Chapter 11: Austrian Trade Circle Plan

During the uproar of the civil service exam, the Austrian army in the Papal States - under the farewell of Pope Pius IX, embarked on their journey home.

Louis-Napoleon-Bonaparte, who had just ascended to the presidency and wanted to make his presence felt by intervening in the Papal States, regretfully had to give up.

The Austrian army had already finished its job. Pope Pius IX had no intention of changing his allegiance. If the French forces moved further, it would be an invasion.

If the Austrian army didn't leave, perhaps Pope Pius IX would seek to balance things out with the French. But now, as they were beginning to withdraw, why would he want to create discomfort for himself?

History took a turn here. The French could not extend their influence into Italy. Through military intervention in the Papal States, Austria maintained its influence among the Italian states.

This was very important for Austria's business community. Retaining political influence also meant holding onto this commercial market, giving a boost to the ongoing Industrial Revolution.

At a new round of government meetings, Finance Minister Karl Ludwig von Bruck said enthusiastically: "The development of industry and commerce cannot be separated from the market.

Looking at countries around the world, only the British have completed the industrial revolution, built on their vast colonies.

Austria doesn't have extensive colonies. If we want to catch up with the British pace, we need to establish a market for Austria.

We have released the domestic market through a series of reforms, but it still takes time to cultivate, far from meeting the actual needs of our industrial and commercial development.

Using diplomatic means to establish a commercial circle led by Austria will greatly promote our economic development and accelerate our industrialization.

Including the Kingdom of Naples, the Papal States, Tuscany, Bavaria, and Württemberg in this economic circle, we will form a market of 67 million people, becoming the largest economy on the European continent...."

Joining with the Italian states and southern Germany to form the largest economic body on the European continent, this is not just about economic interests. Politically, it can also consolidate Austria's dominant position in southern Europe.

In this way, it can also strike at the rising Kingdom of Prussia. Once the business circle centered around Austria is established, the German Customs Union will be in name only.

Due to transportation issues, even if we allow the Prussians to join the new economic body, they cannot reach the Italian regions. Before the railway network is fully established, the transportation costs alone would make their products uncompetitive.

They can't access the new markets, yet the original German market will face the impact of Austrian goods. The present Kingdom of Prussia is not the Kingdom of Prussia twenty years later; its manufacturing industry does not have an advantage over Austria.

The plan sounds good, but it's not easy to implement. First and foremost, what can convince everyone that a common economic body benefits them?

In any alliance, interests are the best ties. An economic circle dominated by Austria obviously benefits Austria, but it might not necessarily benefit the member countries.

Austria's industrial revolution needs external resources, at least in its early stages, and this is undeniable.

It's only in the later stages that we can talk about trade balance, capitalizing on high added-value products to make the exploitation seem less apparent.

Metternich opposed, saying, "Mr. Karl, your plan is indeed very good, but unfortunately, the chance of success is too low.

Whether it's the Italian states or the southern German states, if they feel too exploited, they can switch alliances. Austria isn't their only option.

Don't talk about loyalty between countries; it doesn't exist. If there's no betrayal, it's only because the stakes aren't high enough.

Finance Minister Karl confidently explained, "But Austria is their best choice! In a common economic body, indeed we benefit the most, but it doesn't mean they don't benefit at all.

At least some of those who cooperate with us can reap greater benefits. If we turn the ruling class into this interest group, then there's no problem.

As long as we can control the scale of this, the general population won't notice. Take, for example, the German Customs Union in the German regions. Didn't the public refrain from opposing the Kingdom of Prussia?

Once the industrial revolution is completed, with our technological advantages, we can further promote balanced trade, further concealing this wealth exploitation."

Franz was shocked; this sounded like they were fostering a comprador class.

The industrial budding in Italy is in the north, and there's a void in the central and southern regions. Capitalist economy hasn't taken off; Southern Germany isn't much better, with slow economic development and a market filled with goods from the Kingdom of Prussia.

Now Austria wants to establish an economic circle, and for the ruling class of these states, it doesn't harm their interests. On the contrary, everyone can benefit from cooperation.

"What about the attitudes of other major powers? If we promote this plan, will it cause uncontrollable diplomatic situations?" Felix asked with concern.

Metternich stood up, paced a few steps in the room, then answered.

"It's not a big issue. The aforementioned regions are all within our traditional sphere of influence, and we haven't overstepped. The major powers won't react too aggressively.

Not long ago, British Foreign Secretary Palmerston visited Vienna, and we re-established everyone's sphere of influence in Italy. Even if the British are dissatisfied, they have no reason to interfere.

