When the bubble burst, the Holy Roman Empire, as the economic powerhouse, suffered the most. As the second-largest industrial nation in the capitalist world’s economic system, Great Britain’s losses were naturally the second largest. It didn’t matter that the two nations were politically opposed. Economically, they had long been tied together. If the Holy Roman Empire had a serious economic bubble, Great Britain’s was not far behind. In fact, the crisis should have broken out right after the European War, but it was jointly suppressed by various powers. The Austrian government had taken measures, and the British government was not idle either. During Gladstone’s administration, Great Britain’s diplomatic strategy had nearly collapsed completely. If they had lost economic prosperity as well, the British people would have likely torn them apart. The cabinet wanted to pass the last leg of their term peacefully, and the financial groups needed time to withdraw, so they came to a deal and artificially created an illusory boom in the economy in the second half of the year. The economic crisis that was originally supposed to have erupted in 1893 was forcibly delayed until now. If the Vienna stock market hadn’t crashed, it probably would have been prolonged even further. In this context, the newly appointed Robert Cecil was in a tragic situation. Before he had even settled into his seat, the stock market crashed, and he could see a full-blown economic crisis on the horizon. In those days, Britain practiced a free-market economy, and the government was not supposed to interfere with the market. Of course, that was just something people said and if you took it seriously, you had already lost. Not directly interfering in the market did not mean not interfering at all. In fact, government economic policies, laws, and regulations were all important factors influencing economic development. The only difference was the degree of intervention. Actions like adjusting tax rates, social relief, cooperating with financial groups to save the market, and starting a foreign war to divert a crisis were all part of the government’s market intervention. “Well, did the financial groups agree to step in and save the market?” Prime Minister Robert Cecil had no choice but to worry. Ever since the economic bubble burst, the London stock market had followed in the Vienna stock exchange’s footsteps, beginning a relentless downward trend. Unlike the conservative Holy Roman Empire, where a large number of family-owned businesses tightly held their shares and refused to go public, Great Britain was the most developed country in the financial industry. Almost all large-scale companies were publicly listed. Going public made it easier to get financing, which helped accelerate a company’s growth, but the side effect was that the company’s fate was tied to the stock market. The management model of professional managers, while seemingly scientific, meant that the company’s money was not their own. To achieve higher returns in the short term, company executives’ strategies were often overly aggressive. In normal times, this was fine, but once the stock price fell sharply and corporate financing became difficult, these aggressive strategies often led to a company’s cash flow drying up. In contrast, private, family-owned businesses preferred to operate steadily and surely. Although their growth was a bit slower, the companies themselves rarely carried a large amount of debt and usually maintained sufficient cash flow, so there was no risk of their capital chain breaking. Most importantly, these private corporations were usually high-quality, profitable, and highly competitive companies, making them the most resistant to risk. You could look at Franz’s Royal Consortium for a perfect example. The companies they took public were mostly high-risk tech ventures, or ones that had insufficient profitability, uncertain prospects, or whose growth potential had already hit an industry bottleneck. The truly profitable companies, or those in a high-speed development phase, were all kept private, quietly making a fortune. They would only go public to cash in once their growth had reached a limit. “Shared growth” and “shared benefits” are just deceptive nonsense. When you have a guaranteed high-return business, why would you take it out and share it with others? Perhaps some companies have managed this, but they are as rare as a phoenix’s feather or a unicorn’s horn. Out of thousands of publicly listed companies, only a hundred or so are like this; the vast majority perform only average after going public. Only those companies that can operate steadily, outpace inflation, keep up with the country’s economic growth, and never crash are considered conscientious. If all of these high-quality companies were listed, then even if the market valuation was low, given the economic size of the Holy Roman Empire, the scale of the two major financial centers in Vienna and Frankfurt could not possibly be smaller than London’s. In this context, the Holy Roman Empire, whose stock market had a worse crash, was actually hit less hard economically than Great Britain. Minister of Finance Aquinas shook his head and said, “I’m afraid they refused our proposal. The financial groups believe that the current stock market still has a bubble. Intervening now to boost stock prices carries a very high risk, and they need to wait. If the government truly wants them to fund a bailout, the financial groups have also put forward a condition: they must act together with Austria, because they are afraid of being taken advantage of by others.” Robert Cecil frowned and said unhappily, “Wait? If we wait any longer, the companies will all go bankrupt! What market will there be left to save? The audacity of