Holy Roman Empire

Chapter 606: Resource Curse

The era of colonial expansion has ended, and the Austrian government’s focus has once again shifted back to domestic issues. Austria’s most pressing problem now is the uneven economic development within the country, leading to a widening wealth gap.

Looking solely at the per capita income of 64.6 guilders, this figure is already quite substantial. After excluding children and the elderly, the per capita income for the labor force exceeds one hundred guilders.

However, the reality is that large capitalists and nobles earn annual incomes in the tens of millions, while the vast majority of ordinary workers have actual annual incomes of less than 30 guilders.

Franz himself is also a beneficiary in this regard. As someone who has contributed to raising the average income, he now finds himself troubled by the expanding wealth gap.

Vienna, for example, boasts the highest per capita income in the world: its average annual income is 328 guilders.

This income level places one in the middle class and above in any country or region worldwide.

As Austria’s financial, cultural, technological, and educational capital, it seems unsurprising that Vienna has reached this level with so many resources at its disposal.

However, statistical data tells Franz that this is merely superficial prosperity as serious internal issues exist.

Vienna has a population of 1.06 million, with approximately 620,000 of them being of working age. Of these, less than 11.2% earn an annual income of 328 guilders or more, and only 29.6% earn over 100 guilders, while 24.6% earn less than 30 guilders (calculated only for the labor force population).

This is still the capital. With such a number of low-income individuals, other regions would likely be even more severe.

According to statistical data, the number of people with an annual income below 20 guilders has reached as high as 31.2%. This is not a figure one would expect from a developed country, yet reality is as such.

The stark wealth gap is only one aspect. The regional development imbalance is even more alarming. The per capita annual income in the poorest small counties is less than eight guilders.

This income barely covers the cost of potatoes. This is still under the assumption that Austria is a grain-producing country. if it were in Britain, they would have to settle for foraging for wild vegetables.

Moreover, this disparity continues to grow. The poorer regions are getting poorer, while the richer regions are becoming richer.

Old problems remain unresolved, and new issues are emerging. With economic development, the urban-rural gap is widening at an astonishing rate.

The five years from the abolition of serfdom in 1848 to 1854 were a golden period for rural economic development in Austria, with agricultural output increasing by 56% during that time.

However, rural economic growth slowed rapidly afterward, especially after the agricultural crisis of 1873, when Austria’s rural economy even experienced negative growth for a time.

While the national economy surged, rural economic growth in 1875 was less than 1%, nearly stagnating.

With so many problems converging, Franz felt like he was losing his hair from worry. Solving these issues sounds simple, but how should they be addressed?

This is not just Austria’s problem. No country in the 19th century was exempt from these issues and none managed to resolve them effectively.

Since Franz raised these issues, the Austrian government has been trying to find solutions, but reality remains harsh.

Franz even hesitated to order the bureaucrats to resolve these problems because once such an order was given, he feared he would no longer see the true data. ?

This is not the internet age. In this era of poor communication, covering up the truth is all too easy. All it takes is a stroke of the pen to tweak the numbers.

Deceiving superiors and concealing the truth is a skill that bureaucratic groups excel at, as exemplified by the neighboring Russian government. Since Alexander II pushed for reforms, the Russian Empire has shown astonishing growth on paper.

Looking solely at the figures, Russia’s industrial strength has already surpassed Austria’s and is likely to exceed that of continental Europe in just a few years. Perhaps during Alexander II’s lifetime, the Russian Empire could even surpass the entire world.

Compared to the Russian bureaucrats, Austria’s officials are still somewhat conscientious. While data falsification does occur, it is certainly not as extreme.

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This is Franz’s achievement. As a competent emperor, it was necessary to have clear rewards and punishments, so he established a strict reporting reward system.

You can falsify data, but you must ensure that everyone cooperates. It is not enough to guarantee cooperation from just the next government, you must ensure that even future governments will comply.

Under a lifetime accountability system, anyone who knows and fails to report bears collective responsibility. All honors received will be revoked, and they will spend the rest of their lives in prison together.

Whistleblowers will be promoted directly by three ranks and can work in investigative departments specifically tasked with rooting out data falsification.

As a sacrifice for this policy, the bureaucrats of the Bosnia and Herzegovina province were the first to suffer. An official whom Franz had originally held in high regard was also placed on the cabinet’s list and fell victim to the fallout.

In a single sweep, over a thousand public officials were imprisoned, and the entire bureaucratic group in Bosnia and Herzegovina was implicated, resulting in nearly a complete collapse.

Following this incident, everyone became more restrained, and the data quickly returned to normal.

In the political arena, who doesn’t have a few political enemies? If local governments were all united, the Austrian government would have long since lost sleep over it!

With strict oversight from above, those below naturally dared not act recklessly. It’s just statistical data so it’s best to report it honestly. Falsifying data may yield political achievements but is far more likely to lead to imprisonment.

At the Vienna Palace, during an economic meeting, Franz slammed his hand on the table and said, “The domestic economy is developing rapidly, but the wealth gap, regional disparities, and urban-rural divides are becoming increasingly severe. It is now time to address these issues.

If we continue to delay, it will only become more difficult to handle in the future. I do not expect a complete resolution of these problems, but we must ensure that the situation does not continue to deteriorate.”

The bar is set low because, given the current state of productivity, Franz knows these issues can’t be entirely resolved.

