THE CONSEQUENCES OF THE CREDIT-ANSTALT CRISIS FOR CEE

Österreichische Postsparkasse, architect: Otto Wagner, built 1904-1906

The Great Depression hit Hungary hard, stopping the slow recovery and leading to a dramatic decline. The crisis hit Hungary first through the collapse of the international agricultural market with a 60-70 per cent decline in agrarian prices. But the most severe blow was dealt by the break-down of the Credit-Anstalt and was followed by the international financial and banking crisis. Hungary was heavily indebted, but new credits stopped arriving and substantial portions of the short-term credits were withdrawn from Hungary. The Hungarian National Bank lost most of its gold and foreign exchange reserves and the banking system reached the edge of the abyss in 1931. Between 1931 and 1933 70 banks collapsed. By 1938 the number of banks had been reduced by more than 300 that had been operating in 1929. The effect of the shrinking banking sector was the decrease in its share of industry. Strict government measures were introduced after the financial collapse and the repayment crisis in 1931, the gold Standard was abolished and foreign exchange controls were introduced. After the trade agreement with Nazi Germany in February 1934 barter trade became dominant and a clearing system was introduced to replace hard currency payments in foreign trade. State interventions, economic nationalism, high protection and the policy of self-sufficiency became stronger. Hungary was isolated from the world market and became integrated into the German Nazi economic system.…

FINANCE AND INDUSTRIAL INVESTMENT IN THE HABSBURG EMPIRE

Sparkasse Karlsbad, Bohemia

 

Industrialisation and the industrial boom in Cisleithania, the western part of the “Dual Austro-Hungarian Monarchy”, boosted the confidence of Austrian liberalism, while the crash of 1873 weakened it again considerably. The Gründerzeit (literally: founding time) resulted from a combination of several factors, a mushrooming financial sector willing to invest in the economy, an expanding rail network making demands on the iron industry and technical innovation in various coal-consuming industries, all of this interacting to produce an economic leap forward. As in the 1850s the railway expansion spurred financial innovation, the Gründerzeit was characterised by a blossoming of banking institutions. After the financial crisis of 1857/58 most private bankers experienced a serious downturn, but finance grew again from 1867, the founding of the dual monarchy, via the multiplication of joint stock banks through the established Creditanstalt, associated with Anselm Rothschild, and the Niederösterreichische Escomptegesellschaft. Utilising high profits, the banks helped sponsor the growth of joint stock companies, 1005 of which received charters in the years 1867-73. Vitkovice, controlled by Rothschild, led the way in the adoption of the Bessemer process by the monarchy’s major iron works by 1870, along with puddling, the rolling mill and increasingly the use of coke instead of charcoal. Chief among them was the Bohemian Iron Company, centred at the coal-mining town of Kladno near Prague, which had emerged from the amalgamation of three predecessors in 1857. The coal production received a powerful impetus from technical innovations in a series of industries in the 1860s, like flour milling, sugar refining, paper making and of course the textile industry.…