Abolishing Local Tariffs

By 1848, the Czech regions had become one of Austria's industrial centers. As industry developed, the capitalists' wealth grew enormously.

The demonstrations that had broken out this time were, in essence, the result of a mismatch between the capitalists' wealth and their political standing. They were unwilling to have no say in politics.

Meanwhile, the Austrian Government had been introducing new laws one after another, sacrificing the capitalists' interests to some extent and fueling the demonstrations in Prague.

In Franz's view, these people had probably grown too accustomed to the carefree days of Metternich's era, and forgotten that whoever made the rules of the game could change them at any time.

Now the Austrian Government was declaring that it was done playing the game: those who went along with it would prosper, and those who opposed it would perish. Whoever had a problem with that would be dealt with.

Of course, everyone was civilized. They couldn't take things too far. You still had to beat someone with a stick, then offer them a sweet date.

"Given the current domestic situation, I propose abolishing local tariffs to ease the capitalists' discontent!" Finance Minister Karl proposed.

At present, the only place in Austria where local tariffs remained was Hungary. They had already been abolished elsewhere, one region after another.

In fact, it would be wrong to place all the blame for the tariffs between Hungary and Austria on the Vienna Government. As early as the previous century, Austria had planned to abolish local tariffs throughout the country, but the Hungarian nobles and capitalists had opposed it.

Austria's economic development was uneven. In industrially advanced regions, capitalists naturally supported abolishing local tariffs. But in backward, industrially underdeveloped Hungary, the capitalists were still counting on protectionism, weren't they?

Of course, there were also people in Hungary who supported abolishing local tariffs. The grain industry's capitalists, for instance, wanted the tariffs gone.

Hungary's tax revenue had nothing to do with the Vienna Government. The Hungarians collected and spent it themselves.

Without a doubt, the Hungarian nobles could take a cut of the revenue from local tariffs. They were also the greatest obstacle to abolishing them.

Karl's motives in putting forward this proposal were clearly not entirely innocent. Besides winning over some of the capitalists, he also meant to warn the Hungarian nobles.

At this point, the Vienna Government still believed that the nobles were the ones running the Kingdom of Hungary, and that the capitalists in the public eye were merely their front men.

Franz had no intention of correcting them. There were far too many nobles in Hungary, making up four percent of the total population. Most Hungarian capitalists had another identity as well—they were nobles.

If they weren't brought to heel, their penchant for courting disaster would likely make the Hungarian question a headache for him in the future.

History had already proved as much. Austria, and later the Austro-Hungarian Empire, had been plagued by the Hungarian question. If the Hungarian people had not still supported the Habsburg Family, Hungary would have become independent long ago.

"Agreed. Austria is a unified country. The existence of local tariffs goes against the tide of history!"

Without a doubt, Franz no longer minded if the Hungarian rebellion grew more violent.

The Austrian Government's reforms had, in fact, already met the demands of the Hungarian workers and peasants.

Divide one side and strike the other, unite the majority and suppress a small minority—that was always sound politics.

He would continue introducing laws to clear away obstacles to the development of the bourgeois economy and weaken the capitalists' resolve to rebel.

Abolishing local tariffs would only harm the great nobles' interests. The lesser nobles had no way to profit from them. In fact, their interests had suffered too: without tariffs, at least their grain would be more competitive.

That alone wouldn't be enough to make the Hungarians join the rebellion en masse. At most, it would drag most of the nobles into it.

"Your Highness, I'm afraid that won't do. Abolishing tariffs with Hungary would deal a blow to Austria's grain industry and hurt the earnings of Austrian farmers!" Archduke Louis objected.

Franz suddenly realized that abolishing tariffs with Hungary would hurt not the farmers most, but the nobles who owned vast estates. With a new competitor in the market, grain prices would inevitably fall.

Franz hesitated. Should he provoke the domestic nobles at a time like this? They had only just abolished serfdom. Now Hungarian grain would be allowed in to drive down prices. Would that cross their bottom line?

At that moment, Prime Minister Felix helped make the decision.

"Since 1846, grain prices in Austria have been rising steadily. For the sake of national stability, we need to keep them within a reasonable range.

"In the long run, Hungary's grain entering Austria would also be a good thing. Lower grain prices would help us stabilize public opinion as quickly as possible.

"Besides, once tariffs are abolished, Austrian industrial and commercial goods will become more competitive in Hungary, helping the economy recover from the damage it has suffered!"

Franz was reassured. If even the wealthy Prime Minister didn't mind grain prices falling, then the nobles' bottom line was probably much lower than he had feared.

It seemed that Austria had abolished its tariff system around this time in history too, though Franz wasn't sure of the exact year.

"The Prime Minister is right. Abolishing tariffs now can help the Austrian economy recover as quickly as possible. That's very important to us.

"Because of the war, our fiscal revenue will probably drop sharply this year. If we hadn't confiscated the rebels' property, the government might already have gone bankrupt.

"The coming war to suppress the rebellion will cost money like water running through a sieve. Even that property will be a drop in the bucket. We have to find ways to increase revenue and cut expenses.

"We still have so many factories in our hands. They must be put back into operation as soon as possible. We can't do without the Hungarian market!" Foreign Minister Metternich said.

Well, Austria really was short of money. Before the March Revolution, the Vienna Government had still owed 748 million gulden in national debt. Now it owed about 600 to 650 million gulden. (One gulden was worth approximately 11.6928 grams of silver.)

Don't get the wrong idea. That didn't mean Franz had paid it off. It was because the creditors were no longer around.

Because of the rebellion, many bonds had been destroyed in the fighting, and even more creditors had become wanted fugitives. The army suppressing the rebellion had also seized a large number of bonds, which Franz had simply burned.

The Austrian Government issued two kinds of national debt: registered and bearer bonds. Wanted fugitives wouldn't come to collect on registered bonds, of course, while bearer bonds could still change hands.

Expecting the Hungarian market to revive Austria's economy was wishful thinking.

Franz believed that Hungarian capitalists wouldn't mind doing business with Austria, even if revolution broke out.

The problem was, once fighting began, how could they guarantee the safety of transport? And who would have the mind to buy those goods? It wasn't as though they could sell weapons to the Hungarians, was it?