Papers Relating to Foreign Affairs, Accompanying the Annual Message of the President to the First Session Thirty-ninth Congress

Mr. Motley to Mr. Seward

No. 111.]

Legation of the United States, Vienna, June 27,1865.

Sir: I have no startling events to record since my last writing. Nevertheless it cannot be denied that the attention of the Austrian statesmen is absorbed by very grave matters. Whether the position of the administration or of any members of it is seriously compromised or not I am not prepared to decide; but it is certain that defeats have been sustained by the government on vital questions, which, in a regularly organized parliamentary system on the English model, would necessarily lead to a resignation or to a dissolution. A few days ago there was a warm debate upon the question whether, according to a certain article (No. 13) in the February constitution, ministers were not bound to obtain the sanction of the Reichsrath to measures taken during its recess. A resolution to the effect that such measures were unconstitutional and void unless subsequently confirmed by the representative body was carried against the ministers by a majority of two-thirds. I have not learned that there are to be any steps taken in consequence of this vote.

This week the minister of finance has announced that a loan of 117 millions of florins will be necessary to cover the estimated deficit for the years 1865 and 1866. The house of deputies refused to sanction at present a loan of more than 13 millions, or one-ninth of the whole amount, a sum immediately required for the protection of the July coupons on the existing debt, and reserves the further authorization of the loan demanded until the finance laws for 1865 and 1866 shall have been constitutionally passed.

The effect of these sentiments and discussions has been very perceptible on the exchange and in the public feeling. There is a sentiment, amounting almost to conviction in some quarters, that the empire is on the high road to national bankruptcy; that it is impossible to raise any more revenue from taxation, as the people are not able to bear the existing burden, and that some means must be discovered without delay for reducing the expenses at least to an equilibrium with the present revenue, and for putting an end to the annual deficit which has assumed a frightful regularity.

Those means have not yet been found, and I refer you to extracts appended to this despatch from remarkable speeches just made in the house of peers, by some distinguished members of that body, as proofs that very great alarm is felt, and that the alarm is not without cause.

In previous despatches I have given you sufficient details as to the annual budgets of the empire, and as to the amount of the national debt.

In round numbers, for general purposes, it may be said that Austria owes today about as many florins as the United States government owes dollars.

The annual interest, exclusive of that upon the “Grund Entlastung,” (a debt of about 500 millions, contracted for the emancipation of the peasants,) is not far from 120 millions of florins. The market price of the Austrian loans, bearing 5 per cent. interest in specie, is quoted to-day in Frankfort at 66⅞, and that of the United States six per cent. five-twenties at 75.

Thus, at this moment of our emerging from a terrible civil war of four years’ duration, which has cost 3,000 millions of dollars, our credit is about equal to that of the Austrian government, although our actual indebtedness is about double theirs, (a florin being nearly half a dollar,) while the population, respectively, of the empire and of the republic is almost exactly the same.

As United States stocks have been sold as low as 36 in Frankfort, or at less than half their present market value, you perceive how rapid has been the advance, in the belief that the American government is not rushing very rapidly upon that national bankruptcy which our excellent friends in England have so steadily predicted.

After all, it is felt that a nation which has a vested capital of at least 21,000 millions of dollars, or seven times its debt, whose population doubles every quarter of a century, whose wealth doubles every ten years, and whose annual production may be fairly stated at 4,000 millions, or considerably more than that of any other country, is not in danger of insolvency unless the character of its people, both for industry and good faith, should suffer some astounding metamorphosis.

The instant disbanding of a large part of those armies and navies, (as soon as the last shot in the civil war was fired,) with which it was considered so certain abroad that we were at once to attack England and France, and the world in general, in order to find occupation for our warriors, and to slake the persistent thirst for blood which the war against the slave power was supposed to have engendered, has astounded Europe—for Europe always knows that we are going to do exactly the reverse of what we really do—but it has benefited our credit.

The rapid disappearance of those tremendous forces seems as prodigious to the European mind as their sudden apparition when required to save our national life, while the vanishing into space of the “nation” created by Jefferson Davis, and so warmly welcomed by the haters of our republic, without leaving one solid fragment of itself in existence, ought to furnish a lesson to politicians in future in the art of distinguishing exhalations from organized bodies.

