The Hapsburg Effect

Happy memories of the ‘Old Empire’ help predict capital flows in Eastern Europe.

The idea of a “genealogy of power,” a Nietzschean trope, has sparked fresh interest thanks to new research showing the influence of inherited wealth, as exemplified by Thomas Piketty’s best-selling “Capital in the 21st Century” and studies of the remarkable staying power of elite surnames.

But geography is at least as strong a historical force in financial history. The Hapsburg empire, or better the Austro- Hungarian Empire, offers a laboratory of sorts as large swathes of the former multiethnic political bloc are now part of the European Union, all of whose members had to pledge to join the single currency union in the future – an example of how proximity can be fertile grounds to foster convergence.

Yet geography can play tricks if it is construed as the simple topography represented in a world atlas. As it happens, the way eurozone banks – often using Vienna as a regional hub – spread their influence and their loans into Central and Eastern Europe duplicates the patterns of the past.

If you want to read it all, purchase the entire issue in pdf for just three euro