A Case Study on Trianon

In October 1918, the Austro-Hungarian Monarchy collapsed. The Monarchy had previously provided a broad framework within which a number of nations had undergone social transformation, and modern capitalist economies had come into being. The strains and tensions engendered by the internal economic contradictions characteristic of the twentieth century, and which were reflected in the level of economic development as compared with more advanced powers, were no doubt a contributory factor in the breakup of the Monarchy, but its main causes should rather be sought in the political and social contradictions of the time and their reflection in public consciousness.

After the 1914-18 war, the political map of Europe was completely transformed. The decay of the Austro-Hungarian Monarchy had significantly contributed to this. Instead of large areas, each uniform in color, smaller units appeared, each of a different hue. These small countries with populations ranging from seven to fifteen millions, entered on the struggle for an independent existence. On the territory of the former Monarchy, three successor states emerged-the Austrian republic, the Czechoslovak republic, and Hungary. Other important sections of it were incorporated into neighboring states: newly resurrected Poland, an enlarged Serbia (now Yugoslavia), and Romania. The enormous extent of this redistribution of territories and populations denoted in itself a radical transformation of economic conditions.

The changes in territory and population did not, of course, account completely for the changes in the economic situation of the countries concerned. The economic potential inherited by the successor states bore no relation to their inheritance of land and people.

Czechoslovakia, for example, came into possession of a disproportionately large share of the Monarchy's industrial potential. From the statistical calculations (which differ in some respects), we can conclude that 70 percent of the entire industrial capacity of Cisleithania was concentrated in the new Czechoslovak state: 75 percent of the coal mines, 63 percent of the lignite, 60 percent of the iron industry, 75 percent of the chemical industry, 75-80 percent of the textile and shoe industries. With its 13.6 million inhabitants-hardly more than a quarter of the population of the defunct Monarchy-Czechoslovakia disposed of an economy on a western European level, and of a powerful industry producing a large surplus for export.¹

Similarly, the economic structure of Hungary, which lost the regions inhabited largely by the national minorities, underwent considerable change. It gained in industrial strength, for within its new boundaries, which enclosed about a third of its former territory, there remained about 55 percent of its industry, and 41 percent of its population. There was, however, a marked disproportion between its sources of raw materials and its manufacturing capacity; in other ways, too, the internal economic balance had been seriously upset: for instance, only 11 percent of the iron ore and 15 percent of the timber was left within the new boundaries, while it retained 80-90 percent of the engineering and printing plants. Thus, even from the territorial standpoint alone, the postwar economies of the states of central, eastern, and southeastern Europe were not just continuations of the prewar economic setup.²

The creation of independent states in the place of great empires, the dissolution of large territorial and economic units, the contraction of some countries to a third of their former area and the expansion of others to twice or even three times their former size in land and population, the economic condition of countries pieced together out of territories at different stages of economic development and taken from different states-all these circumstances created a radically new situation. Even under normal circumstances, a considerable period of time, in fact an entire historical era, would have been required to complete the adjustment to new conditions, the integration into a unified economic whole, the opening up of new development possibilities and the attainment of a steady and sustained rate of economic growth. But history did not allow the problem to be presented in this fashion. The needs of the new order became apparent at a moment when the problems of the transition

*Including Bosnia and Herzegovina

**Hungarian Kingdom in the Austro-Hungarian Empire

from a war to a peace economy were being added to the already difficult problems faced by an economy crippled by war, and all clamored for immediate solution. The simultaneous appearance on the scene of all these problems brought about complete economic chaos, almost inextricable confusion, and a state of utter hopelessness.

The most difficult conditions were to be found in the countries which had suffered the worst upheavals, Austria, Hungary, and Poland. By 1917, it was already plain that the Monarchy's Austrian territories were at the end of their economic tether. In the summer of 1918, the economic experts were unanimously of the opinion that Austria could not face another winter of war. Agricultural production had sunk to about 50 percent of its prewar level, and at their best the Austrian territories were far from self-sufficient; they had always been dependent on imports, especially from Hungary. Hungary, however, could not come to the rescue, for she was not even in a position to satisfy her own requirements.

