Austrian Bankruptcy (1854)

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In the Notebook the dispatch of this article under the title "Oesterreichs Finanzen" is dated March 3. The article dealt not only with the state of Austrian finances, but analysed Napoleon III's speech of March 2 and contained some other material which the Tribune, editors arbitrarily combined with Marx's previous report (see Note 34). The article on Austrian finances was published as a leader. As the editors were wont to pass off his articles for their own, Marx wrote to Engels on April 22, 1854: "Of late the Tribune has again been appropriating all my articles for its leaders and putting my name to nothing but rubbish. It has appropriated, for example, a detailed account of Austrian finances, articles on the Greek insurrection, etc. Not to speak of their 'congenital' habit of making a splash with your military stuff".

Notwithstanding the imminence of war and their pressing needs, the French and the Austrian Governments have not yet succeeded in strengthening the nervus belli, namely, the money-power. Notwithstanding the Lucullian magnificence displayed in the dinners given by the French Minister of Finance to the Receivers-General, the Crédit Mobilier, and the principal bankers of Paris, those capitalists prove stubborn and cling to that discreet sort of patriotism, which, by exacting the greatest possible interest from the state, is wont to indemnify its private interests with the public ones. Thus the terms of the proposed French loan of two hundred million francs remain still unsettled. As to Austria there can exist no doubt that one of principal motives which induce her to profess friendly feelings toward the Western Powers is the hope of thus reviving the confidence of moneyed men and getting out of her financial difficulties. Indeed, the official gazette at Vienna had hardly uttered a few words about Austrian neutrality and good understanding with France, when it surprised the public with the announcement of an intended sale of a considerable portion of the six million acres of crown lands, and with a financial rescript, dated Feb: 23, 1854, to the effect that the whole of the State paper-money, 150,000,000 florins, now in circulation, and of compulsory currency, was to be transferred to the National Bank, and successively converted into bank-notes, at the expiration of which change all the paper issued by the treasury will be withdrawn from circulation, and no more State paper-money of a forced currency be issued. In making this change the Imperial Government is guarantee to the Bank for the paper-money transferred to it, and pledges itself to indemnify it for the expenses connected with that conversion; to pay, in extinction of the debt thus created, a yearly installment of at least 10,000,000 florins; to mortgage the customs' revenue as security for the regular payment of these installments, and to pay the Bank in specie in proportion as those duties are received. At the same time the Government is bound to do its best to enable the Bank to fulfill its obligations and resume specie payments. Meanwhile, in order to give the holders of bank-notes the means of changing their notes at pleasure into a debt bearing interest, payable in specie, the Bank undertakes to issue bonds bearing interest, to be in all respects on the same footing as State bonds or obligations. The Government will also call in what are known as Redemption notes and Anticipation notes, and put them entirely out of circulation.

The conversion of State paper of a forced course into inconvertible bank-notes will not reduce the amount nor ameliorate the quality, but only simplify the denominations of the paper-money issued. As the State is in the possession of the same means which it grants the Bank for the redemption of the paper-money, it would itself have made use of them if not fully aware that the want of confidence in itself was such as not to allow credit to be restored save by the help of a bank, which is not the property of the State. Thus the dependence of the Emperor on the Jews of the Vienna Bank grows at the same pace as the military character of his Government. In January 1852, he mortgaged to them the salt-works of Gmünden, Aussee and Stallein. In February 1854, they obtain a lien on the customs' revenue of the whole monarchy. Step by step the Bank becomes the real and the Government merely the nominal owner of the Empire. The more Austria has resisted the demands of participation in political power on the part of the middle classes, the more she is forced to undergo the unmitigated despotism of one fraction of those classes the money lenders.

The decree, of which we have above given the substance, disguises an attempt at a new loan under the form of aid tendered to the holders of bank-notes, in changing them into a debt bearing interest; the latter to be paid in specie. In 1852 the Government also pledged itself to meet in specie various minor payments and obligations, but as it received the taxes only in State paper-money or in bank-notes the Administration was forced to contract a loan of thirty-five million florins at London and Frankfort. The new loans, of course, augment the old deficits and the augmented deficits lead to new issues of paper-money, the superabundance and consequent depreciation of which they were intended to prevent. The broad distinction drawn on the part of the Government between payments in specie and payments in bank-notes is as good a means of rescuing the notes from their discredit as the augmentation of the circulating medium of the Bank by 150 millions is a means of enabling it to fulfil its engagements and resume cash payments. The Government will pay the Bank in specie in proportion as the customs duties are paid in the same, but it is well known that not only the Austrian peasants but even the citizens in the larger towns are as fond of hoarding as the Chinese and the Indians; that in 1850 sums were hoarded even in copper, and that in 1854 they are paying all taxes in paper, although it is only accepted with a discount of full seventeen per cent.

