Holy Roman Empire

Chapter 243: Economic Development

Colonizing overseas has always been a challenging task, especially for a budding colonial empire like Austria, which has much to learn.

In this era, the African continent is anything but benign. The most formidable enemies are not the local natives but the harsh natural environment.

Dangerous insects, fierce beasts, and rampant diseases are the main factors that keep nations from colonizing Africa. Otherwise, the continent would have been carved up long ago.

Frankly, if it weren’t for breakthroughs in the production of quinine, which began to address the major issue of dysentery, Franz would not have dared to venture into Africa.

For safety, all Austrian soldiers are being educated in hygiene practices. Personal and camp hygiene are to be strictly adhered to according to established standards.

To avoid contracting local diseases, Franz even issued masks. The soldiers were warned not to casually come into contact with the natives and were especially forbidden from engaging in sexual relations with the locals. Intermarriage was absolutely not an option.

Franz must take these precautions seriously. There are always those with less conventional tastes, and this is even more true in military camps. Fortunately, this batch of immigrants likely includes a considerable number of young women, which should help address this issue.

After more than three months of preparation, the first Austrian colonial expedition set sail from the port of Trieste on April 28, 1854.

Led by two second-class battleships, accompanied by five cruisers and more than ten auxiliary ships, they embarked on the first step of colonization with an infantry regiment, targeting Guinea.

Their opponents this time were native tribes, and the navy’s role would be more of a training exercise, perhaps even engaging enemies in canoes. The main fighting force would be the army.

Franz had initially planned to establish a Marine Corps, but this met collective opposition from both the Army and the Navy. The Army did not want to diminish its say in colonial activities, and the Navy simply couldn’t afford it.

This wasn’t a joke; Austria’s navy was indeed lacking funds. To secure more funding, they first needed to prove their value.

Politics often works this way, grounded in pragmatism. The amount of funding allocated reflects the perceived value.

If overseas colonies could bring substantial profits to the empire, then the navy could shift from being a neglected force to a favored one.

Franz had no objections; this was the most rational approach. Without sufficient benefits, rashly expanding the navy would be a complete waste of resources.

Instead of doing that, it made more sense to invest the precious funds into domestic economic development. Although the economic boom in the country hadn’t subsided, with railway stocks soaring following the opening of several main lines, almost reaching sky-high levels.

If it weren’t for Franz’s insistence on prohibiting the construction of duplicate railway lines, Austrian railways would have already followed the example of Britain and America in redundant construction.

Of course, it was precisely because each railway line was granted exclusively to one company that it became so highly coveted by capital investors. In this era, what was the most profitable? Clearly, it was a monopoly.

With such positive developments, the government’s mandate to pair popular railway routes with a few less popular ones was also accepted.

To attract foreign investment, even the railway transportation fees were left to be freely determined by the market. Franz wasn’t worried at all that these prices would skyrocket.

In a market economy environment, it’s certainly the market that decides. The level of prices in society is determined by supply and demand relationships, and the cost of railway freight would naturally be dictated by the maximization of profits.

Capitalists naturally understand the trade-offs. Now, as railways have just emerged to compete with traditional modes of transport, if they don’t have a price advantage, how can they snatch customers?

Being able to save costs and time compared to traditional transportation means progress. The potential impact of high freight costs on the circulation of goods will be a matter to consider after the completion of railway construction.

Currently, all of Austria’s railway companies are in a state of pure investment. Even though the few main lines that are operational are busy and profitable, their earnings are just a drop in the bucket.

These profits are being reinvested by the railway companies into the construction of new railway lines. Franz is well aware that Austria’s railway companies have never distributed dividends since their establishment.

They haven’t made any profits yet, so how can they be expected to reduce prices? If they did, the railway industry, which is currently in high demand, would likely become unpopular overnight.

At this time, the Austrian government will certainly not come out to hinder them. The promise of ten years of tax exemption has already been fulfilled. The government is not charging any fees, which is an encouragement for everyone to continue building railways.

“Time is life, time is money.”

This slogan has become the motto of all the executives of Austria’s railway companies. The sooner a line is put into operation, the sooner it begins to generate revenue.

Up to now, all of Austria’s operational railway lines have not disappointed anyone. In the context of free pricing, there are no loss-making routes, which greatly stimulates the nerves of certain individuals.

Numerous British and French capitalists wanted to control Austria’s railway network for the sake of monopolistic operations. And so they leaped into the wonderful illusion crafted by Franz, losing themselves in a dream.

Indeed, profits lead to delusion. Everyone is frantically building railroads. Many see this as an opportunity to stake their claim; owning more railroads now means more stable income in the future.

With no concept of a railway bubble at present, and with the advantage of monopoly operations, nobody believes they will make a loss.

In such a context, Franz, who monopolizes the supply of sand and raw materials, naturally makes a fortune. By the end of this year, it is expected that Austria’s total railway mileage will exceed 10,000 kilometers.

When Franz came to power, the total length of railroads in Austria was less than 3,000 kilometers. On average, more than 1,400 kilometers of railroad were completed each year.

In this era, only the Americans across the ocean could compare. Like Austria, the United States also experienced a railway investment boom. However, due to some of the capital being diverted to Austria, it wasn’t as frenzied as in history.

The total railroad mileage in the entire New Holy Roman Empire exceeded 12,000 kilometers. In fact, the railroad mileage in the small German states alone exceeded 2,000 kilometers.

