the common market of the austro-hungarian monarchy

László Katus 

THE COMMON MARKET OF 

THE AUSTRO-HUNGARIAN 

MONARCHY 

The Compromise (Act 12 of 1867) having determined 

the joint affairs affecting the lands of the Hungarian Crown and 

of the countries represented in the Imperial Council and the mechanism 

of dealing with them, continues thus: 

There are other greatly important public affairs the joint 

aspects of which are not derived from the Pragmatica Sanctio but 

which partly because of the situation and the political perspective 

and partly because of the overlap of the interests of the two parties 

would be more appropriately administered jointly than strictly separately.…The 

joint aspects of commercial matters also are not 

derived from the Pragmatica Sanctio because according to it the 

lands of the Hungarian Crown, being legally separate countries 

from the other countries of the prince can make decisions through 

their own responsible government and legislature and can regulate 

their commercial affairs by their own duty alignments. Because, 

however, there are important and numerous mutual connections 

between Hungary and His Majesty’s other lands the legislature is 

prepared to have customs and commercial unions arranged, from 

time to time, between the lands of the Hungarian Crown and His 

Majesty’s other lands.…The union would be set by joint negotiations 

in such a fashion that there would be similar arrangements 

between the two independent countries.…On this occasion as 

well…by agreement the rules about the nature, uniform ratios, and

22 LÁSZLÓ KATUS 

management of the taxes linked to industrial productions shall be 

established so that the possibility of unilateral decisions of a 

responsible government or legislature leading to a decrease in the 

revenues of the other party be excluded. The methodology will 

also be determined for the future so that any reforms to be instituted 

about these taxes will be decided by the two legislatures by 

mutual understanding. 

The law also stated, “It is desirable and important for both parties 

that the monetary system and money rates be identical in the countries 

belonging to the customs union.” 

It was on this basis that the commercial and customs union was 

arranged between the two countries and enacted as Act 16 of 1867. 

Accordingly, “For the duration of the alliance the national territory of 

both parties…constitutes a single customs and commercial territory, 

which is surrounded by a common customs boundary.” The two countries 

jointly determined the customs duties to be charged and also 

entered into commercial agreements with other countries on the basis 

of mutual understanding. A number of economic issues had to be regulated 

and administrated by the two countries as a joint endeavor. 

These included issues of importance to both countries, such as railroads, 

rivers and maritime navigation, mail and telegraph service, measures 

and weights, and copyright. 

The income from salt and tobacco and those indirect taxes 

which directly affect industrial production, namely taxes on liquor, 

beer, and sugar, will be handled during the existence of this act in 

both countries by equal ordinances and administrative regulations…patents 

on inventions will be valid in both countries….The 

inhabitants of one of the national territories who wish to engage in 

commerce or industry in the other territory, or seek employment in 

that territory will be treated exactly the same way as the residents 

of that territory so far as starting or maintaining a business or the 

taxes to be paid and…will enjoy complete equality before the law. 

In order to harmonize the economic policies to be established in 

these matters customs and commercial conferences were held from

THE COMMON MARKET 23 

time to time. The customs and commercial agreements were made for 

a period of ten years but after five years either party could initiate negotiations 

for their modification. If these discussions proved unsuccessful 

the alliance could be canceled. 

The treaty stated that, “Until changed by law, the Austrian currency 

remain joint asset.” The Compromise did not address the central bank 

issue and only stated that the monetary system was one of the matters of 

“common interest.” In theory, Hungary had the right to establish its own 

central bank. The Hungarian government and legislature did not accept 

the validity of the 1862 Bank Act but for the time being accepted the 

existing situation and the monopoly position of the Austrian National 

Bank. On September 12, 1867, in Vöslau, the Austrian and Hungarian 

ministers of finance signed an agreement according to which the Hungarian 

minister committed himself that until the two countries, by joint 

agreement, regulated the monetary system of the Monarchy, Hungary 

would not establish a separate central bank and would accept the 

imposed use of the banknotes issued by the Austrian National Bank. 

After the Compromise the situation of Hungary took a significant 

improvement in the economic community of the empire. It was no 

longer in a dependent position and became a partner with equal rights 

and equal rank. The unified customs area of the centralized empire 

became a customs union of two economically independent and sovereign 

countries, designed for a specified period of time, voluntary and 

subject to cancellation. 

One month after his appointment as prime minister, in November 

1875 Kálmán Tisza abrogated the commercial and customs alliance in 

order to achieve changes favorable for Hungary in three areas. These 

were: that excise taxes be paid in the country where the item was consumed 

and not the country where it was produced, that the import 

duties (the so called fiscal duties) on items not produced in the Monarchy 

be raised, and the central bank be reorganized according to the 

principles of Dualism and parity. The Austrians were primarily seeking 

a raise in the industrial custom duties. The difficult negotiations 

dragged on for more than one year and finally an agreement was 

reached in February 1877, which met only some of Tisza’s demands. 

The Austrian National Bank was reorganized on a Dualist basis as the 

Austro-Hungarian Bank, with two identical principal branches, one in


Vienna and one in Budapest. Parity was accomplished only partially. 

The fiscal duties were raised but in the matter of the excise taxes the 

situation, unfavorable for Hungary, could not be changed (Act 20 of 

1878). In exchange for raising the industrial duties the Austrians 

agreed to raise the import duties on agricultural products. In Act 25, 

1878, the Hungarian legislature accepted the status of the Austro-Hungarian 

Bank and its monopoly of issuing the banknotes. 

The new agreement contained an important new clause: “A joint 

stock company legally established in one of the countries, insurance 

companies, commercial or industrial associations (Erwerbs- und 

Wirtschaft-Genossenschaften) may extend their activities to the territory 

of the other country and establish a branch there. In such situation 

they shall be deemed to be equivalent to the domestic establishments.” 

For the implementation and the rules governing the above a separate 

agreement was made (Act 22 of 1878). 

In 1887 the commercial and customs union was extended without 

any difficulty and so were the privileges of the Austro-Hungarian Bank. 

In 1897, the paralysis of the legislature in Vienna made this impossible 

and therefore the treaty and the banking privileges were extended only 

for one year. In 1898 the Hungarian Bánffy government and the Austrian 

Thun government reached an agreement concerning the details of the 

commercial treaty. This agreement was beneficial for Hungary because 

the Hungarian point of view could prevail in two areas which had been 

turned down when requested by the Tisza government in 1877–1878. 

