The Economic Spurt That Succeeded

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Deleted member 1487

http://en.wikipedia.org/wiki/Ernest_von_Koerber
What if Ernst von Koerber's economic plan had actually been carried through in Austria-Hungary? After becoming Prime Minister in 1900, Koerber tried to overcome the nationalist divide in Cisleithenia (Austrian half of the Empire) through a great public works program that would build up the rail roads to Lemberg, capital of Galicia and 4th largest city in the Empire, and Triest, the largest and most important port, which would link the port with Prague and enhance the rail roads in Slovenia and Carinithia, while also enhancing the port capacity of the city. Furthermore and probably much more importantly his plan called for building up a canal system that would link the Danube with the Elbe, Oder, and Vistula rivers, reducing shipping costs to Austrian and Bohemian industry immensely. Furthermore it would also reduce costs in shipping goods to Hamburg for shipment abroad and allow for cheap Russian coal to be brought in. There were also plans to regulate rivers to prevent yearly floodings and damage to nearby towns/infrastructure/agriculture.

Essentially the plan would have caused a major boom to the economy (at the time it would have cost 1 billion crowns), especially when there was a general recession going on. Much like other successful dictatorships it would have given the Empire purpose as a facilitator of infrastructure and trade that would be a massive boon to the various nationalities, hopefully glossing over the more negative aspects of the regime.

Unfortunately, the historical plan, though passed in parliament and begun, was sabotaged by the Finance Ministry, whose head was very conservative in economic policy, and somewhat sadly, very principled in his stands. The project was unfunded and only some minor canals were built.

What if all this went through? The 1st phase was the Danube-Oder Canal through Bohemia and was scheduled to take between 1902-1912. The next phase would include either the Vistula canal or the Elbe, but ultimately the whole plan was to be completed in 1927. Historically the rail road to Triest was built, but the Lemberg line wasn't.

The industry of Cisleithenia would likely boom as a result, perhaps butterflying away WW1, and unemployment would drop. Up until the plan fell through Koerber's efforts actually managed to get the various nationalities to work together (though he made political concessions to each group), including opening up parliament to the general franchise.
Once the plan fell through Koerber fell and the various groups returned to obstructionism. By 1905 the Hungarian crisis loomed. What would happen if Koerber survived past 1904 and his plan was carried out? I think he may well have pushed for universal suffrage in Hungary and Austria, which potentially would have changed the political game in AH.

http://books.google.com/books?id=EJ...CBcQ6AEwAA#v=onepage&q=koerber canals&f=false
 
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Wait, what? The Südbahn linking Wien and Triest was finished in 1857, and the Kaiser-Franz-Josefs-Bahn between Wien and Prag in 1871.
 

Valdemar II

Banned
Interesting of course the effect would be far reaching even in such obscure subjects economic science. Simply because the Finance Ministry was breeding ground for what later would become the Austrian School*. While other would likely develop this cancer, it would lack the prestige its Austrians founders origin gave it.

If he get universal suffrage push through together with a economic boom would help strengthen the transnational Social Democrats, whom could serve as glue for the empire.

*Just as it helps destroying the American economy, so did it with the Austrians. Ironic opening up central Europe to regimes whom embrace central planning.
 

BooNZ

Banned
Interesting of course the effect would be far reaching even in such obscure subjects economic science. Simply because the Finance Ministry was breeding ground for what later would become the Austrian School*. While other would likely develop this cancer, it would lack the prestige its Austrians founders origin gave it.

If he get universal suffrage push through together with a economic boom would help strengthen the transnational Social Democrats, whom could serve as glue for the empire.

*Just as it helps destroying the American economy, so did it with the Austrians. Ironic opening up central Europe to regimes whom embrace central planning.

Troll much?
 
Interesting of course the effect would be far reaching even in such obscure subjects economic science. Simply because the Finance Ministry was breeding ground for what later would become the Austrian School*. While other would likely develop this cancer, it would lack the prestige its Austrians founders origin gave it.
QUOTE]

Now now, not all the Austrians are von Mises.
 

Valdemar II

Banned
Now now, not all the Austrians are von Mises.

No, but the economic policies the Austrian Empire embraced at this point was big part in why it ended so badly, and it was a rather good argument in why the suffrage shouldn't be limited to income classes which the Austrian School economics give short term benefits. If Austria-Hungary had a more universal suffrage, they wouldn't have gotten away with leaving infrastructure development to private agents. And the result would have been a stronger and more unified AH.
 

Deleted member 1487

Wait, what? The Südbahn linking Wien and Triest was finished in 1857, and the Kaiser-Franz-Josefs-Bahn between Wien and Prag in 1871.

