THE BALKANS & THE AUSTRO-HUNGARIAN EMPIRE AROUND 1914

Novi Sad, Serbia

In the context of World War I the marginalization of the Serbian and thereby of the larger Balkan dimension already began during the July crisis itself. Serbia and its actions occupied a subordinate place. Furthermore the fact that Serbian-dominated Yugoslavia emerged as one of the victor states of the war seemed implicitly to vindicate the act of the murder of the Austro-Hungarian crown prince and his wife on 28 June 2014. In an era when the national idea was still full of promise, there was sympathy with south Slav nationalism and little affection for the ponderous multinational commonwealth of the Habsburg Empire. But our moral compass has shifted by now. The Yugoslav wars of the 1990s have reminded us of the lethality of Balkan nationalism. Since Srebrenica and the siege of Sarajevo, it has become harder to think of Serbia as the mere object or victim of great power politics and easier to conceive of Serbian nationalism as a historical force in its own right. From the perspective of today’s European Union we are inclined to look more sympathetically on the vanished imperial patchwork of Habsburg Austro-Hungary. Putting Sarajevo and the Balkans back at the centre of the outbreak of World War I does not mean demonizing the Balkans or their politicians. We need to understand the July crisis of 1914 as a complex event. Far from being inevitable this war was in fact inconceivable for most Europeans of the time, at least until it actually happened. So the conflict was not the consequence of a long-run deterioration, but of short-term shocks with the Balkans at the centre.

THE END OF THE MULTICULTURAL STATE

Synagogue, Krakov

During the 1920s and 1930s Austrian intellectual life was still dominated by men who had grown up under the empire. Many of them deemed the Habsburg Empire a lost paradise, whose lustre brightened as time passed. In 1938 the last vestiges of cosmopolitanism perished from Vienna and much of the Danube basin as Jews were decimated, saddling their successors with a corrosive guilt. After 1938 for a long time no other forum for debate has emerged to replace what Hitler had destroyed. The demise of intellectual Vienna is a major reason why post-1945 Central and Eastern Europe has produced so few innovative thinkers.

 

With the Treaty of Paris of 1919, i.e. the treaties of Versailles, St. Germain, Trianon and Sèvres, the disintegration process of the whole Danube region, which during the Habsburg Empire had constituted a homogenous economic free-trade area with a well-working division of production and provision of services, was speeded up in a disastrous way. After the break-down of so many regimes, the collapse of the Russian, German, Habsburg and Ottoman Empires, the map of Central and Eastern Europe was redrawn along nationalistic lines. The main aim was the creation of ethnic-linguistic nation states according to the belief of the US President Wilson that nations had the “right to self-determination”, a belief that was easily held by those far from the ethnic and linguistic realities of the regions which were to be divided into neat nation states. The whole attempt was a disaster and triggered the national conflicts that have torn the continent apart in the 20th century. The Balkans wars of the 1990s and the Ukrainian conflict can be seen as the latest “legacies of Versailles”. …

EASTERN JEWS

Jewish cementery, Krakov

Joseph Roth, born to a Jewish family, grew up in Brody near Lemberg/Lvov/Lviv in Eastern Galicia, the eastern part of the Austro-Hungarian Empire. Brody had one of the biggest Jewish populations in Europe and Jewish cultural life played an important role there. He began his studies in Lemberg and then went on to study philosophy and German literature in Vienna in 1914. In 1916 he quit university and volunteered in the Austro-Hungarian Army. The collapse of the empire had a lasting and detrimental effect on him, as on many other Jewish intellectuals. “My strongest experience was the War and the destruction of my fatherland, the only one I ever had, the dual Monarchy of Austro-Hungary.” In 1927 he wrote his famous essay “The Wandering Jews” about the minority of Eastern Jews and their plight. “The Eastern Jew does not know anything about the social injustice of the West; nothing about the reign of prejudice, that governs the paths, actions, customs and ways of life of the average Western European,….nothing of the hate which is already so strong that it is cherished like a life-giving (but life-killing) eternal fire that warms the egotism of every man and every country…. For the Eastern Jew the West means freedom, the possibility to work and to develop his talents, justice and autonomous rule of the mind. Western Europe sends engineers, automobiles, books and poems to the East. It sends propaganda soaps and hygiene, the useful and the sublime….For the Eastern Jew Germany for example is still the country of Goethe and Schiller, of the German poets, who every ambitious young Jew knows better than a swastika-loving grammar school pupil.” They started migrating from the borderlands to the Russian Empire, where “every year there is a war and every week a pogrom”. Some returned, many more continued their journey. “The Eastern Jews have nowhere a fatherland, but graves in every cemetery…. Most give to the West at least as much as the West takes from them. Some give more to the West than the West gives to them. They all have the right to live in the West who sacrifice themselves, in that they venture to the West.” …