Austria agreed that there would be parity between the two countries 

within the Austro-Hungarian Bank and also that the excise taxes would 

be paid in the country where the goods were used or consumed. The 

Austrian government agreed to raise the agricultural import duties but 

demanded that the quota, i.e. the Hungarian share of the costs of joint 

endeavors, be raised. Because the Austrian legislature still could not 

deal with the commercial treaty, the two governments agreed that it 

would be arbitrarily extended until the end of 1903 the expiration date 

of the international commercial treaties. They also agreed that if by then 

no new agreement could be reached, the 1887 agreement would continue 

to remain in place. 

Kálmán Széll, the new prime minister appointed at the beginning 

of 1899 published the legal formula, known by his name, according to


which “because a customs and commercial treaty had not been generated 

between the lands of the Hungarian Crown and the kingdoms represented 

in the Imperial Council, a legal status of an independent customs 

area came into existence for the lands of the Hungarian Crown.” 

He continued to maintain, however, the economic community. The 

Széll formula was entered into Act 30 of 1899, which extended the 

existing commercial agreement until 1907. The act also prescribed 

that before a new international commercial treaties could be established 

a new autonomous customs tariff system had to be set up for the 

Monarchy. The privileges of the bank were extended until the end of 

1910, changing the charter of the bank in Hungary’s favor. In 1902 

negotiations between the two governments about a new commercial 

and customs union started again. Under pressure from the agricultural 

sector, the Hungarians demanded a substantial increase in the agricultural 

customs duties but in exchange for this they were forced to 

accept an increase in the industrial customs duties. On New Year’s Eve 

in 1902 an agreement was reached between the two governments 

about a new commercial and customs alliance and about the basic 

principles of a new, autonomous customs duty system. This was 

known as the Széll-Körber Pact. This agreement, based on the results 

achieved at the 1898 negotiations, was recognized even by the opposition 

coalition that from a Hungarian perspective it was the best 

arrangement since 1867. The practical implementation of the agreement 

had to be postponed for a few years because due to the 1903 

domestic policy crisis in Hungary, the Hungarian legislature could not 

address this matter. 

In the agreement made with the ruler in April 1906 the opposition 

coalition gave up its previous demand for an independent customs area 

and agreed to enact into law the commercial contracts and the new 

customs tariff. It agreed that even if the agreement with the Austrian 

government could not be reached it would maintain the united customs 

area until the end of 1917, when the international commercial 

treaties would expire. The new agreement was reached after many 

months of negotiations in October 1907 and was based on the Széll- 

Körber Pact. A new feature in the agreement was the change that the 

two countries henceforth would not be in alliance but would have a 

contract with each other (Act 12 of 1908).


In the actual practice of the economic community there were 

numerous problems and difficulties. The foreign trade interests of the 

two geographically, economically, and developmentally different countries 

were difficult to harmonize when the customs tariffs had to be 

determined or during commercial negotiations with foreign countries. 

There were also frequent disagreements when the domestic economicpolitical 

issues had to be brought into harmony. 

In 1878, after the most serious economic crisis of the Dualist era, 

the Commerce Committee of the Hungarian National Assembly 

believed that, “the customs unity did not hamper the economic advances 

of our country, but, in fact, was a major factor in its favor.” 1 

The supporters of a common customs area pointed out the advantages 

of the wide imperial market for the development of a modern 

economy and for the implementation of modern technical advances. 

The great advantage of a larger area of business activities is 

that they make the development of the particular areas and countries 

possible in the direction where it is the most practical and 

where it can take best advantage of the natural conditions thus making 

it possible for the individual areas to develop their nature-given 

advantages to the fullest and most profitable extent.…The common 

and united customs area of the Austro-Hungarian Monarchy was, 

without a doubt, beneficial for the economic well being of the two 

different but interdependent parts of the Monarchy. 2 

This argument was endorsed by historic growth. The common customs 

area where, in principle, there was an unfettered competition and 

1 “A képviselŒház vám és kereskedelemügyi bizottságának jelentése a vám- és kereskedelemi 

szövettségrŒl szóló törvényjavaslatról” [Report of the Custom and Commerce Committee 

of the House of Representatives on the bill on the customs and commerce union], in Az 1875. 

évi augusztus hó 28-ra hirdetett országgyŠlés képviselŒházának irományai [Papers of the 

House of Representatives of the National Assembly Convened on August 28, 1875] (Budapest, 

1878), vol. 21, p. 342. 

2 “Miniszteri elŒterjesztés a vám- s kereskedelmi szövetségrŒl szóló törvényjavaslathoz” 

[Ministerial proposal on the bill on the customs and commercial union], in Az 1875-ik évi 

augusztus hó 28-ára kihirdetett országgyŠlés fŒrendi házának irományai [Papers of the August 

28, 1875, Upper House Session of the National Assembly] (Budapest: 1878), vol. 8, pp. 167 

and 171.


free trade, gave both countries the opportunity to develop those branches 

of their economy in which they were in an advantageous position 

and specialized on the production of those products for which they 

were particularly well suited. In the trade between the two parts of the 

Monarchy the comparative advantages, granted by the natural, historical, 

and structural differences, could become manifest. 

The creators of the Compromise considered the most important 

activity of the subsequent decades to be to make up in all areas for the 

deficiencies of the past centuries and to move up to the level of the 

leading European countries or, at least, to the level of the western parts 

of the Monarchy. “We have accepted the principle of free trade and its 

consequence of free competition and believed that the nation would not 

acquiesce in the areas where it was left behind and would do everything 

to catch up with its neighbors,” stated István Gorove, minister of agriculture, 

industry, and commerce. 3 

Let us examine more closely the economic areas in which Hungary 

lagged behind Austria and let us attempt to answer the question how 

much progress and catching-up had been achieved during the fifty 

years of Dualism. In what follows Hungary means the lands of the 

Hungarian Crown, including Croatia, the pre-Compromise Transylvania, 

and the Military Frontier. The Hungarian data should not be compared 

to the Austrian because the Austrian averages do not reflect the 

significant developmental differences between the Hereditary 

Provinces and the eastern and southern border areas, namely Galicia, 

Bukovina, and Dalmatia. The last joined the Habsburg empire only at 

the end of the eighteenth century. Therefore, in our analyses wherever 

the data permit it, we will divide the Austrian averages into the Hereditary 

Provinces, i.e. the fourteen countries and provinces to the west of 

Hungary and the three provinces to the east and south. Hungary’s economic 

developmental status was in the middle between the Hereditary 

Provinces and the three border territories. 

3 Az 1865. évi deczember 10-ikére kihirdetett országgyŠlés képviselŒházának naplója [Journal 

of the House of Representatives of the National Assembly Convened on December 10, 

1865] (Pest: Emich G. Nyomda, 1868), vol. 6, p. 172.


It is clear that in agriculture Hungary was on the same level as the 

Hereditary Provinces and in some aspects was even ahead of them. 