Those conversant with the past history of the Austrian Exchequer will fail in discovering any novelty either in respect to the promises held out in the new decree, or the financial devices resorted 'to. The first issue of Austrian paper-money took place under the Empress Maria Theresa, toward the end of the Seven Years' War. It consisted originally of Bank bills exchangeable by the State authorities for silver. In 1797, in consequence of the pecuniary difficulties of the Government in the wars against France, the convertibility into silver was abolished. The first issue under the Empress Maria Theresa having amounted to twelve million florins, the total sum of Bank bills issued in 1809 amounted to 1,060,793,653 florins, their reduction in value having at the same time reached its maximum. On the 20th of February, 1811, the Government published a patent 45 by which the Bank bills were altogether withdrawn from circulation and redeemed (hence the name Redemption notes) at the rate of 20 for 100 for a new paper called Wiener Währung. The Government declared this to be the real money of the country, and promised that this new paper should never be increased beyond the amount necessary for exchanging the Bank bills. In May 1811 the Wiener Währung was already at a discount of 8 per cent., and Anticipation notes were issued, so called because the proceeds of a part of the taxes for twelve years were anticipated by them. The first issue of Anticipation notes really amounted to only forty-five million florins, and for their redemption within twelve years an annual sum of 3,750,000 florins was destined to be taken from the land taxes.

But in consequence of the war, new issues of Anticipation notes quietly followed each other, each new issue being attended by a reduction of their value. In 1815 the premium for silver reached the height of 400 per cent. against the Wiener Währung On the first of June, 1816, an imperial patent appeared declaring that the State would in future never again have recourse to an inconvertible paper currency; that the paper-money in circulation should be gradually withdrawn and specie be restored as the standard medium of circulation. In order to fulfil these promises, the privileged National Bank was constituted definitively, January 18th, 1818, the State having made an arrangement with the Bank by which it pledged itself to redeem the inconvertible paper-money. As late as June, 1852, however, we find again the Finance Minister announcing in the official gazette that, in future, compulsory loans, extraordinary taxation, depreciation of the value of money, would be absolutely excluded; if not exactly at present, yet in future, Austrian paper would be converted into coin without loss, and that the loan now contemplated would be applied to withdraw the State paper-money and for the payment of the State debts to the Bank. There can be no better proof of the hollowness of such promises than their periodical occurrence.

At the time of Maria Theresa the Austrian Government was powerful enough to issue its own Bank bills, exchangeable for specie and even at a premium over silver. In 1818 the State, in order to redeem its paper-money, was obliged to recur to the establishment of a privileged bank, the property of private capitalists, who received advantages very burdensome to the State, but who were pledged to the issue of convertible notes. In 1854 the Government appeals to the help of a bank, whose own paper has become as depreciated and inconvertible as that of the State itself.

Although from 1815 to 1846 Austria enjoyed a period of almost uninterrupted peace and internal tranquillity, the first shock after that long period found her altogether unprepared. The insurrection at Cracow, and the disturbances in Galicia, at the end of February, 1846, augmented the public expenditures by more than 10,000,000 compared with 1845. The army expenses were the principal cause of this increased outlay. They amounted to 50,624,120 florins, in 1845, but in 1846 raised 7,000,000 more, while the administrative expenses of the provinces rose 2,000,000. In 1847 the commercial crisis and the bad harvest produced a great diminution in the excise revenue, while the army [budget] rose to 64,000,000, chiefly in consequence of troubles in Italy. The deficit of that year was 7,000,000. In 1848-9 the revenue of whole provinces was lost, besides the war expenses in Italy and Hungary. In 1848 the deficit was 45,000,000 florins, and in 1849, 121,000,000. State paper of compulsory currency, to the sum of 76,000,000, Three-per-Cents, was issued in 1849. Long before this, the Bank had stopped specie payments, and its issues were declared by the Government to be inconvertible. In 1850 there was a deficit of 54,000,000 and the chances of a war with Prussia brought down the paper-money to a discount of 60 per cent. The total amount of State paper-money issued in the years 1849, '50 and '51 was 219,000,000. In 1852 the deficit was 8,000,000 more than in '49, and 46,000,000 more than in '47. In 1851 the war budget was 126,000,000, fully double what it was in '47. In '52 the police expenses were 9,000,000, fourfold greater than those of '48. Both police and war expenses also increased in 1853.