them to even think of acting with Austria! It’s obvious what’s happening. The Holy Roman Empire’s economy had a major problem after the European War, and it’s in a period of economic adjustment. Whether or not this stock market crash happened, they were going to have an economic crisis. We, on the other hand, are just the unlucky ones who were dragged into it. If we can’t stabilize the stock market, we’ll have to go through an economic crisis with them. Do you really think the Austrian government will save the market without dragging everyone else down with them? They want nothing more than to drag everyone down to share the losses.” Complaining was useless. The London stock market didn’t just have British capital; it also had capital from continental Europe. If the different parties couldn’t reach a consensus and the British financial groups intervened to save the market, the continental groups would take the opportunity to sell off their stock, leaving the British as bag holders. Although European capital had begun to flow back since the beginning of the year, for their enormous size, it was only a small portion that had actually been repatriated. When the Vienna stock market crashed, the British financial groups used their advantage as the home team to act first and deal a severe blow to international capital. Now, with the bailout question on the table, they were naturally worried that others would follow suit. If they spent a huge sum of money to boost stock prices, and others used the chance to flee, they would be in a terrible situation. After all, financial groups are not omnipotent. In the deceitful world of the capital market, everyone must be careful and cautious, or they will be eliminated by the market sooner or later. Moreover, while a wave of corporate bankruptcies was very unfavorable for the country, for the financial groups, it was a feast of capital. They could use the opportunity of corporate bankruptcy and restructuring to acquire some high-quality companies at dirt-cheap prices. … The British government wasn’t the only one with a headache. Facing the Holy Roman Empire, a rogue state determined to drag everyone down, all the capitalist industrial nations were in a state of extreme distress. In the past, every country had criticized the Austrian government for interfering with economic freedom. This time, there was no need for such criticism, but the outcome was even more difficult to accept. For once, the Austrian government had followed the natural laws of a market economy, and as a result, everyone was dragged into an economic crisis. In fact, Franz was also in a difficult position. If he had the choice, he wouldn’t want an economic crisis to happen now either. But there was no other way; the Holy Roman Empire’s economy had unknowingly gone off track. This was especially true for the northern states, where not only was industrial development imbalanced, but there was also a large amount of overcapacity. For example, the railway and construction industries were two major disaster areas. After the European War, some states in the north, for reasons unknown, had embarked on a massive infrastructure spree. There was nothing inherently wrong with infrastructure, but the problem was they built a huge number of unnecessary projects. There were redundant rail lines, with some branches even extending into villages, sprawling real estate projects, and completely impractical water conservancy projects. If it weren’t for the economic crisis and the subsequent bankruptcy announcement of the Kingdom of Prussia, Franz would not have known that some people were having so much fun with it. In fact, even if he had known in advance, he couldn’t have intervened. State autonomy wasn’t just a figure of speech; how a state chose to develop its economy was its own freedom and didn’t require reporting to the Emperor. The only good news was that the northern German region had a poor grain harvest last year. That's right, a poor harvest was a good thing at a time like this, at least for the moment. If there had been a bumper crop, Franz would have to consider the problem of agricultural surplus. After all, during an economic crisis, people had to tighten their belts, and even for a necessity like food, sales would still decline. The poor harvest in the north last year at least guaranteed the stability of the empire’s agriculture. As for the subsequent effects of the harvest shortfall, those were minor issues. Aside from the Kingdom of Prussia, which had been impoverished by the Russo-Prussian War, the other northern states were in very good economic shape, otherwise, they wouldn’t have had the money to squander. Since the outbreak of the economic crisis, with the exception of Wilhelm II personally coming to Vienna for help, the other states had only sent a few telegrams to complain about their difficulties and, incidentally, cry poverty for money. It was clear they could still hold on for now and were unwilling to let the central government interfere in their internal economic affairs. Franz liked these low-maintenance subordinates the most. As long as they didn’t cause trouble for the central government, why would anyone want to meddle in a state’s domestic politics unless they had nothing better to do? Regardless of whether they were courting disaster, judging from the results of their economic development, these state governments were doing better than most of the directly governed provinces. The Kingdom of Prussia’s problems were primarily a serious legacy from the past. The huge war indemnities from the Russo-Prussian War had impacted their domestic economic development. However, overall, the economic recovery was not bad. Although they were a little behind their neighbors, their per capita income still surpassed