But it is hardly possible for the Austrian empire, or for any of the great or little powers of the continent, to effect such sweeping retrenchments as our geographical position and our democratic institutions allow. Of the four millions of soldiers always kept on foot in Europe, this empire has from 320,000 to 613,000, the latter figure being that of its army on a war footing, while the total number (active and reserve) of the army of Hesse Cassel, with its population of 740,000, is 15,000, or two thousand more than the whole United States army—officers, musicians, and privates—in 1860.

It is true that the expense of the imperial army has just been reduced, as was well put by Minister von Schmesling in his speech to the peers, from 135 million florins to 95 millions, being a saving of 40 millions; but the exposed condition of the empire, the troops of enemies ever ready to take advantage of any momentary weakness, and the constant possibility of external wars, great or little, or of disturbances in some portion of its very heterogeneous population, render it doubtful whether such a diminution can be sustained, and almost certain that it could be carried no further.

That the exigency of diminishing the imperial expenditure is very great, and that there is a frank determination, both of the ministry and of the opposition, to effect such retrenchments, seem to be certain, but the road to them does not seem so clear.

It was wittily observed by Count Rechberg, ex-minister of foreign affairs, that the opposition was very loud in shouting fire, but they did not come forward with the engines to put it out; and it was quite as wittily replied, by Count Auersperg, that the key of the engine-house was not in their hands, but in that of the authorities.

Thus far I have not seen any very promising indications of large economies to be effected in the future; and, after all, a great empire in Europe must, under the universal system which now prevails in this hemisphere, look rather to increased national production than to very great savings of expenditure to relieve its embarrassments.

I suppose it to be as well established a fact as any in human history, that the largest individual liberty of action consistent with due security to life and property will give the largest national production, other things being equal.

It is for this reason that in the United States the same amount of capital, land, and labor yields more wealth than can be expected in any European country.

No doubt the resources of Austria are great, almost inexhaustible; but this, after all, is but a phrase. The resources of Mexico are boundless, so are those of Turkey, while the national resources of Holland are almost null; yet Holland has been at times one of the richest and most productive states in the world.

The more Austrian industry is freed from its fetters; the sooner the emancipated serf finds himself able to earn more than twenty kreuzers, or ten or twelve cents per diem, which is about the daily wages of the laborer in many of the most populous and important provinces, the sooner will the deficit which now perpetually stares the country in the face, suggesting horrid visions for the future, begin to withdraw his disagreeable visage.

Certainly democratic institutions are not possible, scarcely conceivable; or desirable in Austria; but so long as protection, legislation, class privileges and general administrative interference with the individual prevent the mass of the people, by whom the resources of a state must be worked, from having any better prospect in life than that of earning, by twelve hours of daily toil, about one-tenth of what can be earned by an American laborer of the lowest class in the same time, certainly a very largely increased productiveness of the empire cannot be expected.

To perpetually look upward to government for assistance, direction, instruction, advice, and commands in daily affairs is not a habit which inspires a people with the spirit of self-confidence and of self-help, out of which is born national wealth, and which gives the deathblow to deficits. But I am not Writing an essay on political economy.

I have the honor to be, sir, your obedient servant,

J. LOTHROP MOTLEY.

Hon. W. Hunter, Acting Secretary of State.

[Extracts.]

Session of the House of Lords, June 23, 1865.

