The international situation was seething beneath the surface, yet Franz stayed home, playing happily with his grandchildren as if unaware of anything at all. Of course, ignorance was out of the question. With so many countries Britain was trying to woo, there were bound to be a few informants among them. In international politics, those who follow one path to the end are always the minority, and playing both sides is the usual practice. The rivalry between Britain and the Holy Roman Empire was far from one-sided. Until the situation became clearer, most nations would never tie themselves completely to one camp. The Holy Roman Empire could rely on its land power to pull continental states onto its ship, while Britain, with its maritime dominance, was gathering allies across the world. Stopping this was impossible. Fence-sitters would always sway with the wind, and they had no choice but to. That was the way small nations survived. It was not that the Austrian government was incapable of taking action; the real issue lay in its limited ability to project power overseas, where it simply could not compete with Britain. The British had been building their overseas influence for centuries, while the Holy Roman Empire had entered the Age of Exploration less than forty years earlier, leaving it far behind in global reach. Besides, recruiting subordinates was never easy. The countries overseas were far from united, and many neighboring states bore deep historical grudges against each other. Gaining one ally often meant offending another. Bringing nations on board was easy enough; the trouble was that in doing so, the Empire risked being dragged into countless regional disputes. Excessive involvement in local conflicts would only earn resentment and hostility, offering no real gain for the Holy Roman Empire. As for the notion of grateful allies, that was nonsense. In international politics, only tangible interests count. Gratitude is the cheapest currency of all. In this situation, rather than taking the initiative and bringing unnecessary trouble upon themselves, it was better to sit back, watch Britain’s performance, and strike later when the time was right. Whoever sided with the British would simply see their enemies receive support from the Holy Roman Empire. After all, the Empire would never run short of potential allies. Peaceful days always slipped by quickly. As time went on, the conflicts and tensions between the Holy Roman Empire and Britain grew sharper and more pronounced. Before anyone realized it, the term “trade friction” suddenly became popular, dominating the headlines of major newspapers. Thanks to the dividends of the Second Industrial Revolution and the Empire’s advantage in the cost of industrial raw materials, the Holy Roman Empire’s industrial and commercial goods had gained a growing edge in international competition. In the increasingly fierce global market, the once-proud “world’s factory” found several of its key industries struggling to stay afloat. Britain’s long-cherished ideal of “free trade” had become nothing short of a cruel joke under the onslaught of Holy Roman manufactured goods. Unsurprisingly, the Conservative Party, which had long championed free trade, suffered defeat in the 1902 general election. The Liberal candidate, Henry Campbell-Bannerman, successfully entered Downing Street. However, as the victorious Campbell-Bannerman settled into office, his joy lasted only a few days before the grim reality of the mess he had inherited left him stunned. Britain was still the world’s hegemon, but now it was a battered one—full of cracks and leaks everywhere. To be fair, his predecessor, Prime Minister Robert Cecil, had performed admirably. His government had achieved notable results both in politics and in diplomacy. For example, Britain had annexed French Indochina, expanding its colonial territories; it had successfully implemented its strategy of diverting trouble eastward, drawing Russia into the Far East and creating cracks within the Russo-Austrian Alliance; it had formed the Anglo-Japanese Alliance, repaired relations with the American states, and established strategic partnerships with several nations… Yet no matter how many diplomatic achievements there were, they could not conceal Britain’s growing economic crisis. The Second Industrial Revolution had begun to show its power, and Britain, which had failed to keep up with the times, was now paying the price. Not only were Britain’s overseas markets being squeezed by Holy Roman goods, but even its domestic market was under assault. Even the proud cornerstone of British industry, the textile sector, could no longer stand untouched. It all stemmed from Britain’s choice to court the Union. Alarmed by this policy, the Confederation naturally leaned toward the Holy Roman Empire. With the Empire’s support, the Confederation soon embarked on its own industrial revolution. Like most countries, the Confederation’s industrial revolution began with the textile industry. But since the main source of cotton was now spinning and weaving its own cloth, Britain, the nation that had built its wealth on textiles, found itself in an awkward and painful position. Textiles were Britain’s largest industrial chain, and more than a third of the British population relied on it in one way or another. As the world’s leading cotton producer, the Confederation possessed an unmatched cost advantage that easily crushed British textile manufacturers. Once the textile industry faltered, Britain’s economy was bound to collapse within moments. Naturally, the British were deeply alarmed. Because of the government’s effort to befriend the Union, the Confederation’s turn toward the Holy Roman Empire was seen as the greatest diplomatic blunder of Robert Cecil’s administration and one of the key reasons the Conservative