870s, when agricultural reform forced a huge number of out of work peasants onto the labour market. At the same time, the government’s financial measures led to the liberalization of the economy. In the second half of the 19th century, Ukrainian sugar plants produced over three million poods of sugar per annum, which was nearly 80 per cent of the empire’s total production. Moreover, half of all sugar refineries (a fashionable technological innovation of the time) in the Russian Empire were located in Ukraine. In spite of some owners going bankrupt, total output increased. Small and medium-sized enterprises were replaced by gigantic plants which used new imported equipment and were located close to railway branch lines. By the beginning of the 20th century, the number of sugar plants fell by about 33%, while sugar production increased almost fivefold.
However, this did mean increased consumption. The low purchasing power of the majority of the population and the narrowness of the market made competition between sugar producers increasingly tough. Towards the end of the 19th century, the industry experienced two overproduction crises, which forced sugar magnates to ask the government to remove export excise duties, increase government purchases and regulate production volumes. The news of the deal about to be struck between sugar oligarchs and the ruling bodies was leaked to the press, sparking a scandal, after which the government did not dare meet the demands of the producers. In response, the oligarchs built a regulatory structure on their own. In late 1887, the major players established a syndicate at a congress in Kyiv, which within several years, absorbed 91 per cent of all sugar plants in Ukraine. The monopolization of the plants allowed high prices to be maintained and control of the sales markets.
Prices were not only fixed for granulated and refined sugar, but also for the beets purchased to meet the needs of sugar plants. This cut the ground from under peasants’ feet. The pursuit of profits caused an outrageous disproportion in the internal structure of agricultural production in three Right-Bank provinces – Kyiv, Volyn and Podillia, which jointly produced up to 70% of sugar in the empire. In these regions, sugar refining accounted for 85% of all agricultural production and essentially marginalized other branches of farming. In some districts, up to 80 per cent of all arable land was under sugar beet.
Having become a true sugar empire, Ukraine had probably the lowest sugar consumption levels in Europe. Sugar cost 1.5-3 times more in Kyiv than on the London agricultural exchange, while average annual consumption in Ukraine barely reached British levels from the early 17th century. The lack of sugar, exported at give-away prices, was compensated on the domestic market with either traditional honey (which perpetuated old-world wild-honey farming and beekeeping) or with surrogates imported from Germany.
The collective portrait of Ukraine’s first sugar oligarchs is quite specific. Initially, sugar plants belonged to large Polish magnates and rich nobility who had a sufficient free labour force at their disposal. They operated on a seasonal basis, with a low degree of mechanization. Thus, for a long time, owners had no need for qualified personnel, except for a small number of mostly foreign technologists and engineers who worked on a contractual basis.
After serfdom was abolished, sugar plant owners continued to deal with semi-proletarian seasonal workers who were driven to them by the lack of food and farmland in rural areas. Unskilled labourers were a cheap but explosive force. After several high-profile uprisings at sugar plants and distilleries, the tycoons learned to handle them with care. Without any significant wage increases, they set up medical centres and hospitals at their plants and began to build housing for workers. Some entrepreneurs, such as the Symyrenkos, even opened schools, libraries and amateur theatres. In any case, this “philanthropy” was not so much an expression of humanism as an investment in their own security.
A large number of sugar oligarchs did not spend much even on these preventive measures. For example, one of the founders of sugar refining in Ukraine, Oleksiy Bobrynsky (1800-1868), was more concerned with having a selective beetroot-growing station and a college for training technologists. Through his relatives in Kyiv, he also successfully lobbied for the construction of a train station near his plant in Smila – needless to say, not for the transportation of passengers.
Researchers have found that sugar output peaks at Ukrainian plants coincided with record beetroot harvests. Thus, higher production volumes were caused by favourable weather conditions rather than higher productivity, modernized equipment or improved technology.
In the mid-19th century, a number of entrepreneurs from lower social classes joined the sugar business, which crowded the scene previously populated only by the nobility. Artemiy Tereshchenko (1794-1873) is a classic example of a newly rich sugar oligarch. He was a descendant of Hlukhiv-based Cossacks and made a fortune in the grain supply business during the Crimean War. Just like today, winning a tender for government purchases in the Russian Empire was a matter of connections, kickbacks and patronage. Tereshchenko invested the profits he made in sugar plants, at the same time purchasing land for beet plantations from poor landowners.
The Brodsky family was, to an extent, a landmark phenomenon in the sugar oligarchy. Initially, they rented sugar plants but later, in the 1840s, built their own in the Kyiv province. This dynasty owned nine plants in the 1880s and 17 in the 1910s. Lev Brodsky (1852-1923), one of the most prominent representatives of the family, is often mentioned for his philanthropic activities, such as financing the Kyiv Jewish Hospital and the First Kyiv Commercial College. What is omitted, though, is the fact that he was one of the most active founders of the odious sugar syndicate in 1887 and the sugar refiners’ syndicate in 1903.
Most lower-class owners of sugar refineries eagerly obtained high ranks and offices, but they were not driven simply by plebeian conceit. Lev Brodsky had the rank of a State Adviser (an equivalent of army brigadier, giving the family hereditary nobility) which was a significant accomplishment for an orthodox Jew from a modest Jewish family. Tereshchenko’s sons and grandsons had the same rank in the empire’s bureaucratic system and in addition to everything else, endeavoured to be involved in various charitable organizations, supervised by influential nobles and members of the imperial family. It is well-known that access to the emperor always opens the doors to riches.
The prosperity model of sugar oligarchs was in full accord with the rules for conducting business in the Russian Empire: no transparency, competition or equality before the law and an emphasis on family connections, bribes and government offices that enabled lucrative business transactions. Conscience? Godliness? Public opinion? That is what sponsored projects, hospitals, museums and philanthropic societies were for. Oligarchs did not stint on them – just like today.