Count Anton Auersperg.* * ** It would be before all things desirable to expect that the official upholders of the constitutional principle should be those who would feel bound to work most earnestly for the removal of those financial troubles. * * * * At the beginning of the so-called new era the old figures were retained asa result of the old system remaining unaltered. I know that thorough and lasting reforms cannot be effected in a moment’s time, but in these five years there has certainly been too little upward movement, and even an impulse towards a spring has not been given. * * * * Louder and louder riseto us voices from the provinces, partially from the over-burdened provinces—voices of taxpayers crying for relief from taxes hardly longer to be borne. In Hungary, owing to exceptional circumstances, a payment of taxes in natural products has been granted and an attempt made in this direction. Out of Styria, a country which, under its regular conditions, enjoys a quiet and secure prosperity, a wish for similar favors reaches us through official organs, I will not even speak of my poor home, Krain (Carniola,) where it has been allowed as a favor that executions should not be proceeded with, after the object for the execution has ceased to exist, * * * * I should call attention to the fact that from these circumstances results a certain amount of demoralization. If any one succeeds in spite of these melancholy circumstances in laying up a fortune by dint of industry and economy, does he know what he possesses? What can he really call his own? If the father of a family invests his aquired capital in real estate, he receives from it either no revenue at all, or a comparatively small one. If he invests it in stocks, he does not know what would remain to his heirs to-morrow if he were to close his eyes to-day. He allows that the fruits of his earnings should be squandered in the enjoyment of life, even if he does not share in them. The phantasmagoria of an almost exaggerated enjoyment of life and pleasure must not blind us to what lurks behind; there is in them the sting of resignation, if not of despair. This is certainly a position of things far removed from that which we had in view, and on which we placed our hopes, when the celebrated circular of the minister of state opened a vista to us into a new future when we were informed that “Austria would find in the constitution the means to rise to that height of power which is the necessary foundation of material prosperity and intellectual aspiration.” But I look vainly around for this prosperity, for this increase of elasticity. The conditions in which we live, and the causes which have brought them about, were prophetically indicated to a certain extent by another Austrian statesman when he said, “I consider it a destructive measure, the exclusive covering of the wants of the state by a perpetual new increase of the debt; it makes the cultivation of order in the domestic affairs of the state an impossibility; it undermines general confidence because every one loses confidence in himself and gives way to despair.” * ** * * * *

If I meet the father of a family regularly at a pawnbroker’s door, if I see a husbandman regularly mortgage his still ungathered harvest, without laying up these most urgently required means against a day of want, I know what sort of order I have to expect in the household of such a man. It is not to be denied, in the channel which has been entered upon, the ship of state is rushing inevitably into the whirlpool of a financial catastrophe, and we must try with all our strength to save her, for we have reached that point when the two levers which have been used to assist us in the still increasing need have ceased to perform their service. It is certainly impossible to go any further in the augmentation of taxes.* *

The loan system, too, has its limits. The eventual creditor is generally a good reckoner, and if he holds up to himself a domestic interior of the state, in which the interest of the state debt and the army budget consumes half the revenues, and of the other half, twenty-six millions are consumed by arrears of taxes, he will not be very impatient to place his capital at the service of such a state.* * * * * I believe that this is understood in the other house. I believe that it is also understood in this house, under these conditions the finance budget was laid before the Reichsrath with a total appropriation of five hundred and forty-eight millions, and with a deficit which, according to government figures, must be estimated at thirty millions. A species of permanent declaration of deficit seems on the point of taking place, if an energetic opposition is not made. This has already been made in the other house, and the result has been that the government itself, at the first serious attack, has reduced its own budget twenty millions and a fraction. I regret that the government on the presentation of the first budget has not won for itself these laurels; that it made these important reductions only after the pressure of the representatives of the people. In the crown lands this proceeding has not had a favorable result; the conclusion has been drawn that the original budget was not put together with that earnest care which the position and necessity of the state demanded; it was further concluded—and I hardly believe that this was a mistaken inference—that if twenty millions could thus be saved, one could also have saved in a greater or less degree in former years.

* * * * * * * * *

Count Leo Thun. The detailed reports had made upon men the impression of an attempt at fine coloring; and even the principal report was not free from this, for it mentioned, for instance, that the end could only be reached gradually, and not by a single effort. The committee indicates that a steady diminution of the deficit had taken place, but it was not only a diminution—it was an entire removal of the deficit, that was urgently required. In this way (the speaker continued) we shall never reach that end. That no further increase of taxes is possible every one will admit to me, but I am justified in my question, why, in this increase of taxes, a sudden impulse was not avoided? If all those last farthings which are brought in by means of the tax execution are put into circulation and a deficit still remains, in consequence of which the weight of interest rises to a sum which is still greater than that which is brought in by the executions, then those last farthings have been collected in vain. [Bravo!] What is wanted is not a gradual change, but an immediate radical cure; for I am firmly convinced that if the balance is not soon successfully restored, this task will in a short time become impossible. Our position can be characterized in a few propositions, the indisputable truth of which, according to the report of the minister of state, has received full recognition in government circles. The first proposition is this; that every household which is so arranged that the yearly returning expenditure is greater than the receipts, while the difference has to be covered by new and ever more disastrous loans, must necessarily come at last to bankruptcy. The second proposition is this: that our receipts cannot be increased by tax laws; a tax reform is ever hinted at. The sanguine hopes, however, which are based upon this, are only that by this means the amount from taxation as it exists at present, can be made permanent for the future. A good deal of this is in no event to be expected. [Applause.] Consequently the equilibrium in the state accounts can only be obtained by a diminution of the expenditure at least to that figure at which the receipts are now estimated.[Bravo!]

