How did Catherine the Great modernize and westernize Russia?
It's fair to say that Catherine's policy of modernization was something of a mixed bag, alternating between appearance and substance. Catherine, child of the Enlightenment that she was, initiated a number of changes designed to rationalize the structure of governance and economic life within the Russian Empire, to bring it more in line with Western Europe.
For example, Catherine established the Free Economic Society with the express purpose of modernizing Russian agriculture and industry, which was relatively backward by European standards. As Russia's economy was overwhelmingly based upon agriculture, this reform was long overdue. Catherine also opened up Russia to greater foreign investment, particularly in those areas of her vast territory chronically underdeveloped. Related to the economy was the question of education, and in this area of policy Catherine expanded the educational system, enabling more members of the middle-classes to go to school and university.
But there were limits to Catherine's zeal for modernization. The autocratic system of government she inherited remained untouched, with Catherine jealously guarding her absolute power. She also ignored the plight of the serfs, whose status and rights actually declined during her reign. Catherine's failure to address the issue of serfdom led directly to the Pugachev Rebellion of 1773.
Catherine modernized the Russian military, but this ostensibly enlightened measure was carried out for decidedly unenlightened ends, as Russia expanded its already enormous empire, annexing substantial tracts of new territory. As with Peter the Great, Catherine saw modernization as a means to an end, a way to turn Russia into a great power able to compete with the West, culturally, economically and militarily. And, as with her illustrious predecessor, Catherine ensured, at the same time, that the foundational elements of Russian politics and society--autocracy, serfdom and imperial conquest--remained wholly intact.
Catherine the Great, who was German by birth, considered herself an "Enlightened" monarch, and made some attempt to rule by Enlightenment ideals. Catherine imported Western architects, scholars, and even sculptors and musicians to make Russia more Western. She also introduced the use of the French language at the Russian Court. She improved education and strengthened local governments; and also restricted the use of torture and allowed some degree of religious tolerance.
All this came to a crashing halt when a revolt by Emelian Pugachev, who claimed to be her dead husband, convinced her that the peasants were dangerous and she must rely on the nobility. She then confiscated church lands, expanded serfdom, and freed the nobles from paying taxes. By the time of her death; Russia was in worse shape than when she ascended the throne.