Industrialization in other countries: Germany

Germany Before Unification (Up to 1871):

• The Industrial Revolution began about a century later in Germany than it did in England. Before 1871, Germany was not united properly. This was because of the power struggle, mainly between Prussia and Austria, that was occurring at the time. This disunity did not provide for a stable or flourishing economy. selfstudyhistory.com
• The southern side of the Rhine Valley of Germany was incorporated into France by Napoleon.
  • At that time France was, despite its economic shortcomings with respect to England and Belgium, quite a bit more advanced than Germany.
  • This period of forced integration with France stimulated economic change in the Rhine Valley.
    • In 1815 this area became independent of France but retained some of the economic and institutional reforms of the Napoleonic period.
    • Serfdom and the guilds were abolished.
    • Other remnants of fedualism were ended which restricted commerce and industry.
• Zollverein:
  • Initially conceived by the Prussian Finance Minister Bulow, as a Prussian customs union in 1818, Zollverein or German Customs Union was finally organised by the 1833 Zollverein treaties. The Zollverein formally came into existence on 1 January 1834. The Zollverein linked the many Prussian and other German Princely territories. Over the ensuing more than thirty years, many other German states (except Austria) joined.
  • Before unification of Germany, Prussia (Later Germany) initiated the concept of a common market (Custom Union) in 1818. Zollverein or German Customs Union was finally organised by the 1833 Zollverein treaties and which formally came into existence on 1 January 1834.
  • The Zollverein linked the many Prussian and other German Princely territories. Over the ensuing more than thirty years, many other German states (except Austria) joined.
    • The Zollverein of 1833 abolished tolls between the various German principalities, made Germany into a common market.
    • The Zollverein helped to reduce protectionist barriers among the German states, especially improving the transport of raw materials and finished goods, making it both easier to move goods across territorial borders and less costly to buy, transport, and sell raw materials. This was particularly important for the emerging industrial centers, most of which were located in the Rhineland, the Saar, and the Ruhr valleys.
• For a period of decades, until about 1860’s, there were attempts at imitating in Germany the industrialization that had taken place elsewhere in Europe. This imitation was only moderately successful.

Factors responsible for the rapid industrialisation of Germany after 1871

• Unification of Germany:
  • In 1871 finally a united Germany was formed under the chancellor of Germany, Bismarck, which united the divided states together.
  • A new united country meant that goods, natural resources could be distributed among all of Germany faster than before. Business thrived because of the unification.
  • A unified country meant that it was coordinated in its actions, and therefore was less vulnerable to political, social and military attacks which lowered costs and risks associated with owning a business.
• Government’s Role, Protection and Welfare:
  • Government supported not only heavy industry but also crafts and trades.
  • In 1879 industrial protection was introduced by applying the foreign tariffs on imports. This encouraged trade, employment, and business.
  • Government accumulated a lot of money from tariffs imposed on foreign items, which allowed her to put money back into the economy and to introduce social welfare such as Health Insurance, Accident Insurance and Old Age Pension.
  • Social Welfare was also introduced (First time by Bismark) made people think twice about how bad the government was, and deterred people from swinging toward the communist side of the political spectrum. Also these deterred migration of skilled Germans to other countries like the USA.
• Contribution of Bismarck:
  • Firstly, he unified the country; secondly, he brought the economy into line; thirdly, he made sure it stayed that way and encouraged it; and fourthly, he prevented anything from hurting the economy badly.
  • Bismarck won the support of both industry and skilled workers by his high tariff policies, which protected profits and wages from American competition, although they alienated the liberal intellectuals who wanted free trade
  • Even before unification, his Blood and iron Policy included Iron (which fuelled Industrialization).
• Education:
  • Germany implemented a technical education curriculum which emphasised the technical areas of industry, such as electrics, chemistry, and physics. Germany was to become strong in the technical fields.
  • The country possessed many people capable of making and using the technology and resources to their greatest capability.
• Population:
  • As the country prospered, it became a desirable place to live, and so many people moved in from other countries. This boosted the economy, and the country grew.
  • Because of this economic growth, living standards went up, wages went up, and so people could afford to have more children. And so the population increased again.
  • The country becomes urbanised. This means that there are more workers available, and so industry prospers.
• Agriculture:
  • Farmers abandoned traditional, inefficient practices for modern new methods, including use of new fertilizers and new tools. The sugar beet was introduced as import substitution.
  • Even so farms were small in size, and women did much of the field work. Many worker became available for industrial work.
• Threat of France:
  • German politicians, industrialists, and academics all felt a threat from France. This was because the feared a retaliation from the Seven Weeks War of 1866. Germany strove to make itself stronger, just in case of an attack.
• Role of Railways:
  • Railways played a very important part in Germany’s growth. The country was a slow starter in the railway race, but she soon caught up.
  • Railways increase efficiency, because everything gets there faster, and the tempo of business speeds up.
  • Germany became the centre of activity for the European business community, and and Germany was able to trade with more countries since Germany had some geographical challenges that did not allow her to ship directly south, and therefore had to ship through different countries. This problem was caused by all the main rivers flowing North, away from the majority of trading partners.
  • The rail system increased the demand for steel and coal giving stimulus to the economy.
• Natural resources:
  • Germany was rich in natural resources. These include coal and iron ore in the Ruhr, the Saar and the Upper Silesia; sodium and potassium in large quantities (this is what enabled a large chemical industry); and the people.
  • Germany benefited greatly from the settlement made with France which awarded Germany with five billion Francs as result of the Seven Weeks War with France. The settlement also included the French territories of Alsace and Lorraine, these were rich in minerals and soil and so was a great thing for the German economy.
• Banks and Cartels:
  • Banks gave over money willingly, and a special breed of bank grew up; the ‘credit bank’. This breed is entirely devoted to banking in the business sector.
  • Different banks formed cartels in different industries. Cartel contracts were accepted as legal and binding by German courts although they were held to be illegal in Britain and the United States.
• Examples of successes:
  • Steel:
    • Germany became Europe’s leading steel-producing nations in the late 19th century, thanks in large part to the protection from American and British competition afforded by tariffs and cartels. The “German Steel Federation” was established in 1874.
  • Leadership in Chemicals:
    • Based on its leadership in chemical research in the universities and industrial laboratories, Germany became dominant in the world’s chemical industry in the late 19th century.
    • Big businesses such as BASF and Bayer led the way in their production and distribution of artificial dyes and pharmaceuticals, leading to the German monopolisation of the global chemicals market at 90 percent of the entire share of international volumes of trade in chemical products by 1914.

