Csaba Lentner - East of Europe, west of Asia

2.2 Economic aspects and effects of the Austro-Hungarian Compromise of 1867 | 43
3.98% by 1878, then reduced it to 3.05% by 1883. In the same context, the
downward trend was 4.51% -3.76% -3.19% for advances and 3.93% -2.62%
-2.72% for mortgage loans.
To sum it up, the more relaxed political environment following the compromise
favoured economic life. Except for the contradiction of the agrarian
side, the political and economic elite were a supporter of free competition,
in which they enjoyed the support of the state. “Immediately after the
compromise, the state got directly involved in the construction of modern
infrastructure. The private railway companies were subsidized by the state
with a state guarantee of interest and shipping companies with an annual
subsidy.” 177 The state issued a government loan for the construction of railways
and canals (Act 13 of 1867).
According to the pre-cited writings of László Katus and John Komlós, the
foreign capital and equity ratio remained below the critical 40%, so – according
to their unified wording – we can speak of a sovereign economy. The
post-compromise Hungarian economic administration followed a strategy of
catching up with using protectionist means, with the increased involvement
of the state, large factory sizes and the early emergence of finance-capital,
and the “pulling industry” of agriculture became the processing industry. 178
Conversely, the survival of (millions of acres of) entails (on both sides of the
Lajta river) suggested feudal atavism and, in the long run, prevented the land
from becoming a capitalist property, and hog-tied the peasants who made
up the majority of society, resulting in the emigration of millions, as well as
social, and partly ethnic dissatisfaction. According to the contemporary conception,
it was the Hungarian landowner who “screwed” (also) the ethnic
peasantry, at least the main ideologists of parallel nation-building perceived
that this way, mostly as one of the reasons for separation, although there was
no ethnic (social) discrimination in dualist Hungary. 179
The phenomenon of nearly half a century of operation is characterized
by strong state influence on economic life, essentially the establishment of a
state-controlled economy. As a result of the first industrial law, “280 new factories
were created, 227 of which were agricultural distilleries. Four factories
have expanded with new branches of industry. The number of old factories
benefiting from the preferences was 195, 75 of which were agricultural distilleries.
A total of 479 factories received preferences, but 302 (63%) of them
were agricultural distilleries.” 180
As a result of the state’s industrial subsidy – more comprehensively than
previously described – “between 1867 and 1873 capital stock have been
multiplied by six […] 170 new joint stock companies and 552 financial institutions
were founded, more than 4000 kilometres of new railway line was
built, mostly from private capital, but with state aid through interest insurance”
181 . Between 1881 and 1914, 959 new factories were created with state
subsidies, including 432 agricultural distilleries, 572 other industrial plants.
The state supported the expansion of 234 factories, while 865 old factories