Chapter 303: A Barracks Is an Iron-Forged Whole, Where Soldiers Come and Go Like Water (Bonus Chapter)
Economic crises in the capitalist world often come and go very quickly. The first global economic crisis finally drew to a close in early 1859.
By the end of 1858, Austrias industrial production had fallen by 29.7% compared to the previous year, while the overall economy shrank by 17.3%. More than three thousand companies went bankrupt, and the number of unemployed at one point exceeded one million...
Franz finally understood why everyone was so afraid of economic crises. The Austrian government took proactive measures, but the losses were still significant. Needless to say, countries that didnt take action suffered even more.
Of course, Austrias significant economic losses were also directly related to the previous period of rapid economic growth. The railway companies that Franz had inflated saw their market value plummet to one-tenth of its peak.
However, the losses caused by the economic crisis were not entirely negative. From another perspective, it also meant that Austrias industrialization was nearing completion. Only when capitalist economies reach a certain stage of development do such losses occur.
If the capitalist economy hadnt developed, they wouldnt be affected by economic crises, even when they occur.
The neighboring Russian Empire was an example; did the economic crisis have any effect on them?
The United States and Austria were hit hardest by the economic crisis. The United States suffered because the British withdrew funds, causing a liquidity crisis in the market, and leaving the weak central government completely at a loss.
Of course, Austria suffered from the aftermath of the crazy influx of capital and the blind investments of capitalists. After the economic crisis, the market returned to rationality, which wasnt necessarily a bad thing.
After a cursory glance at the economic reports, Franz nodded in satisfaction.
In a situation where there was no previous experience to draw upon, the Austrian governments performance in quickly overcoming the economic crisis was still deemed satisfactory.
Prime Minister Felix spoke up and said, Your Majesty, the economic crisis has ended and the global economy is beginning to recover. The Cabinet has decided to end the economic stimulus policies to prevent a recurrence of feverish blind investment.
To combat this economic crisis, the government increased investment in infrastructure. Our budget deficit reached a staggering 280 million guilders in 1858, far exceeding the governments fiscal burden capacity.
To ease fiscal pressure, the government plans to gradually reduce fiscal spending over the next three years and gradually reduce debt by 30 million guilders.
Projects that have already started construction will continue, while those that are planned or have not yet started will be postponed.
Infrastructure development also requires money, and as the biggest rescuer in this economic crisis, the Austrian government has also incurred massive expenses.
A portion of the funds raised by issuing bonds went towards bailing out unfinished projects, while another portion entered railway companies and nationally important industries via equity investments.
The 280 million guilders fiscal deficit was money that had already been spent. Two and a half years of fiscal revenues have now been transformed into infrastructure projects and corporate equity.
As for the unspent funds, they were earmarked. Not every project was left unfinished. Their schemes still managed to ensnare quite a few.
As people continued to work to complete the projects, the government naturally had to pay for them. The Austrian governments reputation was at stake, so it had to make prompt payments as soon as inspections and acceptance checks were passed.
With the government running out of money, it naturally has to cut spending, and the first cut fell on infrastructure investment.
The massive infrastructure development this time was already equivalent to 10 years of investment. This pace couldnt continue.
No matter how crazy he was, Franz could not possibly allocate twice the annual fiscal revenue to infrastructure development every year.
Emergency investments in the midst of an economic crisis could still make sense. But with the crisis over, building infrastructure needs to take into account economic returns.
Franz thought for a moment and said, This is inevitable. Our total debt is already the fourth highest in the world, so its really necessary to reduce some of it.
Important urban infrastructure in the country has been largely covered now. In the absence of urgent projects in the short term, infrastructure development could be temporarily halted.
The fiscal pressure on the government could be quite severe over the next two to three years. After that, the massive corporate equity we hold should begin to generate returns.
As he said this, Franz himself lacked confidence. While it was true that they could make a profit, unfortunately, the largest investment had been made in railway companies, and it was unlikely that they would see a profit from this investment.
Unless, of course, he relaxes his policies and allows the railway companies to abandon some of the less profitable lines and operate railways only in economically prosperous areas.
Economically, it would be the most beneficial. Politically, it was out of the question.
Building railroads to every city in the country that needed one was not just a matter of economic growth, but more a matter of strengthening central control over local regions.
In this context, Franz could only apologize to the speculators who were late and got trapped. For the sake of national development, the railway companies must first operate at a loss, with profitability not being the immediate goal.
If the government had not bundled railway projects amid the economic fever but had left the capitalists free to build railways as they saw fit, 3-5 parallel lines would probably have been built in prosperous areas, while economically backward provinces would not have seen a single rail.
This has already been proven in Britain and France. Railroads without economic value simply dont get built, while economically prosperous areas see a great deal of redundant construction.
If it were just this one pitfall, it would be acceptable, but the problem is that many of the companies the government has invested in are in heavy industries, which are characterized by high investment, long cycles, and high returns.
In the short term, these companies need to expand production and drive technological innovation, so dividends are essentially nonexistent, and relying on these investments to offset the budget deficit seems like a distant prospect.
Of course, from the beginning, the Austrian government did not expect to make much profit from them.
More importantly, through government investment, it provides vital funding to these core industries, essentially saving them.
It was equivalent to the current government suffering hardship to leave ample reserves for subsequent governments. This can only happen in politically stable countries.
For countries with frequent changes of government, even leaving no problems for successors would already be considered decent. Want to build up reserves for them? Keep dreaming!
This is also one of the reasons why the national debts of many countries are increasing. As long as the current government is happy during its term, who cares about the fate of its successors?
As the debt piles up from one administration to the next, eventually reaching insurmountable heights, the government has no choice but to succumb to the influence of the financial conglomerates, gradually becoming a mere mouthpiece for money.
A barracks is an iron-forged whole, where soldiers come and go like water.
Monarchies were different. While cabinets changed, Emperor Franz would remain, and even future successors would be his descendants. Naturally, he would not allow anyone to sacrifice future development for immediate gain.
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