Chapter 163: Development
Amid the turmoil, 1850 passed quietly and silently. What seems like an ordinary year has had an extremely profound impact on Austria.
Large amounts of foreign capital poured into Austria, driving the development of the domestic economy. All kinds of factories sprouted up like mushrooms after a rain.
The most direct impact of economic growth was the increase in government fiscal revenue. Although many industries were given tax reductions and exemptions, the government still obtained a large amount of tax revenue in the upstream and downstream links.
In 1850, industrial and commercial tax revenue increased by 8% compared to 1849, which was over 4 million guilders. This number may not seem big, but Franz was very satisfied.
This was just the beginning. When the tax exemption period ends, it will be the surge period for tax revenue growth.
The benefits brought by industrial and commercial development were obviously more than this tiny amount. The supporting industrial chains of enterprises also developed accordingly.
This was reflected in raw material production, product sales, transportation, catering and entertainment, and other industries. It could all be seen in finance.
In 1850, Austria’s economic growth was 18.7%, and the government’s fiscal tax revenue increased by 9.4%.
This number was not high. Any country that opens its market will usher in rapid economic growth, with examples of soaring growth of 30-40%.
In the current time period in Europe, Austria’s economic growth was also leading the pack.
Doubtlessly, the dividends from economic growth were directly invested in the military, and could not be further invested in production.
Of course, Franz would not dare to invest in production either. If it weren’t for the communication and transportation conditions that restricted this era, Austria’s domestic economic growth would have been even faster.
Rapid economic growth is not necessarily a good thing for a country. What is most important is sustainable development. Short-term economic explosions, if the market does not keep up, then overcapacity will be inevitable.
Overcapacity means that large quantities of goods cannot be sold and will rot in warehouses. Capital-rich companies can still cut capacity and transform, while weak companies will naturally only go bankrupt.
Bankruptcies, increased unemployment, and continuous declines in market purchasing power will cause feedback, forcing capitalists to further cut capacity and layoffs, starting a vicious cycle and triggering an economic crisis.
To some extent, this arms race also extended the time of Austria’s rapid economic growth. The military itself is a consumer group, and military expansion is expanding the consumer market.
The fastest development in Austria now is railways. Construction started in 1849, and by now hundreds of sections have started construction.
The annual increase in railway mileage was 265 kilometers. Don’t get this wrong, this is not new construction, but railways that started construction a few years ago just happened to be completed in 1850.
For the railways that started construction in 1849, there is still no trace of them now. This is different from highways. Highway construction can be built and paved section by section, while railways are different. Unless a section is completed, even if the tracks are laid, trains cannot run on them.
By 1852, it is estimated that some sections in the plains will be open to the public. Whether they will be put into operation in advance is a question that only the railway companies themselves know.
The Austrian government will not care about this minor issue. These private railway operations are self-sustaining, and have nothing to do with the government.
In order to encourage the construction of railways, the Austrian government also announced a tax exemption policy. From the initial planning of railway projects, no railway operating taxes will be levied for the next ten years.
If you want to make money, build the roads early and operate them. Delaying the construction period is not good for your wallet.
Taking advantage of the booming railway environment, the Austrian government packaged a large number of railway lines and gave them to private railway companies.
The relocation costs can be paid by the government, on the condition that they must start construction within one year and complete it within ten years after obtaining the railway construction rights.
According to what Franz knew, the Austrian government has to this date sold more than 40,000 kilometers of railway lines through coaxing and deceiving.
Heaven knows how many unfinished projects will be left in the end. Anyway, the government will not lose money. Even if it takes over unfinished projects later, it will still be cheaper than starting from scratch.
These issues are also clear to the railway companies, but the hot market will deceive people’s eyes, and Austria’s economic growth also deceived many people.
Coupled with the push from financial consortiums, it further encouraged investors’ ambitions. Many speculators thought that when it reached the highest point, they would sell off the stocks and make a fortune.
In order to drive up stock prices, of course a great report needs to be made. If a railway company only has a few hundred kilometers of railway, no matter how you boast, it will not attract many people.
If there are thousands or even tens of thousands of kilometers of railways, then there is no need to boast at all. People will project a blueprint for you.
Making money from railways is just one aspect. After controlling the railway network in certain areas, even investing in other industries can use the transportation network owned to squeeze out peers. A conceptual business empire would emerge.
In the most popular years of railways in Europe, it was possible for four or five railways operated by different companies to appear between two cities, competing directly in the market.
The Austrian government still had integrity, at least it did not authorize the same section to different railway companies, which made many people see the opportunity.
Is there any business in the world that makes more money than “monopoly”? Even low-value railway lines, once a market monopoly is formed, will bring in a huge profit!
