The Online Library of Liberty

A project of Liberty Fund, Inc.

• Titles In the Liberty Fund Library of the Works of Ludwig Von Mises
• Acknowledgments
• Preface
• Introduction
• Monetary and Economic Policy Problems Before, During, and After the Great War
• Part 1: Austro-hungarian Monetary and Fiscal Policy Issues Before the First World War
• Chapter 1: The Political-economic Motives of the Austrian Currency Reform 1
• Chapter 2: The Problem of Legal Resumption of Specie Payments In Austria-hungary 1
• Chapter 3: The Foreign Exchange Policy of the Austro-hungarian Bank 1
• Chapter 4: On the Problem of Legal Resumption of Specie Payments In Austria-hungary
• Chapter 5: The Fourth Issuing Right of the Austro-hungarian Bank 1
• Chapter 6: Financial Reform In Austria 1
• Chapter 7: The General Rise In Prices In the Light of Economic Theory 1
• Chapter 8: On Rising Prices and Purchasing Power Policies 1
• Chapter 9: Disturbances In the Economic Life of the Austro-hungarian Monarchy During the Years 1912-1913 1
• Part 2: Economic Policy Issues In the Midst of the Great War
• Chapter 10: On the Goals of Trade Policy 1
• Chapter 11: Inflation 1
• Chapter 12: On Paying For the Costs of War and War Loans 1
• Chapter 13: Remarks Concerning the Problem of Emigration 1
• Part 3: Austrian Fiscal and Monetary Problems In the Postwar Period
• Chapter 14: Monetary Devaluation and the National Budget 1
• Chapter 15: For the Reintroduction of Normal Stock Market Practices In Foreign Exchange Dealings 1
• Chapter 16: On Carl Menger’s Eightieth Birthday 1
• Chapter 17: How Can Austria Be Saved?
• Chapter 18: The Claims of Note Holders Upon Liquidation of the Bank 1
• Chapter 19: The Austrian Currency Problem Thirty Years Ago and Today 1
• Chapter 20: The Restoration of Austria’s Economic Situation 1
• Chapter 21: The Austrian Problem 1
• Chapter 22: The Gold-exchange Standard 1
• Chapter 23: The Social Democratic Agrarian Program 1
• Chapter 24: America and the Reconstruction of the European Economy 1
• Chapter 25: The Currency and Finances of the Federal State of Austria 1
• Chapter 26: The Economic Crisis and Lessons For Banking Policy 1
• Part 4: Interventionism, Collectivism, and Their Ideological Roots
• Chapter 27: The Economic System of Interventionism 1
• Chapter 28: Economic Order and the Political System 1
• Chapter 29: Remarks Concerning the Ideological Roots of the Monetary Catastrophe of 1923 1
• Appendixes
• Appendix A: Maxims For the Discussion of Methodological Problems In the Social Sciences: Paper Delivered At the Private Seminar 1
• Appendix B: Short Curriculum Vitae of Mayer Rachmiel Mises of Lemberg 1

CHAPTER 9

Disturbances in the Economic Life of the Austro-Hungarian Monarchy During the Years 1912-19131

In 1912-13 Austria and Hungary weathered a severe economic crisis, the effects of which are yet to be surmounted.2

The economic upturn on the world market, which had surpassed its three predecessors in almost all sectors of manufacturing, reached its zenith in 1912; however, 1913 brought a market reversal and the weakening of the business cycle.3 Though this general recession probably intensified the Austro-Hungarian crisis, it was not the cause. Austro-Hungary was already experiencing a severe downturn in 1912, but as long as the economic boom continued abroad, the effects of this domestic crisis could not have caused a breakdown in all branches of the economy. Thus, when, in 1913, the weakening of the world market occurred, the crisis in the monarchy became a general one. One must, however, keep the following in mind: the Austro-Hungarian crisis was an incident that occurred independently of the events on the global market, and the causes and development of the crisis can be explained only by the particular circumstances of the monarchy.

