Hyperinflation occurs when the price of goods and services increases rapidly and at an excessive rate in a country. It results in the doubling or more of prices that relate to products and services in a month. Austria was one such country that felt the brunt of hyperinflation and this was caused by many issues which had very adverse effects on the Austrian economy.
The war brought about a break-up of the Austro-Hungarian empire, Austria was one of the countries that was left to fend for itself. According to Ebeling (2006), issues of hunger and employment pushed the government to introduce food subsidies. These subsidies accounted for a huge part of the budget and negatively affected it, Austria proceeded to print more money to ensure there was enough money supply in the economy. Unfortunately, this money was not equivalent to the economy and this undermined the currencies purchasing power. This made the price of goods rice drastically. Another cause of hyperinflation was tariffs that were introduced by neighboring states. Initially Austria traded freely with neighboring states, but after the division the states introduced some high tariffs that made it difficult for Austria to trade with them.
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Hyperinflation was caused by various entities, the government was one such entity and it had reasons why it acted as it did. According to Iber (2020), after the war many people were left unemployed, additionally there was a rise in figures of the sick and hungry. The government had to offer food subsidies and benefits for the unemployed. In order to sustain this the government had the option of getting foreign aid, but the payback would be hefty due to the currency already having depreciated. The government instead took the option of printing more money in order to deter any possible social unrest in the country.
When problems started to arise in Austria, the government attempted a few solutions to try and curb possible hyperinflation. According to Iber (2020), in an attempt to circumvent the very high trade tariffs and bans that would affect them. The Austrian government came up with agreements on quotas and compensation. These agreements would allow Austria to exchange goods and products with other countries for cash. Unfortunately, these agreements were later seen to actually bring on more costs that would arise from transacting.
Hyperinflation brought with it a plethora of consequences that were suffered by the Austrian citizens. According to Wikipedia (N.D), during the hyperinflation period people were known to hoard food and other products. The country clearly needed help, and the outcome of this was people looking out for themselves in order to survive. According to Ebeling (2006), the people in the region would hoard fuel and food supplies and try to sell these goods in the Austrian black market to the countries citizens. Austrians were pushed to go into the woods to collect wood so as to stay warm in the cold seasons. Many children were often seen begging at places like restaurants and hotels for food.
Austria was unable to trade freely with other states because of the high tariffs, this had an effect on the existing goods in the country. The cost of living in Austria went from 100 to 1,640 in a period of 4 years (Ebeling ,2006). There was clearly a high demand for goods and low supply, this resulted in high prices. According to Iber (2020), many Austrians experienced hunger during this period. This was brought on by the fact that the price of goods had greatly increased making it difficult for Austrians to sustain themselves. Additionally, because unemployment was on the rise, people had to wait on the government to give them benefits of which may not be enough because prices were rising unexpectedly.
References
Ebeling, M. R. (2006). The Great Austrian Inflation. https://fee.org/articles/the-great-austrian-inflation/
Iber, M.W. (2020). Post-war Economies (Austria-Hungary) . https://encyclopedia.1914-1918-online.net/article/post-war_economies_austria-hungary
Wikipedia. (N.D). Hyperinflation . https://en.wikipedia.org/wiki/Hyperinflation