VIENNA, THE MELTING POT OF CENTRAL EUROPE

Crest of the Ephrussis, migrated to Vienna from Russia

Since the beginning of the industrial revolution Vienna had the largest multi-ethnic immigration of all European big cities. in 1880 65 % of the population were not born there and in 1910 the share was still 51 %. The famous Ringstrassen buildings can act as a symbol for this multi-ethnic climate. They were built by architects from different nationalities, constructed by workers and craftsmen who had immigrated to Vienna from all parts of the empire and were partly inhabited by first and second generations of immigrated industrialists of the Ringstrassen era. These architects built similar representative buildings in all the big cities of the Austro-Hungarian Empire and this architectural heritage can still be seen in many cities of the Danube region, restored to new splendour after 1989.…

THE DANUBE REGION UNTIL 1918: MOSAIC OR MELTING POT OF CENTRAL EUROPE

Budapest, market hall

The Canadian historian William Hubbard showed how tightly social, economic and demographic developments in the second half of the 19th century in Cisleithania, the western Austrian part of the Austro-Hungarian Empire were linked to the migrational processes and the minorities issue. In the seven biggest cities in this area, namely Vienna, Graz, Trieste, Prague, Brno, Lemberg/Lvov/Lviv and Krakow, the share of the population born in these cities was rather small. As in other European and American cities urbanisation was fed by migration from the countryside, not by higher birth rates in the cities. In Vienna you had in 1880 a share of immigrants of 65 %. Especially in Vienna immigration was a hot issue of social and political debate. The dynamisms of migrational processes and the political, economic and social status of minorities in the 19th and 20th century were undoubtedly due to urbanisation and industrialisation processes. Immigration followed the allocation of capital, but also traditional migrational processes continued that added to the numbers of already existing minority groups dispersed across the Danube region. One should not forget that migration was already a central phenomenon of the pre-industrial society here.…

THE MULTICULTURAL EMPIRE: “KRONPRINZENWERK” published 1885-1902 by the Habsburg Crown Prince Rudolf

Before the dramatic rise of nationalism, the monarchy officially still celebrated its ethnic and cultural diversity. One important and interesting scientific project had as its patron the crown prince Rudolf. In 1884 he asked the permission of the Emperor to carry out a comprehensive survey of the ethnic diversity of the Austro-Hungarian Empire. In 17 years (until 1902) all crown lands, peoples and regions of the monarchy were researched and the results were published in 24 German and 21 Hungarian volumes. Subscribers could buy the individual issues at a subsidised price of only 30 Kreuzer per issue very cheaply. The political character of the scientific project was to propagate the pride of the Empire in its ethnic and cultural diversity. Despite this propaganda attempt, the knowledge about the lands of the Habsburg monarchy in the West was marginal. Still in 1938 Neville Chamberlain spoke out against a declaration of war against Hitler by saying British solders should not be sacrificed for a conflict “in a far-away country between people of whom we know nothing.” – meaning Czechoslovakia.…