The hardening of the international monetary market in the last weeks of 1912 and in the first months of 1913 is viewed partly as a direct result of the bellicose developments in the Balkans and the fears associated with them. The Austro-Hungarian Monarchy was affected by these events more than any other country partly due to its geographic closeness to and strong economic ties with the Balkans, but primarily because the troubles in the region increased the monarchy’s domestic political difficulties and made a war with Russia a very serious concern. However, the economic crisis that Austria-Hungary weathered in 1912-13 was not caused by the war in the Balkans, though the war did contribute significantly to its intensification. The Balkan states ordered a general mobilization only in the last days of September 1912, and that war actually broke out only in October.4 Until then no one in Austria-Hungary had even considered the possibility of a war on the empire’s borders. The crisis, however, was already extant in the first months of 1912: in mid-February the secretary general of the Austro-Hungarian Bank advised against any additional extensions of credit and announced a stricter credit policy on the part of the Bank for the near future. The outbreak of the economic crisis can be dated from this point.

Those who seek instruction about the evolution and the proportions of the crisis can find abundant opportunity in the publications cited, though much of the data still requires modification, and the presented material is sketchy in more than one area. There is no doubt that in one or two years we will be able to survey the effects of the crisis much better. Yet the swift publication of the data, though suffering from unavoidable deficiencies, deserves special acknowledgment.

Understandably, both official publications say very little about the causes of the great economic crisis, and whatever is offered relates primarily to the general crisis on the world market and to the military crisis. We learn relatively little about the particular circumstances in the monarchy which led to the Austro-Hungarian crisis both prior to and after the weakening of the global business cycle. It is exclusively this issue that concerns us in the following presentation.

In one of the articles published as a series in the New Free Press [Neue Freie Presse], Böhm-Bawerk recently attempted to explain the increased deficit in the monarchy’s balance of trade.5 He points out that “it is said, and it may very well be correct, that many private persons in our country live beyond their means. However, it is certain that for some time many of our public bodies have lived beyond their means. The nation, the Crownlands, and the municipalities rival one another in the growth of their expenditures. The increase in revenues has not kept up with the increase in expenditures, and the difference must be compensated for by the assumption of debts. As the domestic capital market is not in the position to satisfy the large demands made upon it by the government’s budgetary requirements, the state had to turn abroad for funding. The increase in foreign debt is thus expressed as liabilities in the balance of trade. One must view these circumstances as the ultimate cause of the deficit in the balance of trade: we have become large and freewheeling in our economic expenditures.”6

These remarks by Böhm-Bawerk indicate the direction for an explanation of the most recent Austrian economic crisis. However, they are not completely satisfactory in their interpretation of the causes of the liabilities in the balance of trade.

In Austria and in Hungary, too much is consumed, or, in other words, too little is produced. The country, the provinces, and the municipalities have been led astray by the ease with which the modern banking system readily supplies loans. In the decade from 1902 to 1912, the country’s debt (for the Crownlands and provinces represented in the Parliament) increased from 3,640 million to 7,240 million crowns. The continual issue of new debt has unfavorably affected the price levels of pensions and the rate at which new loans have been extended. In 1903, the small sum of 6 million crowns, which would require a standardized 4.2 percent annuity for repayment on the occasion of its conversion, could be offered at par. Subsequent loans were issued at continually worsening terms. The crown annuity, offered in January 1912 at the nominal value of 200 million crowns, was issued to the consortium at a market rate of 89.50. Since that time, it has been absolutely impossible to issue crown annuities at 4 percent. The exchange rate for gold has had to replace the exchange rate for crowns, and an interest rate of 4.5 percent has replaced the 4 percent annuity rate, while treasury notes and bonds have replaced the annuities. The 4.5 percent treasury bonds that were issued in March 1914 at a face value of 396.6 million crowns, and which were repayable within 15 years through an installment lottery, were assumed by the consortium at a market rate of 94.5 percent. The actual burden, which accrued to the national treasury due to this assumption of debt, is estimated at 5.3 percent. The demand price for the Austrian 4 percent crown annuities on the Vienna bourse was 100.34 on average in 1905; it was 83.07 on average in 1913. The provinces and municipalities were doing no better, with a similar situation in Hungary.