Party lost the general election. While in opposition, Campbell-Bannerman had repeatedly criticized the government for this failure. Yet after taking office himself, he quickly realized that the situation was far more complicated than he had imagined. At first glance, Britain’s attempt to court the Union seemed like a diplomatic blunder, but in truth, the British government had no choice. Whether or not that policy existed, the Confederation would still have developed its own cotton textile industry, since its interests demanded it. As early as ten years ago, the Confederation had already planned to establish a domestic cotton textile industry, but under heavy British pressure, it was forced to abandon the idea. In recent years, however, with the rapid rise of the Holy Roman Empire and Britain’s dominance beginning to waver, the suppressed ambition of the Confederation to develop its own textile industry resurfaced. This time, things were different. With the Holy Roman Empire actively stirring the pot, Britain no longer had the means to stop the Confederation from pursuing industrial expansion. By this stage, tensions between the two sides were inevitable. No matter how much importance London placed on bilateral relations, it could not overcome conflicts of interest. The Austrian government could help the Confederation develop its textile industry, but the British government absolutely could not. Otherwise, the domestic interest groups would stage a coup. Trying to ally with a nation whose core interests directly conflicted with one’s own was far less advantageous than partnering with a stronger power whose interests clashed less severely. After all, Britain was about to compete with the Holy Roman Empire for supremacy and perhaps even face it in war, so having a reliable ally was essential. “Talking big feels great at the time, but you pay for it later.” Campbell found himself living that very proverb. He had enjoyed criticizing his predecessor’s diplomacy when in opposition, but now that he held power, he had no choice but to continue the same policies. If it were only a matter of diplomacy, Prime Minister Campbell could still manage. After all, thick skin was part of a politician’s job, and saying one thing while doing another was practically routine. What truly worried him was the steadily declining domestic economy and the growing social unrest that came with it. Of course, Campbell was not entirely unprepared for these problems. As the leader of the reformist faction, he had proposed a series of reforms years earlier. But in this world, shouting slogans was always easier than getting real work done. Reform was never smooth sailing. Throughout history, successful reformers had always been a rare few, while the majority ended in tragedy. Now that he had taken office, Campbell truly understood how difficult the situation was. Reality showed him that it wasn’t that the previous government had been unwilling to reform, it was that the vested interests involved were so enormous that no one dared to act rashly. ……… Secretary of Trade Lloyd George reported, “This is the import and export trade report for the first half of the year, and the situation is quite grim. Compared to the same period last year, our total exports fell by 0.46% in the first half of this year, while total imports rose by 2.67%. The trade deficit increased by 3%. This marks the third consecutive year of declining exports and the tenth consecutive year of a growing trade deficit. To be precise, ever since the end of the Continental War, our trade deficit has been rising continuously. Due to shrinking exports and the growing deficit, the pound’s international standing has also taken a hit. Especially in continental Europe, more and more countries are using the Holy Roman Empire’s guilder and gold for trade settlements. The pound has been pushed to the margins. The root cause of all this lies in the loss of competitiveness of our domestic industrial and commercial goods in international markets. In emerging industries such as machinery manufacturing, electrical equipment, and the internal combustion automobile sector, it is nearly impossible to find British products. Even our own domestic markets are now flooded with goods made by the Holy Roman Empire. If this continues, it is only a matter of time before the British economy collapses.” A trade deficit was nothing new. Ever since France and Austria completed their industrialization, Britain had gradually fallen into a trade deficit in international commerce. Thanks to the advantage gained during the First Industrial Revolution, this deficit did not bring disaster at first. On the contrary, it helped push the pound into becoming an international currency. But the good times did not last. As the trade deficit continued to expand, problems slowly emerged. The growing imbalance directly led to an outflow of wealth. After all, not every country was willing to accept payments in pounds. Britain simply did not have enough power to print money and make the world pay for it. With the rise of the Holy Roman Empire, its currency, the Guilder, began to seize the pound’s market share, and the trend became increasingly evident. No one was foolish. Seeing Britain’s trade deficit grow larger by the year, few countries were willing to hold large reserves of pounds and foot the bill for British consumption. Over time, more and more European countries stopped accepting the pound as a settlement currency. As the pound’s share in the international monetary market declined, Britain had no choice but to use real gold and silver to plug the hole in its trade deficit. Although the colonies could still be exploited, the continuous outflow of precious metals remained a serious problem for the British government. Changing this situation seemed simple in theory—either