The Czechoslovak Review/Volume 3/Rašín's Financial Measures

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Jaroslav F. Smetanka, Editor
Published Monthly by the Bohemian Review Co., 2324 S. Central Park Ave., Chicago, Ill.

Entered as second class matter April 30, 1917 at the Post Office of Chicago, Ill., under act of Congress of March 3, 1879.

Vol. III, No. 5. MAY 1919

15 cents a Copy
$1.50 per Year

Rašín’s Financial Measures

For months after the Czechoslovaks got rid of the Austrian yoke they continued to be tied to the defunct empire by one of the strongest bonds in existence—a common currency. And the Austrian currency was in a terrible condition.

Next to the lack of food, inflation of currency was the greatest evil with which all Central Europe, including Bohemia, had to contend. Money was plentiful, far more so than before the war, but it would buy nothing. As a result people did not see any use in working and they squandered their paper money on the few luxuries still obtainable. The Austro-Hungarian Bank is sued during the war 37,000,000,000 crowns, unsecured by any metal, reserve. That meant a per capita circulation of 750 crowns. In Bohemia, the industrial portion of the empire, the amount of paper money to each person was more than one thousand crowns. At normal rate of exchange that would mean more than $200, and even at the terribly depreciated rate of exchange the circulation of fiat money was greater per capita than in the prosperous and wealthy United States.

The break-up of the monarchy and the rise of new national states did not stop the presses of the Austro-Hungarian Bank. The bank continued to create fictitious money which was a burden on all the new states, and it loaned this money to German Austria and Hungary. No attention was paid to the protests of the Czechoslovak government; in fact it was notorious that the new money was sent in bundles to Slovakia and Bohemia to stir up rebellion against the republic among German and Magyar minorities.

The government of Prague realized that the creation of a separate Czechoslovak currency was imperative. But to make plates and print a few billion of notes of entirely new money required a great deal of time and special facilities lacking in the new republic. Other means had to be found, and after two months of secret preparations Alois Rašín, minister of finance, laid his plans before the National Assembly on February 25. The principal provision of his bills set a term of nine days within which all Austrian money circulating in the territories of the Czechoslovak Republic had to be brought in to public offices and banks to be stamped or earmarked; frontiers would be tightly closed in the meantime, to prevent the influx of more bank notes from Vienna and Budapest. After the expiration of this period only stamped bank notes would be legal tender.

But in addition to separating Czechoslovak currency from Austrian and Hungarian currency Rašín’s financial measures dealt also with the problem of inflation. One half of all the currency brought in for stamping was to be retained by the state as a forced loan bearing interest at one per cent only. By this means it was intended to withdraw at one stroke half the money from circulation. Dr. Rašín stated, however, that the government intended to refund soon the smallest amounts thus held back, so as to avoid unnecessary hardship to the poor. And in order to utilize to some advantage the temporary business paralysis created by the period of stamping money, the financial measures provided further for the stamping of all securities held by Czechoslovak citizens, especially Austrian war bonds, and for a census of all movable property, the intention being to get a reliable basis for the imposition of a heavy property tax. In checking up property separate entry was made of property held before the war and that gained during the war; much higher rate is to be imposed upon war profits. Dr. Rašín explained that an extraordinary prop- erty tax was unavoidable in the interest of sound economical life; to distribute the necessarily heavy taxes over a number of years would mean that they would be added to the cost of production and thus handicap Czechoslovak products in the world markets.

Another bill introduced by the minister of finance at the same time asked for authority to issue a domestic loan purchaseable only in gold, silver or foreign currency. This loan is to be repaid in four years in kind. In this way the government hoped to lay the foundation for a metallic reserve for its new currency. It was well known that in spite of all the Austrian requisitions during the war the Czechoslovak people had hidden considerable amounts of precious metals in coins and ornaments. To induce the people to bring in their hidden stores of gold and silver the new loan bore four per cent interest and was exempt from all taxes, including property tax.