In many industries, production fell because of the shortage of raw materials, and even those branches of industry-such as coal and iron-which were essential for the prosecution of the war did not reach prewar production levels. Hence the young republic of Austria, created in the autumn of 1918, found itself in a catastrophic economic situation. To add to these difficulties, food supplies in the country were at a dangerously low level. The bread and flour rations were-to quote Schuschnigg-too big to die on, but too small to live on. At the beginning of 1919, the consumption of milk in Vienna was

only 7 percent of the prewar figure. The supplementary foodstuffs sent in aid secured, at the best, a condition of bare existence; agricultural output even by 1920 did not exceed 50 percent of what it had been before the war. For lack of coal, the railways had, for the most part, been brought to a halt. Furnaces could not be fired. In the summer of 1919, 200,000 factory workers were unemployed. Inflation had started long before as a result of the enormous war expenditure. By the end of 1918, the value of the crown, eroded by numerous war loans, had fallen by two-thirds. In 1919, the situation continued to deteriorate, for the country had been bled white and was now to all intents and purposes cut off from the other parts of the former empire. In these circumstances, economic decline could not be arrested; on the contrary, it grew worse: industrial production was hardly more than one-third of the 1913 figure.

Conditions in Hungary were similar. Here, agriculture was the main source of the national income, and because of labor shortages, the requisitioning of horses by the army, and the fall in the number of cattle, it had suffered a sharp decline. The production of grain fell from 142 million cwt. in 1913 to 84 million cwt. in 1918, maize from 96 million to 48 million. There was a comparable industrial decline. In 1918, many consumer goods industries, long deprived of raw materials and fuel supplies by the war industries, showed a fall in production of 60-70 percent. Even coal-mining, essential to the prosecution of the war, showed as early as 1917 a decline in production of about 17 percent, and by 1918 the output of iron and steel had fallen by a half.

By 1918, the decline had reached such a nadir that the needs of the army could no longer be satisfied and the civilian population had to endure severe deprivations. Expenditure on the war swallowed up 40-50 percent of the national income and was financed largely by the issue of paper money. Inflation had become as rampant as in Austria.

The short-lived success of the revolution had, naturally, hardly any effect on the economic difficulties, and after the counterrevolution had gained the upper hand in the autumn of 1919, conditions became even more chaotic. The Romanian forces in the country which had helped to overthrow the Hungarian Republic of Councils contributed to this situation by dismantling and carrying off a not inconsiderable quantity of machinery and rolling stock. By 1919, Hungary's agricultural output had fallen to about a third, and by

1920, to about 50-60 percent of the prewar figure. In the autumn of 1919, industrial production was only 15-20 percent of the peacetime level, and by 1920, it had risen to only 35-40 percent.

Even Czechoslovakia, which started on its way in more favorable circumstances than any of the other states in the area, could not avoid a temporary recession. The utter exhaustion and the inflation which in 1917-18 were characteristic of the monarchy in its death throes, had, of course, also involved the Czech and Slovak regions of the empire. At the end of 1918, in the months following the creation of the Czechoslovak republic, industrial production was only half the prewar figure, and even in 1920 it rose only to about 70 percent. (Of the more important products, steel production was around 78 percent, iron about 72 percent, and cement about 85 percent.) Owing to its greater strength and its more favorable situation on the side of the victors, the Czechoslovak economy had access to quicker and better possibilities of rehabilitation. By 1921, when Austria and Hungary were just beginning to emerge from their critical economic condition, Czech industry was already reaching 75-80 percent of its prewar output, and on this foundation the republic could successfully tackle the currency depreciation.⁴

The whole production situation of the immediate postwar years, more especially the ubiquitous and steep decline in agriculture, dealt a heavy blow to the export possibilities of those countries in the region which were particularly dependent on foreign trade. Hungary furnishes a characteristic example: compared to prewar figures, it exported only 0.1 percent of wheat, 0.3 percent of flour, 2.1 percent of cattle, and 2.5 percent of meat. (By 1921, the figures were respectively 7.4, 33, 20, and 78.) Only the export of wine and feathers reached or exceeded the prewar volume. By 1920, the total export of agricultural produce reached 21 percent, and in the following year 41 percent of the prewar level. Given Hungary's economic structure, this enormous setback could not be compensated for by the export of manufactured goods; and in any case, industrial exports had also declined. In 1920, they scarcely exceeded 40 percent, and in 1921 reached only 57 percent of the prewar totals. A vicious circle hindered the development of the export trade. For the economy to function and for industry to be put on its feet, foreign currency and raw materials were essential, but these could be secured only by the export of agricultural produce, a thing then impossible; the place of these missing agricultural products could have been taken by

competitively-priced manufactured goods, but to produce these was impossible without importing raw materials.⁵

