Holy Roman Empire - Chapter 488

Chapter 488: Chapter 61: Franz’s Headache
 

With the conclusion of the economic conference, the power industry was designated as Austria’s new pillar industry for the next decade, accompanied by heavy industry.

Up to this day, the scale of Austria’s heavy industry has also reached astronomical figures. The main industries involved are: steel, metallurgy, coal, machinery, chemical engineering…

In terms of categorization, power can also be regarded as a type of heavy industry, the connection between the two is very tight. It was only singled out because it was just starting and had a very large industry scale on its own.

There can’t be many pillar industries, so since power and heavy industry have become the new pillar industries, naturally, other industries have fallen from the “pillar industries.”

Undoubtedly, what was replaced was “railways.” It’s not that railways have become unimportant, but rather, after over twenty years of hard work, most of Austria’s railways had been completed.

The railway industry began to approach saturation, and in this state, what were needed were steady development and no longer required the government to invest too many resources.

Besides railways, agricultural development had actually reached its limits. The growth rate of domestic agriculture had already slowed, and the agricultural product market is only so big; growing more grain doesn’t mean earning more.

The current rate of agricultural growth is almost on par with the population growth, and Austria already occupies seventy percent of the international agricultural product export market, a share that is almost impossible to increase further.

Even before long, it would face the impact of the resurgence of Russian agricultural products, making it very difficult to maintain the current market share.

In order to ensure the healthy development of agriculture, Austria’s agriculture had undergone several adjustments, from the initial direct export of agricultural products to later refined agricultural product exports.

In the meantime, this included promoting sericulture in Lombardy and the Veneto region and developing the silk industry; promoting vine planting in the Balkan Peninsula and starting a wine industry.

These measures were all taken to artificially reduce grain production to ensure the stability of grain prices. With the outbreak of the Prusso-Russian War and the disappearance of the Russians as a competitor in the international market, life has only gotten better in recent years.

However, such good days are about to end. The Tsarist Government is negotiating with various countries, preparing to offset the previously defaulted debts with grain.

This was forceful selling, and if the creditors did not accept, then these debts would never be repaid. Without thinking, Franz knew that Alexander II’s plan would be successful.

It’s not easy to collect debts from the Russians; even if discounted, recovering a part is better than a total loss. Even if national governments have objections, capital interests would ensure a compromise.

The current controversy is nothing more than a matter of interest benefits, which are bound to be settled sooner or later. The diplomatic barriers preventing Russian grain from entering the international market have now been cleared by Alexander II.

The market is only so large; if you sell more, others naturally sell less. Although there are many places short of grain in this era, unfortunately, only Europe had the purchasing power.

If it wasn’t for the Russian Empire’s transportation being powerful enough to directly hinder their grain exports, international grain prices would immediately collapse.

Franz had never doubted the grain production capacity of the Russians, especially with the Great Land Clearance spearheaded by Alexander II, which was virtually turning the tables.

From the more than twenty assassination attempts Alexander II faced in recent years, it is evident how much his reforms were loathed.

Even the slow-witted nobility had come to realize this, but unfortunately, it was too late; the lands had already been cultivated, and it was too late to go back.

Franz was not interested in meddling in the internal strife of the Tsarist Government, including Alexander II using grain to offset debts, which he didn’t regard too optimistically.

Even the best policies depend on enforcement, and the grain within the country was not the Tsar’s. To use it to repay debts, one must first collect the grain and then transport it.

Let’s not talk about the financial pressure it brings; just the purchase of grain needs to be carried out, right? In the face of interests, who can ensure that these bureaucrats wouldn’t be tempted?

One should know, even when Alexander closely supervised the Great Land Clearance, there were still officials skimming the peasants’ food supply, leading to uprisings, and it happened more than once.

If the grain is levied in the form of taxation, then incidents like collecting an extra three or five buckets might occur, or a term similar to “meltage” may emerge, legally skimmed off.

Buying grain directly from the people with money, the bureaucrats would also embezzle funds. They would forcefully buy at a low price from the peasants and then turn around and sell to capitalists for a profit, leaving just a bit for the Tsar as a settlement.

Unless the Tsarist Government set a high price, higher than the market price, allowing bureaucrats to gain more benefits, otherwise, not much grain would be collected.

The Tsarist Government’s plan might be unachievable, but the shock brought by Russian grain would not be small. As long as there is profit to be made, capitalists would still transport and sell the grain.

Franz strongly suspected that Alexander II was doing this deliberately. First, by using grain to pay off debts, he entangled various countries, prompting them to open their markets.

The Tsarist Government would symbolically offset some of the debt with grain each year, then allowing capitalists to transport and sell the grain.

This approach might seem to present no profit for the Tsarist Government, but in actuality, as long as they can sell domestically unsold grain, that would be a huge profit.

Even if other countries figured out the Russian’s plan, they would most likely go with the flow. For grain-importing countries, getting cheap grain is always good news.

