Hayek’s article, originally published in The Spectator on April 6, 1945, and reprinted as an addendum in 2013, examines the conditions under which an independent postwar Austria could become politically durable. Written with Russian armies approaching Vienna, it moves from the economic origins of support for Anschluss through regional federation and territorial adjustments to a proposal for an internationally protected Vienna. Its closing argument against punitive treatment of Austria brings these proposals together: independence requires an economic foundation, not merely an Allied decision to separate Austria from Germany.
Hayek regards that separation as both settled Allied policy and the probable wish of Austrians after their experience of occupation. Nevertheless, he cautions against explaining the earlier attraction of union chiefly through national sentiment:
The important point to realise is that the pro-Anschluß movement was based much less on sentimental-nationalist grounds than on purely rational calculation: It was the hope of a poor and weak country to gain by inclusion in the prosperity of its wealthy neighbour.
This interpretation makes economic opportunity central to the future settlement. Germany’s diminished prospects and the hostility generated by occupation have undermined the appeal of union, but neither development resolves Austria’s underlying weakness. Hayek does not claim that Austria cannot support its population; he argues that an isolated Austria could do so only at standards unlikely to satisfy its substantial industrial working class.
His account of the interwar crisis centres on the collision between national impoverishment and organised labour’s newly acquired strength. Workers pressed for better living standards, and employers initially met those demands by consuming accumulated capital. Hayek connects this process with financial failures and the sale of industrial assets to Germany. Nazi industrial expansion along Austria’s eastern border has, he suggests, intensified the difficulty by creating additional industrial districts and bringing in workers who might remain. Their economic prospects will therefore be decisive for political stability. Questions of ownership and management are particularly difficult because the small Austrian bourgeoisie has been expelled or discredited, but the article confines itself to the wider political arrangements.
Hayek’s preferred answer is a comprehensive Central European federation incorporating the former Habsburg territories, Yugoslavia, Romania, and probably Bulgaria. He proposes that disputed regions such as Transylvania, Croatia, and Slovakia might become separate member states. Federation would thus address both economic fragmentation and territorial conflict without simply restoring the former imperial arrangement. Russian opposition appears to block this solution. A closer Austrian–Czechoslovak association could provide a nucleus for subsequent federation, but Czechoslovakia’s alignment with Russia might make it unacceptable to Austrian Social Democrats and Catholics.
Territorial revision offers only limited relief. Hayek supports returning German-speaking South Tyrol to Austria while explicitly excluding Italian-speaking Trentino. His reasoning combines economic advantage with the importance of attachment to the individual Land: partition has deprived Tyrol of its centre and encouraged centrifugal tendencies. He similarly opposes new Yugoslav claims to the parts of Carinthia that previously voted for Austria. Incorporating Berchtesgaden might improve internal communications and prevent its emergence as a German nationalist shrine. For maritime access, he favours considering an internationally controlled free city at Trieste, with guaranteed port facilities for Austria and Czechoslovakia, rather than Austrian annexation.
These proposals remain subordinate to the structural problem:
None of these possible changes would, however, fundamentally alter Austria's economic problems.
The article’s most distinctive alternative is to make Vienna the seat of the successor to the League of Nations. Situated between anticipated Western and Russian spheres, the city could acquire a neutral international role. Hayek extends this suggestion into a constitutional and commercial proposal:
But one might go one step further and make Vienna, together with the adjoining industrial areas, a really neutral district, with full internal autonomy but international control of all its foreign relations.
A completely free-trade district would allow industrial Vienna to use its commercial infrastructure beyond the constraints of a small, largely agricultural national market. The remaining Austria would retain sufficient manufacturing capacity, while Vienna’s disproportionate urban concentration would gain an appropriate economic field. Crucially, international control would separate commercial revival from renewed political predominance: neighbours could benefit from Vienna’s recovery without fearing the restoration of its former power.
The final section challenges the view, associated here with Anthony Eden, that Austrians must earn differentiated treatment through resistance. Hayek argues that early occupation, the dispersal of conscripted youth among German units, and collaborators’ ability to invoke German nationalism make clandestine organisation exceptionally dangerous. The absence of revolt is therefore an unreliable measure of consent. Survival may also preserve people needed to rebuild Austria.
His decisive objection to collective punishment is prospective rather than simply exculpatory. Treating Austria as Germany’s partner risks forcing it back into that position. Although the Allies may legitimately claim German assets located in Austria, further reparations would aggravate the economic weakness underlying political instability. The article ends by stating its governing principle:
To put it bluntly, Austria's independence, as is probably true of any country not held together by either linguistic or historical unity, must be economically worth while to be lasting.
The article’s relevance lies in this connection between sovereignty and viable economic institutions. Federation, free trade, international guarantees, and restraint over reparations are alternative ways of making independence sustainable. Hayek presents postwar reconstruction not chiefly as the drawing of borders or allocation of blame, but as the creation of arrangements under which Austria’s population has practical reasons to maintain a separate political existence.
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