According to a contemporary study dividing the total revenues from 

agriculture and forestry would provide each resident in both Austria and 

Hungary with approximately 77 forints. The area of mining shows a difference. 

In all of Austria each inhabitant would receive 1.65 forint, in 

the Hereditary Provinces they would receive 2.29 forints and in Hungary 

only 0.92 forint. 4 

The differences between agriculture and industry were shown 

clearly in the 1863 imperial steam engine statistics. According to these 

there were 203 steam engines actively engaged in Hungarian agriculture 

(except for two steam plows all worked as threshing machines) 

with a total energy output of 1,661 horsepowers, while in Austria there 

were only 18 machines with an energy output of 147 horsepowers. In 

Fehér County alone more engines were used than in all of Austria. In 

agricultural mechanization Hungary was thus well ahead of the areas 

west of the Leitha River. In industry the situation was precisely the 

opposite. In Austria 2,759 steam engines were engaged in mining and 

industry with an energy output of 45,948 horsepowers. In the lands of 

the Hungarian Crown the totals were 506 machines with 8,588 horsepowers. 

5 

4 J. Fillunger, Vergleichende Statistik über die Real- und Productionswerte der Landwirtschaft, 

der Montanindustrie, des Verkehrs- und Communications-Anstalten, dann 

Erörterung des Staatshaushaltes in österreichischen Kaiserstaate (Vienna: Selbstverl., 1868), 

tables 16, 34, and 40. 

5 Statitisches Jahrbuch der Österreichischen Monarchie für das Jahr 1863 (Vienna, 1864), 

pp. 173–178, 197–200, and 205–234.


TABLE 1. Steam Engines in Industry and Mining in 1863 

Per 

Index 

100,000 inhabitants (Austria=100) 

Machine Horsepower Machine Horsepower 

Austria 13.65 227.27 100 100 

Hereditary Provinces 19.05 315.25 140 139 

Galicia, Bukovina, Dalm. 1.9 36.14 14 16 

Hungary 3.29 55.9 24 25 

The 1862 tax statistics give us a detailed description of the relative 

level of development of industry and of the various branches of the service 

sector in the individual countries, territories and regions of the 

Monarchy. These statistics included all non-agricultural revenues and 

extended to all independent business men, from the artisans, door-todoor 

salesmen and postmasters to the major industrialists and merchants, 

banks, and railway companies. The statistics contain the taxes 

paid by nearly one million tax payers divided into 43 groups and 1,300 

occupations. The first volume presents the industrial areas and the second 

volume includes all non-agricultural activities under the title of 

Commerzialgewerbe and extends to commerce, credit, transportation, 

healthcare, independent intellectual occupations, and the various service 

functions. 6 The number of taxpayers per 1,000 of population gives 

a good indication of the incidence of non-agriculturalist taxpayers. The 

amount of taxes paid per 1,000 members of the population indicates the 

relative level of development of the non-agrarian sectors because the 

taxes assessed were proportional to the income. In Austria there were 

36.23 such taxpayers per 1,000 members of the population while in the 

lands of the Hungarian Crown the number was less than half at 17.05. 

The difference of the amount of taxes paid was much greater. In Austria 

it was 690 forints and in Hungary only 182 forints. The difference 

between the two categories indicates that the Hungarian taxpayers had 

6 Die steuerpflichtigen Gewerbe des österreichischen Kaiserstaates im Jahre 1862, vol. 1, 

Industrial-Gewerbe, vol. 2, Commerzial-Gewerbe (Vienna, 1865–1866) [Mittheilungen aus 

dem Gebiete der Statistik 12, nos. 1 and 4].


substantially lower incomes than their neighbors beyond the Leitha 

River. It can also be seen from these data that industry in Hungary was 

relatively more developed than were commerce and the service sectors. 

TABLE 2. Taxes Paid in Non-Agricultural Occupations in 1862 

Handicraft Industry Commerce Total 

Manufacturing credit, transp. non-agriculture 

industry all other serv. activity 

Per 1,000 Per 1,000 Per 1,000 

Taxpayers Tax Taxp. Tax Taxp. Tax. 

Austria 18.60 246 17.62 444 36.23 690 

Hered. Prov. 24.51 337 20.61 574 45.12 911 

Galicia, etc. 5.19 40 10.84 148 16.03 187 

Hungary 10.14 71 7.71 111 17.85 182 

Indexes (Austria = 100) 

Austria 100 100 100 100 100 100 

Hered. Prov. 132 137 117 129 125 132 

Galicia, etc. 28 16 62 33 44 27 

Hungary 54 29 44 25 49 26 

We get a similar picture about the relative underdevelopment of the 

Hungarian non-agrarian sectors from the 1869–1870 census employment 

data. 

TABLE 3. 1869–1870 Census Data on Employment in the Industrial Sector 

Ratio of the employees as a percent of all wage earners 

Austria Hered. Prov. Galicia, etc Hungary 

Industry, mining 20.13 25.57 6.22 9.55 

Commerce, etc. 3.36 3.59 2.79 1.83


Employees in the given sector per 1,000/ population 

Industry, mining 117.6 156.0 34.9 45.2 

Commerce, etc. 19.7 21.5 15.7 8.7 

Indexes (Austria = 100) 

Industry, mining 100 133 27 38 

Commerce, etc. 100 109 80 44 

The best indicator of the economic development of a region or of 

a country is the per capita national income or gross domestic product 

(GDP). In recent years two estimates have been developed to reconstruct 

the GDP for the dualistic period of the Austro-Hungarian 

Monarchy. One was prepared by the eminent American historian, 

David Good, an expert on the economics of the Monarchy and the 

other one was prepared by Max-Stephan Schulze. David Good calculated 

the GDP of the countries, territories, and regions of the Monarchy 

per capita between 1870 and 1910. 7 The results of his calculations 

of interest to us are contained in table 4. Because Good did his calculations 

in today’s dollars the table shows dollar values of the individual 

countries and territories as indices of the Austrian averages. It can 

be seen that in 1870 the per capita GDP in the lands of the Hungarian 

Crown represented 59 percent of the Austrian values while the figure 

for the eastern and southern territories was 52 percent. 

7 David F Good, “Revised estimates of the GDP per capita in Central and Eastern Europe, 

1870–1910: Technical Notes and tables,” Center for Austrian Studies Working Papers Series 

(1998); and David Good and Tongshu Ma, “The Economic Growth of Central and Eastern 

Europe in Comparative Perspective, 1870–1989,” pt. 2, European Review of Economic History 

3, (1999): 103–137.