In the nations of East Central Europe, the crippling of foreign trade created a catastrophic situation, for they had emerged from the breakup of the Monarchy with a so-called export-import sensitive economy. When Austria, Bohemia, and Hungary were parts of the old empire they did not have to cope with export problems, for a considerable proportion of Austrian and Czech industrial products-for instance, three-quarters of their textile manufactures-were marketed in the agricultural regions of the Monarchy, and the same in reverse applied to agricultural produce. For example, 80 percent of Hungarian agricultural exports (primarily grain and flour) had been marketed in the Austrian and Czech areas.

Thus, foreign trade-that is, exports to countries outside the Monarchy-had played a relatively subordinate role, given the variety of possibilities within the empire itself. In the new situation, the successor states disposed of one-sided, unbalanced productive capacities. Some of them had inherited relatively too much industry, others too little. But in both cases, within the new frontiers, only part of the commodities required to operate the national economy was present. Without these essential prerequisites, these economies could not function satisfactorily within the restricted national markets. For Czechoslovakia and Austria, this implied the export of manufactured goods and the import of agricultural products and many industrial raw materials; Hungary, on the other hand, had to export agricultural produce and import industrial raw materials and capital goods. Thus, for the successor states foreign trade became vitally important; all of them became to a large extent dependent on it. -The foreign trade problem in its turn posed in a new form the question of capital accumulation. The very importance of trade, the restricted outlets for exports, the unavoidable need for imports were in themselves enough to increase the need for capital to finance trade. But capital accumulation, which had always been small, sank even lower because of the decline in production and the rapidly spreading currency depreciation. The fall in internal capital accumulation was particularly marked in the case of Austria, which had formerly been a relatively big exporter of capital and had played a leading role in supplying the capital needs of the more backward regions of the Monarchy. Inflation, always a corollary of economic exhaustion, had wiped out a large part of its monetary capital. In

1913, the deposits in the leading Viennese banks and in the savings banks of the capital and the countryside, came to 2.2 billion crowns. In 1923, this figure-converted to its gold value-had sunk to 8.7 million. The extraordinarily slow pace of recovery is demonstrated by the fact that even by the summer of 1925, average deposits stood only at 11 percent of prewar levels. All this was an inseparable part of the new problems of financing, and forced Austria as well as Hungary to seek large injections of capital from abroad. Their only means of recovery from the economic chaos of the postwar years was to tap foreign sources. Currency stabilization, based on credits from western countries and the loans which followed, became one of the most important factors in the consolidation of their economies. The situation in Yugoslavia, Romania, and Poland was very similar. Only Czechoslovakia, by its own unaided efforts, managed to extricate itself from the postwar confusion and to embark on a program of independent development.⁶

However, the results of the breakup of the Austro-Hungarian Monarchy stretched much further than the short-term manifestations of economic chaos, or the troubles and convulsions caused by adjustment to new conditions. The confusion, which lasted for several years, was such as could lead both to great progress and to a state of permanent regression. When the Monarchy broke up, it was by no means clear which of these two possibilities would be realized, for conditions in the Monarchy had influenced the economic development of its constituent peoples in very diverse ways. Living together within a large area had brought both advantages and disadvantages. It had, for instance, been advantageous to Austrian and Czech industrialization, to the development of Hungary's agriculture and agricultural industries; it had been unfavorable to Austrian and Czech agriculture and to Hungary's consumer goods industry. In addition to these reciprocal advantages and disadvantages, the Monarchy had embodied a system based on the inequality of its constituent parts, as reflected in the division of labor. The economic unity of the empire had rested on the integration of backward agrarian regions with others which had attained a standard of industrial development comparable to that of Western Europe. Apart from the splitting up of an economic community which had endured for half a century, and of the capitalist development which had held it together, the end of the Monarchy denoted for the newly emerging states a release from both the favorable and the unfavorable

aspects of the system through which the division of labor had been carried out. Thus, the longer-term developments in one or other of the successor states were not merely the result of the empire's disintegration, or of the economic potential which had been inherited, but were largely dependent on the path followed after the breakup and on the success of the economic strategy that was planned and pursued. Therefore, attention should be focused above all on the economic strategy of the various countries of the Danube Basin between the two World Wars.

