Abstract. This article explores the complex topic of Russian economic modernization in the first third of the 20th century. The authors believe that the essence of S. Yu. Witte's reforms and those of the Bolsheviks during the First Five-Year Plan were similar: accelerating the country's transition to industrial development through the transfer of resources from the agricultural sector. Only the methods differed, with the Bolsheviks placing greater emphasis on directive regulation of the economy. This paper focuses on the objective factors that determined the nature and outcome of modernization reforms. The authors argue that a key factor in the success of Stalin's reforms was the institutional changes in Russia caused by the October Revolution of 1917. The authors believe that the consequences of S. Yu. Witte's reforms were positive, but World War I interrupted Witte's path to modernization in Russia. The authors believe that the key mistake of S. Yu. Witte's reforms, as well as of the entire financial policy of the Russian Empire in the early 20th century, was the limitations of direct taxation, given that the tax burden on the Russian economy at that time was no higher than in developed Western countries.