TABLE 4. Per Capita GDP Indices According to David Good’s Calculations 

(Austria = 100) 

1870 1910 Average annual 

growth (%) 

Austria 100 100 1.48 

Hereditary Provinces 118 123 1.56 

Galicia, Bukovina, Dalmatia 52 52 1.56 

Hungary 62 78 2.05 

Croatia 41 52 1.84 

Lands of the Hungarian Crown 59 75 2.00 

Monarchy 85 90 1.63 

More recently Max-Stephan Schulze calculated the GDP of the two 

countries of the Monarchy at the 1913 prices. He divided the GDP 

according to principal economic areas 8 (table 5). 

The most important indicators in both calculations show the degree 

of Hungary’s economic backwardness when compared, at the time of 

the Compromise, with the other half of the Monarchy. The per capita 

GDP was roughly two thirds of the Austrian one but in the industrial 

areas it was barely one quarter. The indices also show what we could 

deduce from other contemporary sources, namely that the principal sector 

of Hungarian economy, agriculture, was much less backward than 

the industrial sectors. The per capita agricultural income in Hungary 

was 21 percent higher than the one in Austria and Hungarian agriculture 

was substantially better mechanized. It is true, however, that average 

productivity per unit of land was higher in Austria and that the productivity 

of agricultural labor was also higher there. 

8 Max-Stephan Schulze, “Patterns of Growth and Stagnation in the Late Nineteenth Century 

Habsburg Economy,” European Review of Economic History 4, (2000): 311–340; and 

Schulze, “Origins of Catch-up Failure: Comparative Productivity Growth in the Habsburg 

Empire, 1870–1910,” London School of Economics Working Papers, no. 100/07 (2007). In 

this publication Schulze corrected both the Austrian and Hungarian GDP data from the earlier 

article. Our table shows the corrected figures.


TABLE 5. Austria’s and Hungary’s GDP According to Schulze 

Per capita GDP based Hungary as a % 

on 1913 prices in crowns of Austria 

1870 1910 1870 1910 

Austria Hungary Austria Hungary 

Agriculture 117 141 145 245 120.6 169.5 

Industry, Mining 128 31 238 104 24.2 43.7 

Commerce, Credit 

Transportation 41 12 105 42 29.8 40.4 

Services 150 104 146 99 69.4 67.0 

GDP 436 288 635 490 66.1 77.1 

Distribution of the GDP 

1870 1910 


% % % % 

Agriculture 26.8 48.8 22.8 49.9 

Industry, Mining 29.5 10.8 37.4 21.2 

Commerce, etc. 9.3 4.2 16.5 8.7 

Services 34.4 36.2 23.3 20.2 

GDP 100.0 100.0 100.0 100.0 

Average Annual Growth Rate % 

Total GDP 

Per Capita GDP 


% % % % 

Agriculture 1.39 2.15 0.54 1.39 

Industry, Mining 2.40 3.82 1.54 3.05 

Commerce, etc. 3.27 3.95 2.40 3.18 

Services 0.81 0.62 -0.04 -0.12 

GDP 1.80 2.09 0.94 1.34


Was Hungary able to overtake its neighbors or at least decrease its 

differences by the outbreak of World War I? The answer to this question 

can be provided by the measures of economic growth, namely the rate 

of annual growth in the GDP or, rather, by its per capita rate, calculated 

on the basis of steady prices. The growth of Austrian annual national 

income was first calculated by Anton Kausel according to the requirements 

of modern economic science. 9 He concluded that between 1870 

and 1913 the total GDP increased annually by an average of 2.21 percent 

while the per capita GDP increased by 1.32 percent. According to 

Iván Berend and György Ránki the corresponding changes in Hungary 

between 1867 and 1913 were 3.2 percent and 2.5 percent. They calculated 

on the basis of 1900 prices and did not include the so-called nonproductive 

services and thus their calculations cannot be compared 

directly with the Austrian ones. 10 The present author endeavored in the 

1970s to calculate the gross and net national product using the 1913 

prices and including the non-productive services, administration, 

police, education, healthcare, rental income, etc. to make the calculations 

comparable with those of Austria and other foreign countries. His 

results were 2.5 percent for the total GDP and 1.8 percent for the per 

capita GDP. He later corrected his calculations and had to raise both figures 

by 0.2 percent. 11 We have seen in table 4 that Good calculated a 

generally similar rate of growth for Hungary’s economy (2.00 percent) 

9 Anton Kausel, “Österreichs Volkseinkommen 1830 bis 1913, Versuch einer Rückrechnung 

des realen Brutto-Inlandsproduktes for die österreichische für Reichshälfte und das Gebiet der 

Republik Österreich,” in Geschichte und Ergebnisse der zentralen amtlichen Statistik in Österreich 

1829–1979, ed. Österreichischen statistischen Zentralamt (Vienna: Das Amt, 1979), pp. 

689–720. Krausel’s calculations are accepted by Angus Maddison, see Maddison, The World 

Economy (Paris: Development Center of OECD, 2006), p. 404. 

10 Iván T. Berend and György Ránki, “Nemzeti jövedelem és tŒkefelhalmozás Magyarországon 

1867–1914” [National income and capital accumulation 1867–1914], Történelmi Szemle 

9, no. 2 (1966): 187–203. 

11 László Katus, “Economic Growth in Hungary during the Age of Dualism (1867–1913). A 

Quantitative Analysis,” in Social-Economic Researches on the History of East-Central Europe, 

ed. Iván T. Berend and others (Budapest: Akadémiai Kiadó, 1970); László Katus, “Magyarország 

gazdasági fejlŒdése, 1890–1914” [The economic development of Hungary 

1890–1914], in Magyarország története [The History of Hungary], vol. 7, 1890–1919, ed. Péter 

Hanák (Budapest: Akadémiai Kiadó, 1978), vol. 1, pp. 394–401; László Katus, “Hazánk és 

régiónk a dualizmus korában” [Our country and region in the era of Dualism], in Tolna megye a 

dualizmus korában [Tolna County in the Era of Dualism), ed. Gyula Dobos (Szekszárd: Tolna 

M. Önkormányzat Lvt., 2003), pp. 146–147.


but he saw Austria’s growth rate to be greater (1.48 percent) than shown 

by Kausel. 

Max-Stephan Schulze completely recalculated the GDP for both 

Austria and Hungary between 1870 and 1913 and reached a significantly 

lower figure for both countries. For Austria the growth rate of the per 

capita GDP came out 0.94 percent and for Hungary 1.39 percent. From 

our perspective it is important that according to his calculations Hungarian 

economy grew at a considerable faster rate than the Austrian one even 

though the differences in the rate of growth between the two countries 

remained generally the same as in the earlier calculations (annually 

0.4–0.5 percent). 

