BUSINESS ABROAD: Austria Comes Back

A year ago the Russian, British, French and American occupation forces finished pulling out of Austria, leaving behind them a relieved people but a big economic question mark. How would the sickly dwarf-state get along without the foreign exchange earned from the departing military forces?

Last week, at the end of its first full year of independence, Austria’s answer was clear: not since the days of Emperor Franz Josef has the country been so gemutlich; never has it been so prosperous. As the troops pulled out, the tourists moved in. By last August, Chancellor Julius Raab’s government announced, the nation’s tourist revenues reached a record $100 million, exceeding the previous high set during all of last year by 20%. There was not a hotel room to be had in Vienna, though two new hotels-the Am Stephansplatz and the Auersperg-had just been completed, and a third was abuilding.

Baroque Flavor. Austria’s economic renaissance is far more substantial, however, than a whipped-cream prosperity concocted by tourists. For the first time since its establishment in 1918, the little Maine-sized republic is economically solid. Industrial output is running at more than 2½ times the 1937 level; foreign trade has nearly doubled since 1953, and the country is enjoying near full-employment. National income has soared from 25.3 billion schillings ($1 billion) in 1948 to 80.5 billion schillings ($3.2 billion) in 1955.

Though the country is only one-fourth arable, increasing farm efficiency and mechanization have made it self-sufficient in dairy products, sugar, potatoes and most meats; nearly self-sufficient in rye, barley, oats, fruits and vegetables. The capital has been rebuilt with new buildings constructed along baroque lines to retain the city’s distinctive flavor. An enormous six-story, block-square office building is rising in Vienna, and more than 300,000 new apartments have been put up, more than replacing the 200,000 destroyed in the fierce World War II fighting. Building has boomed so fast, in fact, that the government had to pull the reins by tightening credit and cutting down public works.

Trend Reversed. Nevertheless, Austria still has its problems. To get the Russians to leave, it had to promise Moscow a ransom of $152 million in goods over the next ten years, plus 1,000,000 tons of oil annually for ten years. Moreover, pushed by the Socialists, the No. 2 party and junior member of every postwar coalition Cabinet, the country has become the most nationalized anywhere outside the Iron Curtain, with its iron, steel, aluminum and electric power industries wholly in government hands. About 33% of its investment capital is privately held.

Paradoxically, the 11-year-old trend to Socialism took place under the rule of the free-enterprising Volkspartei; it was the price that Austria’s leading party (which lacked.an absolute majority) had to pay for Socialist support. But last spring Austria’s voters took a look at the immense reconstruction job done by private enterprise despite government hobbles and, for the first time, gave the Volkspartei a whopping vote, just one seat short of a parliamentary majority. It was a clear mandate to roll back government control.

Great Expectations. At first, businessmen’s expectations soared as the Volkspartei clipped the power of Socialist Minister of Nationalized Industries Karl Waldbrunner by switching nationalized industries from his hands to control by a board of directors. There, however, the conservative revolution has stuck. For the board is the old government in a new guise-consisting of four Cabinet ministers, equally divided between the Socialists and Volkspartei, presided over by Chancellor Raab.

More encouraging has been the debate over the fate of the oilfields (1955 output: 3.500.000 tons) expropriated by the Nazis, nationalized by the Russians and operated since their return by another government holding company. Recently the foreign interests-principally Socony-Mobil and Royal Dutch Shell-which discovered and developed the fields, offered to spend $60 million to repair and modernize the fields if the government would hand them back. The offer was tempting; Vienna lacks that kind of money to rejuvenate the fields, although it needs their maximum output to satisfy Russian reparations and domestic demand. Nevertheless the government has said no so far. However, it was a soft Viennese no and last week further negotiations were in progress. Said a leading Austrian politician: “The foreigners are asking 100% denationalization; we are offering no denationalization at all. We will reach a point somewhere in between.”