In Austria, it is primarily the imperial administration that functions poorly and is too expensive. More than one hundred years ago, Stein wrote about the bureaucracy in the Austrian government, that they “concern themselves solely with the employment of a system of clumsy and labyrinthine formalities that halts the free activity of human beings at every instant, in order to substitute in their place masses of paper, and the civil servants’ negligible idiocy or laziness.”7 Stein would probably find this scathing judgment appropriate for the current Austrian administration; indeed, even official publications arrive at the conclusion “that throughout the entire organization of the domestic administration, beginning with the lowest body and continuing up to the highest judicial courts, substantial problems exist that prevent an adequate deployment of actions in the government’s areas of responsibility.”8 The excessive expenditures of the provincial governments, even more than the imperial government, explain why sufficient funds cannot be found, in spite of the fact that the tax revenues are more oppressive than in most other countries. As a result, new bonds must be constantly issued to keep up with expenditures.

A substantial portion of the public debt can be ascribed to the growing trends in a socialist direction of the last few decades at both the national and municipal levels that has resulted in the government taking over existing enterprises and building new factories with public funds. Nowhere has this trend been as strong as in Austria.

These large state companies are the greatest hemorrhage point in the national Austrian budget. They are poorly managed; they yield no income, and instead require subsidies every year to cover their deficits. These have been met from additional tax revenues or by issuing new bonds. The negative financial effect of these state enterprises has been most obvious in the largest of them, the National Railway Company. The failures of the Austrian state railway system, even in comparison with the performance of the Prussian-Hessian state-owned railroad, are commonly explained by the assertion that the conditions in Austria are essentially different from those in Prussia, and that the Austrian state railway labors under a series of circumstances that hamper its proper operational management.

Yet quite recently, one of the most successful Austrian industrialists, Georg Günther, the general director of the Austrian Berg- und Hüttenwerks-Gesellschaft [Mining and Steel Company], in a speech based on comprehensive quantitative data (including an exact comparison of the individual entries in the income statements of the Austrian and Prussian state railways), attempted to provide evidence that these difficulties could justify only a portion of the adverse performance of the Austrian state railroad. Even with a generous allowance for all of those circumstances that could unfavorably influence the Austrian state railroad, Günther arrived at the conclusion that the expenditures of the Austrian state railway were approximately 80 million crowns too high, and that this could be traced back primarily to the large number of employees, or, in other words, to the low work expectations for individual employees. Namely, if the disparities of the operational conditions were factored in, the results showed that the Austrian state railway employed approximately 50,000 more employees than would be employed by the Prussian state railroad in the same circumstances.

While each employee of the Prussian state railway is responsible for the service of 42,500 axle-kilometers, the corresponding service responsibility in Austria amounts to only 32,900 axle-kilometers. Most notable is the disparity for employees at the central service; in Austria job performance per worker is 571,400 axle-kilometers, whereas in Prussia each individual’s performance is 1,115,000 axle-kilometers. Within the central service in Austria alone, there are approximately 5,400 employees too many, requiring an annual expenditure of 23 million crowns. This explains quite sufficiently why the Austrian state railroad is incapable of delivering an income that corresponds to its investment capital despite higher tariffs.9

It also explains the poor state of public finances and the growth of the public debt, the enormous increase in tax burdens, and the difficulties hampering production and trade due to the defective functioning of the national transportation system.

However much the causes of the crisis may be found in the government’s overspending, a more fundamental reason is budgetary mismanagement in the private sector. Austria-Hungary proportionally produces less than Western Europe. Even the number of people actively employed in production is relatively lower than elsewhere, since the public sector draws too many people away from productive labor. That which was said above about the national railway administration is equally true about all branches of the national government: it employs far too many people everywhere.

