Holy Roman Empire - Chapter 124

Chapter 124: Chapter 11: Austria’s Economic Circle Plan

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While the civil service examination was causing a stir, the Austrian Army in the Papal State—bade farewell by Pope Pius IX—embarked on their journey home.

Having just assumed the presidency, and desiring to make his presence felt by intervening in the Papal State, Louis-Napoleon Bonaparte had no choice but to regretfully abandon the idea.

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The Austrian Army had already completed their task, and Pope Pius IX had no intention of changing his allegiance. If the French Army were to proceed, it would be an invasion.

If the Austrian troops hadn’t left, perhaps Pius IX would have sought to balance them with the French, but now that the withdrawal had begun, why would he cause himself unnecessary trouble?

History took a turn here, as the French were unable to extend their influence into the Italian Area by taking advantage of the military action in the Papal State. Austria maintained its influence over the Italian countries.

This was of utmost importance to Austria’s industrial and commercial sectors. Retaining political influence also meant maintaining a commercial market, injecting a strong boost into the ongoing Industrial Revolution.

At the new round of government meetings, Finance Minister Karl Ludwig von Bruck declared with great enthusiasm, “The development of industry and commerce is inseparable from the market.

Looking at countries around the world, only the British have completed the Industrial Revolution, which is based on their possession of vast colonies.

Austria does not have vast colonies; if we want to catch up with the British, we need to establish a market that belongs to Austria.

We have unleashed the domestic market through a series of reforms, but this needs time to develop and is far from enough to meet the actual needs of our industrial and commercial progress.

Using diplomatic means to establish an Austria-led economic circle will greatly promote domestic economic development and accelerate our industrialization process.

Incorporating the Kingdom of Naples, the Papal State, Tuscany, Bavaria, Württemberg, and other areas into our economic circle, we will form a market of sixty-seven million people, becoming the largest economy on the European Continent.

Forming Europe’s largest economy by combining the Italian countries and South German States was not only economically significant, but politically, it could also solidify Austria’s dominance in Southern Europe.

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At the same time, it could strike a blow to the rising Kingdom of Prussia. Once the Austria-centered commercial circle was established, the German Customs Union would be in name only.

Because of transportation issues, even if the Prussians joined the new economy, they couldn’t reach the Italian Area. Before the railway networks were linked, transportation costs alone would make their products noncompetitive.

They wouldn’t be able to reach the new market, and the existing market in the Germany Region would face the impact of Austrian goods. The current Kingdom of Prussia is not what it will be in twenty years—their manufacturing industry does not have an advantage over Austria.

Although the plan was good, implementation would not be easy. The first question was how to convince everyone that a common economic body would be beneficial for them.

In any alliance, interests are the best glue. An economy circle led by Austria obviously aligned with Austrian interests, but it was not necessarily the case for the member countries.

Austria needed to draw resources from the outside world for its Industrial Revolution, at least in the initial phase, and this was undeniable.

Only in the later stages could we use the guise of balanced trade, leveraging high-value-added products for profit, making the exploitative nature appear more palatable.

Metternich objected, “Mr. Carl, your plan is indeed excellent, but unfortunately, this plan has too low a chance of success.

Whether it’s the Italian countries or the South German States, if they feel over-exploited, they will switch sides. Austria is not their only option.”

These small countries followed Austria for their benefit. If Austria could no longer guarantee their interests, then changing their allegiance was entirely possible.

There should be no talk of loyalty between countries; loyalty does not exist. The absence of betrayal is simply due to insufficient incentives to betray.

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Finance Minister Carl confidently explained, “But Austria is their best choice! Indeed, we benefit the most from a common economic body, but that does not mean they have no benefits at all.

At least some of those who cooperate with us can gain more, and if we turn the ruling class into this interest group, then everything is solvable.

As long as we can control this well, the lower classes won’t feel it, like the Customs Union in the Germany Region, didn’t the people not protest against the Kingdom of Prussia?

Once the Industrial Revolution is completed, leveraging our technological advantage, we can also promote commercial balanced trade and further conceal this wealth plundering.”

Franz was shocked; they were about to support a comprador class.

The budding industries in the Italian Area were in the north, and the central and southern regions were a blank slate—capitalist economics had yet to develop; the South German Region wasn’t much better, with slow economic development and markets flooded with goods from the Kingdom of Prussia.

Now Austria wanted to establish an economic circle, which didn’t damage the interests of the ruling class of these Sub-States. On the contrary, everyone could achieve a win-win through cooperation.

“What about the attitudes of the other great powers? If we promote this plan, could it create an uncontrollable diplomatic situation?” Prime Minister Felix asked with concern.

Metternich stood up and paced the room for a few steps before giving an answer.

“It will not be a big issue. The aforementioned areas are within our traditional sphere of influence, we are not overstepping our bounds, and the reaction of the great powers won’t be too intense.

Not long ago, British Foreign Minister Palmerston visited Vienna, where we reaffirmed our respective spheres of influence in the Italian Area. Even if the British are dissatisfied, they have no reason to interfere.”