Viewed from half a century away, this difference in the annual 

growth rate between the two countries seems to have resulted in a marked 

closing of the gap for Hungarian economy. According to Schulze’s calculations 

the difference between the per capita GDP in Hungary in 1870 

was only 66 percent of the Austrian one but by 1910 it had grown to 77 

percent. According to Good’s calculation the advance was even more 

rapid and rose in forty years from 59 percent to 75 percent. In his final 

conclusions Schulze states that the failure of catching up, which appears 

in the title of his work, was due to Austria’s slowness in development 

which made it fall further and further behind Germany and the other west 

European countries. He considered Hungary’s advance to be a success 

story, at least within the Monarchy. He believed that during the half century 

prior to World War I, Hungary occupied a middle position among the 

European nations so far as economic developments were concerned. 

Among fifteen European nations Hungary occupied the seventh position 

so far as growth was concerned. Only Switzerland, Germany, Denmark, 

Sweden, Finland, and France did better than Hungary. 

So far as international comparisons are concerned the data in the 

most recent edition of Angus Maddison’s Historical Statistics differ from 

those of Schulze. Maddison found that Hungary was not in the middle 

group of European countries in the area of European economic growth 

but among the leaders. The per capita GDP grew more rapidly only in 

three countries, Germany, Denmark, and Switzerland. The combined 

average of the per capita GDP in the twelve western European countries 

was higher than Hungary’s by 91 percent in 1870 but by 1910 the difference 

had decreased to 76 percent. This shows that the Hungarian econo-


my was moving closer, albeit slowly, not only to the Austrian one but to 

all European countries. The indicators also show that in 1913 Hungary was 

much closer to the west European averages than it is today. If we set the 

Hungarian per capita GDP at 100, then the combined GDP of the twelve 

European countries in 1913 was 176 and in the year 2000 it was 277. 12 

FIG. 1. Per Capita GDP in 1913 and in 2000 (Hungary = 100) 

USA 

Japan 

Greece 

Portugal 

Spain 

Western Europe 

Finnland 

Norway 

Sweden 

Denmark 

Holland 

Belgium 

United Kingdom 

France 

Switzerland 

Germany 

Italy 

Austria 

Hungary 

1913 

2000 

0 100 200 300 400 

12 Angus Maddison, The World economy: Historical statistics (Paris: Development Center of 

the OECD, 2006), pp. 438–445, 478, and 558. The GDP of every country is calculated in 1990 

international Geary-Khamis dollars.


Schulze did some calculations on fixed capital assets and labor productivity 

in both halves of the Monarchy. The capital assets grew in 

Hungary between 1870 and 1910 at an average annual rate of 4.01 percent 

and in Austria at a rate of 2.55 percent. The productivity of the 

work force grew annually by 1.29 percent in Austria and by 1.65 percent 

in Hungary. The principal reason why productivity grew so rapidly 

in Hungary was that the work force was well supplied with capital 

assets and that the capital-output ratio (capital coefficient) was also 

growing at a rapid rate. Schulze emphasized that Hungary had made up 

its initial substantial backwardness in this area by 1913 and reached 

80–90 percent of the Austrian level relative to the physical capital per 

unit output. 13 Thus in this area Hungary was also successful in moving 

closer to Austria because, with the exception of mining, productivity 

grew at a faster rate in every section of the national economy in Hungary 

than in the other half of the Monarchy. 

TABLE 6. Labor Productivity According to the Calculation of Schulze 

Agricult. Mining Industry Commerce Services Total 

Credit 

of above 

Transport. 

Value added per worker in constant 1913 prices in cronws 

1870 

Austria 349 823 1,207 1,438 1,413 702 

Hungary 338 648 822 784 934 455 

1910 

Austria 544 2,122 1,855 1,899 2,039 1,171 

Hungary 662 1,525 1,514 1,438 1,373 877 

Hungary as a % of Austria 

1870 97 79 69 55 66 65 

1910 122 72 82 76 67 75 

Average annual growth 1870–1910 in % 

Austria 1.12 2.40 1.08 0.70 0.94 1.29 

Hungary 1.69 2.16 1.49 1.53 0.97 1.65 

13 Max-Stephan Schulze, “An Estimate of Imperial Austria’s Gross Domestic Fixed Capital 

Stock, 1870–1913: Methods, Sources, and Results,” in London School of Economics Working 

Papers, no. 92/05 (2005). He accepts our calculations for Hungary. See Katus, “Economic 

Growth,” pp. 109–111.


The above shows that between 1867 and 1914 the rate of economic 

growth and of structural change was significantly greater in Hungary 

than in the other half of the Monarchy. This comment is valid for the 

entire national product, for all principal branches of economy, for the 

work force, for productivity, and for capital assets, i.e. for all the most 

important indicators of the status and dynamism of the national economy. 

The contemporaries were aware of this accelerating trend of catching 

up with the other, better developed half of the Monarchy. This 

became manifest by the fact that the relative ability of the two countries 

to bear the economic and financial burdens, the so-called quota, i.e 

Hungary’s contribution to the expenditure of joint affairs, was raised 

between 1867 and 1907 from 30 percent to 36.4 percent. 

In spite of the more rapid growth of the Hungarian economy there 

were still obvious differences prior to World War I in the levels of development 

between the Hereditary Provinces, Hungary, and the eastern and 

peripheral regions of Galicia, Bukovina, Dalmatia, and Croatia. It is 

therefore a legitimate question whether the integration of the various 

regions, having different conditions, structures and development, in the 

common customs area, had progressed and moved toward a larger, complete 

economic unit. The question is very much justified because it is generally 

accepted that political evolution clearly led toward disintegration 

and in our case eventually led to the dissolution of the Monarchy. Analysis 

of the economic history gives a simple answer: by the end of the nineteenth 

century in the area of the customs union the interregional exchange 

of merchandise, capital, and working force had increased significantly 

and there was a parallel trend toward equalizing the regional differences 

in prices, salaries, and interest rates. All this shows the advances of mercantile 

integration. 14 David Good calculated the per capita GDP in twenty-two 

territories and regions for 1870 and for 1910. The reduction in the 

coefficient of variation from 0.41 to 0.35, shows the gradual leveling of 

the territorial differences during these forty years. 

14 David E. Good, Economic Rise of the Habsburg Empire, 1750–1914 (Berkeley: University 

of California Press, 1984), pp. 96–124. He summarizes his facts about economic integration 

as follows, ”The quantitative evidence supports those who stress the more positive achievements 

of the Habsburg economic union. Judged in economic terms the Empire experiences 

substantial market integration in the decades before World War I” (p. 124).


The indicators of growth for each individual section, shown above, 

draw our attention to a perspective which, in our view is very important 

in assessing the effects of the common market on Hungarian economy. 