However, even the producers’ economic labor is less profitable than in other countries. The high protective tariffs on grains and the prohibition against meat importation preserve a farming culture functioning in a long-outdated manner, which, located far distant from Western European agricultural activity, expects all salvation to come from established subsidies and so on, which the state (and the agricultural majority selected for the committees in the parliament) unsparingly guarantees from the tax monies levied on the urban, manufacturing population. The owners of large latifundia seldom care personally for the administration of their estates; this is more often left to an officialdom that uses the government’s leisurely and unimaginative business administration as a model. The property’s fideicommissary dependence prevents the transfer of the land to better landlords. In the largest of the Austrian Crownlands, Galicia, agriculture appears as large-scale land-holdings, on the one hand, whose prosperity is hindered by a lack of capital, scarcities of agricultural labor, and the owners’ lack of ability; and smallholdings (more than 800,000 properties, ca. 80 percent of that entire number amounting to less than 5 hectares),10 which can offer only meager nourishment to a family; the category of the mid-sized agricultural holding is almost completely absent from this province. In a special report about the ratio of agricultural output to general price increases, which Graf Hardegg reported to the Herrenhausen [the upper house, or House of Lords, of the Parliament] in 1912, the backwardness of Austrian agriculture was characterized in the following manner: “In broad areas, we remain closely tied to the old three-field system, which is inadequate for the agricultural resources and has long outlived its usefulness, where the land appropriate to the highest yield is barely worked, let alone cultivated, and where conventions and customs still hold sway that can no longer be considered up-to-date. We have, in fact, predestined entire landed areas to animal husbandry, where the number of animals has constantly decreased instead of increasing, where the production of provender for the animals is low, where the cultivation of the alps, feedlots, and meadows appears to have hardly moved past the initial stages, and where animal husbandry, directed in a completely irrational manner, bears tragic fruit.”11

A few numbers illustrate most clearly the backwardness of agriculture in Austro-Hungary. In 1912, the crop yield per hectare (in hundredweights per meter) amounted to:12

In the German Reich, 58.9 cows are supported by one square kilometer of productive agricultural land, whereas in Austria, the same area supports only 32.5 cows.

The situation in industry is no better. The Austrian worker (and the same is true for the Hungarians to an even greater extent) labors less intensively than, for example, the Germans or even the Americans. Entrepreneurial activity, for which only the slightest tendency exists, is impeded at every turn by a legislature that has set itself a goal of inhibiting the development of large firms to the best of its ability. The above-mentioned exposé of the Koerber administration includes the remarks: “The protection of the small firm, which is suppressed by the new form of economic life; the impediment of speculation in the exploitation of advantageous business activities in all directions; these and other attempts, whose partial validity should not be denied from an ethical point of view, have impaired the prosperity of our economic life in many cases, without bringing about any of the specified, desired results.”13 In 1912, a report by the economic commission for the Austrian House of Lords [Upper House, Reichsrat] concluded “that the improvement in the entrepreneurial spirit and, with this, the expansion of our industry outward, leaves so much to be desired that an ‘anticapitalist’ spirit, having encountered no resistance, has propagated itself with stultifying effect.”14

The farmer, the tradesman, the worker, and above all the civil servant work and earn little; however, they still desire to live comfortably, and thus they spend more than their circumstances would allow. The frivolity of the Austrians and Hungarians sets them sharply apart from the sober thriftiness of the Western Europeans. There appears little concern for the future, and new debts are added to old, as long as willing lenders can be found.

As long as the lenders are willing. Thus we arrive at the crux of the matter.

