Karl Marx 
Austrian Bankruptcy 

New-York Daily Tribune. 

Nr.4033, 22. März 1854 

Austrian Bankruptcy. 

Notwithstanding the imminence of war and their pressing needs, the French 
and the Austrian Governments have not yet succeeded in strengthening the 
nervus belli, namely, the money-power. Notwithstanding the Lucullian 
magnificence displayed in the dinners given by the French Minister of Fi- 
nance to the Receivers-General, the Credit Mobilier, and the principal bank- 
ers of Paris, those capitalists prove stubborn and cling to that discreet sort 
of patriotism, which, by exacting the greatest possible interestfrom the State, 
is wont to indemnify its private interests with the public ones. Thus the terms 
of the proposed French loan of two hundred million francs remains still 
unsettled. 

As to Austria there can exist no doubt that one of [the] principal motives 
which induce her to profess friendly feelings toward the Western Powers 
is the hope of thus reviving the confidence of moneyed men and getting out 
of her financial difficulties. Indeed, the official gazette at Vienna had hardly 
uttered a few words about Austrian neutrality and good understanding with 
France, when it surprised the public with the announcement of an intended 
sale of a considerable portion of the six million acres of Crown Lands, and 
with a financial rescript, dated Feb. 23, 1854, to the effect that the whole of 
the State paper money, 150,000,000 florins, now in circulation, and of com- 
pulsory currency, was to be transferred to the National Bank, and suc- 
cessively converted into bank notes, at the expiration of which change all 
the paper issued by the treasury will be withdrawn from circulation, and no 
more State paper money of a forced currency be issued. In making this 
change the Imperial Government is guarantee to the Bank for the paper 
money transferred to it, and pledges itself to indemnify it for the expenses 
connected with that conversion; to pay, in extinction of the debt thus created, 
a yearly installment of at least 10,000,000 florins; to mortgage the customs' 
revenue as security for the regular payment of these installments, and to pay 

Austrian Bankruptcy 

the bank in specie in proportion as those duties are received. At the same 
time the Government is bound to do its best to enable the Bank to fulfill its 
obligations and resume specie payments. Meanwhile, in order to give the 
holders of bank notes the means of changing their notes at pleasure into a 
debt bearing interest, payable in specie, the Bank undertakes to issue bonds 
bearing interest, to be in all respects on the same footing as State bonds or 
obligations. The Government will also call in what are knownas Redemption 
notes and Anticipation notes, and put them entirely out of circulation. 
The conversion of State paper of a forced course into inconvertible bank 
notes will not reduce the amount nor ameliorate the quality, but only simplify 
the denominations of the paper money issued. As the State is in the posses- 
sion of the same means which it grants the Bank for the redemption of the 
paper money, it would itself have made use of them if not fully aware that 
the want of confidence in itself was such as not to allow credit to be restored 
save by the help of a Bank, which is not the property of the State. Thus the 
dependence of the Emperor on the Jews of the Vienna Bank grows at the 
same pace as the military character of his Government. In January 1852, he 
mortgaged to them the salt-works of Gmunden, Aussee and Hallein. In 
February 1854, they obtain a lien on the customs' revenue of the whole 
monarchy. Step by step the Bank becomes the real and the Government 
merely the nominal owner of the Empire. The more Austria has resisted the 
demands of participation in political power onthe part of the middle classes, 
the more she is forced to undergo the unmitigated despotism of one fraction 
of those classes—the money lenders. 

The decree, of which we have above given the substance, disguises an 
attempt at a new loan under the form of aid tendered to the holders of 
bank notes, in changing them into a debt bearing interest; the latter to be paid 
in specie. In 1852 the Government also pledged itself to meet in specie various 
minor payments and obligations, but as it received the taxes only in State 

paper money or in bank notes the Administration was forced to contract a 
loan of thirty-five million florins at London and Frankfort. The new loans, 
of course, augment the old deficits and the augmented deficits lead to new 
issues of paper money, the superabundance and consequent depreciation of 
which they were intended to prevent. The broad distinction drawn on the 

part of the Government between payments in specie and payments in bank 
notes is as good a means of rescuing the notes from their discredit as the 
augmentation of the circulating medium of the bank by 150 millions is a 
means of enabling it to fulfill its engagements and resume cash payments. 
The Government will pay the bank in specie in proportion as the customs 
duties are paid in the same, but it is well known that not only the Austrian 
peasants but even the citizens in the larger towns are as fond of hoarding 

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as the Chinese and the Indians; that in 1850 sums were hoarded even in 
copper, and thatin 1854 they are paying all taxes in paper, although it is only 
accepted with a discount of full seventeen per cent. 

