Holy Roman Empire - Chapter 502

Chapter 502: Chapter 75, Interests Move People’s Hearts
 

Following the Anglo-Ebura War, the Benjamin Cabinet found itself caught in a political maelstrom. Not to mention considering re-election, they needed to work hard just to complete this term.

For this reason, the Colonial Department assumed the responsibility, with the Colonial Minister Louis and the Governor of Cape Town, Derfu, both resigning to take the blame. Still, the opposition refused to let the matter rest and relentlessly pursued the issue.

Had it not been for the diversion of public attention with the “Tripartite Alliance,” it’s possible that Downing Street might already have a new occupant by now.

But far from enough, to obfuscate this stain, the Cabinet must achieve greater political and diplomatic success.

Relations with Russia were also part of this, as capitalists needed to open up the Russian market to earn more profits.

Under these circumstances, Alexandrovich’s visit to London was naturally welcomed by the London Government.

…

“Your Royal Highness, regarding your country’s desire to borrow money, we are in principle in agreement,” said Foreign Minister McLean with graceful demeanor. That was his genuine thought—as long as the Russians could persuade the bankers, London Government wouldn’t interfere no matter how much they borrowed.

Alexandrovich’s brows furrowed; if he could persuade the bankers, he wouldn’t have to deal with the UK Foreign Office.

“Your Excellency, the Minister, we are encountering difficulties right now and need your government’s assistance,” he said.

As he spoke, Alexandrovich felt a strong sense of offense deep within him, humbled to the point of having to ask for a loan as the Crown Prince.

There was no other way, for one must bow their head under another’s roof. If he didn’t step in personally, Alexandrovich was certain, the bureaucrats at the Foreign Office would definitely fail to produce a result.

It wasn’t because they were incompetent, but rather because the British intended a political show, to enhance the government’s reputation among the populace.

Compared to negotiating with officials from the Foreign Office, discussing with him as Crown Prince would add more topicality.

Alexandrovich needed this prestige too, to strengthen his position domestically—both parties had their needs met.

Foreign Minister McLean smiled slightly, calmly stating, “We are also very happy to help a friend, but there’s just a little trouble right now.

The trade barriers set up by your government severely impact the normal functioning of bilateral relations. If your country could join the free trade system, then none of this would be a problem.

This is a win-win choice. Once part of the free trade system, your country’s agricultural exports would face no restrictions whatsoever. It would be of major assistance in solving your nation’s financial issues.”

The free trade system—that’s what the British proposed to open up the markets of various European countries. While expanding the market for British goods, it also came with the British Pounds – Gold settlement system, or in other words, the push for currency hegemony.

Currently, the Russians still implement a bimetallic standard. Joining this system would require a reform to a gold standard currency.

The Tsarist Government’s currency system reform had long been underway, though always with Austria’s help. As relations cooled, the Russians’ currency reform stalled.

The British saw an opportunity to step in. They wanted to draw Russians, halfway into the Divine Shield – Gold System, into the British Pounds – Gold System instead, thereby lengthening the lead over their competitors.

Now there are three major systems in the international currency market: the British Pounds – Gold System, the Divine Shield – Gold System, and the Franc – Gold and Silver System.

Undoubtedly, with Canada and Australia as two major gold producers, and with so much accumulation from colonial plunder, the British Pounds – Gold System naturally has the upper hand.

Following closely is the Divine Shield – Gold System. Austria’s domestic gold output is not insignificant, and with the supplementation of gold from the African Continent, it also holds an important position in the international currency market.

However, the distance to catch up to the British still remains quite vast. To bridge this gap, the Vienna Government has constantly been enticing the Russians to join.

But Alexander II was unwilling to become a subordinate, and thus the issue was never resolved. Following the outbreak of the financial crisis in the Tsarist Government, the two started negotiations once again. However, the gap in their bottom lines was too large, and it all came to nothing.

In comparison, the French’s bimetallic system has been somewhat tragic. France’s gold output is too low to meet demands, forcing them to adopt a bimetallic system.

Although in this era most countries use a mixed standard, the frequent changes in gold and silver coin values bring significant challenges to settlement.

The French have gone to great lengths to maintain the stability of the Franc’s value. However, this still doesn’t prevent the reality of the depreciation of silver.

If they adopt a gold standard, they don’t have the production capacity, and if they adopt a silver standard, production far exceeds demand. In this era, silver output has begun to spike, growing far faster than the pace of increase in social wealth.

Alexandrovich fell silent. Joining the British-led free trade system had too many implications, certainly not something he could decide on his own.

Never mind McLean’s assurances that borrowing would be no issue, and how tempting it sounded—the problems embedded were immense.