reclaim the lost markets or develop new products to open new ones. Unfortunately, the current competitor was the Holy Roman Empire. Military intimidation was useless, and competing through normal commercial means made it impossible to regain lost ground. As for developing new products, that was even more unrealistic. If British companies had that kind of capability, their export trade wouldn’t be shrinking in the first place. Secretary of Labor Burns said, “Due to the economic downturn, labor disputes and employment issues at home have become increasingly tense. According to our survey data, the unemployment rate rose by another 0.3% in the first half of this year. It may seem insignificant, but this marks the fifth consecutive year of increase. As for labor disputes, there is no need to elaborate; just look at the protest marches outside. This year, the number of such incidents has clearly risen. Take London as an example: in the first half of the year alone, there were sixteen strikes involving more than a thousand people, with demonstrations taking place almost every month. If I did not know this was London, I would have thought I had wandered into Paris. The frequency of strikes and protests is simply unbelievable…” It was clear that Burns genuinely wanted to solve the problem. As the first representative of the working class to join the Cabinet, he had to produce tangible results, if only for the sake of his political career. Before taking office, he believed that passing laws to protect labor rights and restrain the arbitrary behavior of capitalists would be enough. But after seeing the firsthand data, Burns began to doubt his own eyes. The problems in Britain now were no longer just about capitalist exploitation; the greater issue was that enterprises themselves were struggling to survive. Emerging industries had been battered, traditional ones were facing brutal market competition, and issues such as thin profit margins and overcapacity had become widespread. In the original timeline, British capitalists responded by cutting production and retreating to their colonies, where they could comfortably live off local markets. After all, Britain’s colonial markets were large enough to sustain them. As for upgrading machinery, investing in research, and facing international competition head on, they would rather shout a few rousing slogans about progress and innovation. But if anyone actually took those words seriously, they would end up suffering. Capital is always pragmatic. If it can earn money while lying down and taking no risks, why would it bother to join risky international competition? The data does not lie. In every country, the aggressive, research-heavy companies are usually the first to collapse, while the conservative, stagnant ones tend to survive longer. Conservative firms may eventually be eliminated by the market, but before that happens, their owners have already made plenty of profit. By contrast, companies that continue investing in research and development may find success and glory if everything goes well, but if any problem arises midway, they risk losing everything. Capital hates risk and steady profits are the greatest happiness. Those willing to risk their entire fortune for a brighter future for their enterprise are always a minority. Chancellor of the Exchequer Herbert Henry Asquith said, “These problems have existed for quite some time. To address the domestic economic downturn, the previous government twice reduced taxes on industrial and commercial enterprises. If Parliament had not vetoed it, they were even preparing to launch an export subsidy program to boost competitiveness. But all these measures only address the symptoms. To truly solve the problem, our enterprises must make their own efforts. We have to admit that in many fields we are already behind. German-made products are everywhere. Take any one of them and compare it to its British equivalent, and our companies simply cannot compete on value for money. The real problem now is that domestic capitalists have little interest in technological innovation, especially in machinery and equipment manufacturing, where innovation is almost nonexistent. What the capitalists really want is to end free trade and restore protectionism, relying on tariffs to safeguard their markets. Of course, they do not say it so bluntly. They call it a temporary protective measure to give domestic industries time to develop new technologies. But we all know the truth: with the current level of investment in research and development, even in the next century nothing will change.” No matter what policy is proposed, it always comes down to interests. It was for profit that the British government once established the free trade system, and it is for profit again that it now considers abandoning it. Even though Asquith despised this situation and regarded those unambitious industrialists as parasites of Britain, he still had to take their opinions seriously. Sensing the tense atmosphere, Prime Minister Campbell raised his hand and said, “These are the very issues we must face in the days ahead. Britain has reached this point because these problems have piled up over time. Reality tells us that reform can no longer be delayed. If things continue this way, we won’t even have the strength to compete with the Holy Roman Empire. The growing social conflicts at home alone could exhaust half our vitality. We can consider protecting our markets, but we must think carefully about how to protect them, to what extent, and what consequences it might bring. These issues are all deeply interconnected. Once we adopt trade barriers, other nations will inevitably respond in kind, and our import and export trade will certainly suffer. As for the domestic situation…”
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