Those conversant with the past history of the Austrian Exchequer will fail 
in discovering any novelty either in respect to the promises held out in the 
new decree, or the financial devices resorted to. The first issue of Austrian 
paper money took place under the Empress Maria Theresa, toward the end 
of the Seven Years' War. It consists originally of Bank bills exchangeable 
by the State authorities for silver. In 1797, in consequence of the pecuniary 
difficulties of the Government in the wars against France, the convertibility 
into silver was abolished. The first issue under the Empress Maria Theresa 
having amounted to twelve million florins, the total sum of Bank bills issued 
in 1809, amounted to 1,060,793,653 florins, their reduction in value having at 
the same time reached its maximum. On the 20th of February, 1811, the 
Government published a patent by which the Bank bills were altogether 
withdrawn from circulation and redeemed, (hence the name Redemption 
notes) at the rate of 20 for 100 for anew paper called Wiener Währung. The 
Government declared this to be the real money of the country, and promised 
that this new paper should never be increased beyond the amount necessary 
for exchanging the Bank bills. In May 1811 the Wiener Währung was already 
at a discount of 8 per cent., and Anticipation notes were issued, so called 
because the proceeds of a part of the taxes for twelve years were anticipated 
by them. The first issue of Anticipation notes really amounted to only forty- 
five million florins, and for their redemption within twelve years an annual 
sum of 3,750,000 florins was destined to be taken from the land taxes. 

But in consequence of the war, new issues of Anticipation notes quietly 
followed each other, each new issue being attended by a reduction of their 
value. In 1815 the premium for silver reached the height of 400 per cent, against 
the Wiener Währung. On the first of June, 1816, animperial patent appeared 
declaring that the State would in future never again have recourse to an 
inconvertible paper currency; that the paper money in circulation should be 
gradually withdrawn and specie be restored as the standard medium of 
circulation. In order to fulfill these promises, the privileged National Bank 
was constituted definitively, January 18th, 1818, the State having made an 
arrangement with the Bank by which it pledged itself to redeem the incon- 
vertible paper money. As late as June, 1852, however, we find again the 
Finance Minister announcing in the official gazette that, in future, com- 
pulsory loans, extraordinary taxation, depreciation of the value of money, 
would be absolutely excluded; if not exactly at present, yet in future, Aus- 
trian paper would be converted into coin without loss, and that the loan now 
contemplated would be applied to withdraw the state paper money and for 

Austrian Bankruptcy 

the payment of the state debts to the Bank. There can be no better proof 
of the hollowness of such promises than their periodical occurrence. 

At the time of Maria Theresa the Austrian Government was powerful 
enough to issue its own bank bills, exchangeable for specie, and even ata 
premium over silver. In 1818 the State, in order to redeem its paper money, 
was obliged to recur to the establishment of a privileged bank, the property 
of private capitalists, who received advantages very burdensome to the State, 
but who were pledged to the issue of convertible notes. In 1854 the Govern- 
ment appeals to the help of a bank, whose own paper has become as depre- 
ciated and inconvertible as that of the State itself. 

Although from 1815 to 1846 Austria enjoyed a period of almost un- 
interrupted peace and internal tranquility, the first shock after that long 
period found her altogether unprepared. The insurrection at Cracow, and the 
disturbances in Galicia, atthe end of February, 1846, augmented the public 
expenditures by more than 10,000,000 compared with 1845. The army ex- 
penses were the principal cause of this increased outlay. They amounted to 
50,624,120 florins, in 1845, but in 1846 rose 7,000,000 more, while the ad- 
ministrative expenses of the Provinces rose 2,000,000. In 1847 the com- 
mercial crisis and the bad harvest produced a great diminution in the excise 
revenue, while the army rose to 64,000,000, chiefly inconsequence of troub- 
les in Italy. The deficit of that year was 7,000,000. In 1848-49 the revenue of 
whole provinces was lost, besides the war expenses in Italy and Hungary. 
In 1848 the deficit was 45,000,000florins and in 1849,121,000,000. State paper 
of compulsory currency, to the sum of 76,000,000, Three-per-Cents, was 
issued in 1849. Long before this, the Bank had stopped speciepayments, and 
its issues were declared by the Government to be inconvertible. In 1850 there 
was a deficit of 54,000,000, and the chances of a war with Prussia brought 
down the paper money to a discount of 60 per cent. The total amount of State 
paper money issued inthe years 1849, '50, and '51 was 219,000,000. In 1852 
the deficit was 8,000,000 more than in '48, and 46,000,000 more than in '47. 
In 1851 the war budget was 126,000,000, fully double what it was in '47. In 
'52 the police expenses were 9,000,000, fourfold greater than those of '48. 
Both police and war expenses also increased in 1853. 

