Holy Roman Empire

Chapter 124: Austrian Economic Circle Plan

During the uproar of the civil service exam, far away in the Papal States, the Austrian army embarked on its journey home with the blessings of Pope Pius IX.

Just as he had ascended to the presidency and was considering using interference in the Papal States to establish his presence, Louis Napoleon Bonaparte had to regretfully make the choice to abandon the plan.

The Austrian army had already completed its mission, and Pope Pius IX showed no intention of switching allegiances to a new master. If the French troops continued further, it would be seen as an invasion.

If the Austrian army had not withdrawn, perhaps Pope Pius IX might have considered using the French as a counterbalance. However, now that they are leaving, why should he make things uncomfortable for himself?

At this point, history took a turn. The French influence did not manage to penetrate deeply into Italy, and through their military intervention in the Papal States, Austria preserved its influence among the Italian states.

This was extremely important for Austria’s business and industrial sector. Preserving political influence also meant safeguarding a significant commercial market, injecting a boost into the ongoing industrial revolution.

During a new round of government meetings, Finance Minister Karl Ludwig von Bruck spoke enthusiastically, saying, “The development of industry and commerce depends on the markets. Looking at countries around the world, only the British have completed the industrial revolution, and this was built upon the foundation of their vast colonial territories.

Austria lacks vast colonies. If we want to catch up with the British, we need to establish a market that belongs to Austria.

We have initiated a series of reforms to awaken the domestic market, but this will take time to nurture and will not adequately meet the actual needs of our industrial and business development.

By diplomatic means, establishing a commercial sphere led by Austria will significantly boost our domestic economic development and accelerate our industrialization.

Incorporating regions such as the Kingdom of Naples, the Papal States, Tuscany, Bavaria, Württemberg, and others into this economic sphere, we will create a market with a population of 67 million, becoming the largest economy on the European continent.”

……

Bringing together the Italian states and Southern German states to form the largest economic entity on the European continent is not only about economics; it also serves to solidify Austria’s dominance in Southern Europe politically.

Additionally, it can serve as a blow to the rising Kingdom of Prussia. Once the commercial sphere, centered around Austria, is established, the German Customs Union (Zollverein) will be rendered ineffective.

Due to transportation constraints, even if the Prussians were allowed to join this new economic entity, they wouldn’t be able to reach the Italian region. Before a comprehensive railway network is established, the transportation costs alone would render their products uncompetitive.

While they can’t access the new market, the existing German market would face competition from Austrian goods. The Kingdom of Prussia of today is not the same as the Kingdom of Prussia twenty years from now, and their current manufacturing industry does not hold a competitive advantage over Austria.

While the plan is promising, implementing it won’t be easy. The first challenge is convincing everyone that a shared economic entity is in their best interest.

In any alliance, self-interest is the strongest bond. The economic sphere led by Austria is clearly in Austria’s interest, but it may not be as clear-cut for the member states.

Austria’s industrial revolution relies on external resources, at least in its initial stages, and this is a fact that cannot be denied.

It’s only in the later stages that they can present it as a trade balance and leverage high-value-added products for profit, making it look more attractive to others.

Metternich objected, saying, “Mr. Karl, your plan is indeed quite good, but unfortunately, the success rate of this plan is too low. Whether it’s the Italian states or the Southern German states, once they feel excessively exploited, they will jump ship. Austria is not their only option."

These small countries are aligning with Austria for their own interests. If Austria can no longer safeguard their interests, then switching to a different leader is certainly a viable option.

When it comes to relations between nations, loyalty is not to be discussed; it simply doesn’t exist. The absence of betrayal is merely due to a lack of sufficient incentives for betrayal.

Finance Minister Karl confidently explained, “But Austria is their best choice! A common economic entity indeed offers us the maximum benefits, but that doesn’t mean they won’t benefit at all.

At least a portion of those who cooperate with us can reap greater benefits. If we can transform the ruling class into this group of beneficiaries, then everything is feasible.

As long as we can maintain the right balance, the lower classes won’t feel it. For example, in the German Customs Union, the common people don’t resist the Kingdom of Prussia, do they?

Once the industrial revolution is complete, with our technological advantages, we can further promote balanced trade, effectively concealing this plunder of wealth.”

Franz was taken aback by this, as it seemed to be promoting the bourgeoisie.

In the Italian region, industrial development was emerging in the north, but the central and southern regions were largely undeveloped in terms of capitalist economies. The Southern German states weren’t much better, experiencing slow economic development and flooded markets with goods from the Kingdom of Prussia.

Now, Austria wanted to establish an economic sphere, which, for the ruling classes of these states, wouldn’t necessarily harm their interests. In fact, everyone could benefit from cooperation.

“What about the attitudes of the other great powers? If we push forward with this plan, could it lead to an uncontrollable diplomatic situation?” Felix, the Prime Minister, inquired with concern.

Metternich stood up and paced the room for a moment before providing his response.

“It shouldn’t be a major issue. The mentioned regions are within our traditional sphere of influence, and we haven’t overstepped our boundaries. Therefore, the reactions from other great powers should not be overly drastic.

Not too long ago, the British Foreign Secretary, Palmerston, visited Vienna, and we reaffirmed our respective spheres of influence in the Italian region. Even if the British are displeased, they have no legitimate grounds for interference.