In the economic chaos of the postwar period, the first efforts of the new states were directed towards making a clean break with their old economic ties and towards attaining, as far as possible, complete economic independence. They regarded it as their main task to eliminate the last traces of the division of labor prevailing in the former empire, and to make themselves independent of even those regions which had up till then been their natural market for some goods and their main source of supply for others. The value of the goods exported by Austria and Czechoslovakia to Hungary in 1924-even taking postwar territorial changes into consideration-sank to 60 percent of the 1913 figure.

The newly independent states quickly walled themselves in with import prohibitions and high protective tariffs. For in the twenties, the European states-especially in Central and Eastern Europe-vied with each other in setting up the highest possible customs barriers. At the turn of the century, Hungary had already raised the cry for its own tariff system, and she could now turn this slogan into a practical economic policy. Although, by the conditions of the peace treaty, the customs duties of the erstwhile Austro-Hungarian Monarchy as set forth in Law no.53 of 1907 were still obligatory for Hungary, Law no.21 of 1920 gave the government the power to impose by decree new regulations for foreign trade. From July 1921 onwards, one decree after another was issued, placing ever larger numbers of commodities which had formerly been freely imported onto the list of prohibited goods. This applied above all to products of the textile, iron, leather, and engineering industries. Compared with the prewar 10-20 percent duty on consumer goods, the duty from 1925 onwards averaged 50 percent ad valorem and thus kept the principal imports of former days out of the Hungarian market.⁷

Of course, the Central and East European states intended these barriers around their national economies to act as a protection

against all their trading partners equally. In practice, however, protection did not work in a uniform way; its impact was most marked on the neighboring states. This was a natural outcome, for both in agriculture and industry these countries used less up-to-date techniques than did he more advanced nations; consequently, their goods were dearer and could not compete successfully on the world market. Thus, although at the Austrian and Czechoslovak frontiers the same duties were imposed on grain and flour irrespective of origin, these proved to be much more effective against Hungarian than against American produce, in spite of the higher transport costs of the latter. While the customs tariffs of the Balkan states imposed a heavy burden on imported machinery, they affected Austrian products much more than, for example, English and Belgian.

Thus, the barriers which had been erected to promote self-sufficiency unquestionably divided the Central and East European states more deeply from each other than from those of Western Europe. It is significant that between the wars, Yugoslavia's trade with its Balkan neighbors was quite small, exports and imports ranging between 5 and 9 percent of the total foreign trade turnover. Although immediately after the war Czechoslovakia, maintaining its old economic associations, still sold more than half of its exports to the Danubian states, by about the middle twenties the percentage had fallen to little more than a third. This process was reciprocal: parallel with this radical fall in exports to the Danubian states, Czechoslovakia, at the end of the decade (and partly for political reasons) was importing more than half its flour from overseas and not from its agrarian neighbors. The same situation developed in Austria, which was already buying a third of its wheat requirements in America, and during the same period was unable to sell the products of its engineering industry to its agrarian neighbors. Midway through the twenties, the Balkan states were buying French and English machine tools and equipment for textile factories, at a time when Austria's engineering industry was producing hardly more than a third of its prewar output. In spite of geographical closeness, of historical tradition, and the existence of natural markets near at hand, trade between the eastern and southeastern European states shrank to a minimum: to about 10-15 percent of their total trade. An additional reason for this was that they all consistently and rigidly excluded the Soviet Union from their economic life. A large part of what was now Poland had formerly been part of the Russian Empire,

and the greater part of its market lay, so to speak, on Russian soil; yet only 1.5 percent of Poland's export trade was carried on with the Soviet Union. Conditions were similar in Czechoslovakia; while in the other East European states, not even this figure was reached. Exports from East Central Europe were directed largely to Western Europe which, by the Second World War, took 75-80 percent of their exports and supplied 70-80 percent of their imports.⁸