If cash payments were generally common in business dealings in Austro-Hungary, then this living beyond one’s means could never have achieved the broad extent that it has acquired in the last decades. Consumer credit could only have been obtained as a bank loan. The amounts which might have been supplied to consumers by this means would have remained far below the enormous sums that have been accessed with commercial credit. Additionally, one should certainly not underestimate the scope of consumer credit. A not insubstantial amount of credit available for agriculture, urban real estate, and small trade has found use, not for productive, but for consumptive goals. Included in the total, however, should be those large sums of consumer credit that the credit requirements of the civil servants have drawn down. Loans have been guaranteed to the state, provincial, county, and local public officials, who cannot be fired while they live; to officials of the public funds, the court, the railway companies and suchlike, the security of which loans are based solely on the references of the borrowers. As a rule, the pay office disbursing the salary assumes the loan, and this office extracts the monthly interest, expenses, and amortization quotas from the debtors’ emoluments, and pays them over to the lenders. In this manner, many thousands of public officials receive only a portion of their income paid in cash, often only the minimum required for existence remaining free of garnishment. The lenders are safeguarded quite well by this system. The risk that the debtor could die prior to repaying the debt is allowed for by insurance; these premiums increase the already quite substantial costs of these credit transactions, which are conducted not only by private moneylenders, but also by specific credit institutions that are generally organized based on confraternal links.15

If monetary loans were the only form by which consumer credit were guaranteed, then those circumstances that led to this crisis could never have developed. Whoever takes out a loan also has to pay it back eventually; the assumption of debt does not expand his consumer power, it merely relocates it temporally. The matter is different for the system of long-term commercial loans, as they are currently common in Austria and Hungary. The consumer does not pay for his purchases in cash; he remains in debt. This is true for both the exclusive customers of the glittering luxury boutiques in the center of Vienna and also for the miserable poor, who satisfy their needs in squalid country stores in Galicia or Slavonia. The major gentlemen’s tailors in Vienna owe hundreds of thousands of crowns, many of them even more; however, the business requirements of even the smallest “general stores” reach quite sizable numbers. If a customer makes a one-time partial payment on his debt, then this is often only the lead-in to a greater exploitation of commercial credit.

The retail dealer, who has direct commercial dealings with the end user, typically has insufficient capital; indeed, he often lacks his own operating capital. He could not extend long-term credit to his clients, if he were not also in a position to receive long-term credit for his own purchases; he remains indebted to the wholesaler in the same way that the consumer is indebted to him. The Austrian industrialist has to guarantee long-term credit, because otherwise he would not be able to market his wares domestically. In trade rivalry, neither the product’s excellence nor the lower price tip the scales; whosoever would drive the competition from the field has to guarantee more auspicious payment conditions, must seek to accommodate the purchaser through increasing deferrals of the payment dates. Under such circumstances, the bill of exchange has practically vanished from many commercial sectors. Even where it still appears, it does not ensure the punctual observation of the agreed-upon payment dates. If the debtor will not pay on the date of maturity, then the exchange is prolonged. Decades ago, one of the greatest initiates of the monarchy’s credit system had already made the statement that the exchange formula “in three months to the day, I will pay,” should correctly read, in Austria, “in three months to the day, I will extend.” Since that time, the conditions have only become generally worse; only where powerful cartels rule the market (iron, sugar, hemp) is it otherwise. In all those sectors, however, in which the formation of market-determining consortia was unsuccessful, the producers, for whom higher domestic production costs have barred the path to exports, must accommodate themselves to inauspicious payment customs. It has gone so far that today “cash payment” is, according to customary usage, understood to mean several months of credit.

A reform of these conditions would have to begin with the end user. The consumer would have to become accustomed to paying in cash, or at least punctually on the agreed-upon, not-too-distant, payment date. The large department stores, store chains, and cooperatives have completed this educational process abroad, as such stores must insist upon cash payment by virtue of their organization. In Austria, the middle-class policy of commercial development places insurmountable difficulties in the path of this form of retail trade; the policy supports the small shop owner and the handcrafter.

