Holy Roman Empire - Chapter 163

Chapter 163: Chapter 50, Development

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Translator: 549690339

In the midst of chaos, the year 1850 quietly passed. What seemed like an ordinary year had a profound impact on Austria.

A massive influx of foreign capital poured into Austria, driving the development of the domestic economy, and factories sprouted up like bamboo shoots after rain.

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The most direct impact of economic growth was the increase in government fiscal revenue. Despite the tax relief afforded to many industries, the government still gained a considerable amount of tax revenue from upstream and downstream segments.

In 1850, industrial and commercial tax revenue increased by eight percent compared to 1849, amounting to more than four million shields. Although this number did not seem large, Franz was very satisfied.

This was just the beginning. The end of the tax-exemption period would mark the explosive growth phase of tax revenue.

The benefits brought by the development of industry and commerce were, of course, not limited to this. The accompanying industrial chain of enterprises also developed as a consequence.

This was reflected in the industries of raw material production, product sales, transportation, and entertainment, and was evident in the finances.

In 1850, Austria’s economy grew by 18.7 percent, and the government’s fiscal tax revenue increased by 9.4 percent.

This figure was not high. Any country that opened its markets would experience rapid economic growth, with some even seeing surges of thirty to forty percent.

However, in Europe at that time, the growth rate of Austria’s economy was unparalleled.

Without a doubt, the dividends of economic growth were directly invested in the military, and were not able to be reinvested in reproduction.

Of course, Franz did not dare to invest them in reproduction either. Had it not been for the restrictions of communication and transportation in that era, the domestic economy of Austria would have grown even faster.

Fast economic growth is not necessarily a good thing. For a country, continuous development is most important. Rapid economic expansion in the short term without market adaptation inevitably leads to overcapacity.

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Overcapacity means a large amount of goods remain unsold, left to rot in warehouses. Large companies with deep pockets can cut capacity and restructure, while weaker ones have no choice but to go bankrupt.

When enterprises go bankrupt, unemployment rises, market purchasing power continues to decline, and this feedback cycle forces capitalists to further reduce capacity and lay off staff, starting a vicious cycle that leads to an economic crisis.

In some ways, this arms race even prolonged the period of rapid economic growth in Austria. The military itself was a consumer group, and increasing the military was equivalent to expanding the consumer market.

Railroads were the fastest-growing industry in Austria. Since the work commenced in 1849, by now, hundreds of sections had started construction.

The railroad mileage increased by 265 kilometers per year, but do not be mistaken, these were not only recently constructed, but also those railroads that had started years earlier and just happened to be completed in 1850.

Railroads begun in 1849 could hardly show even a hint of progress; this differed from highways, where construction could happen segment by segment, but railroads could not operate trains until an entire section was completed.

However, by 1852, it was estimated that some sections in the plains could become operational. Whether they would be put into operation ahead of schedule was something only the railroad companies would know.

The Austrian Government would not inquire into such minor issues. These private railroads operated at their own profit or loss, independently of the government.

To encourage the construction of railroads, the Austrian Government even announced a tax exemption policy. From the project’s commencement, railroads would be free from operational taxes for the next ten years.

If you want to make money, get the roads built and operational ahead of time. Any delay in the construction period is essentially cutting into your own profits.

Taking advantage of the railroad boom, the Austrian Government bundled a large number of railroad lines and handed them over to private companies. Even the costs of demolition could be covered by the government, provided that construction began within a year of obtaining the rights and the lines had to be operational within ten years.

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As Franz knew, to date, the Austrian Government had managed to sell railroad lines with a total mileage exceeding forty thousand kilometers through a mix of persuasion and deception.

Heaven only knows how many unfinished projects will remain, but in any case, the government will not lose out. Even if someone else takes over an unfinished project later, it will still be cheaper than starting from scratch, right?

Railroad companies were aware of these issues, but the heated market could blind people, and Austria’s economic growth had cheated many.

With the prompting of financial consortia, the ambitions of investors were further inflated. Many speculators thought of selling their stocks at the peak and making a huge profit.

To inflate stock prices, it was necessary to produce a flattering report. A railroad company with only a few hundred kilometers of rail couldn’t attract much attention, no matter how much it boasted.

However, if a company possessed several thousand or even tens of thousands of kilometers of railroads, there wouldn’t be a need for boasting; people would imagine a growth blueprint for you.

Earning money through railroads was one aspect. Controlling the rail networks in certain regions could also lead to the elimination of competitors in other industries, conceptually creating a business empire.

In the hottest years for European railroads, it was possible to see four or five different companies operating competing railroads between two cities.

The Austrian Government still had some integrity. At least it didn’t authorize different companies to run the same sections, which many saw as an opportunity.

Is there any business more profitable than “monopoly” in the world? Even the railroads of low economic value could reap huge profits once a market monopoly was formed.