The economic policies pursued were naturally accompanied by the growth of autarkic tendencies. Austria and Czechoslovakia, for instance, made great efforts to increase their output of agricultural produce and livestock which they had formerly obtained from the agrarian districts of the Monarchy. In Austria, by 1934, the stock of pigs was almost double that of the postwar reconstruction period. About the middle of the twenties, home-grown wheat could hardly satisfy one-third of the domestic requirements, but ten years later, it was already covering more than half. In the middle of the postwar decade, Czechoslovakia's production of wheat came to about 20 million hundredweight; ten years later, it had reached 34 million. In a particularly favorable year, Czechoslovakia, ordinarily an importer of wheat, showed a surplus on its own harvest.

It is, therefore, not surprising that the markets which the Danubian countries could have offered each other shrank more and more as, following the 1929-33 overproduction crisis, still greater efforts were made to achieve self-sufficiency. After 1918, Hungary still sold a fifth or a sixth of its exports to Czechoslovakia; but by the middle thirties, this had fallen to 5 percent. On the other hand, it used as much of its available capital as possible to develop those consumer goods industries which it had formerly lacked.

In comparison with prewar standards, production in the Hungarian textile industry had doubled by 1925, trebled by 1929, and by the end of the thirties, had reached four times the prewar figure; the import of textiles, which in 1913 accounted for 70 percent of total home consumption, now covered only 2-3 percent. The most striking example of this severance of the associations based on the earlier division of labor can be found in the way Austria and Czechoslovakia developed their own industries. In the Monarchy, most of the spinning for the textile industry was done in Austria, while the weaving was concentrated in Bohemia. Each country wanted its textile industry to become independent of the other, so Austria began to enlarge its weaving industry, and by 1925 had already

set up 5,000 looms, while Czechoslovakia, for its part, built spinning mills. Those Balkan states which had enjoyed independence before the war now also strove to consolidate their economic independence, but they were so backward industrially that international economic ties were not of paramount importance. Their efforts were in many ways successful, helping to correct the one-sidedness of their economies and to promote industrialization.⁹

Unfortunately, these methods of encouraging development were by no means the most efficacious. As the states-dazzled by national pride and driven by nationalist passion-began the all-round development of their economies, they paid no heed to the narrow and restricted basis of their economic potentialities as compared to those of the economic cooperation formerly practiced with the neighboring Danubian states. Thus, their venture proved to be not only extremely costly, but also led to much overlapping of effort and superfluous parallel capacity. As a consequence, much of the economic capacity created earlier, both agricultural and industrial, was wasted. By the time Hungary's textile industry was built up, or Austria expanded its weaving. and Czechoslovakia its spinning mills, the old Austrian and Czech textile industries had lost a considerable part of their markets and had fallen into a critical condition. The same thing happened to Hungarian agriculture and flour milling which, deprived of a large part of their share of the Austrian and Czech markets, had also sunk into a state of chronic crisis. Austria tried to promote the cultivation of cereal crops and to develop its own milling industry. It introduced state subsidies, and in 1930 created a special fund by levying taxes on sugar, beer, and alcohol. Hungary's milling industry had supplied the total requirements of the Monarchy, but between the wars it could never, even in boom periods, produce more than three-quarters of its former output. The giant Hungarian mills, which had formerly worked for the export trade, closed down one after the other; their assets were disposed of, their empty premises were sold for conversion into textile factories, or were simply razed. Thus, apparently insurmountable difficulties in selling their products was one of the most obvious consequences of the developments in the agrarian countries of Central and Eastern Europe after the First World War. The developed and even the less well developed countries soon discovered that part of their industrial capacity was superfluous.

This, together with the endeavor of each country to develop

industries which already existed in neighboring states at a level high enough to produce export surpluses hindered, indeed rendered impossible, the creation of national economies based on the newest technological achievements, or the development of modern industries capable of competing on the world market. In other words, the effort to achieve agricultural self-sufficiency in the more industrialized states and the industrial ambitions of the agrarian states had indeed contributed to their own economic development, but had, at the same time, aggravated the new contradictions in the economic development of the entire area.