The real victims with damaged interests would be the current grain-exporting countries, with Austria being the biggest sufferer. Although there is no political opposition at the moment, an economic clash between Russia and Austria has already ensued.

Austria’s options were now severely limited, either to use its advantages in transportation and agricultural technology to drive down the price of grain, making it unprofitable for the Russians to export.

However, doing so would be like injuring the enemy by eight hundred but self-harming by a thousand. It must be known that Austria was the dominant force in the international agricultural product export market, reaping substantial profits each year.

Even if the price war was won, and a larger market share was secured, the decline in grain prices would still lead to a decrease in profits. Ultimately, not only would it be impossible to gain larger benefits, but considerable costs would also have to be paid.

The Russians were merely barefoot challengers; if they failed, they would simply return to their original state, but if they succeeded, they could gain a great deal of benefits.

In the original timeline, the United States waged price wars to knock down all competitors and establish hegemony in grain exports, all for strategic purposes.

Austria certainly couldn’t mimic this, not to mention the expenditure of a significant amount of financial resources, especially now in the era of colonial empires, with England and France possessing vast colonies.

If there was a shortfall in domestic grain, it could be supplemented from the colonies. Reliance on controlling international grain exports just couldn’t intimidate them.

Otherwise, Franz would have already tinkered with forming a grain export alliance, coercing a few grain-exporting countries to manipulate the international grain market to obtain greater benefits.

Unable to achieve strategic objectives, and also facing challenges from numerous competitors, it can be said that after the fundamental accumulation of capital, the importance of agriculture had decreased.

A decrease in importance does not mean it could be abandoned; in fact, agriculture still remained one of Austria’s most important industries. The industrial chain formed around agricultural production accounted for 38.6% of Austria’s gross domestic product.

Although this ratio was gradually decreasing year by year, it didn’t diminish its importance. Faced with the Russian challenge, industrial adjustment had become imperative.

Austria’s agricultural industry system was well-developed, from the primary production of agricultural products to the terminal sales, with product value-addition being exploited almost to the limit.

For example: from wheat to flour, biscuits; from fruits, vegetables to canned goods; from grapes to wine, raisins; from potatoes to French fries…

In this era, it was all about ecological agriculture, there were no chemical fertilizers or pesticides, and thus the notion of green food did not exist. People were too poor, and brand agriculture didn’t have much of a market either.

A complete industrial chain increased the ability to withstand risks, and when impacted, it also had a greater effect on the economy.

The technological content of these industries was very low, and it wasn’t that Europe didn’t have agriculture or these industries at all, but they remained small-scale due to constraints in raw materials.

Once a great amount of cheap raw materials emerged, capitalists would certainly not mind expanding production. Even Austria was Russia’s biggest buyer of grain, with capitalists’ morals being historically low where their interests were concerned.

The low-tariff system between Russia and Austria had indeed created opportunities for the export of Austria’s industrial and commercial products, but it also brought challenges.

Faced with incoming cheap grain, these agricultural product processing enterprises would definitely make choices that suited their interests. The government couldn’t possibly force them in this regard, after all, businesses needed to survive too.

As of this day, the profits of agricultural product processing enterprises had also decreased significantly, from an initial thirty to forty percent, to the current ten percent or so.

This was still gross profit, and the net profit would be even lower. In the cruel market competition, agricultural product processing enterprises had entered a low-profit era, relying on volume to make money.

The relatively high profits were from snack processing enterprises. However, the competition in these enterprises was even more cutthroat, with almost every type of snack on the market having tens or even hundreds of similar products.

The profit per item was decent, but the problem was that sales were not substantial. There were hardly a few enterprises that managed to establish a brand and earn huge profits.

Austria’s agricultural industry technology had already reached the peak of the times, becoming a defender of the market.

Fortunately, the Russians’ agricultural products were relatively singular, mainly potatoes, wheat, and corn; fruits and vegetables, unless processed into canned goods, would rot before they even left the country.

Clearly, Russia’s industries had not yet caught up, and these industries were not very well developed, with domestically produced products not even selling well, much less in the international market.

At this point, it had become imperative for Austria to adjust its agricultural industry, such as by reducing the production of crops that would clearly be impacted, switching to other economically viable crops that were in short supply on the market.

It’s easy to talk about, but hard to do. With so many farmers in Austria, getting them to change their planting habits was not something that could be accomplished with just a few words.

Because market information was not transparent, even Franz could not accurately judge what agricultural products would be in shortage in the future market.

Not knowing what was lacking in the market made the government’s guidance on crop cultivation mere lip service.

Unless it was a planned economy, chaotic situations in crop planting would persist for a long time in the future.

It was an unsolvable problem; crops that were scarce this year might end up rotting in the fields the next year, with no one showing any interest.

Farmers too were adjusting the direction of their crop planting based on their own judgments, involving too many people to coordinate effectively.

Franz had a headache.