The End of Complacency: 7 Views on the Future of Austria

By Hannes Androsch

Since 1945, Austria has presented an incredible success story and has survived the crisis better than most other countries. But such a success story cannot be assumed to continue automatically. Complacency, a reluctance to reform, and a tardiness to increase economic performance threaten to send the country into decline.

Hannes Androsch does not confine his efforts to diagnosing thestatus quo. He seeks to trace the formative influences in the historical development of the Austrian identity, and clearly identifies those forces which have retarded the development of the countries for centuries. These range from an excessive admiration for the provincial political aristocracy, right through to a notoriously difficult relationship with Austria's most outstanding personalities.

Building upon a varied and multi-facetted past, Androsch presents seven arguments which will be material in shaping the future of the country, a future which will be inextricably bound with that of Europe.

• Language: English
• Publisher: Christian Brandstätter Verlag
• Release date: Aug 26, 2013
• ISBN: 9783850336529

Book preview

pride!

A success story whose continuation cannot be taken for granted

Introduction

Crisis is the non-word of our age. For years we have encountered it everywhere, at every twist and turn, in more variations than one can imagine. To begin with we had the real estate crisis, which commenced in the United States in 2007, and which fed directly into the global economic and financial crisis. This erupted into a series of sovereign debt crises, which had been smouldering quietly for many years. Then we had the European crisis as it struggled to devise coherent rules for its monetary union along with necessary new institutions; meanwhile we had a banking crisis, the Greek crisis, the Cypriot crisis …

This over-used word conceals more than it reveals. Causation loses focus, perspective is lost, so that it becomes quite impossible to put current problems in a historical context. It comes as no surprise that the headlines of the past few years should have displaced the attention of young Austrians from something that will only become apparent when they come to read the history books, i.e. the incredible success story of Austria since 1945 and the transformation of the country from a state of abject poverty to one of the most prosperous countries in the world.

Anyone who wandered through Vienna at the end of the Second World War saw a city in ruins, a starving population and despair written in people’s faces. But, also, one would have seen the so-called rubble women, who set about clearing the rubble of bombed buildings with their bare hands. Today Austria occupies an enviable global position in many economic rankings in spite of the many victims of the war, the monumental scale of destruction and the many tribulations of the following ten years of occupation. Today, we occupy eleventh position in a worldwide ranking of national prosperity and, indeed, are ranked third in Europe. Our affluence is one of the most evenly distributed of all countries, if one takes the Ginicoefficient as a measure. Vienna has become one of the top cities worldwide in terms of quality of life, from among cities with a population of over one million inhabitants.

Following a setback in the aftermath of the global recession, Austria’s exports climbed to a historical peak in 2012 and amounted to 123.5 billion euros. Since 2002, the balance of payments has been in continuous surplus, amounting to a cumulative total of 70 billion euros. Our economic performance in the past few years compares favourably with that of other European economies; even the Netherlands is expected to be in recession in 2013, for the third time since 2009. Only in the year 2009 did Austria experience a decline in gross domestic product. What is the background of this extraordinary recovery and for the robustness of our economic performance?

The circumstances of Austria during the First Republic, which commenced after the collapse of the monarchy in 1918, could best be described as precarious. In the immediate aftermath of the First World War, Austria became known as the state that no one wanted and seemed quite unable to overcome the shock of the collapse of the Habsburg monarchy.

The contrast in 1945 at the end of the Second World War could not have been greater and was characterised by a resolute faith in the ability of the nation to survive. A large number of Austrian politicians, from all political camps, had become closely acquainted by virtue of their incarceration in concentration camps during the Nazi reign. Many of the leading figures of the Second Republic (post Second World War) had shared the same experiences, in Dachau and other places of terror; figures such as Leopold Figl, Alfons Gorbach, Fritz Bock, Franz Olah, Rosa Jochmann, Karl Seitz and many more. A complete change of heart, the basis for a new sense of identity, emerged as a result of a series of calamitous events - the civil war of 1934, experiences under the Austro-fascist regime, national socialism and, of course, the Second World War. It must never be forgotten that many, including Jewish fellow citizens in particular, were either murdered, or forced to flee. Fortunately, many of the survivors returned after the war.