The commercial and customs union brought both advantages and disadvantages 

to both countries. The reason why the union was first made 

and then repeatedly renewed was that both countries believed that the 

advantages to their economy outweighed the disadvantages. Both parties 

were willing to make sacrifices in order to preserve the advantages. 

Hungary gave primacy to its agriculture and food processing industry, 

including milling, while Austria considered industry, primarily the 

manufacture of consumption goods as its most important activity. In 

order to control the markets in the entire Monarchy Hungary was willing, 

figuratively speaking, to sacrifice industry and Austria was willing 

to sacrifice its agriculture on the altar of the common market. Surprisingly, 

the data show, that the “victims” behaved in a contrary fashion to 

each other and that Hungarian industry could take advantage of the 

opportunities offered by the common market. Austria’s agriculture, 

accepted its fate, it grew slowly and increasingly lagged behind the Hungarian 

agriculture. In contrast, Hungarian industry grew at a much more 

rapid rate than the Austrian and made a good start toward equalizing the 

differences. The service sector of the Hungarian economy acted in a 

similar fashion and commerce, credit, and transportation all made 

appreciable progress. There was insufficient time to reach complete 

parity. Prior to World War I the value of per capita industrial production 

in Hungary was 44 percent of the Austrian one, according to Schulze, 

and 55 percent according to our calculations. 15 Because the backwardness 

was a long range centennial process, the catching up also would 

have needed a longer and peaceful period of time. 

John Komlos calculated the temporal arrangement of the indexes 

of industrial production between 1850 and 1913 in both countries of the 

Monarchy. 16 His calculations also show that the Hungarian industry 

grew faster than the Austrian one (fig. 2). 

15 We accepted Waizner’s figures for Austria’s national income. Ernst Waizner, “Das Volkseinkommen 

Alt-Österreichs und seine Verteilung auf die Nachfolgestaaten,” Metron 7, no. 4 

(1928): 97–182. 

16 John Komlos, The Habsburg Monarchy as a Customs Union. Economic Development in Austria-Hungary 

in the Nineteenth Century (Princeton: Princeton University Press, 1983), pp. 281– 

318.


900 

FIG. 2. The Indexes of Industrial Production in Austria and Hungary 

According to John Komlos (Index: 1850 = 100) 

800 

700 

600 

500 

400 

300 

200 

100 

1850 1855 1860 1865 1870 1875 1880 1885 1890 1895 1900 1905 1910 

Austria 

Hungary 

The rapid growth of Hungarian industry suggests that relinquishing 

industrial protective customs duties could be compensated for, vis-à-vis 

the industrially more advanced Hereditary Provinces, with other economic 

policy activities, primarily state support of industry and the development 

of a system of public contracts. The Hungarian economic politicians 

also tried to make sure that Hungarian industry participated in the 

orders of the joint army and navy according to the quota. By the beginning 

of the twentieth century this was largely accomplished. 

A few years ago a monograph was published which showed on the 

basis of rich Viennese and Hungarian archival data how this economic 

policy functioned on a day-by-day basis, how the frequently divergent 

interests could be brought into harmony, and how negotiations with the 

leaders of the navy and at sessions of the Council for Joint Affairs, a continuous 

increase in both the ratio and in the total of orders from Hungarian 

industries could be achieved. 17 Distribution, according to the quota, 

17 Mihály Krámli, A császári és királyi haditengerészet és Magyarország: Magyarország 

szerepe a közös haditengerészet fejlesztésében [The Imperial and Royal Navy and Hungary: 

Hungary’s Role in the Expansion of a Common Navy] (Pécs: Pro Pannonia Alapítvány, 2004).


was not a simple process. Some of the required articles could not be produced 

in Hungary and others were unavailable at the price or quality 

required. There were, however, areas of military industry where the 

domestic industry was equipped with the necessary facilities. In order to 

make up for these problems a complex system of compensations had to 

be worked out. Orders to Hungarian industry were frequently channeled 

back through Austrian industries from which raw materials, partially finished 

items, and components were obtained. The reverse, however, was 

also true. The Austrian industries receiving orders from the navy had to 

go to Hungary to obtain certain materials and partially finished products. 

The industrialization of the Hungarian economy is also shown by 

the changes in the structure of foreign trade. At the time of the Compromise 

36.5 percent of Hungary’s exports were industrial in nature and 

this ratio grew only to 39 percent by the middle of the 1880s, but rose 

to 47.6 percent by the years before World War I. We can see a similar 

change in Hungary’s exports of finished industrial goods to Austria. 

The rate of growth in exports to Austria was greater between 1882 and 

1913 then the imports, even in the area of textiles. Austria’s share of 

Hungary’s industrial exports was 64 percent in the 1880s and 71 percent 

around 1910. 

Free market competition in the territory of the customs union with 

the more advanced Austrian and Czech industry had advantages and disadvantages. 

It could retard and distort but it could also stimulate and 

advance Hungarian industrialization. It is partly due to this that the evolving 

Hungarian industry was structurally one-sided and distorted and light 

industry, particularly the textile industry was surprisingly weak and 

underdeveloped by international standards. On the other hand, it was the 

common customs area that assured for Hungary the availability of production 

factors that would have been missing otherwise. It provided the 

new factories the essential network of cooperating industries and the service 

and support components. According to the studies performed at the 

end of the nineteenth century, a significant part of Hungary’s industrial 

machinery came from Austria. The competition in the free market stimulated 

technical advances and the introduction of new products and new 

procedures. The large markets in the Monarchy created an opportunity 

for the economically sound application of modern technology needed for 

the realization of the economies of scale.


After the end of the 1880s the hitherto neglected branches of industry 

started a rapid growth and the structure of industry became more 

complete and more balanced. The increasingly rapid developments at the 

turn of the century continuously created new gaps in the industrial structure 

of the Monarchy and filling these created a good opportunity for 

Hungarian industry because in the new industrial areas and with the new 

products the earlier industrialized regions’ advantages were less important 

and those trying to catch up had a chance to enter the race with generally 

equal opportunities. A classic example is furnished by the Hungarian 

electro-technical industry which for two decades stood at the 

leading edge in world-wide developments thanks to the inventions and 

improvements of the engineers of the Ganz works. By the turn of the 

century the Austrian chambers of industry were complaining that the 

rapidly developing Hungarian industry was a successful competitor with 

the Austrians in such traditional Austrian-Czech industries as the paper 

and textile industries, not just at home but in Austria as well. 

