Holy Roman Empire
Chapter 46: Abolition of the Local Tariff

By 1848, the Czech region had become one of the industrial centers of Austria, and with the development of its industry, the wealth of its capitalists also grew greatly.

The reason that the demonstration broke out was that the wealth and political status of the capitalists did not match, and they refused to stay voiceless in politics.

The Austrian government had continuously introduced new bills, which to some extent sacrificed the interests of capitalists and catalyzed the Prague demonstration.

In Franz's view, these people were probably used to the happy days in Metternich's era, and they had forgotten that those who make the rules of the game could change those rules at any time.

Now, it was the time for the Austrian government to change the rules: those who complied would thrive; those who resisted would perish. Anyone who had complaints about the rules would be destroyed.

On the other hand, as a civilized government, the Austrian government couldn't overdo it and necessarily had to temper justice with mercy.

"In view of the current domestic situation, I propose that we abolish local tariffs to defuse the discontent of capitalists!" said the Chancellor of the Exchequer, Carl.

At that time, the local tariffs in Austria only existed between itself and Hungary, for other local 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 country as early as the last century, but they were opposed by Hungarian nobles and capitalists.

Since Austria's economic development was not balanced, in areas with developed industries, capitalists strongly advocated the abolition of local tariffs; however, in Hungary, where industries were less advanced, capitalists still relied on local protection.

Still, there were some in Hungary who advocated the abolition of local tariffs, such as capitalists in the grain industry.

The Hungarian taxes had nothing to do with the Vienna government: they collected tax for their own use.

Certainly, the Hungarian nobles could take a share of the local tariffs; thus, they were the biggest obstacle to abolition.

The purpose of Carl's proposal was layered: in addition to buying the hearts of some capitalists, it would also serve as a warning to Hungarian nobles.

At that time, the Vienna government still believed that the nobles dominated the Hungarian Kingdom, and the capitalists on the surface were all just puppets.

Franz didn't intend to change the situation. The number of Hungarian nobles was too great, accounting for 4% of the total population, and most Hungarian capitalists had another important identity: nobility.

If they weren't suppressed, all this could cause the nobles in Hungary to become a big headache for Franz.

This concern had been proved right in history: from the era of Austria to that of the Austro-Hungarian Empire, all the governments had struggled with the Hungary issue. If the Hungarian people did not support the Hapsburg family, they would probably have been independent.

"Yes, Austria is a unified country, and the existence of local tariffs is against the trend!"

Clearly, Franz did not mind that the Hungarian rebellion would likely escalate.

The appeals to attend to the interests of Hungarian workers and farmers had actually only come about thanks to the reforms carried out by the Austrian government.

Using one faction to fight another faction, uniting the majority to attack a small group--this was always a good strategy in politics.

Next, he would issue decree after decree to clear obstacles to the capitalists' economic development and shake their determination to rebel.

The abolition of local tariffs only harmed the interests of the big nobles, because the small nobles weren't qualified to profit from it. In this way, the Austrian nobles might even suffer a loss from it, but without tariffs, at least the price of grain from Hungary would be more competitive.

As a result, it would be unlikely that all Hungarians would participate in the rebellion together, and not even all of the nobles would be involved.

"Your Highness, I am afraid that this will not work. The abolition of Hungarian tariffs will have an impact on the Austrian food industry and affect the income of Austrian farmers!" Archduke Louis objected.

Franz suddenly realized that the biggest impact of abolishing the tariff with Hungary was not on the peasants but on the nobles who owned large swaths 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. Just after serfdom had been abolished, he was allowing food from Hungary in, which would surely impact food prices. Would it affect their bottom line?

At that moment, Prime Minister Felix helped make the decision.

"Since 1846, the grain price in Austria has been rising continuously, and for the stability of the country, it is necessary for us to limit it to a reasonable range.

In the long run, it is also a good thing for Hungarian food to enter Austria, because the decline in food prices can help us stabilize public morale as soon as possible.

Moreover, after the abolition of tariffs, Austria's industrial and commercial products will be more competitive in Hungary, which will help us heal from the trauma of the economic crisis!"

Franz was at ease after hearing this: the Prime Minister, a major local capitalist, did not mind the decline in food prices, so the bottom line of the others might be much lower.

In history, it seemed that Austria had also abolished the tariff system during this period, but Franz was not sure which year it was exactly.

"The Prime Minister is right. The abolition of tariffs now will allow the Austrian economy to recover as soon as possible, which is very important to us.

Because of the war, our revenue may be greatly reduced this year. If it weren't for the confiscation of rebel property, I'd be afraid that the government would go bankrupt.

The next counter-revolutionary war will require significant cash flow. I am afraid that the money we have now is just a drop in the bucket, so we have to replace ways to increase revenue and reduce expenditure.

Now we have so many factories under our control, we must get them to work as soon as possible, and the Hungarian market is essential for us to capture!" Foreign Secretary Metternich said.

Austria was really short of money. Before the March revolution, the Vienna government already had 748 million guldens in national debt, which, now, was equivalent to about 600 million to 650 million. (1 gulden was about 11.6928 grams of silver.)

Rest assured, Franz did not pay back any money; the creditors were gone.

Because of the rebellion, many debts were destroyed, and many creditors became wanted criminals. The rebel army also seized a large number of bonds, which were directly burned by Franz.

There were two kinds of national debt issued by the Austrian government: registered and bearer. The former would not be possibly cashed in by the wanted criminals, while the latter could still be transferred.

It was idealistic to expect that the Hungarian market would restore the Austrian economy.

Franz believed that Hungarian capitalists would not mind doing business with Austria, even during a revolution.

The issue was how to ensure the safety of transportation during the war. And who would buy their goods? No one would buy from them, except for weapons.