It is true that the small merchants are not pleased by their customers’ poor habits of payment. Even they would prefer to be paid in cash. However, a keen rivalry also reigns among them: the number of small commercial enterprises is far too high; the possibilities for earning a living in Austria are low. The required certificate of qualification generally impedes the path to an independent business, and, in addition to this, a number of industries are further hampered by the concession system. For many, therefore, no option is left except to establish small trading operations. Capital is either not necessary, or only a little is required. Anyone about whom nothing prejudicial is publicly known can easily gain access to credit from the manufacturers and wholesalers. This explains the superabundance of small trading operations, which often guarantee their owners a meager income despite considerable industriousness.

If the small trader wants to do any business at all, then he has to extend credit. And he may neither hand-select his customers, reject doubtful people, nor deny credit to those whose debts have grown too large. The village shopkeeper must view it as a special honor whenever the beadle or even the community recorder offers him their custom. Woe be unto him if he dares to demand from them (regardless of whether it is only after several months or even years) a settlement of accounts. Indeed, he is dependent upon the representatives of national and autonomous local administrations for every aspect of his business. They manipulate those hundreds and thousands of laws, ordinances, edicts (ukases), which are partly an inheritance of the vormärz absolutism,16 and partly the creation of the modern currents of the middle class and socialist politics. Whether or not the shopkeeper receives the concessions, permissions, and so on, which he requires to conduct his business, he remains completely dependent upon administration officials; they can make things uncomfortable for him during the assessment of taxes, in the exercise of authority by the commercial and market police, or sanitary inspectors, and in one hundred other ways. He has to play things correctly with them, and with their varied and numerous relations, no matter the cost. In Galicia and in Bukovina, in Hungary and its neighbors, everyone believes that he ought to be entitled to the claim that he, and only he, should receive credit unhesitatingly, and should always receive credit thusly. The merchant sees the sum of his outstanding credits with trepidation, not only as an absolute number, but also as growing in relation to his sales figures from year to year. However, he is powerless against the circumstances.

Someday, sooner or later, the day had to come on which it became clear, that a large portion of these outstanding loans, which were posted in the merchants’ account books as assets, were irrecoverable. All these officials, employees, functionaries of the public administration, local home rule, and so on, all these farmers and craftsmen had lived far beyond their means, they had accepted debts that they were neither willing nor capable of repaying. The officials’ emoluments were ceded or disdained up to the limit with only the minimum required for existence remaining free of garnishment; the farmers’ immobile properties were burdened by mortgages beyond their market value; the monetary creditors, who were able to safeguard themselves at the signing of the contract, regularly preempt the mercantile creditors, who, due to the reasons delineated above, can only approach the debtor energetically after a year and a day. It required only the gentlest external push in order to manifest the irrecoverability of these demands.

The much cited speech of Secretary General Pranger in the Wiener Saldierungsverein [Viennese Banking Association] gave this push. As a warning signal, it came years too late; nothing could be changed in that which had already occurred. He exhorted the lenders to caution and restraint, and provoked the inevitable and undelayable liquidation. The scope of the restrictions on and divestments of credit, which resulted in the first months of the crisis, were highly exaggerated; yet they were indeed large enough to be the final straw. The retail merchant, for whom credit was impeded, began to measure his outstanding loans and must have recognized, to his horror, that a portion of them were irrecoverable. In many cases, the retailer saw himself now forced to suspend payments himself; this functioned retroactively from the end consumers step-by-step back to the producers. Credits, which had for years been entered into the account books as “good,” were revealed at one stroke as rotten. The businessman recognized too late that he had already lost a majority of that which he thought he had earned through years of hard work.

The insolvencies mounted up. The Wiener Kreditorenverein [Viennese Society of Creditors] for protection from demands in cases of insolvency, to which textile firms primarily belonged, accrued:

The 1912/1913 crisis brought about the liquidation of the unsustainable borrowing system of previous years. It is true that not everything was liquidated; more than enough remained reserved for the future. And yet it is the pernicious system of poor payment conditions that remains; from this, the Austrian economy is threatened by ever-new dangers. As long as the overproduction on the domestic market lasts, and the unfavorable production circumstances impede industrial exports, no change, however, can occur.