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The Russians might support us there, the Tsarist Government wouldn’t mind such trivial matters.

The French are too preoccupied with themselves, Louis-Napoleon-Bonaparte resorted to disgraceful means to be elected president, the Republicans will not accept him.

With a cabinet and parliament dominated by Republicans at odds with the president, the French will be incapacitated for a long time to come.

I reckon the Prussians will strongly oppose, but their opinion is neither here nor there, powerless to stop our actions.”

“The British have no reason to intervene,” a joke indeed. Franz would rather believe the British lacked the power to intervene, or rather, they lacked the compelling interest that would make them act desperately.

In this era, the Great Britain Empire is not short of markets; as the sole industrial nation, coupled with the widest colonial markets, they’re living comfortably.

British investments in Italy are mainly focused on the Kingdom of Sardinia, and then there are Lombardy and Venice; scarcely any merchant would be foolish enough to invest in the destitute Southern Italy.

The Italian countries are still feudal monarchies; the commercial markets are of little concern to John Bull and not worth falling out with Austria over.

With Russian support, even British opposition would be ineffective. Before the Crimean War, the British had not yet been recognized as the preeminent power; Austria, at least, did not acknowledge them.

The attitude of the Kingdom of Prussia is not yet a concern for Austria; they have not unified Germany and are not yet the formidable Second Empire of the future.

In 1848, the Kingdom of Prussia had a population of just 13 million, barely 40 percent of Austria’s, and their economic output was roughly half of Austria’s. (Note: Economic output is not equivalent to industry)

“What about Spain?” Franz asked with concern.

Other European nations might be ignored, but Spain’s stance cannot be overlooked. In the Kingdom of Naples, Spain’s influence is no less significant, even stronger.

Spain is no longer under the Habsburg dynasty; now it is the era of Isabella II of the Bourbon Dynasty, and their attitude must also be considered.

Metternich explained, “Your Majesty, according to the intelligence we have, there are severe internal conflicts within the Kingdom of Spain, and a revolution could break out at any time.

We are only establishing a commercial alliance without harming their interests; the likelihood of the Spanish Government interfering is not great.”

Franz nodded. Squeezing the softest fruit is just standard practice; as long as Austria hasn’t annexed the Kingdom of Naples, the Spaniards can accept it.

Besides, given the current level of Spanish industry, there aren’t many industrial products exported to the Kingdom of Naples anyway.

“Mr. Carl, as we expand the market like this, can our domestic industry and commerce keep up? If we cannot seize the market immediately, and instead nurture a bunch of competitors, it will be humiliating,” Prime Minister Felix frowned and asked.

Don’t mock others. Austrian industry is not very developed at this time either. It’s advanced for Southeast Europe but far behind the British, and even slightly behind the French.

“Your Excellency Prime Minister, you can rest assured on this point; our Ministry of Industry can guarantee that we will defeat any competitor!” exclaimed the confident Industry Minister Kascin-Qubeck.

His confidence is based on the preliminary success of the national enterprise system; unlike private enterprises that chase after profits, the current strategic goal of state-owned enterprises is to quickly complete the industrial revolution, with profits being a secondary concern.

The Austrian Government isn’t leeching from these enterprises, and the profits they are generating are naturally being fully invested into technological innovation and production expansion.

Now recovering from the damage the war has done to commerce and industry, Austria’s manufacturing sector is rapidly ascending.

This rate is not yet the limit, as long as the government is willing to spend money in this area, it can continue to increase.

This was within Franz’s expectations; regardless of how future generations might criticize the state-run system, state-owned economies have played a positive role in the stage of primitive capital accumulation.

As long as the management of these companies doesn’t decay, state-owned enterprises with their many advantages are definitely more combative than private ones.

The Soviet Union is the prime example, having developed by leaps and bounds in a short time, and establishing a vast empire.

As for the decline in the later period, Franz completely dismisses it as irrelevant. Before decline comes rise. Why worry about problems that have not yet appeared?

If the state economy fails, economic transformation can be carried out later. After all, Austria is not just about state-owned economy; private enterprises are also developing.

Once the industrial revolution is completed, the non-profitable light industrial enterprises can gradually be sold off, and the government just needs to control industries critical to national wellbeing.

Seeing no further questions from the gathered officials, Franz said, “If there are no more doubts, let’s proceed to vote on establishing a commercial circle centered around Austria. Those in favor, please raise your hands.”

Democratic voting was not Franz’s innovation; it was already present in Europe, and he simply learned from the experience of predecessors.

In Austria, the eligible decision-makers were ministers and higher-ranking officials, with the main purpose being checks and balances.

Franz is not a man who covets power, most of the political affairs were delegated to the Cabinet. To prevent being marginalized, he added democratic voting in the expanded government meetings.

Ministerial and higher-ranked officials are personally appointed by the Emperor and are normally incorruptible. They are potential Cabinet ministers, leading the Cabinet while also dividing its power.