By the turn of the century appropriate structures appeared in the common 

customs area for a higher form of economic integration, usually at the 

level of individual plants but occasionally on an industry-wide basis as 

well. Joint companies were established and there was a gradual development 

of cooperation between the companies of the two countries in a variety 

of forms and to various degrees. We find most of the joint companies 

in industry. At the turn of the century Austrian and Czech industrial companies 

established dozens of subsidiary establishments in Hungary primarily 

to take advantage of government subsidies and of the benefits of a 

cheaper labor force and to be closer to the consumer markets. The subsidiaries 

of the Austrian companies shortly became independent joint stock 

companies but maintained close contacts with the parent organization. At 

the beginning of the century we know of about a hundred such industrial 

companies which were some of the largest and strongest companies of the 

Monarchy. There were such joint companies in almost all areas of industry 

with most of them being in the iron, steel, and textile industries. 

Within the joint companies a large variety of production and business 

cooperation developed. These included specialization of production, 

the distribution of manufacturing profiles between the various factories. 

Mutual provision of parts and partially finished products, 

exchange of expert information, patents, manufacturing procedures,


and the equalization of profits. The historian Sándor Ausch noted, “So 

far as the exchange of component parts typical of modern industrial 

developments and international commerce, and the high percentage of 

exported products are concerned, the 1906 Hungarian machine industry 

presents a favorable image even in comparison with today’s highly 

developed industrial nations. The industrial liaisons between the countries 

of the imperial markets and the subsidiary companies created a fertile 

soil for specialization, cooperation, and technical collaboration.” 18 

The basis for the common market was created by the division of 

labor between a country producing agrarian products, food, and raw 

materials and a country that was more industrialized. This division 

between agriculture and industry remained until the end, but from the 

1860s on there was a gradual transition toward a higher and more modern 

division of labor between the two increasingly industrialized countries 

with national economies of different structure and level of development. 

This was clearly visible in the changes of the structure of commercial 

exchange. As stated by the American specialist of Hungarian economic 

history in the era of Dualism, Scott M. Eddie, “When compared to 

the 1850s, the regional evolution of specialization, essential for the uniform 

production for the common market of the Monarchy, had made significant 

strides by 1882. Hungary was no longer the larder of the Empire 

but also the major exporter of certain finished products which were 

largely based on the raw materials produced within the country itself.” 19 

The economic relationship with Austria and the common market 

had a major role in the evolution of Hungarian economy in the era of 

Dualism in three distinct ways. 

First, it was due to the common market that the leading sector of 

Hungarian economy, agriculture, could preserve its dynamism during 

the European crisis in marketing grain. In the competition with American, 

Russian, and Romanian wheat and flour and because of the 

increasing seclusion of the central and western European countries, 

18 Sándor Ausch, “Önálló gazdasági fejlŒdés vagy tŒkés függés” [Independent economic 

progress or capital dependence], Történelmi Szemle 11, no. 3 (1968): 319. 

19 Scott M. Eddie, “Mit bizonyítanak az 1882–1913-as export statisztikai adatok: Magyarország 

valóban csak a Monarchia “éléskamrája volt?” [What is proven by the 1882–1913 export 

statistics data: Was Hungary really just the “larder” of the Monarchy?], Történelmi Szemle 25, 

no. 3 (1982): 423.


Hungarian wheat and flour lost its foreign markets. The common market, 

however, continued to accept Hungarian agricultural and food 

products in increasing volume. The common market also played an 

important role in the modernization of the Hungarian economy by providing 

the import of capital, and skilled labor. 

We have official data for trade between Austria and Hungary prior 

to 1850 and after 1882. These show that Austria’s share in Hungarian 

foreign trade was about 80 percent in the 1840s. The situation did not 

change significantly between 1882 and 1913. The participation of the 

common customs area in Hungarian exports was between 71 and 77 

percent and between 73 and 86 percent so far as imports were concerned. 

The former showed a steadily increasing trend while the latter 

kept gradually decreasing. It is beyond doubt that these figures contain 

some of the business beyond the common customs area, achieved with 

Austria’s help, but even knowing this we may assume that at least two 

thirds of Hungarian foreign trade was limited to the common customs 

area. In their foreign connections the other half of the Monarchy was 

not nearly as dependent on Hungary as Hungary was on it. Hungary’s 

participation in Austria’s foreign trade was only 35 to 40 percent. 

The dynamics of the common customs area is shown by the fact 

that, calculating at the same price from 1882 to 1913, the Hungarian 

exports to Austria grew annually by 2.85 percent and the imports grew 

by 3.37 percent. As mentioned above, Austria became the most important 

export market for Hungarian economy. The rate of exports between 

1882 and 1913 increased more rapidly toward Austria than toward the 

areas beyond the common customs area. This was true not only for agricultural 

products but for industrial products as well. 

During the 1840s 90 percent of Hungary’s exports to Austria consisted 

of agricultural products and only 10 percent of industrial ones. By 

the 1880s the agricultural exports were reduced to 64 percent and the 

industrial exports rose to 35 percent. This structural change in Hungary’s 

exports to Austria continued and in 1909–1913 the ratio of agricultural 

raw material exported dropped to 55 percent and the ratio of 

industrial products rose to 44 percent. Within the latter there was still a 

25 percent component of food processing products. This shows that the 

common market stimulated the development of not only the agricultural 

sector but of the industrial one as well.


The changes in imports were smaller but even these show the 

increasing industrialization of Hungarian economy. Hungary’s imports 

from Austria continued to be almost 90 percent industrial but it is very 

noticeable that the ratio of finished consumable goods had decreased, 

from 73 percent to 64 percent. There was an increase in the import of 

investment items and of partially finished goods destined for completion 

in Hungary. The former increased from 13 percent to 19 percent 

and the latter from 5 percent to 7 percent. 

By comparing Hungary’s trade in the common customs area with 

Hungary’s trade towards the areas beyond the common market we can 

make an important observation, namely that the common market had a 

more beneficial effect on Hungarian economy. Our volume of imports 

increased more rapidly than that of our exports. This was due to the 

export and import price index which led to the development of favorable 

terms of trade. According to Eddie’s calculations, between 1882/86 and 

1909/1913, Hungary’s export price index to the common market 

increased annually by 0.17 percent while its import price index decreased 

by 1.02 percent, meaning that the terms of foreign trade improved by 26 

percent. This also meant that for the same amount exported Hungary 

could import 26 percent more, prior to World War I than in the first half 

of the 1880s. In trade beyond the customs area the situation was precisely 

the opposite. The price index of Hungary’s exports decreased twice as 

much as of imports, (annually 0.97 and 0.47 percent), and thus Hungary’s 

terms of trade decreased by 13 percent. 20 This development in the terms 

of foreign trade was due to the specific economic division of labor in the 

common customs area, customs tariffs, and to the evolution of a pricing 

structure different from the one for the world markets. The beneficial 

effects of the common market and of the Monarchy’s customs policies 

can be seen when we compare the foreign trade calculated at Monarchy 

prices with those calculated at world market prices (figs. 3 and 4). 