How German industrialisation process differed from that of British:

• With their coal, iron, steam engine and heavy industry, Britain and Germany both industrialised in similar fashion but still there were many differences in their process of industrilisation.
• Late start but catching up quickly:
  • Industrialisation started in Britain and Germany was out of the game in the beginning. Germany who was slow in the beginning but caught up quickly.
  • The British were the first to industrialise which made it easier for them to be in the lead in the beginning but harder for them to develop further especially with old machinery, and continuously growing competitors. This is the reason why Germany experienced such a rapid growth and the British growth eventually slowed down.
• Focus on technical education:
  • Britain did not focus as much on technical education as the Germans did. Germany focused on the future by building infrastructure, focusing on basic education, which was something the British lacked.
• Focus on chemical industry:
  • While Germany was focusing on the chemical and electrical industry, Britain was thriving in the textile industry because Britain had colonies in the Americas, they were also in possession of large amounts of cotton.
• Role of government:
  • In Germany the central government’s role was greater than it had been in Great Britain.
  • This was partly because the German government wanted to hasten the process and catch up with British industrialization.
  • In Germany, early industrialisation was led by Bismarck (one man focused) which was not the case with Britain.
• Difference in banking:
  • Germany was ahead of Britain was in the confidence of banks to lend money.
  • In Britain, many banks did not lend money to businesses because they feared that the business would not be able to pay it back.
  • In Germany, banks gave over money willingly, and a special breed of bank grew up; the ‘credit bank‘.
  • Different banks formed cartels in different industries but they were illegal in Britain.
  • Germany used its rich iron and coal resources to develop heavy industry, such as iron and steel manufacture. It also proved to be an environment that encouraged big businesses and corporation among large firms. The German banking sector was, for example, was dominated by a few large banks that coordinated efforts to increase industry.
• Geographical challenges:
  • Germany had to overcome the geographical challenges as all of Germany’s main rivers flowed North.
  • Britain had a clear advantage since many of their rivers flowed all year around and did not flow in one direction. This allowed Britain to transport materials, goods and resources quickly and efficiently.
• Focus on war material:
  • In Germany, focus of industries was of industrialisation on war material was more than Britain.
• Role of Railways:
  • Role of railways was more important in Germany (as discussed earlier) compared to Britain.