The real question, however, is not how Austria got into her financial 
cul-de-sac, but how, when thus immersed in bank paper and debt she has 
avoided open bankruptcy. In 1850 her revenue amounted to one hundred 
and ninety-six millions [, seventy-four millions] more than in 1848; and to 
forty-two millions more than in 1849. In 1851 the receipts were two hun- 
dred and nineteen millions[, twenty-three millions] over those of 1850. In 

1852 they reached two hundred and twenty-six millions, an increase of six 
millions over those of 1851. Thus there has been a continual increase of 

Karl Marx 

revenue although not in the same proportion in 1852 as in 1851, and in 1851 
not in the same proportion as in 1850. 

Whence this increase of revenue? Putting aside the extraordinary receipts 
from the Sardinian war indemnity and the Lombardo-Venetian con- 
fiscations, the transformation of the Austrian peasant into a landholder has 
of course increased the tax-paying power of the country and the revenue 
derived from the land tax. At the same time the abolition of the patrimonial 
courts brought the income, which the aristocracy had formerly enjoyed from 
their private administration of justice, into the coffers of the State, and this 
branch of revenue has been constantly increasing since 1849. Then a con- 
siderable increase arose from the income-tax, introduced by the patent of 
October 29, 1849. This tax has proved particularly productive in the Italian 
provinces of Austria. In 1852, for instance, the increase of the income-tax 
in the German and Slavonic provinces, together amounted to six hundred 
and one thousand florins, while in the Italian provinces alone it was six 
hundred and thirty-nine. The principal cause, however, which has saved the 
Austrian Empire from a formal bankruptcy, is the subjugation of Hungary 
and her assimilation with the other provinces in respect to taxation. 

The basis of the whole Austrian system of taxation may be said to be the 
land-tax. On the Ist April 1812, appeared an imperial patent, in which the 
Emperor Francis announced his resolution to establish uniformity in the 
land-tax system all over his German, Slavonic and Italian provinces. In one 
paragraph of this patent it is ordered that no exemptions from the land-tax 
should in future "be made according to the personal quality of the possessors 
of estates or houses," and as a whole this view was acted upon. In the 
Archduchy of Austria, the new survey was introduced in 1834, and this was 
the first hereditary domain in which the new system was brought into opera- 
tion. Austrian-Lombardy possessed an excellent survey from the time of 
Charles VI, the Censimento Milanese. Hungary and Transylvania, however, 
by no means contributed to the land-tax and other taxes, inthe same degree 
with the other provinces of the Empire. According to the Hungarian Con- 
stitution, the Hungarian possessors of by far the greatest part of all the land, 
were subject to no kind of direct tax, and even several of the indirect taxes 
imposed upon the other provinces, pressed neither upon Hungary nor upon 
Transylvania. The population of Hungary, Transylvania and the Military 
Frontier, together amounted, in 1846, to 14,541,958; those of the other 
provinces of the Monarchy, to 22,901,675, so that the former should have 
contributed seven-eighteenths of the whole revenue. But Hungary and 
Transylvania in 1846 only contributed twenty-three millions, which, as the 

whole revenue in that year amounted to one hundred and sixty-f our millions 40 

was only somewhat less than one-seventh of the revenue. The Hungarian 

Austrian Bankruptcy 

provinces occupy 5,855 of the 12,123 German square miles, which form the 
area of the Austrian Monarchy, consequently one-half of its superficial 
extent. 

The Emperor Joseph II, whose great aim was the centralization and com- 
plete Germanization of the Austrian Monarchy, had arbitrarily introduced 
innovations in Hungary intended to place her on the same footing with the 
other Provinces. But this produced such aneffect on the public mind in that 
country that Joseph II, at the close of his life feared that the Hungarians 
would rebel as the Netherlands had done. The Emperors Leopold II, Fran- 
eis I, and Ferdinand I, did not dare to repeat the hazardous experiment. This 
cause—the impediments to an equalization of taxes existing inthe Hungarian 
Constitution—ceased to work after the Hungarian revolution was quelled by 
Russian assistance. The Emperor Francis Joseph having never sworn to the 
Hungarian Constitution, and being made Emperor in the place of Ferdinand 

because he had never sworn to it, at once introduced the land-tax onthe same 
footing with the other crown-lands. Besides, by the abolition of the frontier 
of Hungary onthe Ist of October, 1850, the Austrian Monarchy came to form 
one single territory with respect to customs as well as taxes. The Excise and 
the tobacco monopoly were also introduced there on March 1, 1851. The 
increase of the direct taxes alone in the Hungarian Provinces amounted to 
11,500,000 florins in 1851, and to about 8,000,000 florins in 1852. 

We arrive then at the irrefragable conclusion, that on the possession of 
Hungary and Lombardy depends not only the political but the economical 
existence of the Austrian Empire, and that with their loss the long-delayed 
bankruptcy of that State becomes inevitable.