20 Scott M. Eddie, “The Terms and Patterns of Hungarian Foreign Trade, 1882–1913,” Journal 

of Economic History 37, no. 2 (June, 1977): 333–335; and Eddie, “Mit bizonyítanak,” pp. 

416–425.


140 

FIG. 3. The Evolution of the Terms of Hungarian Foreign Trade, 

1882–1913, at Monarchy Prices (1882 = 100) 

130 

120 

110 

100 

90 

80 

70 

60 

1882 1887 1892 1897 1902 1907 1912 

With Austria 

Linear trend 

Linear trend 

Countries beyond 

the customs area 

FIG. 4. The Evolution of the Terms of Hungarian Foreign Trade, 

1882–1913, at World Market Prices (1882 = 100) 

110 

100 

90 

80 

70 

60 

1882 1887 1892 1897 1902 1907 1912 

With Austria 

Linear trend 

Linear trend 

Countries beyond the 

customs area


The common market of the Monarchy stimulated the development 

and modernization of Hungarian economy by the free and rapidly 

increasing volume of merchandise, but also by supplying factors of production 

which were either missing from the backward Hungarian economy 

or were in short supply. The importation of capital, high level of 

technology, and highly skilled workers had a major strategic effect during 

the time when the Hungarian capitalist economy was established 

during the 1830s to the 1880s. The imported factors of production, 

which had such an important role in the initiation and maintenance of 

the Hungarian economic development, came to a large extent from the 

western lands of the Monarchy. 21 

In the 1870s every fifth worker in a Budapest factory was born in 

Austria. By 1900 the number of workers from Austria had declined to 

9 percent, but among engineers, technical administrators, managers, 

and foremen the incidence of Austrians was still 16 percent. In 1901, 8 

percent of the industrial plant owners and directors were Austrians. In 

the textile industry the ratio was 17 percent, in the paper industry 14 

percent, and in the chemical industry 11 percent. 

During the era of Dualism 7 to 8 billion crowns of foreign capital 

were invested in the Hungarian economy. Almost half of this originated 

in the other half of the Monarchy. Frigyes Fellner estimated that the 

face value of the securities issued in Hungary and held in Austria 

amounted to 3 billion crowns in 1905 and 3.2 billion in 1913. In table 

7 we have tried to show the contemporary data and estimates of the 

placement of securities issued in Hungary. 22 

21 Komlos writes: “The close tie to the Austrian capital market, a tie that was contingent on the 

economic and political union, was therefore a crucial factor in the development of the Hungarian 

economy.” See Komlos, The Habsburg Monarchy as a Customs Union, p. 206. According to 

Good, “In the Habsburg context Austrian capital flows to Hungary were instrumental in the 

emergence of modern economic growth in Hungary in the late nineteenth Century.” See Good, 

Economic Rise, p. 173; Schulze notes, “The outflow of Austrian capital to Hungary after the 

1873 Vienna stock market crash was crucial in prolonging economic stagnation in Austria, whilst 

fueling the first widespread wave of industrialization in Hungary. The reversal of this capital outflow 

in the early 1890s was associated with an increase in Austrian economic growth and a 

decrease in Hungary’s rate of expansion.” Schulze, “Patterns of Growth,” p. 311. 

22 Tabellen zur Währung-Statistik [2. Ausgabe, 2. Theil.] (Vienna, 1900–1904); Franz Bartsch, 

Statistische Daten über die Zahlungsbilanz Österreich-Ungarns vor Ausbruch des Krieges. 

Mitteilungen des K.K. Finanzministeriums (Vienna, 1917), vol. 12; Frigyes Fellner, A nemzetközi 

fizetési mérleg és alakulása Magyarországon [The Development of International Balance


TABLE 7. The Placement of Securities Issued in Hungary (Billion Crowns) 

In Hungary In Austria Abroad Total 

In 1892 

Government loans 1.3 2.4 0.7 4.4 

Other securities* 0.7 0.6 0.2 1.5 

Together 2.0 3.0 0.9 5.9 

In 1912 




In percent 

In 1892 




In 1912 




* Mortgage debentures, municipal bonds, shares and bonds of banks, industrial and 

transportation companies. 

of Payment in Hungary] (Budapest: Politzer Zsigmond és fia, 1908); Frigyes Fellner, Ausztria 

és Magyarország nemzeti jövedelme [The National Revenues of Austria and Hungary] (Budapest: 

MTA, 1916). Because these calculations contain numerous estimates, we must agree with 

György Kövér, who states, “So far as the Austrian participation in nineteenth century national 

capital imports is concerned, we believe that a more restrained view is indicated and we should 

also be more restrained in discussing the accumulations of capital in the era prior to World War 

I. See György Kövér, “A dualizmus-kori tŒkeimport számítások historiográfiai és módszertani 

kérdései” [Historiographic and methodological questions about the calculations of capital 

imports in the era of Dualism], in A felhalmozás íve. Társadalom és gazdaságtörténeti tanulmányok 

[The Curve of Accumulation. Essays in Social and Economic History] (Budapest: Új 

Mandátum, 2002), p. 269.

The Hungarian government loans during the twenty-five years after 

the Compromise were largely financed by Austria or Austrian banks 

played a key role in the placement of the loans. At the beginning of the 

1890s more than 60 percent of the Hungarian government bonds had 

their interest and amortization paid in Austria. By the turn of the century 

Austria’s role in providing capital for Hungary had decreased significantly. 

Its place was taken by domestic accumulations of capital and by 

capital obtained from beyond the customs area, mostly from Germany 

and France. At the same time a major shift of Austrian capital investments 

from the government to the private sector can be seen. The one billion 

crowns withdrawn from government loans were invested in the securities 

of private companies, primarily mortgage debentures and industrial 

shares (table 7). 

In 1914 the shares of the Hungarian industrial companies were 

worth one billion. Of these 210 million (18.5 percent) were placed in 

Austria and only 87 million (7.6 percent) were placed beyond the customs 

area. The participation of Austria was particularly strong in the 

iron industry (40 percent), the textile, leather and clothing industry (23 

percent), in the machine industry (20 percent), and in the chemical 

industry (19 percent). According to the 1910 industrial statistics 205 of 

the 2,480 Hungarian industrial companies were completely or partially 

in Austrian hands. 23 THE COMMON MARKET 49 

23 Magyar statisztikai évkönyv 1914 [Hungarian Statistical Yearbook, 1914] (Budapest: Magyar 

Királyi KSH, 1916), pp. 123–124.

the common market of the austro-hungarian monarchy

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