Not being able to solve a problem does not mean ignoring it. Regardless of how things go, taking action is better than inaction. Even maintaining the current status quo would be a significant achievement.

Prime Minister Felix responded hesitantly, “Your Majesty, the biggest issue with regional economic development imbalance is the limitations imposed by natural conditions.

We can only adapt our policies to local circumstances and formulate appropriate economic development strategies. A significant portion of these areas is constrained by natural conditions, making both agriculture and industry unsuitable for development.

From a broader perspective, we must make choices regarding these regions and focus on developing areas where progress is more feasible.

The widening urban-rural gap is a global issue. With the advancement of industrial technology, the disparity between agriculture and industry will only worsen.

In the short term, the most effective approach is to promote land consolidation and adopt large-scale farming models to replace the smallholder economies prevalent in many areas.

However, this is also the least desirable solution. The social problems brought about by land consolidation are far more severe than the widening urban-rural gap.

In fact, neither of these two issues is the key problem. The most important issue remains the expanding wealth gap and the increasing number of people living in poverty.

As long as we address the income issues of the lower classes, both regional development imbalances and widening urban-rural gaps can be accepted.”

This is a false proposition. If they do not address regional development imbalances and urban-rural disparities, how can they reconcile the wealth gap?

The three issues have always been interdependent. Income differs from others as it is regulated by the market, and the government cannot forcibly control it.

Franz was no longer an economic novice. He did not naively believe that simply setting a higher minimum wage would raise everyone’s income.

This was impossible, as the labor costs that each industry could bear varied significantly. For certain traditional industries, their market competitiveness relied on cheap labor.

Many countries in later years deindustrialized, and aside from the nominal excuse of “environmental protection,” the primary reason was that labor costs in developed countries were too high.

Or rather, unions had become tools for certain individuals to profit, and in pursuit of higher investment returns, capitalists had no choice but to relocate their factories.

Austria had not yet reached that point. Many capitalists were still in the phase of making money while lying down, and the profits in most industries were quite good.

The main reason why the income of the lower classes remained stagnant was the supply-demand relationship in the labor market. The notion that labor costs affected market competitiveness was, in reality, quite absurd.

Currently, labor prices are relatively low. Labor costs account for a very small proportion of total expenses. In many industries, apart from labor-intensive sectors, labor costs are less than one-tenth of product prices.

Compared to their British competitors, Austria’s labor costs are much cheaper, and raw material costs are also significantly lower, yet the retail prices of products in international markets are nearly the same.

This greatly dissatisfied Franz. With so many advantageous conditions, capitalists were failing to compete with the British for market share. Clearly, the domestic market had already satisfied them, leading to a lack of ambition.

If this situation is not changed and they do not develop a sense of crisis, Austria might get inflicted with the “resource curse.”

In the original timeline, the capitalists of Britain and France were just like this. Since they could make money, why bother working harder?

Each one indulged in eating, drinking, and having fun, completely lacking a sense of crisis, and ultimately watched as Americans and Germans surpassed them.

Changing the current state of complacency among domestic capitalists is the core focus of this economic meeting.

Franz said, “Addressing the wealth gap is indeed a core issue. What plans does the government have?”

Prime Minister Felix replied, “In the short term, the simplest way to raise everyone’s income is through immigration. While there is an oversupply of labor domestically, there has been a persistent shortage of labor in the colonies.

We have been facilitating immigration in recent years, but we have not done enough. In the inland areas, we have hardly done any promotional work. This situation must change now.

The government plans to migrate ten million people from the homeland to the colonies within five years. This time, the primary areas for immigration will be rural regions with excessive population density and impoverished remote areas.”

As desperation sets in and masses move to the colonies, the domestic labor market will inevitably see a shift in supply and demand, ending the era of capitalists’ reliance on cheap labor.

Franz was not being ruthless. He was simply forced by reality.

The German Empire of the original timeline is the best example. Apart from coal and iron, it lacked almost all other resources, had higher labor costs than the French, and had no colonies to plunder, yet it still managed to develop.

The talents obtained from compulsory education is one aspect, but more importantly, it is the crisis awareness of enterprises that drives everyone to push for technological innovation.

Austria has implemented compulsory education for many years, and the quality of its population is not low. It also possesses a richer market and resources, so there’s no reason it shouldn’t succeed.

The Second Industrial Revolution began in Austria, and logically, with Franz’s encouragement, new technologies should have developed faster than in history. However, reality has proven otherwise.

In 1875, newly registered patents in Austria showed that royal industries accounted for one-third of the total, and this percentage has been rising year by year.

After conducting research, Franz discovered that the core issue was that businesses were too comfortable. With profits coming easily, capitalists were simply unwilling to push for technological innovation.

This was driven by self-interest. Cheap labor, low raw material prices, and a vast market meant they could make money without effort.

On the other hand, investing in new technology research is fraught with uncertainty. Investments and returns do not necessarily correlate, and people are generally reluctant to take risks.

Without pressure, one must create pressure. In this era before the internationalization of capital, Franz was not afraid of capitalists fleeing.

Engaging in international trade requires government endorsement. Every multinational conglomerate has government backing. Even so, these groups are often taken advantage of by local players.

There are many classic examples of this: for instance, British and French capital invested in Austrian railways and infrastructure construction but ended up being exploited by Franz during an economic crisis.

Similarly, British capital invested heavily in railway construction in the United States and ultimately lost everything.

Those with backing can be exploited within the rules. As for those without backing—there’s no need to be concerned about appearances.