Chapter 21, Stuck in the Economy
The colonial exhibition only involved a small part of the energy of the Vienna government, and its focus is still on the country.
After the end of the Near East War, Austria's economic expansion should decline, but the capitalist free economy market is often irrational.
The economy of the entire New Holy Roman Empire was like an out-of-control carriage, rushing forward all the way. At this time, the brakes could no longer be pulled, and they could only watch the carriage running further and further on the road without returning.
The government interferes with the market economy? Franz doesn't want to take the blame for the economic crisis, nor can he bear the blame.
The overall overcapacity of the capitalist world determines that no matter what measures are taken, an economic crisis will explode.
Taking measures can only extend the time of the crisis. Then the longer the time of the crisis is extended, the greater the destructive power it will bring.
This is not a problem with the new Holy Roman Empire, but involves all capitalist countries. Only when everyone interferes with the market together can they survive the crisis smoothly.
Vienna Palace Economic Conference
Franz took out a document to everyone and said seriously: "This is the latest economic report, everyone should read it carefully.
The situation of blind investment in our country is very serious. Many industries have overcapacity and a large number of products have been accumulated.
In the short term, it is impossible for us to find a new market to digest these excess production capacity.
Although the newly opened Balkan Peninsula and African colonization consumed some of the production capacity.
However, the degree of new markets is far less than the crazyness of the domestic capital market.
The same is true for foreign countries. All major capitalist countries have experienced overcapacity of varying degrees. At present, the situation is the most serious for us and the United States.
This is a risk that must be taken when a large amount of foreign capital is introduced. Once the economic crisis breaks out, British and French capital will definitely withdraw funds and leave the market. If we cannot properly deal with it, the consequences will be very serious."
Secretary of Finance Carl said: "Your Majesty, we cannot directly interfere with the free circulation of capital. The best way now is to lead them to the real economy.
When capital becomes real estate such as factories, railways, and infrastructure, it will be difficult for them to leave again."
When capital becomes real estate, if you want to leave the market, you will have to cut your losses. During the economic crisis, these industries are not valuable, and you can't even find buyers.
No one takes over, and the capital invested in it will be trapped by the market. If you want to get rid of the trap and wait for the economy to recover!
However, once the economy recovers, many of these industries have become high-quality assets, and capitalists have no need to abandon these industries.
Felix Xiang frowned and said, "There will be too great a problem for doing so, allowing more foreign capital to invest in the real economy, and the overcapacity situation will be even more serious.
Even if we retain this capital, it will aggravate the scale of the economic crisis, and the final harm will still be borne by us."
Chancellor Carl explained: "Everything has two sides. If you want to minimize the crisis, it is best to let them invest in urban infrastructure.
For example: Now we have promoted urban safe drinking water projects, drainage pipeline reconstruction, urban road construction...
There is no overcapacity in these industries. There are more than 300 cities in the new Holy Roman Empire. Due to government funds, we are currently only renovating infrastructure in big cities.
These areas can accommodate a large amount of capital, but once the economic crisis breaks out and the capitalists’ capital chain breaks, a large number of unfinished projects will still need to take over."
Felix asked with concern: "Take a small problem, the biggest problem is urban infrastructure construction, and the government has always been invested in construction, and these projects are basically no possibility of profit.
If you want capitalists to invest, you must first let them see the profit points. It’s fine if the urban safe drinking water project is used, and the tap water plant can charge water fees. How can other infrastructure make profits?”
Chancellor Carl explained: "Of course there is no profit point. The investment in infrastructure construction is too large, and most projects are public welfare, so it is impossible to make money from the project itself.
Therefore, we must go indirectly, for example: bidding to the society, the government will only take out a small part of the money in the early stage to ask capitalists to advance funds for construction, and after the project is completed, the project funds will be settled after passing the acceptance.
These projects cannot be completed in a short period of time, and the investment amount is very large. Once the economic crisis breaks out, banks tighten their money, and most capitalists' economic chains will be broken.
As long as we indicate on the contract that if there is an unfinished project, we will not pay the bill, which will save a lot of money.
If these consortiums behind foreign capital are willing to invest capital to continue completing these projects, then it would be best.
With the influx of new capital, these projects can continue to be constructed, which will inevitably drive the economies of many industries, and this economic crisis has passed.
Anyway, the money for infrastructure construction will be paid sooner or later. We will still make a profit if we can survive an economic crisis smoothly."
Franz's eyes lit up. Isn't this a replica of Roosevelt's new economic policy? It's just that the scale is not that large. The initial basic point was not to survive the economic crisis, but to trap foreign capital.