There was one line already in place in a round-about way, but this line would be the second to Trieste and would directly link Prague with Trieste.
Actually it was the only aspect of the whole deal that was actually completed in OTL. Pardon if I didn't make that clear in the beginning.

No, but the economic policies the Austrian Empire embraced at this point was big part in why it ended so badly, and it was a rather good argument in why the suffrage shouldn't be limited to income classes which the Austrian School economics give short term benefits. If Austria-Hungary had a more universal suffrage, they wouldn't have gotten away with leaving infrastructure development to private agents. And the result would have been a stronger and more unified AH.

I have to agree with Valdemar on this. I don't mean to troll or inject modern debate into the issue, though it is kind of interesting how Gerschenkron tried to draw a few subtle parallels with other events in his exploration of this topic. But it is tremendously disheartening, but prophetic in a way how Gerschenkron talks about how ideology was used by the finance department to undermine the Canal bill in a very similar way to how challenges to the Healthcare Bill in the US is currently being contested. Politics is the same throughout the ages I guess.

In any event the plan did fall through partly because Kroeber didn't give it the full court press it needed to get off the ground and allowed the partisans to delay and diminish it until it ambled on long enough without progress that it died. Much had to do with the stalling plans of the Finance Ministry, but the ultimate failure rests on Koerber for not more actively harnessing the good will for the plan to make it an irresistible force.

I was a bit off on the TL, it turns out that construction wouldn't have begun on the canals until 1904, not 1902, but river regulation and rail construction would have started in 1902.
In addition to the construction there would have been further acquisition of river barges and rolling stock to take advantage of the new carrying capacity. Overall it would have been a major public works campaign that, as I stated before, would very likely to have ended the economic downturn of the 1900-1905 period and furthermore created a national boom period for the duration of project and in its aftermath, as industry can start to take advantage of the low freight costs to ship products and import materials. Interestingly enough even in the 1500's the need for these canals were recognized, though it wasn't until the 1800's the technology was there to accomplish it and will wasn't there until Koerber. Frankly AH needed an economic development plan and the 'hands off' Austrian school did the Empire no favors and probably held back economic development to this day.

There are some downsides too, which I feel are minor, but the canals would compete with the rail roads, which after 1905 IIRC were owned by the state. It could mean an operating loss for one or both ventures. Beyond that the increase in public debt, which the finance ministry was most concerned, would be large, especially as IOTL military expenditures jacked up the debt considerably in the next decade (mainly for extra artillery and major naval construction, which may not happen here as much due to the debt caused by the infrastructure program).
 
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Deleted member 1487

So no other ideas about a public works project in Austria-Hungary?
 
Infrastructure spending in itself does not guarantee increased economic activity. Japan dumped tons of money into infrastructure spending for over a Decade and they have nothing but a 200+% GDP national debt to show for it. Well they did get the Economic term “Lost Decade” coined to describe their problem, but I doubt they view that as a positive.

As I see it the problems with the plan are:
It appears to entirely government funded, so Ethnic patronage is going to become a problem real fast. This problem would actually be the opposite intent of the project. Also, governments by their nature do not spend resources efficiently, but in this case you are going to have Ethnic issues which may make the costs balloon far beyond the original estimate. Common Ethnic issues: Failure (intentional or by accident) to communicate, pay differences, unwillingness to work with specific type of workers, fights, only certain Ethnic groups can work on certain areas of the canal or rail track, etc…
1 Billion Crowns is a lot of money, and Austria-Hungary consistently bounced in and out of deficits (while carrying a large debt from the last century) during this period. Therefore, how will it be funded: cut military spending, raise taxes, start printing money to cause inflation? Then one must also take into consideration the effects of whichever method of paying for it, like weaker military, slower economic growth, and/or economic unrest do to rising prices.

If the end goal is enhanced economic activity there are other ways to go about it:
Instead of paying for the infrastructure directly the Austrian (It sounds like all the developments would affect only the Austrian half of the monarchy) government could offer “incentives” to private industry. This was used very successfully in the US to spur railroad building (though giving away land like what was done in the US is probably not possible) during the late 1800s.
Increasing the use of mechanized farming, which should lead to farm consolidation, is another area to explore. Austria-Hungary was very rural, and if you can get the zillion subsistence and small farms to merge into more efficient mid-sized farms you can free up labor. A good recent example of this is China’s growth over the last few decades with rural migrants coming to the cities and functioning as cheap labor.