The monarchy has to export goods in order to maintain equilibrium in the balance of payments without increasing the foreign debt. Today, remittances by emigrants form the most important asset of the monarchy’s balance of payments; this is an unhealthy circumstance that cannot be sustained over the long term.

Therefore, a pleasant sign of improvement must be welcomed, this being a recent increase in the export of textile goods. The Austrian cotton industry has suffered for years from a surfeit of new spindles that were established as a result of the 1907 economic boom. For years, attempts have been made in this industry to control overproduction through business restrictions on the one hand, and through forced exports, even at loss-generating prices, on the other. The result has not failed to appear. Exports amount to, in this and a few related articles (in thousands of hundredweights):

For 1913, the statistics demonstrate an essential increase in the export of semifinished and finished goods overall. Most notably, the increase in sugar exports is of consequence: from 254 million crowns in 1912 to 295 million crowns in 1913.

Nowhere is there as much discussion about the necessity of improving the balance of payments, of boosting the export of goods (and last but not least foreign commerce), as in Austria. However, the people remain a far cry from pursuing the single path that will lead to the desired goals. Because in this case, all of those small, beloved options, by which people in Austria prefer to solve large problems, fail. Only one possibility could help: the radical elimination of all hindrances that the economic policies have laid in the path of the development of productive forces.

PART 2

Economic Policy Issues in the Midst of the Great War

[1. ][This article originally appeared in German in the Archiv für Sozialwissenschaft und Sozialpolitik, vol. 39 (1914/1915).—Ed.]

[2. ]Two official publications contain information about the crisis of 1912/13:

• 1.Bericht über die wirtschaftliche Lage Oesterreichs in den Jahren 1912/13 [Report on the Economic State of Austria in 1912/13], 4th ed. Communications by the Commercial Center of the United Chambers of Commerce and Manufacturing, and the Central Organization of Industry in Austria, no. 127 (Vienna, 1914). 104 pages.
• 2.Wirtschaftsstatistische Chronik. Rückblich auf das Jahr 1913 [Statistical Economic Chronicle. A Look Back at 1913], 8th ed. Special Publication of the Statistical Journal in 1914 (Brünn, 1914). 41 pages.

[3. ]See Feiler, Die Konjunkturperiode 1907-1913 in Deutschland [The Economic Cycle 1907-1913 in Germany] (Jena, 1914), pp. 129ff.

[4. ][The Balkan conflict was the cause of two wars in Southeastern Europe in 1912-13 in the course of which the Balkan League (Bulgaria, Montenegro, Greece, and Serbia) first conquered Ottoman-held Macedonia, Albania, and most of Thrace and then fell out over the division of the spoils. As the result of the First Balkan War (October 1912-May 1913), almost all remaining European territories of the Ottoman Empire were captured and partitioned among the members of the Balkan League, and an independent Albanian state set up. Despite their success, the Balkan states were unsatisfied with the peace settlement, which brought about the Second Balkan War (1913) between Bulgaria and its former allies Serbia, Greece, and Montenegro, with Romania and the Ottoman Empire also intervening against Bulgaria. The outcome turned Serbia, an ally of the Russian Empire, into an important regional power, alarming Austria-Hungary and thereby indirectly providing an important cause for World War I.—Ed.]

[5. ]For three decades, from 1875 to 1906, the Austro-Hungarian Monarchy’s balance of trade had been uninterruptedly positive. In 1907, the balance of trade became negative again for the first time, and indeed to the amount of 45 million crowns; in the following years, the liabilities in the balance of trade increased (by millions of crowns) to 427, 434, 787, and 823 million crowns. In 1913, it sank to 631 million crowns. It has increased again since that time. In the first quarter of 1914, liabilities amounted to 230 million crowns, in contrast to 169 million crowns in the first quarter of 1913, 268 million crowns in the first quarter of 1912, and 184 million crowns in the first quarter of 1911.