On the Russian side, we can even get support. The Tsar's government won't care about these minor issues.

The French are busy with their own problems. Louis-Napoleon Bonaparte, in his bid to be elected president, used dubious means. The Republicans won't support him.

With a Republican-led cabinet and parliament opposing the president, the French won't be able to do much for a long time.

The Prussians will probably strongly oppose, but their opinions don't matter much; they can't prevent our actions."

"The British have no reason to interfere", this seems like a joke. Franz would rather believe the British don't have the strength or interest to interfere.

In this era, the British Empire isn't short of markets. As the only industrialized nation, coupled with the vast colonial market, they're quite comfortable.

The British investments in Italy are mainly in Sardinia and then in Lombardy and Venice. Few merchants would foolishly invest in southern Italy, which lacks resources.

Italy's states are still feudal monarchies, and their commercial markets are non-essential for the British. It's not worth turning against Austria over them.

Given Russian support, even if the British object, it won't matter. Before the Crimean War, the British hadn't achieved a universally recognized dominant position, at least not in Austria's eyes.

The attitude of the Kingdom of Prussia isn't something Austria needs to worry about right now. They haven't unified Germany yet and aren't as imposing as the Second Reich of the future.

In 1848, the Kingdom of Prussia had a population of just 1 million, less than 40% of Austria, and its economic output was roughly half of Austria's. (Note: economic output isn't equivalent to industry)

"What about Spain?" Franz asked with concern.

"Other European countries can be ignored, but the attitude of Spain cannot be overlooked. In the Kingdom of Naples, Spain's influence is by no means weak, and it's even stronger.

Spain is no longer in the Habsburg dynasty era; now it is the era of the Bourbon dynasty under Isabella II. We must consider their stance.

Metternich explained, "Your Majesty, according to the intelligence we have, Spain is riddled with internal strife, and a revolution could break out at any moment.

We are merely establishing a trade alliance without harming their interests. The possibility of Spanish government interference is low."

Franz nodded in agreement, thinking that it was just the usual tactic of exploiting the weak. As long as Austria didn't annex the Kingdom of Naples, the Spanish could accept it.

Furthermore, considering Spain's current industrial level, there aren't many industrial products exported to the Kingdom of Naples.

"Mr. Karl, as we expand our markets, can our domestic industry keep up? If we can't capture the market immediately and end up cultivating competitors, it will be a public embarrassment," Prime Minister Felix asked with a frown.

Don't mock others. The industrial development of Austria at this time wasn't that impressive either. It's advanced in Southeast Europe, but when compared to the British, it falls short, and even lags behind the French.

"Prime Minister, rest assured on this matter. Our Ministry of Industry can guarantee a victory over any competitor!" Industrial Minister Kasten-Quebec confidently said.

His confidence stemmed from the early success of the state enterprise system. Compared to private enterprises chasing profits, the strategic goal of state-owned enterprises now is to quickly complete the industrial revolution. Profits are secondary.

The Austrian government isn't siphoning off from the companies. The profits generated by these enterprises are fully reinvested in technological innovation and production expansion.

Due to the war's damage to trade and industry, it has since been restored, and Austria's manufacturing is rapidly rising.

This pace is not the limit. If the government invests more, growth can still continue.

This was within Franz's expectations. Regardless of future criticisms of the state system, in the initial phase of capital accumulation, the state economy played a positive role.

As long as the management of the companies doesn't deteriorate, state-owned enterprises, with their numerous advantages, are definitely more competitive than private ones.

The USSR is a prime example. In a short time, they achieved leaps in development and established a vast empire.

As for the decline in the later stages, Franz simply disregarded it. One must rise before they can fall. There's no point in worrying about potential issues so far in advance.

If the state economy fails, an economic transformation can be carried out. After all, not only is Austria relying on state economy, private enterprises are also developing.

Once the industrial revolution is completed, unprofitable light industries can be sold off, and the government can retain control over industries vital to public welfare.

Seeing no more questions from the attendees, Franz said, "If there are no further questions, let's vote on the establishment of a trade circle centered around Austria. Those in favor, please raise your hands."

Democratic voting was not Franz's innovation; it has been in Europe for a long time. He simply learned from his predecessors.

In Austria, those eligible to participate in decision-making are ministers and higher-ranking officials. The main purpose is to ensure a balance of power.

Franz is not power-hungry. He delegates most governmental tasks to the cabinet. To avoid being sidelined, he introduced democratic voting during government expansion meetings.

Ministers and higher-ranking officials are appointed and dismissed by the king himself, and under normal circumstances cannot be bought. They are potential cabinet ministers, governed by the cabinet, but also sharing the cabinet's powers.