In regards to Universal suffrage and Social Democrats, the historical outcome does not support the argument that they were beneficial to Austria-Hungary. In the case of the Social Democrats they did not unit the ethnic groups as there was both a Czech and German Social Democratic parties. In the case of Universal suffrage when the Austrian half had it, and the Hungarian half did not it was obvious the Hungarian half had a more unified government. Also, if you look at history universal sufferage does not have any known economic effect (both the UK and Germany went through the entire Industrial Revolution without it). Universal sufferage is assumed to help with political unity, but is not a given either since it did not help with unity in the Austrian half of the monarchy. Also, if you look at a highly multi-ethnic nation like Singapore it runs quite well under a one-party rule system.
 
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If he get universal suffrage push through together with a economic boom would help strengthen the transnational Social Democrats, whom could serve as glue for the empire.

*Just as it helps destroying the American economy, so did it with the Austrians. Ironic opening up central Europe to regimes whom embrace central planning.

As you'd expect, I agree with you on economic theory, but I'm not so sure the social democrats will be a nationalist panacea. I don't know much about the prewar Austrian SPD, but there wasn't much cooperation between the German SPD and Czech Social Democrats in Czechoslovakia in the interwar period...
 

Deleted member 1487

Infrastructure spending in itself does not guarantee increased economic activity. Japan dumped tons of money into infrastructure spending for over a Decade and they have nothing but a 200+% GDP national debt to show for it. Well they did get the Economic term “Lost Decade” coined to describe their problem, but I doubt they view that as a positive.
These are two different style economies in very different states of development. Japan is a smaller nation geographically and had a vastly more developed infrastructure than early 20th century Austria-Hungary. In fact, Japan has sea transport available to a much larger part of its country/industry, which is quicker and more economically than rail, vis-a-vis AH.

I understand that ideology is a huge part of this argument, which ultimately drove the bueracracy to sabotage the plan. Remember where Austrian school economics comes from and the buerocrats were the fore-runners to this ideology. Fact of the matter is that AH was hugely underdeveloped infrastructure-wise compared to more successful economies as transportation costs made business costs too high relative to AH's competitors. There was a reason industrialists heavily backed this plan, while the agriculturists opposed it.

As I see it the problems with the plan are:
It appears to entirely government funded, so Ethnic patronage is going to become a problem real fast. This problem would actually be the opposite intent of the project. Also, governments by their nature do not spend resources efficiently, but in this case you are going to have Ethnic issues which may make the costs balloon far beyond the original estimate. Common Ethnic issues: Failure (intentional or by accident) to communicate, pay differences, unwillingness to work with specific type of workers, fights, only certain Ethnic groups can work on certain areas of the canal or rail track, etc…
Actually ethnic patronage was built into the plan; it was part of the point of the exercise. What happened, but was ultimately defunded in early stages, was private construction companies bid the project and given the general goals. Government contractors planned out the routes, but private business carried out the plans and gave prices based on several routes offered by the technocrats. Who the contractors hire, employ, buy materials from, etc. is all their decision. Ethnic issues are handled by the experience private contractors, who probably would use local labor and already have experience in these projects working across regional areas. I don't buy this argument.

1 Billion Crowns is a lot of money, and Austria-Hungary consistently bounced in and out of deficits (while carrying a large debt from the last century) during this period. Therefore, how will it be funded: cut military spending, raise taxes, start printing money to cause inflation? Then one must also take into consideration the effects of whichever method of paying for it, like weaker military, slower economic growth, and/or economic unrest do to rising prices.
Actually the 1 billion is more than the Empire had in debts at this time (which would increase substantially later on during the military build ups and was handled relatively easily as loans of several orders higher were taken out for artillery, ships, factories, etc.) This would all be loans, as was stated in the OP. Several billion in debt was taken out before WW1 and after this proposal and the AH economy did not tank. In fact all that it would potentially impact is AH willingness to spend large sums on their useless navy. Not a major loss when it means much cheaper transportation for industry, allowing both manufacturing and mining to increase their business extensively by lowering their costs and opening up trade to both Germany and Russia.

If the end goal is enhanced economic activity there are other ways to go about it:
Instead of paying for the infrastructure directly the Austrian (It sounds like all the developments would affect only the Austrian half of the monarchy) government could offer “incentives” to private industry. This was used very successfully in the US to spur railroad building (though giving away land like what was done in the US is probably not possible) during the late 1800s.
Increasing the use of mechanized farming, which should lead to farm consolidation, is another area to explore. Austria-Hungary was very rural, and if you can get the zillion subsistence and small farms to merge into more efficient mid-sized farms you can free up labor. A good recent example of this is China’s growth over the last few decades with rural migrants coming to the cities and functioning as cheap labor.
"Incentives" to private industry was used to build up Austro-Hungarian railways, but failed to do the same with canals and river regulation. Much like the Tennessee Valley Authority, the government was the only entity that was willing or able to tackle this part of infrastructure. Germany used government money in the 1800s to build up their canals too and it worked out well for them. AH avoided the issue for the length of its existence and economic historians like Gerschenkron state this is a major reason Austria fell behind the Reich German in wealth and productivity despite starting from a higher level of both in the early to mid-1800s.

