Hungarian Defence Forces
In April 1867, the Austro-Hungarian Empire was established. Franz Josef, the head of the ancient Habsburg dynasty, was recognized as both Emperor of Austria and King of Hungary. Nevertheless, the issue of what form the Hungarian military would take remained a matter of serious contention between Hungarian patriots and Austrian leaders. As the impasse threatened the political union, Emperor Franz Josef ordered a council of generals in November of the same year. Ultimately, the leaders resolved on the following solution: in addition to the joint (k.u.k.) army, Hungary would have its own defence force, whose members would swear their oath to the King of Hungary (who was also Emperor of Austria) and the national constitution, use the Hungarian language of command, and display their own flags and insignia. (Austria would also form its own parallel national defence force, the "Landwehr".) As a result of these negotiations, on 5 December 1868, the Royal Hungarian Landwehr ("Magyar Kiralyi Honvédség", or Defence Force) was established.
Austria-Hungary
As in the German Empire, the Austro-Hungarian Empire frequently used liberal economic policies and practices. From the 1860s, businessmen succeeded in industrializing parts of the Empire. Newly prosperous members of the bourgeoisie erected large homes, and began to take prominent roles in urban life that rivaled the aristocracy's. In the early period, they encouraged the government to seek foreign investment to build up infrastructure, such as railroads, in aid of industrialization, transportation and communications, and development.
The influence of liberals in Austria, most of them ethnic Germans, weakened under the leadership of Count Eduard von Taaffe, the Austrian prime minister from 1879 to 1893. Taaffe used a coalition of clergy, conservatives and Slavic parties to weaken the liberals. In Bohemia, for example, he authorized Czech as an official language of the bureaucracy and school system, thus breaking the German speakers' monopoly on holding office. Such reforms encouraged other ethnic groups to push for greater autonomy as well. By playing nationalities off one another, the government ensured the monarchy's central role in holding together competing interest groups in an era of rapid change.