The State that the Elite Didn’t Want
After the First World War Austria was divided between friends and enemies of democracy,
but even the conservatives opted for a democratic republic—mostly out of fear of a working class uprising if it were denied them.
Until 1920 the Social Democrats worked together with the Christian Socials in the provisional national assembly to create a government. Despite the difficult conditions they were able to set many milestones for working people. But Austria’s much desired merger with the larger democratic Germany was prohibited by the peace treaty at St. Germain. Above all, the miserable economic condition of rump Austria after the disruption of the economic ties of the Austro-Hungarian Empire sharpened social conflicts in the new republic.
The State that the Elite Didn’t Want
Finding a solution to “the State that nobody wanted,” combined with the problems facing the young republic in 1919, was an issue that constantly forced its way into political discussions during the inter-war period.
But if one looks at pictures from the day when the First Republic was established one gets an entirely different impression. Thousands of people celebrated the newly founded republic in Vienna. That was because the end of the monarchy eliminated an essential basis for the continued privileges of the aristocracy and the grand bourgeoisie versus the majority population of workers and small farmers. The short term power vacuum that ensued allowed the Social Democrats to win political and social reforms against the formerly privileged strata in Austria - starting with the establishment of free and equal voting rights in 1918 that abolished the previous system of giving greater weight to the votes of large scale property owners. They also gave women the right to vote and hold office for the first time. Beyond “mere” political reforms, they also established the eight hour working day, created an unemployment insurance system, guaranteed vacations for employees, required employers to allow the establishment of employee councils, a major school reform, and the founding of the Chamber of Labor to represent the interests of employees.
During the short interregnum of the provisional republic, the Social Democracy, in particular, fought for democracy as the most powerful party in the coalition with the Christian Socialists, regarding it as an essential prerequisite for peacefully reaching a free and equitable society. In 1920 a new constitution, which was strongly influenced by Hans Kelsen, was adopted for the First Austrian Republic.
It is true that the much-cited desire for a merger with Germany existed at the beginning of the First Republic, but the political motivations for this couldn’t have been more different: while the Social Democrats hoped that a merger with Germany would strengthen the labor movement, for rightists the desire sprang from nationalist and racist motives. But the treaty of Versailles imposed by the victorious powers ended any hope of a merger with a democratic Germany.
The revolutionary tide that Austria experienced in those years rapidly ebbed in rural regions and the Social Democrats lost the support of the agricultural workers, and with that their plurality as well. Early in the First Republic the Social Democrats decided on a strategy of concentrating on the voter potential of the cities. They passed up on the opportunity to organize large numbers of agricultural workers by promoting rural land reform. That decision cost the Social Democrats a lot of votes in the 1920 election. Small and middle-sized farm owners who had supported the Social Democrats at first also turned against the party that they felt had abandoned their interests. These had hoped, above all, that the Republic would free them from the war-time confiscation of their produce. But in the midst of the severe economic crisis years after 1918 the official government, and not just the Workers’ and Soldiers’ Councils, repeatedly resorted to confiscations in order to supply the urban population with food.
Political Change and economic crises in the 1920s
The Social Democrats lost their majority in the 1920 parliamentary election and went into opposition. The conservative government was confronted with great economic and social challenges: For one thing reparations payments were a heavy burden on the budget, for another all of Europe was suffering from an economic downturn. In Austria that led to rapid inflation, which reached a peak in 1922.
In order “To curb inflation as well as to rehabilitate the state budget and thus the Austrian economy,” as conservative Chancellor Seipel put it, a strict restructuring plan was enforced: Austria's economic and financial policies were put under the supervision of the League of Nations and the foreign credits provided by the "Geneva Restructuring" were subject to strict conditions. That led to a balanced budget within a year, but the social consequences of this conservative economic regime were devastating – resembling those of the recent austerity regimes forced on several EU countries faced with economic crises. The dismissal of tens of thousands of civil servants and the introduction of new taxes, which particularly affected those with lower incomes, resulted in a rapid impoverishment of broad population strata.
At the same time the government began to "Clear away the social debris" (Seipel), which meant eliminating the social policy measures that the Social Democracy had promoted in the first two years of the republic. These policies to “protect the economy” brought inflation under control and stabilized the currency, but it was the working population that paid the price for this “success.” Social distress reached ever greater tragic heights in Austria as a result of these policies.
When Wall Street’s “Black Friday” threw the entire world economy into a crisis in 1929 and the crucial financial institution in Austria, the Creditanstalt bank, had to be rescued at great cost and the ever increasing social distress led to greater radicalization among the people. The crisis peaked in Austria in May 1931. The gross national product fell by a quarter from 1929 to 1933 and wage levels declined by 30 percent. In the worst time period of the crisis there were more than 550,000 unemployed. Long term unemployment combined with little or no government aid became a mass phenomenon and devastated the positon of working people—and that weakened the power of the Social Democratic Workers’ Party (SDAP) and the Free Trade Unions as well.