True, the more backward countries, through state aid and protective tariffs, succeeded in reducing imports, and thus laid the foundations for the relatively rapid development of consumer goods industries. Throughout most of these East Central European states it was the textile and other light industries which showed the most substantial progress. In Hungary, as already mentioned, the textile industry was in a position to cover practically all domestic requirements, compared to the only one-third of former days. In Yugoslavia also, it was the textile industry which between the two World Wars showed the fastest development. In the first half of the twenties, textiles had accounted for almost a third of all imports; in the second half of the thirties, for no more than 10 percent. On the other hand, the import of machines and factory equipment doubled. In Romania, before the Second World War, textiles represented more than a fifth of the value of the total industrial output.¹⁰

This rapid advance in the production of textiles and other consumer goods undoubtedly gave a great impetus to the industrial development of Eastern Europe; but it served also to conceal the discrepancy between the obsolete manufacturing processes and the industrial needs of the age. For during the first half of the twentieth century, the textile industry, indeed, consumer goods industries as a whole, were, in the more developed countries of Western Europe, already entering a relative decline. For example, during the years immediately preceding the Second World War, the output of the textile industry in England sank from 19 percent to 11 percent of the total industrial production; and in continental Europe, from 18 to 11 percent. On the other hand, the share of the iron, steel, metal-working and chemical industries rose in England from 32 to 44 percent, and on the continent from 41 to 50 percent.¹¹

After the First World War, industry underwent a radical transformation.

Through the use of new techniques, it became possible to provide electricity much more cheaply; industry, therefore, used it on a steadily expanding scale, and electrical power entered on its triumphant course. The multi-purpose electric motor forged ahead in competition with the clumsier steam engine. At the same time, the second great factor in the transformation of industry was making itself felt: the internal combustion engine, the invention of which led to completely new methods of industrial mass production. The modern assembly line was used first of all in the automobile industry; it opened the path to modern factory organization and management techniques, and to new ways of increasing output. It is no coincidence that these new mass production methods quickly spread to other industries, first to the manufacture of machine tools, with a marked effect on costs of production. All these processes naturally caused changes in the whole structure of industry, and in the more advanced capitalist countries, heavy industry advanced by leaps and bounds. In Western Europe, its share of the total output rose from 25-30 to around 50 percent.

The majority of the Central and Eastern European states could not keep pace with this development; it was only the light industries which managed to increase production, while the potentially dynamic heavy industries, where the new technology could and should have been adopted, stagnated. In this part of Europe, there was practically no country which could adapt its engineering in industries for modern mass production; with their small and restricted markets, they were unable to take advantage of the new developments in industrial technology. If we measure the advance of modern industry by the per capita consumption of steel, the increase in England and Sweden between 1913 and 1938 was between 50 and 100 percent; whereas even in Czechoslovakia and Poland, there was virtual stagnation.¹²

The exclusion of certain types of commodities and the effort of each country to produce goods which had formerly been imported meant that the advantages following from the intense efforts to increase production in certain branches of industry were counterbalanced by the recession in others for the lack of markets. The example of Hungary is typical and highly instructive: while textile production quadrupled, heavy industry made no progress, and the food processing industries showed a substantial decline; as a result, total industrial production rose very slowly indeed, by not quite 30 percent

over a period of twenty years. Owing to the stagnation in agriculture the annual rate of increase of the national income was only about 1.5 percent. In Austria, the rate of growth was similar, while Poland, which had regained its longed-for independence, was, between the two World Wars, quite unable to reach even that minimal economic growth. One important reason for Central and Eastern Europe's slow economic development was that these countries-though foreign sources of capital were less plentiful than before-still persisted in attempting to make themselves independent economically, and thus dissipated even the restricted opportunities of development open to them. Their exertions to promote economic development and industrialization were, therefore, bound to have only limited success.

In all the countries of the region, the problem of employment was the gravest. It was quite impossible to eliminate chronic unemployment; in Poland, Romania, Yugoslavia, and Bulgaria a fifth to a third of the rural population could find no work, and industry was in no position to absorb them.

