Economics Questions

Re: Why did Imperial Germany develop so succesfully?

Kakugo — Tue, 26 Oct 2010 13:08:36 GMT

Prussia during the XVIII century was in a very similar position to Sweden a century earlier. A strong military power. That's about it. It could not even dream to compete with France or England from an economic point of view. Very much like Sparta all its power rested in its large, well drilled armies. Like proven in the Seven Years War Prussia had little in the way of economic means: a war longer than the usual couple of seasons bled her dry and left her at the mercy of Russia. Just like Swedish armies depended on French gold to work properly, Prussian armies depended on English gold to work properly: once England reached her goals Prussia was more or less left to fend for herself.

Still at the beginning of the Revolutionary Wars Prussia seemed to have learned very little, and not only from an economic point. Her armies were still drilled in the same way as under Friederich der Grosse and were repeatedly humilated by the more dynamic and innovative French generals and marshalls. It took the shock of being downgraded from the most imitated military power to little more than a joke for Prussia to start changing.

Re: Why did Imperial Germany develop so succesfully?

Marko — Mon, 25 Oct 2010 08:41:56 GMT

While Prussia is often represented as a huge, open-air military base, this is far from the truth.

Things are not etched in stone but change with time. It depends on the period we are talking about. After something like 1806 Prussia was just a normal state comparable to its contemporaries. 18th century Prussia however was not. The state consumed an atypicaly large proportion of wealth for its needs and the consumption was mainly military. It did not resemble a giant open air military base however, the society at large and the dregs filling up the rank and file of the military were strictly seperate.

Re: Why did Imperial Germany develop so succesfully?

Kakugo — Sun, 24 Oct 2010 20:01:18 GMT

DMI1, the reason is pretty simple: part of Friederich Wilhelm III's politics were aimed precisely at creating the conditions for a prosperous Prussia. Under his rule the tax burden on the industrial Rheinland was lessened, bureaucracy simplified and heavy industries incentivated. While Prussia is often represented as a huge, open-air military base, this is far from the truth. Sure the Junkers had tight control of the military, and the Eastern provinces were still chiefly agricultural, but nobody even dreamed of destroying the new-found goldmine by imposing upon it a crushing tax burden or choking it with an ultra-conservative government. It can be easily said that under Prussian rule people of the Rheinland were actually better off than under the French: while Napoleon and his revolutionary forerunners saw it as little more than a rich land to be plundered at will the Hohenzollern kings saw it as a lasting source of income to be carefully husbanded and an integral part fo their kingdom, not a land of conquest. It can be said that for the first time in centuries the Rheinland was finally given lasting peace and a government that, far from being perfect, at least didn't try to bleed her dry. And while the Zollverein didn't much good for trade with England or the Hapsburg Empire, this was easily outset by the enormous increase in domestic demand due to the deletion of archaic barriers and by trade with Scandinavia and what today we would call the "developing world".

Finally let's not forget the old Germanic tradition for innovation and quality: well before Imperial Prussia goods manufactured in the Rheinland (be them guns, clocks or cutlery) had long enjoyed a reputation for the highest quality. This tradition was not only kept alive but incentivated in every possible way: decent salaried for skilled workers, high quality technical schooling, a relatively benign tax regime. Taxes in Prussia during most of the XIX century were lower than in England and comparable to what was paid in the Lombard provinces of the Hasburg Empire and in France.

Re: Why did Imperial Germany develop so succesfully?

rosstaylor — Sun, 24 Oct 2010 14:51:07 GMT

Kakugo knows way too much stuff!!! I wonder if you know if God exists in an anarcho-capitalist society? : P

Re: Why did Imperial Germany develop so succesfully?

Kakugo — Sun, 24 Oct 2010 10:35:42 GMT

It has to be understood that "Germany" was never a purely monolithic State as often represented, and still isn't to this day.

While the Prussian State surely became hegemonic in virtue of its military might and diplomatic skills it would have achieved little. In spite of various modernization plans Prussia proper was still largely an agricultural economy. It became an economic powerhouse just by swallowing the whole Rheinland, the most popolous and wealthiest area where most of the heavy industries were located. This came about mostly as an aftermath of the Napoleonic tornado when Prussia's diehard stance against Imperial France was richly rewarded at the Congress of Vienna. This was a decision the Hapsburg Empire would much regret later. Much to Friederich Wilhelm III's credit he rejected the rabidly conservative stances taken by many sovereigns of the era and set about a series of administrative reforms that would insure Prussia's prosperity for the century to come. Part of this can be traced to Friederich William's personal goals: most of his energies were taken up by his long-time ambition to peacefully reunite the Reformed and Protestant Churches. As he was so preoccupied he had little time to devote to more earthly matters.

One of the last acts of his rule was the Zollverein (custom union) of 1834. This came about from two factors. First of all was the elimination of internal trade barriers. As an inheritance of the old peculiar German situation, Prussia and her neighbors had inherited litterally hundreds of barriers, often hampering trade between neighboring cities belonging to same State. This was of course something that simply could not be tolerated, if for no other reason that it put Prussia, now owning the prosperous Rheinland, in a position of disavantage when confronted with France and England, both of which had long eliminated or rationalized internal trade barriers. Count Von Bluow was the driving force behind this reform. This system slowly expanded to include most German States and free cities. Sweden also joined with a free trade agreement. In 1867 the system was completely overhauled following the Austro-Prussian War and the new balance of power in Central Europe. The second factor was the will to put a restrain on English trade. Under the Continental system imposed by France, traders of seaside ports (particularly Hamburg) profited immensely from "smuggling" goods from England into the Empire. It must be said that the French authorities were perfectly aware of this but "let this happen" and contented themselves with levying periodic fines on the "smugglers" and jailing a few culprits for a week or two. After 1815 trade continued, increasing in volume: smugglers had grown very skilled at avoiding trade barriers and were very hard to catch. Of course this was seen as an unacceptable state of affairs and the various Zollverein reforms aimed at turning smuggling into regulated trade, which of course could be taxed and turned into a profit for the State. If you can't beat them, turn them into allies.

