The Austrian-Hungarian Empire was beset by many problems in 1910, when the Second Atlantic War started. Few, if any, saw that the war had opened a great opportunity for advancement and modernization. Still, not even the most hide-bound could ignore the immediate ramifications of the general European War.
Germany was distracted, as well as Russia. The massive war on the Eastern Front proved to be dangerously close, but at least they weren't fighting inside Austrian borders. The roar of war distracted the powers long enough for Austria to approach it's main interior problems.
These problems ranged widely from low literacy, poor manufacturing, ethnic strife, poor central government, and even the lack of a universal language. Despite all these problems the common salve of money proved to be the savior of the Empire.
The state of the Imperial economy was ramshackle at best. Education was underfunded, efficiency was an unheard of word in many areas, and most of the land still lived off the land, as it had for hundreds of years. Still, despite this the seeds for a economic renaissance was there. The opportunities provided by the SAW and the enterprising, if sometimes mis-guided, hand of Franz Ferdinand would combine to turn these seeds into the basis for a mighty industrial power.
Before the industry is discussed, the context of this development is vital to our understanding. The grand theme , of course, is decentralization. Franz Ferdinand had a vision of a United States of Austria. While his exact vision never came into being, this pressure to 'de-evolve' became quite common in many groups. With the slight break with German relations over SAW, Austria found itself quite free to do what it wanted. Geopolitical factors had given Austria a great opportunity. Trade with Germany grew immensely and quickly buried the hurt feelings of late 1910. Factories boomed, as the even the massive German economy strained under the load of the SAW. Companies like Steyr-Daimler-Puch and Austro-Daimler gained massive orders. This first great wave, combined with the great calls for basic items like grain, butter and coal increased the Imperial economy immensely without the costs that would have been involved with war. This instantly become political as Hungarian (and other groups) soon saw that Bohemian and Austrian (German ethnicity) would soon have even more economic power over them.
In a unprecedented move Franz Ferdinand did his best to share the orders out, which invigorated many start-up companies across the Empire. While cries of picking favorites (from Hungarians) and inefficiency (from Germany) rang out neither could turn down the offers. German order instead increased as the war went on. Politically Franz walked a delicate wire, trying to establish his long term goal of a equal Cortia-Bosnia, and a happy Hungary. As a short term carrot, Hungarian firm Granz Industrial Works got immense contracts. The firm even helped build German U-boats, as well as copying plans for the Austrian Navy. Granz (and other companies like it) soon became Franz's fifth column inside of Hungary itself. They cared less about ethnic differences and more about money.
Still this rush of orders, over the entire Empire wasn't a perfect good. In many places it stretched what little economical muscle the area had. Croatia (and most of the poorest areas in general) were ignored for now, and became restless. The bumbling Austrian bureaucracy didn't help matters, as the vast ethnic Empire was pushed to its limit. The railroad system was overworked, and staffing was short even in the largest factories.
Aside from this physical pressure political ones pulled and pushed, even int his time of economic 'plenty'. Count Francis Conrad von Hötzendorf , nearly a stereotype of his class, pushed for a war with Serbia nearly daily. Seeing that this might bring ruin to his Empire, Ferdinand continually said no, and tried to govern in peace. However war swirled around him. As Russia and Germany clashed in massive battles in the East, and Germany began setting up new nations, orders surged in the Empire. Call to join the war had dimmed, as the sheer destruction was shown through photos and 'films'.
Trade with the Balkan nations, still devastated by the Balkan War also picked up as Austria became experienced in the new manufacturing of war. The production of shells, bullets, rifles, even trucks and armored cars increased, slowly, but surely as German made stocks ran low across Europe. Germany's overheated economy demanded still more products, and the weary home front still required food. Many German commanders considered Austria an essential supplier. As one stated “Let them farm, and let us fight”. The Empire did more then farm however. Although ethnic strife was still an important issue (indeed, it might have even been getting worse in some areas) the common bond of money and propensity was beginning to form a new identity in the Empire.
One example of ethnic issues following (and becoming intertwined) with economy is Bohemia. Bohemia had long pressed for greater rights. The Czech culture had been a part of the Austrian-Hungarian Empire for centuries, and had fully developed, enough to want to be free. Many Bohemian nationalists wanted a Monrovia like situation, or even a full agreement like Hungary had. While small Bohemia had the most advanced and developed part of the Empire. Indeed, as the war started, nearly ever contract went to Czech companies until Franz Ferdinand stepped in (albeit with a heavy hand).This economic clout (along with a sympathetic monarch) gave them good bargaining position.
With tens of thousands of employees Skoda Works was the epitome of the new 'Czech Ideal'. Founded in 1859, Skoda had only expanded throughout the decades. The prosperous and aggressive modernization had garnered much respect for Bohemia, rightly so. It was one of the few 'heavy steel mills' in the entire Empire, capable of handling massive ship parts and machinery. Exports had included castings, such as part of the piping for the Niagara Falls power plant or for the Suez Canal sluices, as well as machinery for sugar mills in Turkey, breweries throughout Europe, and guns for the Far East and South America.
When the war started however, exports were limited and arms manufacturing became prime business. Indeed, not only Germany but the new nations of Poland and Ukraine desperately needed guns and ammunition. Still, much of Skoda was still making basic machine parts for the other (newly springing up) Austrian factories. This profitable business soon catapulted Skoda into a new dawn. This money inevitably flowed back to Bohemia and only encouraged the nationalists.
This pressure wasn't as bad as it might have been in the past. Fraz was dynamic and ready to break with tradition to get results. He recognized, on many levels, that change was needed and the SAW gave him that chance. Breaking up the special connection with Hungary was even a positive goal for Frridand, who felt that the Magyars had far too much power. (Indeed, Hungary had tried to 'revolt' in 1905). Still, they needed to be placated, and various programs were issued to achieve this. Money was given for schools, roads, and railroads. While many Viennese saw this as appeasement, Franz saw it was temporary 'distraction' as he set up his grand plan.