As in most of the colonies that Germany, Austria Hungary's ally, had occupied before the First World War, there was, to put it bluntly, little to be obtained commercially in Bosnia-Herzegovina. From an economic point of point of view, how much sense did such conquests make? Did commercial considerations play any major role at all in connection with the outbreak of war?
In the opinion of Rudolf Sieghart, the governor of one of the largest and most influential Viennese banks before 1914, the Boden-Credit-Anstalt, it was the folly of the erstwhile rulers that led directly into the war. The Boden-Credit-Anstalt was regarded as the bank that was particularly close to the Imperial house.
Did the Great Powers ‘stumble’ into the First World War, as is often claimed? Or were there powerful ‘material’ interests behind the official political rhetoric that made the war appear desirable?
Georges Clemenceau’s famous statement, “Autriche c'est ce que reste” (“What’s left is Austria”) referred to the break-up of the Danube Monarchy at the end of the First World War. The sentence can also be interpreted to mean that the Monarchy's heritage included the debts to be paid by the Republic of Austria.
At the end of the First World War, Austria was suffering not only from material exhaustion, but also from the ruin of state finances. Inflation continued. Ultimately, it was inflation that saved the new state from outright bankruptcy until 1922.
Blue- and white-collar workers suffered particularly under devaluation. The de facto disappearance of trade union lobbying as a result of the policy of ‘internal peace’ led, as with civil servants, to huge falls in real wages. It was only in 1917 that the condition of wage earners began to improve again.
The rate of inflation in the war was huge: prices rose on average by 100 % per year, in other words in total by a factor of 16. Nevertheless, this age was not (yet) one of hyperinflation.
The primary means of raising funds is of relevance not only for the triggering of inflationary processes but also for the operation and long-term consequences of a war economy.
During the First World War, the interaction of public debt, increasing money in circulation and a considerable rise in demand for armaments, together with the shortage of food supplies, rapidly led to inflation.
The costs of a war cannot be raised by the normal financing mechanisms. Ultimately, every war is financed by making excessive use of the gross national product, and the weaker the basis of a country's economy, the greater the burden caused by the war.