It must be said that the Junkers caste of Prussia proper had little sympathy for the industralized Rheinland. While it provided the bulk of funding for their beloved army, not to mention most of the armaments needed for their grandiose expansions, they saw it as little more than an hotbed of "liberals", much harder to control than the peasants they were accustomed to. Also the great industrial families of the Rheinland, whose influence and wealth grew enormously after 1815, were seen as serious rivals to their monopoly on political power. Still in 1915 Junkers officers were bitterly complaining that the great expansion of the army meant meant recruits drawn from the industrialized cities (hence suspected "liberals" and "Socialists") were far outnumbering Prussian peasants, regarded as much superior "soldier material".

Inter-State jealousy was also always an issue. Prussia never forgave Ludwig II, the "mad king of Bavaria", for desperately trying to avoid the 1870 war with France and for sternly resisting the great army expansion Prussian Junkers were trying to push on the rest of the Empire. Much of the malicious mythology about this eccentric but harmless (and rightly much beloved by his subjects) character was painted by Prussian propaganda and it's now widely believed the "swimming accident" which ended his life was really nothing more than political assasination planned in Potsdam.

Re: Why did Imperial Germany develop so succesfully?

rosstaylor — Sat, 23 Oct 2010 19:58:41 GMT

Didn't most trades in Europe (western/eastern) had to go through Germany back in the day? Capitalism is a society of traders. I suppose back in the day Germany was a trading ground between Eastern and Western Europe, where goods and ideas exchange more often than other European nations.

Of course, I'm guessing!

Re: Why did Imperial Germany develop so succesfully?

Erdeslau — Sat, 23 Oct 2010 14:35:17 GMT

Germany had a very effective public education system that was, for many years, the envy of the world.

Capital goods were owned mostly by the noble elite (Junkers) and industry was heavily oriented towards armament production.

Economic freedom is often necessary for wealth creation, but I believe the OP was referring to a more general type of freedom, which isn't necessary to create wealth (see China).

Re: Why did Imperial Germany develop so succesfully?

James — Sat, 23 Oct 2010 11:37:36 GMT

What was it that allowed Germany to accumulate knowledge more quickly and comprehensively than certain other countries, such as Britain? I think it was a relative lack of copyright and IP. i.e. Freedom.

What about building up capitol goods over time? Doesn't that require respect for property rights?

Economic freedom is still freedom, you know. Democracy is not.

That said, Imperial Germany was not significantly less 'democratic' than Britain at the time of the First World War... Western propaganda notwithstanding.

Re: Why did Imperial Germany develop so succesfully?

Erdeslau — Fri, 22 Oct 2010 15:44:12 GMT

The simple answer is that the concept of economic development being caused by increased freedom is false. Economic development is driven by the accumulation of knowledge, availability of labour and raw materials and the build up of capital goods over time.

Re: Why did Imperial Germany develop so succesfully?

Caley McKibbin — Fri, 22 Oct 2010 01:45:05 GMT

Early Prussia was poor. We're talking about north Poland and Konigsberg. The only real asset was the hanseatic cities. It was only the later inclusion of Germanic states that made it seem as a whole better than it really was.

Re: Why did Imperial Germany develop so succesfully?

DMI1 — Fri, 22 Oct 2010 01:30:21 GMT

@Marko Makes sense what you're saying. The German worker was poorer than his british counterpart but they did have more

territory and population.

@Grayson While the Zollverein does give germany points in the economic freedom scale, Bismarck was also the first to implement

a welfare state! THis is my main gripe with the whole development issue!

@Stranger Thanks! That does explain something.

Re: Why did Imperial Germany develop so succesfully?

Vitor — Fri, 22 Oct 2010 00:57:06 GMT

Hey Lil, I remember the zollverein been mentioned on a history class during high school!

Re: Why did Imperial Germany develop so succesfully?

Stranger — Fri, 22 Oct 2010 00:37:57 GMT

The paradox of imperialism allowed the more liberal Prussian monarchy to conquer all the other German states and unify Germany into a single empire, all the while Britain was declining increasingly into socialism.

Re: Why did Imperial Germany develop so succesfully?

Marko — Thu, 21 Oct 2010 18:30:18 GMT

Prussia had a primitive economy based on exportation of grain. It turned into an economic power when it was awarded prosperous lands on the Rheine for its role in defeating Napoleon.

Germany on the eve of WWI had 30-40% less GDP per capita than the UK. However it had a considerably larger population.

Re: Why did Imperial Germany develop so succesfully?

Daniel James Sanchez — Thu, 21 Oct 2010 18:25:42 GMT

Germany's economy was among the first to liberalize in Europe. Its liberalization started immediately after the Napoleonic Wars under finance minister (and adherent of Adam Smith) Friedrich von Motz. Serfdom was abolished. And Prussia established a customs union (zollverein) which gradually eliminated nearly all the trade barriers within Germany, and maintained only a weak one surrounding Germany.