Economic nationalism and economic integration: the Austro-Hungarian Empire in the late nineteenth century

This article seeks to square two seemingly contradictory strands in the literature on economic development in the late nineteenth-century Habsburg Empire. On the one hand, there is an extensive historiography stressing the rise of nationalism and its close correlate of growing efforts to organize economic life along ethno-linguistic lines. On the other, there is a substantial body of research that emphasizes significant improvements in market integration across the empire as an outcome of the diffusion of industrialization and an expanding railway network, among other factors. In this article, it is argued that the process of market integration was systematically asymmetric, shaped by intensifying intra-empire nationality conflicts. While grain markets in Austria-Hungary became overall more integrated over time, they also became systematically biased: regions with a similar ethno-linguistic composition of their population came to display significantly smaller price gaps between each other than regions with different compositions. The emergence and persistence of this differential integration cannot be explained by changes in infrastructure and transport costs, simple geographical features, asymmetric integration with neighbouring regions abroad, or communication problems. Instead, differential market integration along ethno-linguistic lines was driven by the formation of ethno-linguistic networks due to intensifying conflict between groups-economic nationalism mattered.