Hungary was rural, Austria industrialized. Hungary's issues are theirs alone. The only major part of Austria that was agriculture based was Galicia and it was negotiated that the local magnates would be handling it local economy. They settled on oil and labor-intensive farming as their economic model. There was little to nothing Vienna could do to encourage change without upsetting the loyal pro-Habsburg nobility.

Hungary had much 'plantation' style farming, but Vienna had no say in Hungarian economics. The Hungarian parliament did.
So ultimately the only way to increase the tax base and productivity in Austria was to increase industry in German Austria and the Czech crownlands. This was the best and frankly most necessary development that would help both farmers and industry (river regulation prevents flooding that wrecks crops and canals provide cheap transport that links up to Russia and Germany plus its ports for intercontinental trade).

In regards to Universal suffrage and Social Democrats, the historical outcome does not support the argument that they were beneficial to Austria-Hungary. In the case of the Social Democrats they did not unit the ethnic groups as there was both a Czech and German Social Democratic parties. In the case of Universal suffrage when the Austrian half had it, and the Hungarian half did not it was obvious the Hungarian half had a more unified government. Also, if you look at history universal sufferage does not have any known economic effect (both the UK and Germany went through the entire Industrial Revolution without it). Universal sufferage is assumed to help with political unity, but is not a given either since it did not help with unity in the Austrian half of the monarchy. Also, if you look at a highly multi-ethnic nation like Singapore it runs quite well under a one-party rule system.
In the long term, i.e. in a no-WW1 world, the trend was away from ethnic politics toward class politics. Gerschenkron makes much of the lack of ideological connection with Habsburg socialists and industrialization as occurred in Russia, but the trend was heading that way. The Czechs were just starting to realize their insistence on separate and parallel parties after the fall of the Badieni government was counterproductive. It is more likely that by the 1920's at the latest the Socialists would have folded back into one party to further their goals. This of course would have been aided by further industrial jobs being created from the economic expansion and increased voters more interested in economic concerns than ethnic tensions.

Also let's clarify what kind of universal suffrage the Austrians had. It was like German suffrage, only universal for a certain number of seats. The other 'tiers' were reserved for nobility, monied individuals, and various other groups. Only about 1/5th of seats in the Reichsrat were voted on by the general public (68 seats IIRC). This meant that the vast majority of seats were not open to general voting and ensured land owners had a disproportionate part of the power. Plus this only came about in 1905, after the fall of Koerber after he pushed for the plan. Basically, even with universal suffrage there was no political benefit for unity, as even if all the seats up for the general vote went to the Socialists, they would still be a small minority party. Indeed the issue is much more complex than that, but to say that universal suffrage just led to further ethnic tensions is inaccurate.
 
Also let's clarify what kind of universal suffrage the Austrians had. It was like German suffrage, only universal for a certain number of seats.
Shouldn't that read: "It was unlike German suffrage, only universal for a certain number of seats." ? The seats in the Reichstag of the German Empire (and the preceding North German League) were all allocated by universal male suffrage, with one vote for every male of twenty-five years or older.
 
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Deleted member 1487

Shouldn't that read: "It was unlike German suffrage, only universal for a certain number of seats." ? The seats in the Reichstag of the German Empire (and the preceding North German League) were all allocated by universal male suffrage, with one vote for every male of twenty-five years or older.
The Prussian system was weighted too, as only a third of seats were open to universal voting in the Reichstag.
 
Parliaments in Imperial Germany
Reichstag = Imperial parliament. ALL seats in this parliament are allocated according to the results of free elections with universal male suffrage (25 years and over). One male of 25 years, one vote.
Reichstag (German Empire)

Bundesrat = Representation of the individual member states, sent there by the states' governments, not the people. The governments in their turn are in most cases not chosen by the states' parliaments, but the reigning monarchs.

Preussischer Landtag = Parliament of the state of Prussia. It consists of two chambers, the Abgeordnetenhaus ("House of Representatives") and the Herrenhaus ("House of Lords"). The seats in the Abgeordnetenhaus are allocated according to elections with a three-tiered census voting system. The Herrenhaus "consisted of hereditary peers, life peers appointed by the King of Prussia, peers by virtue of position, representatives of cities and universities, etc. The majority of members were nobles, although the House also had commoners as members, especially among the representatives of cities and universities." quote from this
Prussian_House_of_Lords
 
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