[6. ]See Böhm-Bawerk, “Unsere passive Handelsbilanz” [Our Negative Balance of Trade], Neue Freie Presse, January 6, 8, and 9, 1914.

[7. ]See Pertz, Das Leben des Ministers Freiherrn von Stein [The Life of the Minister Freiherr von Stein] (Berlin, 1850), vol. II, pp. 433f. [Heinrich Friedrich Karl Freiherr von Stein (1757-1831) was a Prussian officer, statesman, and reformer who served as Prussian minister of economics and finance during the Napoleonic period.—Ed.]

[8. ]See Studien über die Reform der inneren Verwaltung [Studies on the Reformation of the Domestic Administration], p. 21. This exposé published by the Körber administration in 1904 renders a scathing verdict on the abilities of the Austrian government. See also Enquete der Kommission zur Förderung der Verwaltungsreform. Veranstaltet in der Zeit vom 21. Oktober bis 9. November 1912 zur Feststellung der Wünsche der beteiligten Kreise der Bevölkerung in bezug auf die Reform der inneren und Finanz-Verwaltung [Inquiry of the Commission for the Promotion of Administrative Reform] (Vienna, 1913). Additionally, Bericht des Mitgliedes der Kommission zur Förderung der Verwaltungsreform Professor Dr. Josef Redlich über die Entwicklung und den gegenwärtigen Stand der österreichischen Finanzverwaltung sowie Vorschläge der Kommission zur Reform dieser Verwaltung [Report by the Member of the Commission for the Promotion of Administrative Reform, Prof. Dr. Josef Redlich, About the Development and Present State of the Austrian Financial Administration and also Proposals by the Commission for Reforming This Administration] (Vienna, 1913).

[9. ]See Günther, Die Gebarung der österreichischen Staatsbahnen [The Financial Policy of the Austrian State Railroad] (Vienna, 1914). Günther’s remarks were subjected to a very sharp criticism by one of the top officials of the Austrian Railway Ministry in a public speech. See Burger, Die Gebahnung [sic] der österreichischen Staatsbahnen und andere Bahnverwaltungen [The Financial Management of the Austrian State Railroad and Other Rail Managements] (Vienna, 1914).

[10. ][A hectare is a metric unit commonly used for measuring land area. It is equal to 10,000 square meters, about 107,639.1 square feet, 2.47 acres, and 0.00386 square miles.—Ed.]

[11. ]See no. 113 of the supplements to the stenographic protocols of the House of Lords, 21, session 1912, p. 17.

[12. ]In 1911.

[13. ]See Studien über die Reform der inneren Verwaltung [Studies About the Reform of the Domestic Administration], cited above, p. 7.

[14. ]See no. 113 of the documents cited above, p. 3.

[15. ]Among the institutions that guarantee consumer credit to civil servants, the Erste österreichische Beamten-Kreditanstalt [First Austrian Civil Servants’ Credit Institution] in Vienna, founded in 1908 with a fully paid capital stock of 1,500,000 crowns, appears of particular interest. This institution extended loans to employees with fixed annual salaries, and also to retired public officials having fixed annual pensions, and other state civil servants (either from one of the kingdoms or provinces represented in the Reichsrat, or local officials), against cession of their official emoluments for the collection of payments authorized to this public corporation. The performance of these loans, including interest and ancillary charges, was secured by nationally or provincially guaranteed insurance on the borrowers against their demise, as well as against their inability to repay while still alive. The province of Lower Austria assumed subsidiary liability. The bank bonds based on these lending activities, offered at 4.5 percent and amounting to a face value of 30 million crowns, were declared to be gilt-edged securities.

[16. ][The term Vormärz (pre-March) Years (1815-48) refers to the political situation prior to the 1848 revolution during the rule of the Austrian Chancellor Prince Clemens von Metternich. He strongly believed that maintaining social order within the multiethnic composition of the Austrian Empire required comprehensive suppression of national movements at home and within other nation-states.—Ed.]