As for the Russians, we can anticipate their support. The Tsarist government is unlikely to be concerned about these minor matters.

Meanwhile, the French are preoccupied with their own problems. Louis Napoleon Bonaparte used questionable means to secure his presidency, and he is unlikely to have the support of the Republicans.

With a Republican-dominated cabinet and parliament opposed to the president, the French are unlikely to pose a significant challenge in the near future.

Prussia may strongly object, but their opinions are inconsequential and will not hinder our actions.”

The statement that the British have no grounds for interference might indeed seem optimistic. Franz was inclined to believe that the British lacked the capacity or the compelling interests to take drastic action.

During this era, the British Empire had no shortage of markets. Being the only industrialized nation, coupled with its vast colonial market, they enjoyed comfortable times.

British investments in Italy were mainly concentrated in the Kingdom of Sardinia, as well as Lombardy and Venice. Very few businessmen would invest significantly in the less developed Southern Italy.

The Italian states were still under feudal monarchies, and the commercial market was not of utmost importance to the British. It wasn’t worth risking a confrontation with Austria over this matter.

Indeed, with the support of the Russians, British opposition would be ineffective. Before the Crimean War, the British had not yet gained universal recognition of their hegemonic status. At least Austria did not acknowledge it.

The attitude of the Kingdom of Prussia was not sufficient to make Austria wary. At this point, they had not yet unified Germany, and they were still not the formidable Second Empire of the future.

In 1848, the Kingdom of Prussia had a population of only around one million, which was less than 40% of Austria’s population. Its economic output was roughly half of Austria’s. (Note: Economic output is not equal to industry.)

“What about Spain?” Franz asked with concern.

While other European countries could be disregarded, the attitude of Spain had to be taken into consideration. In the Kingdom of Naples, Spanish influence was significant, if not greater.

Spain was no longer in the era of the Habsburg dynasty; it was now the Bourbon dynasty under Isabella II’s reign. Their stance had to be considered as well.

Metternich explained, “Your Majesty, based on the intelligence we have, there are serious internal conflicts within the Kingdom of Spain, and a revolution could erupt at any time.

We are only establishing a commercial alliance, which does not harm their interests, so the likelihood of Spanish government interference is minimal.”

Franz nodded. It was just the most common method of pinching soft persimmons. As long as Austria didn’t annex the Kingdom of Naples, the Spanish could accept it.

Moreover, considering Spain's current level of industry, there weren’t many industrial products being exported to the Kingdom of Naples.

“Mr. Karl, if we expand our market like this, can our domestic industry keep up? If we can’t seize the market immediately, and we end up nurturing a bunch of competitors, we’ll lose face," Prime Minister Felix asked with a furrowed brow.

No one should laugh, as Austria’s industry during this era was not that impressive. In southeastern Europe, it was quite developed, but it lagged far behind the British and even somewhat behind the French.

“Prime Minister, you can rest assured on this point. Our Ministry of Industry can guarantee to defeat any competitors!” confidently stated Minister of Industry Kaschen-Kubek.

His confidence was based on the initial success of the state-owned enterprise system. In contrast to private businesses pursuing profits, the strategic goal of state-owned enterprises was to complete the industrial revolution as quickly as possible, and profits were considered inconsequential.

The Austrian government hadn’t been siphoning profits from these enterprises, and all the profits generated by them were naturally reinvested in technological innovation and expanding production.

After recovering from the damages caused by the war, Austria’s manufacturing industry was rapidly on the rise.

This speed is not yet the limit, as long as the government is willing to invest more in it, it can continue to improve.

This was within Franz’s expectations. Regardless of how future generations may criticize state ownership, during the initial stage of capital accumulation, state-owned enterprises played a positive role.

As long as the management of these enterprises remains effective, state-owned enterprises with numerous advantages are undoubtedly more competitive than private ones.

The Soviet Union is the best example, rapidly developing and establishing a vast empire within a short period.

As for the issue of later decline, Franz completely dismissed it. If there were to be a decline, one would have to rise first. There are no problems yet, so why worry about the distant future?

If the state-owned economy falters in the future, economic transformation can be considered then. After all, Austria doesn’t rely solely on state-owned enterprises; private businesses are also developing.

Once the industrial revolution is complete, unprofitable light industry enterprises can be gradually sold off, and the government can maintain control over industries related to international welfare.

Seeing that no one had any further questions, Franz stated, “If there are no more questions, then let’s proceed with the vote on the plan to establish an economic circle centered around Austria. Those in favor, please raise your hands.”

Democratic voting wasn’t an innovation made by Franz; it had been present in Europe for a long time. He simply learned from the advanced experiences of his predecessors.

In Austria, those eligible to participate in decision-making were ministers and higher-ranking officials, primarily for the purpose of checks and balances.

Franz wasn’t someone who sought to consolidate power. He delegated most of the government affairs to his cabinet. To prevent being sidelined, he introduced democratic voting during government expansion meetings.

Ministers and officials of ministerial rank were all personally appointed by the king, making it unlikely for them to be influenced by bribery. They were candidates recommended by cabinet leaders and, while they accepted the leadership of the cabinet, they also had a share of cabinet authority.