Franz would not admit that he had cheated the capitalists into investing in railroads by exploiting this mentality. He didn’t mind monopolistic businesses as long as they avoided the waste brought by market competition and did not affect the development of the domestic economy.

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If high freight costs impacted domestic economic development, those who made the rules could also change them, such as the Price Bureau, railways state-owned…

These discordant topics were absolutely not something the Austrian Government would tell investors, otherwise how would the UK consortium have been cheated into coming?

Americans had done it, and Franz didn’t mind emulating them once. It didn’t matter, first cheat them into building the railway, and when the railway was no longer of any value, then it was time to consider turning hostile.

In Franz’s view, the policy in his previous life in Hong Kong that limited the maximum profit on public infrastructure projects to fifteen percent was a good one.

If the Austrian Government copied it, the people would surely support it greatly, right? As for the railway companies, a fifteen percent profit could still keep them quite comfortable.

When the investors would be able to recoup their construction costs was unknown. Anyway, the investors at the forefront had made their earnings, and the suckers who came after were always the unlucky ones.

The development of railways naturally stimulated the steel industry, with each steel company rapidly expanding its capacity, ready to grab a share of the upcoming feast.

To effectively integrate resources and enhance competitiveness, in March 1850, the Austrian Department of Industry ordered the merger of seven state-owned steel companies into the Austrian Steel Group.

The first colossal steel enterprise of the Austrian Empire, with an annual production of 12,000 tons of crude steel and 184,000 tons of iron, was born. With a little artistic license, it was branded as producing 200,000 tons of steel per year, and thus the world’s number one steel group was purportedly established.

Whether this was truly the world’s leading steel group remained to be verified, but being the top steel enterprise in Austria was an indisputable fact—with half the Empire’s steel capacity lying within this group.

In this era, countries producing over 100,000 tons of steel in the entire world were single-digit, with only the British exceeding one million tons.

If everyone hadn’t been at this level, the Austrian media wouldn’t dare to boast so big, all in all, journalists of this age still had some integrity.

After the merger, these steel plants began to divide labor, utilizing the geographical advantages of each location to fully integrate their production capabilities.

Simply put, all ore suitable for making steel would be used for that purpose, and those fit for iron production would go towards making iron; the mixed production model would be no more.

The core strategy was to pool the core technologies from each of the enterprises, combining strengths for industrial production. At the same time, a smelting technology research and development department was established to push for technological innovation.

According to the plan, by 1851, the production capacity of the Austrian Steel Group would increase to 240,000 tons, in 1852 it was to climb to 320,000 tons, and by 1853 it would exceed 450,000 tons…

These plans weren’t haphazard; they were completely based on market needs. How else to snatch orders if not by expanding capacity?

The construction of Austria’s railway network was a juicy chunk of meat, and related companies all wanted a bite.

Based on the calculation that one meter of railway utilizes 60 kilograms of steel, a kilometer would consume 60,000 kilograms of steel—meaning Austria’s railway network plan alone would require more than two million tons of steel.

With such an opportunity, it would be nonsensical for steel companies not to increase capacity.

To support the steel industry, the Austrian Government had decided that for the next five years, it would not extract profits from this newly formed group and had also invested one million shields for technological innovation.

Not just steel companies, many related industries were frantically expanding capacity, and Franz was also making a fortune in silence.

One shouldn’t overlook the seemingly insignificant materials like sand and stone—in reality, those with engineering experience know such minor things can be quite profitable.

It was estimated that every kilometer of railway would require tens of thousands of tons of sand and gravel aggregate just for pouring concrete, let alone the huge amount of stone needed for the thick layer of crushed stone on top.

When there is a large volume of any product, profits go up. These seemingly minor things actually weren’t any less profitable than producing steel rails.

It’s just that, most of the time, the profits were distributed among countless smallholders, making it look trivial. Franz was merely using his foreknowledge for early layout and monopolistic operations.

Of course, he wouldn’t admit to monopolistic practices. If you don’t believe it, you can check the contracts between the railway company and the Austria Mining Group, which could prove that monopolistic operations do exist.

Those in the know wouldn’t speak out, and the media would certainly not report it.

The public explanation was that the Austria Mining Group was merely an agent; these mines were shared among dozens of companies. To avoid vicious competition, they joined forces to negotiate with the railway company as a group.

That’s right, the truth was exactly that. In order to prevent the railway company from driving down prices, they had united. Didn’t the final trading price differ only slightly from the market price?

If it had been a monopoly, prices would have surely increased. Since there was no significant price hike, it was not a monopoly.

What it’s like to earn money while lying down—Franz finally experienced this in 1850. From this unremarkable little business alone, he earned an annual profit of one million and twenty-three thousand Shields.

And this was just the beginning. As the railway construction progressed, for a long time to come, he could continue to earn money while lying down.

The only regret was once the railway construction was completed, these remote sand and stone mines would lose their market, and to make a large fortune again, one would have to wait for the construction of the road network. From the current situation, there’d be no such opportunity for the next thirty to forty years.