It can only be described as a frenzy. Historically, the most active period of railway construction was in Germany. By 1850, the total railroad mileage in Germany reached 5,856 kilometers, more than twice that of Austria at the same time.

If Franz had not promoted railway construction in Austria, Germany would now lead Europe in the speed of railway construction, matched only by the French.

Of course, this refers to the era of Napoleon III in France. In 1854, the total railway mileage in Germany was over 3,000 kilometers more than in France.

Starting from 1854, French railways began to grow rapidly. By the time of the Franco-Prussian War, the total railway mileage of France and Germany differed by only a few hundred kilometers.

Among the major European powers, Russia had the slowest railway construction. Due to the Near East War, their railway construction projects were nearly halted altogether, reaching only 1,626 kilometers by 1860.

It was a disgrace among the great powers because even Belgium and Spain had more railroads than they did. Meanwhile, Britain, France, and Germany had all surpassed ten thousand kilometers, not even at the same level as them.

As the national territory grew, the original plan for the railway network naturally expanded. This expansion didn’t require any governmental impetus; private railway companies were already spontaneously moving to stake their claims.

The bidding process for Austria’s railway lines was quite interesting. The faster the construction started and the earlier it was completed, the more likely it was to win the bid.

Since the railways were granted free of charge, the railway companies had to start and complete construction within the promised time frame. Penalties were imposed for exceeding the deadline, and in severe cases, the government had the right to revoke the construction rights. There were also rewards for early completion.

The test was everyone’s capital chain. Franz didn’t resort to any tricks or schemes; as long as the railway company’s operations were sound and they could be completed on schedule, there were no problems.

Once the capital chain was broken, it would be miserable. If construction hadn’t started yet, it would be fine — at worst, pay some penalties and return the unbuilt railway lines.

But if construction had already begun, or even if half of the project was completed but lacked funds for the remaining work, that would result in a significant loss.

All investments would be wasted, with the government taking over unfinished projects to continue construction. Whether the railway companies went through bankruptcy and restructuring or simply collapsed was no longer within Franz’s considerations.

After all, these were open strategies, clearly laid out for everyone. The government wasn’t deliberately setting traps; everything was clearly stated in the bidding notices.

Despite all these risks, under the temptation of monopoly, everyone still eagerly jumped in. British and French capital came in, and so did Austrian domestic capital. Speculators were rushing to get a piece of the action.

Due to the government providing free labor, the construction costs of Austrian railways were artificially lowered during this era, making the financial statements of various railway companies look very attractive.

It can be said that Franz put his heart and soul into Austria’s railway construction. He had to accelerate the pace, as the next economic crisis was only a few years away.

If they couldn’t use foreign capital to drive domestic railway construction during the economic boom, then when the economic crisis erupted and the railway bubble burst, all the unfinished projects would have to be taken over by the Austrian government.

How severe was Austria’s economic bubble? No one could give Franz an answer, but one aspect was telling: the rate of economic growth.

A product worth 100 guilders, inflated to 1,000 guilders in the market, increases wealth by 900 guilders in theory. If the market accepts this, it’s fine, but once the market can’t sustain it and the price falls back to the original 100 guilders, the 900 guilders added by the bubble evaporates.

This is why, during economic crises, wealth can seemingly disappear overnight. Essentially, it’s the bursting of a bubble, bringing the market back to rationality. However, due to supply and demand dynamics, the final price often falls below the intrinsic value of the goods.

Currently, Austria’s economic growth rate is very fast. Even if all other industries in Austria came to a standstill, just the stock market bubble alone would result in at least a 1% annual economic growth.

This era is different from later times when government intervention in the market economy prevented major economic crises.

Now, the market economy is left to develop naturally, with small economic crises occurring every seven or eight years, and major crises every few decades.

With each crisis, industrial output often falls by 20-30% percent, and in severe cases, a drop of 40-50% is not impossible.

In any case, the bigger the bubble, the more violently it would crash in the end. And the earlier the economic growth, the more rapid it would be — a bit like a rollercoaster.

In 1854, the New Holy Roman Empire had a staggering 23,000 kilometers of railways under construction, indicating a severe situation of blind investment in railways.

However, Franz showed no intention of stopping this trend; on the contrary, he was preparing to further fuel the market, aiming to make it even more heated.

The explosive model of economic development is always irresistibly appealing. Every sector in Austria was experiencing explosive growth. Since the outbreak of the Near East War, the industrial growth rate has averaged over 15% annually, and the economic growth rate has also exceeded 10%.

Had it not been for the diversion of the westward expansion strategy midway, these figures might have been even higher by one or two points higher. Rationality was long gone; the market had gone mad, reaching a point where almost any investment seemed profitable.

The contribution of the Russians to this situation was significant. From the start of the Near East War, Austria entered an era of trade surpluses, a stark contrast to its longstanding history of trade deficits.

The illusion in the capital market that “any investment is profitable” was largely due to this sudden Near East War.

Due to the war, a large amount of cash flowed from Russia into Austria, stimulating the economic market. Many capitalists were blindly expanding their production capacities, hoping to make a fortune before the war ended.

Advancing the establishment of overseas colonies was also a strategy to divert domestic economic crises. However, the colonization of Africa was just beginning and would play a negligible role in the upcoming economic crisis.

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