that of Spain and Russia, almost catching up to pre-war France. Although the impact of the economic crisis was great, it had only just begun and was far from its most difficult phase. Given the Kingdom of Prussia’s financial foundation, even if they couldn’t hold on, they wouldn’t have been the first to collapse. This was especially suspicious because the Kingdom of Prussia suddenly announced its fiscal bankruptcy without any prior warning. Under normal circumstances, before declaring bankruptcy, they should have first sought help from the central government. Even for the sake of the empire’s reputation, as long as the funding gap wasn’t too big, the Austrian government would have given them a hand. However, the reality was the exact opposite. Before the government declared fiscal bankruptcy, aside from creating a bunch of unfinished projects, they never once sought help from Austria. It was as if they were single-mindedly determined to go bankrupt. After the Prussian government declared fiscal bankruptcy, only then did Wilhelm II jump out and run to Vienna, crying poverty and selling misery. This was clearly abnormal. Things were different now; as a member of the Holy Roman Empire, Prussia had the ability to bargain with the British. Franz had every reason to believe that the Prussian government deliberately bankrupted itself, and the economic crisis merely provided them with an excuse they could use. Even if this economic crisis hadn’t happened, they would have used another excuse later, such as the government’s cash flow drying up and being unable to pay for construction projects. After all, the benefits of the Prussian government’s bankruptcy were numerous. For one, their domestic economic problems could be taken to the central government, and the Austrian government couldn’t afford to sit by and do nothing. For another, they could reasonably demand debt restructuring for the debt to the British, a debt that might not even be paid off in the next century. The Kingdom of Prussia had a history of this. A year ago, when the “German Federal Government” was on the verge of bankruptcy, the Prussian government tried to follow suit. Unfortunately, they fell short by one move, and the British only accepted a transfer of debt. After all, the German Federal Government was a government that would be dissolved the next day if the contract wasn’t signed today. To avoid not being able to find a debtor, the British had no choice but to hold their nose and accept it. The Kingdom of Prussia was different. Even if the government were dissolved, the King would remain. Wilhelm II would not abandon his throne for debt. As long as the country still existed, the government could be re-established, and the debt couldn’t just vanish. Furthermore, since the Holy Roman Empire was still in the process of being formed at the time, there was no central government to act as a shield. The Prussian government couldn’t withstand the pressure from the British and, after only a few months of debt deferment, they chickened out. But now things are different. As long as the Prussian government was shameless enough, the British would have no way to deal with them. Their debt’s “collateral”? No problem at all, just send people to come and get it. They would guarantee their “full cooperation”. Tariffs are now collected by the central government. As long as the British think they can take the tariffs from the Austrian government, there is no problem at all. Ports and docks are in the hands of the Kingdom of Prussia, but they involve territorial sovereignty, which is also a matter for the central government. If there are negotiations, they should talk with the Foreign Ministry. As long as the Austrian government agrees, everything can be discussed. … The right to mint currency also belongs to the central government. If they want it, they should negotiate with the Foreign Ministry. As a local government, the Prussian government has no right to get involved now. In short, after the debt default, none of the series of mortgage contracts the Prussian government had previously signed with the British could be enforced. Even though these treaties were signed before the Holy Roman Empire was established and still have legal force, to cash in on the terms of these treaties, the British can only negotiate with the Empire’s Foreign Ministry. “Deliberately defaulting on a debt” and “having no money to pay the debt” are two completely different concepts. The former invites international scorn, while the latter is concluded by simply handing over collateral. Now, as long as Wilhelm II is willing to be shameless and act as if he is ready to hand over the collateral, he can push the problem onto the Austrian government, and the matter is over for him. In the end, whether the British compromise or the Austrian government pays off the debt for them, these problems are no longer his to worry about. Even though he knew it was a huge problem, Franz had no choice but to accept it. No matter the reason, he, as the Emperor of the Empire, could not allow national sovereignty to be compromised. Thinking of this, Franz wanted to strangle those keyboard warriors. Who said Wilhelm II was a complete idiot? His political maneuvering was incredibly smooth.
*** https://postimg.cc/gallery/PwXsBkC (Maps of the current territories of the countries in this novel made by ScH)
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"which had been impoverished by the Austro-Prussian War" should probably be Russo-Prussian War
ReplyDeleteI'll correct it. Thanks for pointing it out
DeleteThere's a second line that would also need fixing a few paragraphs below the first one.
Delete"The huge war indemnities from the Austro-Prussian War..."
Fixed. Thank you for bringing it to my attention
Delete