for setting industrial production going again in any way. Its
first steps in war economy were confined to the sphere of finance
and credit: the bourse was closed, and a moratorium announced.
With regard to the latter, however, the requirements of industry
were studied to a certain extent, in that the withdrawal of money
from the banks was allowed, so far as it was necessary for paying
wages and for the provision of working capital.
There was no revival of industry until the orders of the military authorities began to come in, which gave lucrative employment. In a short time, and without any pressure from the Government, but solely as a result of the favourable prices it offered, industrial conditions were completely transformed so as to meet the exi- gencies of the war. At first indeed, since the war was only ex- pected to last a short time, there was little disposition to incur the heavy expenditure necessary in order to secure a share in the manufacture of war material; but this attitude was soon changed, and within six months factories everywhere had been adapted to the supply of munitions and all the variety of other things required by the Government for the armies. Industry was thus in many ways compensated* for the paralysis of trade with private buyers in the home market and for the closing of foreign markets, and it would have been able to continue quietly on the old lines but for the emergence of a new factor which fundamen- tally altered the conditions. This factor was the rupture of com- munications with foreign countries, due in the earlier stages of the war to the limitation, and at one time the prohibition, of exports by neutral countries, the passing over of some of these countries to the enemy, and lastly the blockade by the enemy Powers, which increased in efficiency and made it more and more difficult to import the most essential commodities, until in the end it was almost impossible to obtain from abroad anything, needed either for the soldiers or the civilians.
In this respect Austria found herself in the same position as the German Empire; in fact, her position was in many respects con- siderably worse; many richly productive territories were tem- porarily occupied by the enemy; and as Austria was far less well provided with raw materials than Germany she was less in a position to produce goods for exchange. In addition to this there was another quite exceptional source of difficulties which had the most serious consequences for Austria, namely her relation with Hungary, due to the peculiar constitutional structure of the Austro-Hungarian Monarchy. The Hungarian Government could claim the right to take independent economic measures for her own territory in war-time; a joint arrangement was only possible for the territories of the Dual Monarchy which were united for tariff purposes by agreements between the Austrian and Hungarian Governments; and since neither Government was exclusively concerned to carry out an adjustment of economic conditions solely in accordance with what was necessary for waging war and holding out with the supplies at their disposal, but each had also to champion the interests of one half of the monarchy against the other, the negotiations between the two Governments were often attended with the greatest difficulties, and constantly ended unsatisfactorily. Hungary, in accordance with her economic situation, had always the advantage in these negotiations, :ince she was incomparably richer than Austria in foodstuffs, and the latter was constantly thrown back upon Hungarian supplies; and this superiority on the part of Hungary became more and more definitely pronounced in proportion as the provision of the necessities of life for the army and civil population became a steadily-increasing anxiety.
The more complete the economic isolation of the monarchy the more the lack of raw materials made itself felt, both for the manufacture of indispensable war supplies and for the feeding of the civil population. To prevent the war being brought to a premature end by dearth of supplies, the Government took measures, modelled on those adopted in Germany, for ensuring that necessary goods should be supplied to the proper quarters whether the army authorities, manufacturers of war material, or consumers and at a moderate price.
The quantity of raw materials which Austria had been in the habit of importing from abroad, and the quantity stored in
the country at the outbreak of the war, were comparatively very small. The Austrian and Hungarian ports were of little importance as ports of entry for raw materials, the goods stored there being mainly from the Levant. On the other hand, wool, cotton, metals, etc., which came from overseas, were imported through German or Dutch ports, and were stored there, though often already in Austrian Ownership. It was of the first necessity to assure the transport through Germany of these Austrian- owned goods, and an agreement with the German Government securing this was made. Agreements were also concluded by which a share of the goods owned by Germany was conceded to Austria.
It was next necessary to organize the purchase of goods in neutral countries. This was at first left wholly to private enter- prise; but, as Austrian buyers not only competed with each other but also with buyers from other countries, this was bound to send up prices, while the interests of the State were subordinated to private gain. To meet this situation Germany set up central boards (Zentralen), and Austria followed suit, partly at the re- quest of the German Government, which wished to avoid the competition of Austrian agents. Since the functions of these organizations were commercial, for which the regular Govern- ment officials were unsuited, they were established as commercial joint-stock companies under peculiar conditions adapting them to the service of the state. Any dividends earned by them above 5 or 6 % on their capital were to go to the State (in the first place to the Minister for War, to be applied to war purposes). In Austria the Government did not subscribe any of the capital, but the central boards were subjected to State supervision and their power of fixing prices was in many ways limited. These boards were now given the monopoly of the right to import certain wares (sometimes private buyers were allowed to purchase, but only on condition of selling the goods imported to the board); they were also entrusted with the reception of 'the instalments of raw materials already mentioned as released from bond in Germany. The activity of the central boards as purchasers in neutral coun- tries did not last long; it came quickly to an end in 1915, especially after Italy's entry into the war.
Fresh tasks were, however, soon imposed upon them. The virtual stoppage of all supplies of raw materials from abroad necessitated the strictest economy in the use of those available at home, and this led to an elaborate system of Government control. Since expert advice was absolutely essential to the efficient working of such control, the task of carrying out the regulations as to the distribution of materials, etc., was entrusted to central boards under the form of war associations (Kriegsver- bande), or economic associations (Wirlschaftsverbdnde), each controlling certain materials. The associations, to which the manufacturers using these materials had to belong, were directed by elected committees; at the head of each was an expert ap- pointed by the Government, which was represented on the board by a commissioner exercising the Government's right of super- vision. In addition to regulating the distribution of raw materials these boards exercised other useful functions, such as discovering fresh sources of supply, improving methods of production, etc. They also acted as receiving centres for goods imported from neutral countries, allied states or occupied territories. In this way there arose central boards for wool, cotton, oil and fat, hides and leather, and various metals to name only the more im- portant materials.
The control exercised by these boards was limited in scope and touched only comparatively narrow classes. It was otherwise with the control of foodstuffs, which was all-embracing. The problem in Austria, as elsewhere, was to keep the prices of the necessaries of life at a level low enough to enable the people to live. The attempt to fix maximum prices broke down, owing to the temptations to secret dealing, and, as in England, the card system had to be introduced.
Early in 1015 an institution was established for regulating the traffic in grain during the war (Kriegsgctrcidc-Verkehrs-Anstalt); it had been preceded by a central maize board, established to control the distribution of the maize contributed by Hungary.