Given the slow pace of economic development and the serious Internal contradictions, there was, of course, no possibility of attaining the much desired economic independence and in the end, little had been done to overcome the general backwardness. Before the outbreak of the Second World War, 75-80 percent of the population of Albania, Bulgaria, Yugoslavia, and Romania still earned their living on the land. Even in Poland, the rural population had only fallen from the 64 percent after the First World War to 61 percent. In Hungary, about half the country's population worked on the land.¹³

As a result of the policy of exclusion and autarky, of the consequent restriction of markets, and of the slow pace of industrial development and its consequences for capital accumulation, the economies of the Danubian countries remained extremely vulnerable and unstable. During the second half of the twenties, generous foreign credits and relatively favorable world market prices had enabled them to consolidate their economies; they even enjoyed a moderate prosperity. But when the temporary boom broke and the economic crisis of 1929-33 struck the world, all the economic problems flared up again more fiercely than ever before. Czechoslovakia, which had developed well during the twenties and appeared genuinely industrial; Austria, industrialized but stagnating after the First World War; Hungary, stuck in its old agrarian-industrial pattern;

and the Balkan states, no longer facing competition from the Monarchy and longing for swifter industrialization-all fell into the most severe social and economic crisis, which, in its turn, brought to the fore the basic problem of their existence and progress. The dead-end reached in the thirties left only the choice between Continuing as they were, or adapting themselves to be the Lebensraum of the new and frightening Germany of Hitler. The defenselessness of the Danube-Basin Countries in the face of economic crisis did, indeed, prove fertile soil for the determined advance of the Germans. The rapid growth of German influence and her economic domination prepared the ground for the Anschluss, for the subjection of Czechoslovakia, and finally, for the Second World War. The incompetence and helplessness of the states of the Danube Basin on the eve of the war reflected the fiasco of the political pretensions, of the nationalist economic policies and of the plans for industrial development which they had clung to for twenty years. The economic problems created by the breakup of the Monarchy remained unsolved between the two World Wars.

Notes

1. Alice Teichova, An Economic Background to Munich International Business and Czechoslovakia 1918-1938 (Cambridge, 1978); R. Olsovsky, V. Prucha, et al., Prehled gospodursveho vyvoje Ceskoslovehska v letech 1918-1945 [Survey of the economic development of Czechoslovakia] (Prague, 1961).

2. Ivan Berend and Gyorgy Ranki, Magyarorszag gazdasaga 1919-1929 [Hungary's economy] (Budapest, 1965).

3. G. Gratz and R. Schuller, Die Wirtschaftliche Zusammenbruch Oesterreich Ungarns (Vienna. 1930); K. Rotschild, Austria's Economic Dezelopment Between the Two Wars (London, 1946).

4. T. Faltus, Povojnova hospodarska kriza v rokoch 1912-1923 v Ceskoslovensku [Postwar Depression in Czechoslovakia] (Bratislava, 1966).

5. Ivan Berend and Gyorgy Ranki, Hungary, Hundred Years of Economic Development (London, 1974).

6. N. Layton and Ch. Rist, The Economic Situation of Austria (Geneva, 1923).

7. H. Liepmann, Tariff Levels and the Economic Unity of Europe (London, 1938).

8. A. Basch, European Economic Nationalism (Washington, 1943); L. Pasvolsky, Economic Nationalism of the Danubian States (New York, 1929).

9. W. Weber, Oesterreich Wirtschaftsstruktur gestern-heute-morgen (Berlin, 1962); Die Wirtschaft der Tschechoslovakei 1918-1928 (Prague, 1928).

10. V. Madgearu, Evolutia economiei romanesti dupa razboi mondial [Evolution of the Romanian Economy after World War I] (Bucharest, 1940); M. Mirkovic, Ekonomska Historija Yugoslavija [The economic history of Yugoslavia] (Belgrade, 1962).

11. A. Lewis, Economic Survey 1919-1939 (London, 1932); A. Maisels, Industrial Growth and World Trade (Cambridge, 1974).

12. I. Svennilson, Growth and Stagnation in the European Economy (Geneva, 1954).

13. League of Nations, Industrialization and Foreign Trade (Geneva, 1945).

14. Ivan Berend and G. Ranki, Economic Development of East Central Europe (New York, 1974).

A Case Study on Trianon