Leaving aside everything else, if the tariff protections were lost, could Russia’s fragile industry and commerce survive?

Why did no industrial power join the British free trade system? Isn’t it for fear of their own industries and commerce being impacted? In this era, British-manufactured products were synonymous with quality.

Economically impacted, politically influenced as well. Having joined the British-led free trade system, one must also consider the reaction from Austria.

Don’t look at the cooling relations between the two countries as merely political; the commercial ties between their peoples remain extremely close.

The Second Prusso-Russian War was already brewing, and both sides were preparing for war, making Austria’s importance irreplaceable at this time.

Even if they joined the British free trade system, the London Government couldn’t possibly support the Russian Empire in the Prusso-Russian War; Prussia and Poland were the loyal allies.

Of course, as long as the Tsarist Government were willing to let go of hatred and not seek revenge against Prussian and Polish, the British could also mediate the conflicts between the two sides.

This thought flickered through Alexandrovich’s mind. He was a pacifist, but he certainly wasn’t saintly enough to be foolish with his own position.

After pondering for a while, Alexandrovich asked, “Your Excellency, the Minister, I understand the benefits of free trade.

Your country’s industrial strength is the world’s foremost, and once tariff barriers are eliminated, our nation’s nascent national industries might soon be overwhelmed.

The industrial workforce of the Russian Empire has already exceeded six million, and any problems could trigger an unemployment crisis, seriously jeopardizing national security. How do you propose to solve these problems?”

The Marquis of McLean explained calmly, “Your Highness, you are overthinking it. While many industries might be impacted, your country also has many competitive industries.

Take agriculture, for example, your country’s agriculture has the most potential in Europe, and joining the free trade system will inevitably surpass Austria sooner or later.

The scale of Austria’s agro-processing industry is well known, and no one understands this better than you.

If your country leverages its native grain production advantages and develops corresponding processing industries, you won’t fear competition from anyone.

Just from agricultural exports alone, your country could generate over a hundred million British Pounds in export revenue, isn’t the profit here enough to compensate for the losses in other industries?

It’s not just agriculture; your country is rich in resources, which is an innate advantage. As long as resources are integrated, you won’t have to fear competition.”

Alexandrovich’s face didn’t show it, but deep down he was already very annoyed. Besides stirring up Russian-Austrian relations, the rest was pure fluff.

The international grain market was already saturated; joining it, the Russian Empire would at most carve out a small share. To achieve what McLean mentioned, they’d have to first crush Austria!

The insiders knew the truth; there was a severe technological gap in agricultural production between Russia and Austria that couldn’t be bridged overnight.

Poor natural conditions also played a significant role in limiting Russian agricultural exports. Not to mention the high transport costs, which added to the expenses.

Beyond these issues, there was also the problem with processing technology. First, the necessary machinery would have to be imported since locally produced equipment was substandard.

Secondly, there was a lack of skilled technicians, resulting in persistently high defect rates in production. This was a common ailment in Russian industry and commerce; even with the same equipment, their defect rate was higher than in other European countries.

All these problems, combined, had significantly increased costs, making it difficult for them to compete in agricultural exports.

The Russian Empire was rich in resources, to which should be added—backward transportation. What good were plentiful resources if they couldn’t be transported?

Joining the free trade system was an option, but only if the British offered substantial benefits. Alexandrovich needed tangible gains, not pie-in-the-sky promises.

“Your Excellency, the Minister, all you’ve mentioned are merely future development directions; in the short term, the Russian Empire wouldn’t benefit from joining the free trade system.

But the price we would pay is heavy; not only would it affect our national industry and commerce, but it could even lead to the breakup of the Russian-Austrian Alliance. This is not an equitable transaction, and friends should not be treated with such deceit.”

Alexandrovich emphasized his tone to express his dissatisfaction to McLean.

…

The first round of fencing ended with both parties failing to suss each other out, and negotiations were temporarily adjourned.

Yet Alexandrovich was indeed tempted. Whether or not the British were just leading him on, the dominant position in the agricultural export market was indeed very alluring.

But the mere thought of competitors filled him with despair. In that era, the Russian Empire only exported grain and not other agricultural products, for no other reason than transportation issues.

Fruits and vegetables that were transported from the Russian Empire to other European countries were almost rotten by the time they got there.

Wheat, potatoes, beans, and corn were the Russian Empire’s flagship products. The acreage planted with cash crops was very small, and the export share was negligible.

Take cotton, for instance; due to production technology, geographic conditions, and multiple transportation factors, Russian cotton had lost its competitiveness.

These were not problems that could be solved overnight. The inherent deficiencies were too significant to compensate for postnatally.