Chapter 46: Chapter 46 – Abolition of domestic tariffs

Over the past few years, Bohemia had become one of the industrial centers of the Austrian Empire, and with the development of its industry, the wealth of its capitalists also grew greatly. The dichotomy between their immense wealth and non-existent political power was hard for them to accept.

Due to them lacking any voice or influence in politics, the Vienna government had passed various new laws, which to some extent sacrificed the interests of the capitalists and strengthened their resolve to start a revolution in Prague.

In Franz’s view, these people were probably used to the days of excess and debauchery from Chancellor Metternich’s era and had forgotten that the rule makers could change the rules at any time.

Now, it was the time for the Vienna government as the rule maker to change the rules: those who complied would thrive while those who resisted would perish. Nevertheless, as a civilized government, the Vienna government couldn’t go overboard and had to temper justice with mercy.

Finance Minister von Bruck proposed, “My Lords, in view of the current situation, the Ministry of Finance proposes that we abolish domestic tariffs within the Empire to calm the discontent of the capitalists!”

Currently, the domestic tariffs in Austria only existed between itself and Hungary since other domestic tariffs had already been abolished. In fact, it was not fair to blame the Vienna government for the tariff between Hungary and Austria. Austria had been prepared to abolish tariffs in various parts of the Empire as early as the previous century, but they were opposed by Hungarian nobles and capitalists.

Since economic development in different areas of the vast Austrian Empire varied, in regions with developed industries, capitalists strongly advocated for the abolition of domestic tariffs; however, in Hungary, where industries were under-developed, Hungarian capitalists were only able to compete by relying on the protection of tariffs.

In addition, the taxes in Hungary were collected by the Hungarian nobles and regional governments, not the Vienna government. As a result, the Hungarian nobles also pocketed a massive chunk of the domestic tariffs; thus, they were the biggest obstacle to its abolition.

Finance Minister von Bruck’s proposal had two purposes: in addition to gaining the approval of some capitalists, it would also serve as a warning to Hungarian nobles. The Kingdom of Hungary was currently still dominated by the nobles, while the capitalists, who seemed rich and powerful on the surface, were mere puppets.

This was because there were simply too many Hungarian nobles, accounting for almost 4% of the 13 million Hungarian. In addition, most of the capitalists in Hungary were younger descendants of the noble houses, or members of their branch house. If these weren’t dealt with quickly, the Hungarian nobles would become a big headache for Franz.

Historically, this had been the case: from the era of the Austrian Empire to that of the Austro-Hungarian Empire, all the governments had struggled on how to deal with Hungary.

Franz quickly assented, “Yes, Austria is a unified nation. These domestic tariffs will undermine our unity!”

Through the reforms carried out by the Vienna government, Franz planned to pit the Hunagrians common folk against the nobles. Uniting the majority to attack the minority had always been a good strategy in politics. Afterwards, he planned to issue decree after decree to clear obstacles to the capitalists’ economic development and shake their determination to rebel.

The abolition of domestic tariffs only harmed the interests of the senior nobles because the petty nobles weren’t qualified to profit from it. On the contrary, even though the nobles might lose the income from the tariffs, they also wouldn't have to pay any tariffs when exporting their grain to Austria from Hungary which would ultimately make their grain more competitive and yield greater profits.

As a result, it was very likely that many Hungarians capitalists and nobles would choose not to take the risk of participating in the rebellion.

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“Your Imperial Highness, I am afraid that this is not a good idea. The abolition of domestic tariffs will have an impact on the Austrian food industry and affect the livelihood of the released serfs!” Interior Minister Archduke Louis objected.

Franz suddenly realized that the biggest impact of abolishing domestic tariffs between Austria and Hungary would not fall on the peasants or the released serfs, but on the nobles who owned lots of land. If a competitor appeared, the price of food would definitely fall.

Franz hesitated a little, not knowing if it was a good time to irritate the domestic nobles. He had just abolished serfdom and taken away their workers, and now he was planning to allow food exports from Hungary, which would surely impact the food prices due to the increased supply. Would this cross their bottom line?

Fortunately, Minister-President von Schwarzenberg helped him make the decision.

“Since the crop failures of 1846, the food prices in Austria have continued to rise. For the stability of the Empire and its people, it is necessary that we limit these prices to a reasonable range.

In the long run, it is a good thing for food from Hungary to enter Austria because the decline in food prices would help stabilize public morale.

Moreover, after the abolition of tariffs, Austria’s industrial and commercial products will be more competitive in Hungary, which will help in healing the trauma of the industrial crisis!”

Franz finally heaved a sigh of relief. Since the Minister-President, who himself was a major landowner, did not mind a decline in food prices, the bottom line of the nobles might be much lower.

Finance Minister von Bruck said, “Lord Minister-President is correct. The abolition of tariffs will speed up the recovery of Austria’s economy, which is very important to us.

Due to the various rebellions, our revenue will likely be greatly reduced this year. If it weren’t for the confiscation of wealth and property belonging to the rebel nobles and capitalists, I’m afraid that the government would’ve gone bankrupt.

The coming counterinsurgency wars will also cost a lot of money. I am afraid that the money we currently have in the Treasury is just a drop in the bucket, so we have to find ways to increase revenue and reduce expenditure.

We currently have many factories under our control and we must get them to work as soon as possible, which means that it is essential that we capture the Hungarian market!”

Austria was truly short of money. Before the March revolution, the Vienna government already had a national debt of 748 million guldens, which had now fallen to about 600-650 million guldens.