The real question, however, is not how Austria got into her financial cul-de-sac, but how, when thus immersed in bank paper and debt, she has avoided open bankruptcy. In 1850 her revenue amounted to one hundred and ninety-six millions more than in 1848; and to forty-two millions more than in 1849. In 1851 the receipts were two hundred and nineteen millions over those of 1850. In 1852 they reached two hundred and twenty-six millions, an increase of six millions over those of 1851. Thus there has been a continual increase of revenue although not in the same proportion in 1852 as in 1851 and in 1851 not in the same proportion as in 1850.

Whence this increase of revenue? Putting aside the extraordinary receipts from the Sardinian war indemnity and the Lombardo-Venetian confiscations, the transformation of the Austrian peasant into a landholder has of course increased the tax-paying power of the country and the revenue derived from the land tax. At the same time the abolition of the patrimonial courts brought the income, which the aristocracy had formerly enjoyed from their private administration of justice, into the coffers of the State, and this branch of revenue has been constantly increasing since 1849. Then a considerable increase arose from the income-tax, introduced by the patent of October 29, 1849. This tax has proved particularly productive in the Italian provinces of Austria. In 1852, for instance, the increase of the income-tax in the German and Slavonic provinces together amounted to six hundred and one million florins, while in the Italian provinces alone it was six hundred and thirty-nine. The principal cause, however, which has saved the Austrian Empire from a formal bankruptcy, is the subjugation of Hungary and her assimilation with the other provinces in respect to taxation.

The basis of the whole Austrian system of taxation may be said to be the land-tax. On the 23d Dec. 1817, appeared an imperial patent, in which the Emperor Francis announced his resolution to establish uniformity in the land-tax system all over his German, Slavonic and Italian provinces. In one paragraph of this patent it is ordered that no exemptions from the land-tax should in future "be made according to the personal quality of the possessors of estates or houses", and as a whole this view was acted upon. In the Archduchy of Austria, the new survey was introduced in 1834, and this was the first hereditary domain in which the new system was brought into operation. Austrian-Lombardy possessed an excellent survey from the time of Charles VI, the Censimento Milanese. Hungary and Transylvania, however, by no means contributed to the land-tax and other taxes, in the same degree with the other provinces of the Empire. According to the Hungarian Constitution, the Hungarian possessors of by far the greatest part of all the land were subject to no kind of direct tax, and even several of the indirect taxes imposed upon the other provinces pressed neither upon Hungary nor upon Transylvania. The population of Hungary, Transylvania and the Military Frontier together amounted, in 1846, to 14,549,958; those of the other provinces of the Monarchy, to 24,901,675, so that the former should have contributed seven-eighteenths of the whole revenue. But Hungary and Transylvania in 1846 only contributed twenty-three millions, which, as the whole revenue in that year amounted to one hundred and sixty-four millions was only somewhat less than one-seventh of the revenue. The Hungarian provinces occupy 5,855 of the 12,123 German square miles, which form the area of the Austrian Monarchy; consequently one-half of its superficial extent.

The Emperor Joseph II, whose great aim was the centralization and complete Germanization of the Austrian Monarchy, had arbitrarily introduced innovations in Hungary intended to place her on the same footing with the other provinces. But this produced such an effect on the public mind in that country that Joseph II, at the close of his life, feared that the Hungarians would rebel as the Netherlands had done. The Emperors Leopold II, Francis I, and Ferdinand I did not dare to repeat the hazardous experiment. This cause — the impediments to an equalization of taxes existing in the Hungarian Constitution — ceased to work after the Hungarian revolution was quelled by Russian assistance. The Emperor Francis Joseph having never sworn to the Hungarian Constitution, and being made Emperor in the place of Ferdinand because he had never sworn to it, at once introduced the land-tax on the same footing with the other crown lands. Besides, by the abolition of the frontier of Hungary on the 1st of October, 1850, the Austrian Monarchy came to form one single territory with respect to customs as well as taxes. The Excise and the tobacco monopoly were also introduced there on March 1, 1851. The increase of the direct taxes alone in the Hungarian provinces amounted to 11,500,000 florins in 1851 and to about 8,000,000 florins in 1852.

We arrive then at the irrefragable conclusion that on the possession of Hungary and Lombardy depends not only the political but the economical existence of the Austrian Empire, and that with their loss the long-delayed bankruptcy of that State becomes inevitable.