Economic policy and economic development in Austria–Hungary, 1867–1913

Abstract

Introduction The Emperor of Austria, Franz Joseph I of the House of Habsburg-Lothringen, had every right to be pleased as he stood in the Hungarian capital city of Buda, atop a mound of earth gathered from every part of the country, to be crowned I. Ferencz Jozsef, King of Hungary, on 8 June 1867. Ten days earlier, the Hungarian parliament had passed the acts constituting the Compromise of 1867 which, with their counterpart laws in Austria, formally established the Austro-Hungarian monarchy as of I January 1868. Very largely the personal work of the Kaiser himself, the Compromise regulated the political relations between the two constituent parts of his Empire, at one and the same time stabilizing both the internal conditions and the international position of the Habsburg lands. Franz Joseph had rightly seen that the position of Hungary was the key both to the internal cohesion of the Empire and to the arrest and reversal of the decline of Austria as a major power, which defeat in the war with Prussia in 1866 had exposed so clearly. Under the Compromise, Hungary regained full internal autonomy and most of the status of an independent country, but remained united with Austria in the person of the common monarch and in the conduct of foreign affairs. The Compromise established two classes of relations between the partners in the new Austria–Hungary: ‘Common affairs’ embraced the army and navy, and all aspects of international relations including the diplomatic service; a common ministry was set up to handle the financial side of these matters.