June 5 1947 was a day of great economic significance, both for Austria and the flattened European continent. It was on this day that the United States foreign secretary, George C. Marshall, held a landmark speech at Harvard University, where he proposed the European Recovery Programme (ERP) which was to be a gigantic, self-help scheme for the economic revitalisation of war-devastated Europe. Between 1948 and 1952, the United States made a total of $ 12.4 billion available for reconstruction projects, under the auspices of what became known as the Marshall Plan. Among all recipient countries, Austria was to receive the second highest level of support, measured on a per capita basis, sometimes reaching a level of 10 per cent of gross domestic product. Much of this support took the form of non-repayable grants. Between the years 1945 and 1955, Austria received material assistance from abroad in excess of one billion US dollars. To this day, the ERP funds play an important role in promoting economic prosperity. Even more important than the economic assistance was the psychological impact of this programme and further positive effects were obtained from the cyclical recovery which commenced as a consequence of the Korean War.

The Plan also affected a new orientation in Austrian foreign policy at a critical phase as the so-called Iron Curtain was erected. With the integration of the Second Republic into the western economic system, Austria underwent a reorientation of its foreign and economic policy, away from its traditional sphere of influence in eastern and southern Europe to a general, western repositioning.

What is not so well known is that events could have taken a completely different course. The Soviet Union and her satellite states rejected any participation in the Marshall Plan, because the United States insisted on installing American inspectors to supervise the distribution of material assistance and ERP-loans. This Soviet veto would most likely apply to the Soviet-occupied zones in eastern Austria and, presumably, also to Vienna. In his commendable book Was jetzt (What Now?), Hugo Portisch recounts how the US Congress passed a one-off and exceptional amendment to the ERP-legislation, which permitted the use of Austrian rather than American inspectors in the Soviet-occupied zone of Austria. The Soviet veto was redundant and all of Austria could participate in the Marshall Plan. The fledgling Second Republic was spared an untimely ordeal.

The programme of foreign assistance was augmented by a carefully prepared policy of domestic economic management. The great coalition, which ruled Austria from the departure of the communists from government in 1947, as well as the social partnership which was subsequently installed, both gained in self-assurance from year to year. A core concept of social partnership became effective in the form of the five wage-price agreements between 1947 and 1951. The social partnership also reached a consensus on the necessity to stimulate investment in view of the wartime destruction of productive capacity, not to mention the post-war plundering of economic assets. It was felt that wage increases should be less than the growth in productivity in order to stimulate investment and economic growth. The currency reform of 1947 also supported these decisions. The money supply was significantly reduced in order to restrain inflationary tendencies, as a large monetary overhang existed from satisfying fiscal needs in running a wartime economy. One must not overlook that the very significant debt forgiveness, which Austria was granted in 1953, was also a very great help.

This consensus withstood many tests of resolve and could not be shaken, not even by the communist-inspired disturbances following the fourth wage-price agreement in 1950. Austria asserted itself as a pluralistic, neutral democracy, subject to the rule of law. After 1945, the country had reconstituted its Länder, or federal states, its political parties and interest groups. At the same time, it distanced itself from its old sense of mission, of intellectual and political dominance in Eastern Europe, a vision which had been prevalent at the beginning of the 20 century. It was not until the opening up of Eastern Europe in 1989 that a rekindling of this attitude began to reappear, with the enthusiastic economic expansion into the countries of the bygone monarchy.

The formulation of the hard-currency policy in the mid-1970s proved to be a decisive step forward in improving Austria’s competitive position. Without its rigid adherence to a strong currency, the schilling, Austria would probably never have managed to outperform comparable, modern industrial countries. During the monarchy, Austria had been one of the laggards in the process of industrialisation and in global trade, and had continuously lost ground to other nations. In the nineties and the noughties, on the other hand, Austria became a leading export nation, measured as the ratio of foreign trade to GDP.

However, this situation has changed in the past few years, as can be seen in the many international rankings of business locations. In the current edition of the most important EU-Innovation ranking, Austria has slipped to ninth place, from sixth in 2009. In the ‘Global Innovation Index’, Austria most recently occupied 23rd position, down from 15th place in 2009. In the ‘World Competitiveness Report’ of the Swiss International Institute for Management Development (IMD), Austria also occupies 23rd position, whereby it must be noted that we have dropped twelve places in the past five years. The chapter on Government Efficiency of this report shows how our position has worsened dramatically in the past decade. As concerns the risk that research and development centres could move elsewhere, Austria receives a particularly critical evaluation from the IMD.

Even allowing for the fact that a measure of scepticism is appropriate when dealing with rankings of every kind, we must regard these data with considerable alarm. As long ago as the 1970s, the first reservations about the Austrian success story were beginning to emerge. The welfare state, one of the greatest achievements of the 20 century, had become too expansive and had begun to deteriorate in terms of meeting its