Chapter 419
Chapter 419: Crisis Breaks Out
February 3, 1873.
Vienna, Austria.
The year 1872 remained etched in the memories of Austrians. Amid a global economic boom, Austria celebrated victory over Italy, reclaiming Venice. This dual triumph fueled citizens' confidence, creating job opportunities and triggering military recruitment. Consequently, enthusiasm for overseas immigration waned, redirecting migrants toward cities and Venice.
Since 1848, when Austria suffered setbacks in the Austro-Prussian War, its economy, though slower in industrialization, progressed steadily. Notably, the construction of over 7,000 kilometers of railways from 1859 to 1872 showcased economic growth.
However, the climax arrived in late 1872 when 76 railway companies in the Austro-Hungarian Empire defaulted on bonds. Out of 384 listed companies, 279 had no dividends to offer. Despite this, railway stocks continued to thrive, fostering a false sense of security among investors.
The bubble burst in February, beginning with the Barclay Railway Company default on February 4, followed by the Cook Railway Company on February 5, and the Kenyons Bank on February 6. On February 7, all railway stocks plummeted, triggering a market crash on the Vienna Stock Exchange, leading to a surge in suicides among investors.
At the court of Vienna, Chancellor reports to Emperor Franz about the catastrophic loss of over 400 million guilders in a day. Seventeen suicides occurred in 24 hours, signaling a total credit paralysis and suspension of securities transactions, heralding Austria's economic winter.
Franz, composed and mature, questioned the Chancellor on the crisis's extent. The Chancellor predicted a potentially more significant impact than the 1848 crisis, as the railway industry's paralysis could spread to other sectors.
The economic crisis of 1873, a global downturn, started in industrialized nations before reaching others. Although regions like the Far East and South America remained unaffected historically, the East African Kingdom faced consequences due to its recent economic engagement. Austria, with its slower industrialization and chaotic financial regulation, became the epicenter, exacerbated by its diverse ethnic groups and factions.
The crisis jeopardized the Hechingen Consortium's operations, especially East African grain exports. As an agricultural crisis intensified, international food prices surged. Ernst, receiving news on the day of the stock exchange collapse, initiated a grain dumping war, pulling together East African, German, and Austro-Hungarian agricultural products to flood Europe.
Simultaneously, East Africa negotiated with the Zanzibar Sultanate to export food to the Arab region and Southeast Asia, further complicating international food prices. The Hechingen Consortium's strategic move caught the world off guard, causing a global food price explosion.
Ernst anticipated financial gains from this crisis, leveraging East Africa's unique economic system. The crisis, though detrimental elsewhere, would not impact East Africa negatively, ensuring Ernst's continued profit. As this chapter concludes, Ernst's manipulation of East African grain exports becomes a critical factor in the unfolding economic crisis.