To the result which the house of deputies, led by this view, have already reached, I must on one side still oppose the fact that even the figure at which the House of Deputies has arrived does not seem to me sufficient.* * * * * * * I cannot think that the first speaker has painted with too black a pencil, and I should consider it serious at such a time as this to bring such a reproach against anybody, for I admit frankly that the state of affairs with regard to finance is so black that it would be difficult to paint blacker than the reality.

This fact is so well known that an avowal of it, in this house, cannot bring about discouragement on the part of the population. [A voice: Quite right.] Those who have any knowledge of financial affairs know our situation, and it is not by an open exposition of them that we shall injure a credit which is only to be helped by the conviction that we are fully alive to the danger, and by inspiring the conviction that we mean to seek for a remedy.[Bravo!]

As far as regards the population, it feels through its own interests the consequences of the position; and certainly what it feels works more deeply than anything that is said in this house or written in the newspapers. The tax-payer, whose house is sold over his head, will not look around him to be told by the newspapers what is the condition of financial affairs.* * *

The Minister of State, v. Schmerling.* * * * It is an undoubted fact that we have a deficit in this year of 1865, and we can hardly deny the fact that we shall hardly get through 1866 without a deficit. This is certainly a serious and melancholy circumstance, but I must permit myself to throw a little glance on the past year in order to show that the requisitions of the present year and of the coming year are very different from those that existed in former years. Whoever will throw a glance at the requisitions of a former year, and compare them with those rates that have their present expression in the state proposition of 1865 and 1866, will not be able to avoid the conclusion that a decided retrogression has taken place in the requisition,

I shall only point to the one fact that the war budget, which has been so often drawn into consideration, has experienced a reduction of more than forty millions. It is certainly said, however, why is this saving just now? Why not in former years? If the conviction has been attained that a round sum of 95 millions is sufficient for the war budget, why were135 millions required in former years? Well, to-day we enjoy the certainty of a European peace; to-day, in great and important things, we enjoy security in our interior. That this was not the case in former years will be clear to all who will throw a glance into the past.* * * * * * * * * *

I go further into the question. The government of his Majesty, and certainly not the finance minister alone, but the assembled advisers of the crown, are penetrated and moved by the conviction that in all branches of the administration thorough reforms are necessary, particularly in the direction simplifying the administration, and therefore necessarily making it less expensive.[Bravo!]

The government will be, however, in the position to lay before the lesser Reichsrath, as well as before the Diets in the provinces of the eastern half of the empire, propositions which will give the desired aid exactly in the right direction.[Bravo!]

But there is another very important question which must be kept in view, and that for the present is only to be touched upon. It is necessary to increase the income of the state, not by augmenting taxes, for the government is as thoroughly convinced as this high assembly; but, in the present condition of the empire, there can be no further augmentation of taxes. But we must take into consideration the maxim repeated so often, that in Austria there are still many resources which now lie dormant. They must be utilized, not in augmenting the taxes, but by creating new sources of revenue, and, as in this way the state will indirectly obtain the means of imposing taxes which will not be burdensome, for the future we may look to this as a source of help. That the government of his Majesty have already turned their attention to this purpose, this high assembly must believe from one slight indication, that it is endeavoring in all directions to give every possible assistance to institutions of credit which have the purpose of animating commerce, traffic, and industry, as well as to influence those individuals who are devoted to commerce. When, therefore, through the untiring activity to which the government is pledged and supported by the lively participation of this high assembly, and by the high House of Deputies, we shall have succeeded in working in the double direction, that on one side a total reform of the administration shall diminish the requirements, that, on the other, new sources of national prosperity shall be developed, then we shall have attained what we all wish to attain, and the deficit will be permanently covered.[Bravo!]