Franz would not admit that he used this mentality of capitalists to attract investment in railways. Monopoly operations are acceptable, as this avoids the waste of resources caused by market competition. As long as it does not affect the development of the domestic economy, Franz does not mind the emergence of monopoly enterprises.
If high freight rates affect domestic economic development, then the rule makers can also modify the rules, such as: price management, nationalization of railways...
The Austrian government would never tell investors about these troublesome topics, otherwise how could the British consortiums be fooled?
Americans have done it before, and Franz doesn’t mind copying it once. Never mind how many things there are, first fool them into building the railways before talking about business. When the railways are built and have no utilization value, then only then can the issue of a falling out be dealt with.
In Franz’s opinion, the public infrastructure projects in Hong Kong in his past life, with the highest profit not exceeding 15%, was a good policy.
If the Austrian government replicated it, the public would probably be very supportive. As for railway companies, 15% profit can still allow them to live prosperously.
When investors can recover their construction costs is another question that is not known. Anyway, previous investors have made money, and subsequent bottom fishers have always been unlucky.
The development of railways naturally stimulated the steel industry, and steel companies have expanded production capacity one after another, preparing to get a share in the upcoming feast.
In order to effectively integrate resources and enhance corporate competitiveness, in March 1850, the Austrian Ministry of Industry ordered the merger of 7 state-owned steel companies into the Austrian Steel Group.
Austria’s first steel giant with an annual production of 12,000 tons of crude steel and 184,000 tons of pig iron was born. After some window dressing, it became the world’s first steel group with an annual output of 200,000 tons of steel.
Whether it is really the world’s first steel group remains to be verified, but it is an indisputable fact that half of Austria’s steel production capacity is in this group.
In this era, there were only a handful of countries in the world with steel production exceeding 100,000 tons, with only the British exceeding one million tons.
If it weren’t for everyone staying at this level, Austria’s media would not dare to boast about this. Overall, journalists of this era still had integrity.
After the merger, these steel mills began to specialize, making full use of their geographical advantages to integrate production capacity.
Simply put, according to the quality of iron ore, those suitable for steelmaking are all used for steelmaking, those suitable for ironmaking are used for ironmaking, and no longer engage in mixed production models.
The most important thing is still to bring together the core technologies of several companies and apply them to industrial production. At the same time, a smelting technology research and development department was established to promote technological innovation.
According to the plan, the production capacity of the Austrian Steel Group will be increased to 240,000 tons in 1851 and 320,000 tons in 1852. It will exceed 450,000 tons in 1853...
These plans are not random, but completely based on market needs. How can they grab orders without expanding production capacity?
Austria’s railway network construction is a big fat meat, and related companies are eager to take a bite.
According to the calculation that 1 meter of railway consumes 60 kg of steel, 1 kilometer consumes 60,000 kg of steel. That is to say, Austria’s railway network plan alone requires more than 2 million tons of steel.
If steel companies don’t expand production capacity again, their brains must be flooded.
To support steel companies, the Austrian government has decided not to take profits from this newly established group in the next five years, and has also injected 10 million guilders for technological innovation.
It’s not just steel companies. Many related industries are desperately expanding production capacity. Franz is also quietly making a fortune.
Don’t underestimate these seemingly insignificant gravel and sand, people who have done projects know that these insignificant things have very high profits.
It is preliminarily estimated that every kilometer of railway alone consumes more than 100,000 tons of sand and gravel aggregates just for concrete pouring, and the top thick gravel layer requires astronomical stone quantities.
Any commodity, when traded in large enough quantities, would naturally have higher profits. These insignificant little things actually make profit no less than the steel mills that produce rails.
Only most of the time, they are scattered among countless small businesses, so they look inconspicuous. Franz just took advantage of foreknowledge to make advance arrangements and engage in monopolistic practices.
Of course, he would not admit to monopolistic practices. If someone doesn't believe it, they can just check the contracts between the railway companies and the Austrian Mining Group, which can prove that a monopoly do indeed exist.
But those in the know will not say, and the media will not report it.
The external statement is: The Austrian Mining Group is just an agent. These mines are distributed under the names of dozens of companies. In order to avoid vicious competition, everyone joined together to form a group to negotiate with railway companies.
That’s right, the truth was made out to be like this. In order to avoid being pressed for prices by railway companies, everyone joined together. Everyone can see that the final transaction prices were almost the same as market prices.
If it was a monopoly, prices would definitely have risen sharply. Since there was no significant price increase, it was not a monopoly.
What it means to make money while lying down, Franz finally felt it in 1850. Just this inconspicuous little business brought him 1.23 million guilders in annual profit.
This was just the beginning. With the advancement of railway construction, he could make money while lying down for a long period of time in the future.
Unfortunately, after the railways are built, these gravel mines in the wild would have no sales channels, and there is no hope of making a big profit again until the highway network is built. From the current situation, there will be no expectations for the next 30-40 years.
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