That's right, it's just a trap. Infrastructure projects, as long as money is invested in, they will be trapped. Don't expect the Vienna government to pay in advance before the completion of the project.
Either the capitalists and Austria will overcome the difficulties and fight this economic crisis together; or they will cut their losses and leave the market, and all the previous investments will be wasted.
In order to reduce the harm caused by the economic crisis, pulling people into the water is the best choice now. The worst case scenario is that there is nothing more than leaving behind an unfinished project in the area, which is responsible for taking over by the Vienna government.
Franz could have allowed capitalists to jump into the huge pit of railway construction, but now he naturally doesn't care about letting them jump into the pit of infrastructure construction.
This cannot be considered a trap. During the period of normal economic development, it is a good quality project and there is no such thing as a trap.
After thinking about it, Franz warned: "The plan is very good, but you must pay attention to the degree.
It is necessary to ensure that those who win the bid are strong capitalists. If a group of uncompetent parties get the project, we will end up cheating.
Retaining foreign capital is only a means, not an end. Our ultimate goal is to survive this economic crisis smoothly.
According to the current situation, there is a serious overproduction in the capitalist world and an economic crisis explodes, which is the problem within the past or two years.
If necessary, a deposit system can be introduced. The capitalists who undertake these projects will first pay the project guarantee fund and return it after the project is successfully completed."
In addition to overcapacity, another characteristic of the economic crisis is that it is short of money in the market. Everyone's funds are concentrated in the hands of a few people, resulting in insufficient working capital.
It is the age of the gold standard, and it is impossible to increase the currency in large quantities. Unless the economic crisis is so serious that it cannot bear, Franz will not depreciate the currency.
Then it is very important to keep capital in China as much as possible. Forced means to regulate finance and prohibit capital outflows are the worst means.
If you are unable to change the rules, it is very necessary to abide by the rules. Blindly breaking the rules will inevitably be backfired.
As a member of the vested interests in the rules system, Franz does not think that breaking the rules is suitable for Austria.
In order to retain foreign capital within the scope of the rules, Franz does not want the second generation of aristocratic people in China to come out to make trouble. It would be fine if he had the strength. Wouldn't it be harmful to others and oneself if he had no money to take on projects?
This is not a joke, but a fact. Being rich in a noble family does not mean that every member of a family has money. Many noble children can only get a small part of their property.
Land, titles, and core industries will not be distributed, otherwise these families will decline in a few generations.
Often, the eldest sons who inherit the family business have enough assets to inherit and will not go out to mess around; the second sons who do not have many assets are often active in the gray area.
Franz encountered many such teenagers who were dying. During the Great Revolution in 1848, I don’t know how many noble families were, because these children were dying, and they implicated the family behind them.
Afterwards, all major noble families strengthened their binding force on their children, and most of the children of the noble who were active in thought were cruelly suppressed by their parents.
In recent years, they have been relatively calm. After all, after personally experiencing the Great Revolution, one-third of the nobles in China lost their titles, and half of the families declined, and everyone has a sense of awe.
Chancellor Carl asked in confusion: "Your Majesty, what is the deposit system?"
This is not his ignorance, but that there was no concept of a deposit system in this era, and the earliest guarantee system would not appear forty years later.
It is normal to not understand the concept before this. Everyone has become accustomed to Franz's active thinking and often proposes some new ideas.
Franz explained: "It is very simple to ask the winner to pay a sum of money and serve as a deposit for the project to be completed smoothly.
This includes guarantee for manual wage payment, project quality guarantee, and project project completion guarantee. After the project is successfully completed and the workers' wages are settled clearly, the government will return the guarantee in full."
Felix asked, "Your Majesty, isn't this money deducted from the project payment?"
Franz shook his head and said, "It's different. If it is deducted from the project funds, it cannot determine the capitalist's financial strength.
They took the contract signed with the government and went out to find a bank loan and relied on the bank's loan to complete the project.
If this doesn't matter in normal times, it will not affect the normal progress of the project. However, once an economic crisis occurs, the bank will shrink its monetary policy.
Our current purpose is to retain foreign capital, not to create financial opportunities for some people. Once the project is unfinished, we will have to deal with the aftermath.
If a deposit is collected, our risk will be reduced to the lowest point. If capitalists do not want to bear this loss, they will have to work with us to overcome the difficulties."
This is a psychological problem. The more capital you invest, the harder it is to let go. The greater the capital you are trapped, the tighter the interests of capitalists will be tied to Austria.
In order not to waste the previous investment, capitalists can only withdraw more funds to fill in the pit to ensure the normal progress of the project.
Chapter completed!