Holy Roman Empire - Chapter 303:

Chapter 303: Chapter 52: Ironclad Camps, Flowing Soldiers

The economic crisis in the capitalist world often comes and goes in a hurry. The first global economic crisis had finally come to an end in early 1859.

By the end of 1858, Austria’s industrial production had fallen by 29.7 percent from the previous year, and its overall economy had declined by 17.3 percent. There were over three thousand bankrupt companies, and unemployment had at one point surpassed the one million mark…

Franz finally understood why everyone was so fearful of economic crises. The Vienna Government had taken active measures to cope with the situation, yet the losses were still immense; countries that had not taken any measures were even worse off.

Of course, the substantial losses in Austria’s economy were directly related to its previous rampant economic growth. The railway companies, hyped up by Franz, had at one point seen their market value fall to less than one-tenth of their peak.

The considerable losses brought about by the economic crisis weren’t entirely negative. Viewed from a different angle, it also indicated that Austria’s industrialization was nearly complete. This kind of loss only occurs once capitalism has developed to a certain point.

If capitalist economics had not developed, there wouldn’t be much impact even in the face of an economic crisis.

The Russian Empire next door is an example; what does the economic crisis have to do with them?

The countries that suffered the most from this economic crisis were Austria and the United States; the United States suffered because the British withdrew their capital, leading to a cash shortage in the market and a weak Central Government that didn’t know what to do.

Austria, naturally, suffered from the aftermath of capital flooding in and the blind investments made by capitalists. After the economic crisis, as the market returned to reason, it was not a bad thing.

Having quickly skimmed through the economic report, Franz nodded with satisfaction.

In the absence of any precedents to follow, the fact that they could recover from the economic crisis so quickly was a credit to the Vienna Government’s performance.

Prime Minister Felix spoke, “Your Majesty, the economic crisis is over, and the world economy is beginning to warm up. The Cabinet has decided to end the economic stimulus policy to avoid another frenzy of blind investment.

To deal with this economic crisis, the government increased its investment in infrastructure; our fiscal deficit in 1858 reached 2.8 billion Divine Shield, far exceeding the financial capacity of the government.

To reduce financial stress, the government plans to cut back on fiscal spending over the next three years, and gradually reduce the debt by 30 million Divine Shield.

The construction projects that have already begun will continue, while those that are still in the planning stages or have yet to begin will be postponed.”

Infrastructure also costs money. As the biggest financial backer during the economic crisis, the Vienna Government also spent a colossal amount of funds.

The money raised from issuing bonds was partly used to take over uncompleted projects, and partly to invest in railway companies and industries critical to national economy and people’s livelihoods.

A fiscal deficit of 2.8 billion Divine Shield is the amount spent. Two and a half years’ fiscal revenue had turned into infrastructure projects and company equity.

The remaining funds were earmarked for specific uses. Not all projects were unfinished; many investors were still caught in the entrapment plan.

While others continued to complete their projects, the government naturally had to pay for the construction. The Vienna Government took its credibility very seriously and made prompt payments once the completion was inspected and verified.

The government was out of money, and naturally, it had to cut expenses, with the first reduction being in infrastructure investment.

This round of major infrastructure construction was equivalent to ten years of normal period investment; it couldn’t possibly continue indefinitely.

Even if Franz were to go crazy, he couldn’t possibly allocate a sum equivalent to the annual fiscal income every year for infrastructure construction.

During the economic crisis, it was feasible to have a wave of emergency infrastructure boosts. However, once the economic crisis ended, infrastructure investment still needed to prioritize economic returns.

After some thought, Franz said, “It is inevitable; our total debt is now the world’s fourth largest, and indeed we should cut back on some.

Now the infrastructure construction of important domestic cities has all been included; there are no major essential projects for the short term, so infrastructure construction can take a break.

In the next two or three years, the government’s fiscal pressure might be quite significant. After this period, the large amount of company equity we hold should start to generate returns.”

While saying this, even Franz himself lacked confidence. It was true that returns would come, but the trouble was that the largest sum of money had gone into railway companies, an investment that could not see immediate profits.

Unless he now relaxed policies, allowing railway companies to give up on less popular routes and only operate railways in commercially busy areas.

Financially, this would be the most profitable move; politically, it was absolutely impermissible.

To cover every domestic city that needed it, the railway was not just for economic development but more so to strengthen the Central Government’s control over local areas.

Under these circumstances, Franz could only apologize to the speculators who were trapped later on. For national development, railway companies had to endure losses at first and were not initially intended to be profitable.

If the government had not bundled the railway projects during the market’s heat and left capitalists to freely build railways, it is estimated that the prosperous areas would have had three to five parallel railways, while backward provinces would not have a single track.

This has been proven in England and France. Rails of no economic value would simply not be built, while economically prosperous areas would experience a surplus of construction.

If this were the only problem, it would be manageable, but many of the enterprises in which the government had stakes were heavy industries belonging to the category of high investment, long cycle, and high returns.

In the short term, these enterprises still needed to expand production and drive technological innovation, virtually none of which could expect dividends soon. Relying on these investments to make up for fiscal gaps was a distant prospect.

Of course, from the very beginning, the Vienna Government had no great expectations of making substantial profits from this.

It was more about providing life-saving funds to enterprises through government stakes, preserving these core industries.

This was like the current government living frugally so that future governments could inherit plentiful resources. Such things could only happen in politically stable countries.

In countries with frequent government changes, it’s good enough if they don’t leave troubles for their successors, let alone accumulate wealth for them; that’s a fantasy!

This is also why the debts of many countries’ governments keep mounting. As long as they’re happy during their term, who cares about the welfare of their successors?

Term after term, when debts pile up high, the government has to be influenced by financial groups and gradually becomes a spokesperson for money.

Iron barracks with flowing soldiers.

In a monarchy, however, it’s different. The Cabinet Government might change, but Franz the Emperor cannot be changed. Even if there were to be a successor, that successor would be his offspring. Naturally, he wouldn’t allow anyone to sacrifice the future development for immediate benefits.