For weeks before the introduction of these measures Rašín’s plans were constantly talked about and guessed at. But they were prepared secretly, discussed by the financial committee of the National Assembly in strict confidence before their introduction, and within half an hour after their submission to the legislature they were adopted and the frontiers closed. No travelling was permitted during the nine days of stamping, except to government couriers, and no mails were transported between neighboring states and Czechoslovakia. So efficient, was the machinery provided by Rašín for the execution of his measures that the difficult task of substituting of one currency for another and checking up on all personal property within a state of 13 million people was carried out smoothly and practically without a complaint. One reads in the Prague papers that a German village in northern Bohemia refused to produce its money at the county office on the day appointed, but the elders changed their minds before the stamping period elapsed and were granted the privilege of appearing on a later day. And of course there were a few individuals who seemed to have overslept and who kept sending their unstamped Austrian crowns to the ministry of finance after it was all over, in the vain hope that an exception would be made for them. But on the whole the people accepted the startling measures as necessary, and rich and poor, socialists and agrarians and bourgeois, Germans as well as Czechs, praised Rašín for his wise radicalism. Only Vienna raged and protested, and finally followed the Czechoslovak example. The Magyars intended to do the same thing and stamp their money also, as the Jugoslavs had already done. What will happen to the billions of Austrian currency held in Germany and the neutral European states no one can tell. Today none of the states of the former Dual Monarchy will accept unstamped Austro-Hungarian currency.

One month later Rašín came again before the National Assembly for authority to make an external loan of $179,000,000 to buy food, strengthen the gold reserve and purchase abroad raw materials required by Czechoslovak industries. The loan was authorized and Czech financiers are already negotiating in England, and will soon be negotiating in the United States, for the most favorable terms. Loans extended in the past to the Czechoslovak Republic by the United States government as a war measure will no longer be available. But the credit of the new republic is good, for all classes of the people realize that stability and order must be maintained and production increased, if the state is to live.

Recent news indicates that the controversial question of the expropriation of large landed estates has been settled to the satisfaction of all parties. On April 15th the National Assembly adopted unanimously a law by which the state takes over all estates of more than 150 hectares (about 380 acres) of arable land and more than 100 hectares of forest. It is estimated that the total amount of land thus expropriated will be 1,300,000 hectares of arable land and 3.000,000 of forests; 430,000 families can find new homes on this formerly feudal land. No compensation will be paid for land which was owned by members of the former imperial family, but payment will be made for land taken from noblemen and prelates.

Food conditions have greatly improved with the arrival of supplies from America by way of Hamburg. The first boatload reached Prague on April 8th. The Czechoslovak government bought in Saxony barges and tugs to the amount of five million dollars. A still larger river fleet is operating under Czechoslovak flag on the Danube. With the improvement of the food situation the political situation also has lost some of the partisan bitterness, exhibited especially by the socialists toward the agrarians. And the morale of the entire nation was raised by the arrival of the invalided soldiers from Siberia. Three parties of them arrived in Prague from Vladivostok after a long trip around India, and a party of one hundred Czechoslovak invalids is expected to arrive shortly in the United States on the way home.

The red revolution in Budapest found no echo in the Czechoslovak Republic. No one was anxious to follow the example of the Magyars, who are more hated than even the Germans. The radical socialists of course protested against the use of armed Czechoslovak forces to suppress the proletarian revolution, but then Masaryk promptly turned down appeals of Magyar upper classes to interfere in their behalf. There were local collisions between Magyar red guards and Czechoslovak frontier guards, and the situation will continue dangerous, as long as the southern and eastern boundaries of the Czechoslovak Republic are not determined by the peace conference.

While the principle of the separation of church and state is adhered to by all parties, the government is taking care to avoid religious strife. Thus the National Assembly authorized the erection of additional chairs in the Catholic theological faculty at Olomouc and gave it the name of the Cyril-Methodius Theological Faculty. On the other hand the Assembly authorized the opening of a Protestant Jan Hus Theological Faculty in Prague.