A COMPARISON OF THE TRANSFORMATION OF BANKING AND INDUSTRIAL DEVELOPMENT IN CEE IN THE 1890s & THE 1990s

Trieste, maritime trading centre of the Habsburg Empire

Close ties of banks with the industry of the Austro-Hungarian Empire can be identified, yet a leading role of banks in the industrialisation process cannot be seen. On the contrary, Austrian banks were for years averse to industrial promotion in the 19th century. The caution which pervaded the banking circles in Austria and the Czech Lands was evident in the general lack of risk capital, and in the preference for participating in or granting extended credit to only the booming enterprises. The caution and the lack of entrepreneurial spirit of the banks can be seen from the fact that in the periods of economic expansion the banks lagged behind with their investments. So industrial development was not triggered by investments of banks, but was preceded by private investment or an expansion of government programmes such as railroads. This was not only true for Austrian and Czech, but also for Hungarian banks. Yet despite the fact that economic development was not bank-led in the Austro-Hungarian Monarchy, the banks did fulfil the important role of providing financial intermediation services. The widespread development of banking services, such as credit on current account, open book advances, and discount of bills, were the main contribution of banks to industrial development. They were very efficient in mobilising capital.…

THE GREAT DEPRESSION: CREDIT-ANSTALT CRISIS 1931

Former Österreichische Creditanstalt building, architects Gotthilf and Neumann (built 1916-1921)

The Credit-Anstalt crisis played a crucial role in the dramatic economic developments of the 1930s in Europe as the collapse of the Credit-Anstalt affected the largest bank of Austria and at that time also the largest bank east of Germany. The collapse of the Credit-Anstalt in Vienna started the spread of the crisis in Europe and forced most countries off the Gold Standard within a few months. A feeling of financial distrust and insecurity spread from Vienna and led to runs on other banks in Hungary, Czechoslovakia, Romania, Poland and Germany. The collapse in May 1931 set off a chain reaction that led from the run on German banks to withdrawals in London and the devaluation of the pound to large-scale withdrawals from New York and another series of bank failures in the United States. So in brief the news of the crisis of the Credit-Anstalt, the most important bank in Central Europe, shook the whole economic structure of Europe and sent shock waves through the rest of the world.…

INTERNATIONAL INVESTMENT

Palais Ephrussi, family of Austrian bankers (Vienna – the bank opposite the Palais was destroyed in the 2nd World war), architect Theophil Hansen

The Austro-Hungarian Monarchy generally had an export surplus of securities, which means it was a net importer of long-term capital, except during the period 1903-1908. While in 1868 the majority of loans was taken by Amsterdam, Brussels, Frankfurt and Paris, in 1914 Berlin was the most important foreign creditor. Government securities and railway priority bonds constituted the largest categories. In terms of state debts, the Austro-Hungarian Empire was a debtor towards Western and Central Europe and a creditor towards the Balkans together with Germany. Yet compared to Germany and France, the Austrian banks in Serbia and Romania were insignificant, only in Bulgaria were they of importance. After 1878, most of the debts of the Balkan states financed railway construction. While lending for the infrastructural development of backward countries, the empire constructed its own railway network with the help of foreign capital. After 1855, when the railways were sold to private enterprise and the system of guaranteed interest was introduced, foreign capital penetrated the empire’s economy. The mobilier banks provided the needed capital for the railway construction. In Hungary 85 per cent of the railway system was owned and run by the state by 1891, while in the Austrian half of the empire only 55 per cent was run by the state and it owned only 43 per cent in 1897. More than 70 per cent of the railway priority bonds were still in the possession of foreign investors at the beginning of the 20th century.…

INDUSTRIALISATION IN THE HABSBURG EMPIRE

Budapest, one of the iron bridges

 

The Austro-Hungarian Empire was one of the latecomers in industrialisation together with Switzerland, the Netherlands and Scandinavia. Its reputation of economic backwardness in the 19th century is largely unjustified as only some portions of the empire were really backward, as can be seen above. To an even greater extent than France or Germany the empire was characterised by regional diversity and disparity. The western provinces – “Cisleithania” -, especially Bohemia, Moravia and Austria proper, were economically far more advanced than the eastern part – “Transleithania”. In the west the first stirrings of modern economic growth could be observed as early as the second half of the 18th century, but the topography made internal and international transport and communication difficult and expensive and the poverty of natural resources, most of all coal hindered economic development.…