From: Acemoglu, Daron. Why Nations Fail. Kindle. At the center of Habsburg economic institutions in the 1700s stood the feudal order and serfdom. As one moved east within the empire, feudalism became more intense. … Labor mobility was highly circumscribed, and emigration was illegal. When the English philanthropist Robert Owen tried to convince the Austrian government to adopt some social reforms to ameliorate the conditions of poor people, one of Metternich’s assistants, Friedrich von Gentz, replied, “We do not desire that the great masses shall become well off and independent … How could we otherwise rule over them?” [remainder of this section will leave out “…” marks where edited to condense] In addition to serfdom, which completely blocked the emergence of a labor market and removed the economic incentives or initiative from the mass of the rural population, Habsburg absolutism thrived on monopolies and other restrictions on trade. The urban economy was dominated by guilds, which restricted entry into professions. Until 1775 there were internal tariffs within Austria itself and in Hungary until 1784. There were very high tariffs on imported goods, with many explicit prohibitions on the import and export of goods. The suppression of markets and the creation of extractive economic institutions are of course quite characteristic of absolutism, but Francis went further. [Acemoglu’s definition of extractive economic institutions: institutions designed to extract incomes and wealth from one subset of society to benefit a different subset, from the masses to the elites] It was not simply that extractive economic institutions removed the incentive for individuals to innovate or adopt new technology. In the Habsburg lands, Francis did not encourage his citizens to adopt better technology. On the contrary, he opposed it, and blocked the dissemination of technologies people would have been otherwise willing to adopt with the existing economic institutions. Industry led to factories, and factories would concentrate poor workers in cities, particularly in the capital city of Vienna. Those workers might then become supporters for opponents of absolutism. His policies were aimed at locking into place the traditional elites and the political and economic status quo. He wanted to keep society primarily agrarian. The best way to do this, Francis believed, was to stop the factories being built in the first place. This he did directly— for instance, in 1802, banning the creation of new factories in Vienna. Instead of encouraging the importation and adoption of new machinery, the basis of industrialization, he banned it until 1811. Second, he opposed the construction of railways, one of the key new technologies that came with the Industrial Revolution. When a plan to build a northern railway was put before Francis I, he replied, “No , no, I will have nothing to do with it, lest the revolution might come into the country.”
Posted on: Thu, 08 Jan 2015 21:25:32 +0000
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