THE POLITICAL ECONOMY OF GERMANY 1815-1914 THE POLITICAL ECONOMY OF GERMANY 1815-1914 MARTIN KITCHEN V CROOM HELM LONDON McGILL-QUEEN'S UNIVERSITY PRESS Montreal 1978 © 1978 Martin Kitchen Croom Helm Ltd, 2-10 St John's Road, London SW11 British Library Cataloguing in Publication Data Kitchen, Martin The politicial economy of Germany, 1815-1914. 1. Germany - Economic conditions 2. Germany — Politics and Government - 19th century 3. Germany - Politics and government - 1888-1918 L Title 330.9'43*07 HC285 ISBN 0-85664-610-5 McGill Queen's University Press 1020 Pine Avenue West, Montreal H3A 1A2 ISBN 0-7735-0501-6 Legal deposit second quarter 1978 Bibliothèque Nationale du Québec CONTENTS Preface 7 1. Germany in 1815 9 2. Towards Economic Unification 34 3. The Social Impact of Economic Development 1815-1850 68 4. The 1850s: Growth and Crisis 87 5. Economics and Unification 110 6. From Boom to Depression 132 7. The Impact of the Great Depression 1873—1895 161 8. Imperialism 180 9. Rye and Iron 200 10. World Polities and Mitteleuropa 222 11. The Economic Foundations of Pre-War Policy 1900—1914 241 Bibliography 283 Index 294 To Dick, Katharine and Emily PREFACE Writing an introduction to the Political Economy of Germany in the nineteenth century has proved to be both challenging and frustrating. The opportunity to organise and discuss in greater detail some of the major themes of my eailier work has proved immensely rewarding, but in the process of attempting to cover such a wide field I have become increasingly aware of the problems of writing such a book. Apart from my own shortcomings there is the lack of much basic empirical research on some of the key issues of the economic development of Germany in this period, an obsession by many historians with economic theories which border on the theological, and a serious lack of coherent and consistent statistical data, particularly for the earlier part of the century. In a book of this size there are perhaps too many opinions that are inadequately substantiated owing to lack of space or in­ adequate evidence, a certain simplification of complex issues, and an underemphasis of regional disparities. Hopefully, the more polemical passages will be seen as hypotheses designed to stimulate debate rather than over-confident and dogmatic statements of fact, and the book will be of use to a wide audience of all those who are interested in the debate on the question of why German society evolved in its own particular and unique manner. The theme of this book is the interaction between economic develop­ ment and social structure. Relationships between economic, tech­ nological, social and political developments are examined in an attempt to delineate the histoiy of economic social formations seen as a totality. My main concern in writing this book was to try to discover why German society developed in such a distinct manner and why economic modernisation did not lead to social modernisation. The peculiarities of German industrial capitalism cannot be examined simply in terms of business history, the history of technology, agricultural history or the statistical sophistication of the ‘new economic history’. This is partly because to so many economic historians ‘capitalism’ is a slightly em­ barrassing word which smacks of a political orientation which is not their own, and partly because capitalism, like all economic activity, is also a social formation. Without an examination of the social dimension of economic activity, economic history all too easily becomes bloodless and abstract, or is one-sided and thus distorted. Social activity is not simply a direct result of the development of the material forces of production, for economic activity is in turn decisively affected by the conscious activity of men and by the social formations within which it develops. I have tried where possible to discuss this interaction of the social and the economic in terms of a reciprocal relationship so that political decisions can be seen as having been determined by economic developments and yet having profound economic consequences. The process of industrialisation is immensely complex and its con­ sequences are felt throughout a society. In a book of this length I have only been able to discuss some of the factors which made an industrial revolution possible, and to suggest some of the effects of exceptional economic growth in a society that refused to adapt itself to lessen the resulting social and political conflicts. Such an approach will not please many economic historians, but hopefully it will offer suggestions to students of German history who wish to study the relationship between economic, social and political change. Many shortcomings in the original draft have been at least partially overcome thanks to the incisive and constructive criticism of an economic historian whose desire for anonymity is due less to his becoming modesty than to a profound methodological disagreement over the foundations and principles on which this book is based. To him I owe a great debt of gratitude for his encouragement, scholarly detachment and enduring friendship. I would equally like to thank Peter Weber, whose remarkable knowledge of the period and exceptional bibliographical expertise has saved me from many errors. I should also like to express my thanks to Professor Fritz Fischer, whose work has been a constant inspiration and who in private conversation has provided more guidance and help than he would be willing to admit. To Sheila Roberts who came to my aid at a critical time in the writing of this book I am deeply grateful. Pearl Sirkia, Elsie Trott and Phyllis Hawkins typed a difficult manuscript with great skill and were un­ failingly co-operative and cheerful. 1 GERMANY IN 1815 Abolition of Serfdom In 1815 Germany was an agricultural society. The population of the German states, excluding that part of Austria which belonged to the German Confederation, amounted to approximately 23 million, of whom 10.5 million lived in Prussia. Of this total population three-quarters lived in rural areas. Apart from the Rhineland provinces and south-western Germany, where much of the land was owned by small farmers, most of the agricultural land was the property of the aristocracy, a class which included a large number of impoverished petty aristocrats, whose estates were still organised on traditional semi-feudal lines. The Napoleonic wars resulted in a serious reduction of the number of farm animals. The crop failure of 1816 caused the most serious famine for almost half a century, a situation which was made even more acute by the outbreak of an epidemic which decimated the seriously inadequate stock of cattle. Widespread suffering and misery among the common people were coupled with a political reaction which threatened to destroy the all too modest advances which had been made since 1806 towards the creation of a less autocratic and hidebound society. Yet although Germany in 1815 seemed poor, backward and reactionary, significant changes had been made, particularly after the crushing defeat of Prussia by the French in 1806, which were to have a profound effect in the years to come by providing the basis for modernisation and economic growth. The most important of these measures was the Prussian edict of 14 September 1811 which revised the relationship between landlord and peasant and which called for the liberation of the serfs. The feudal order on the land was the comer-stone of Prussian society in the eighteenth century. For this reason it was fiercely defended by those who profited from the system, who feared the consequences of dramatic change or who argued that the preservation of traditional society was the only alternative to a bloody revolution on the French model. Conversely, no aspect of Prussian life was more fiercely attacked by the liberal bourgeoisie, who used the arguments of the British classical economists about the harmful effects of privilege and traditional rights and obligations on the economic life of the nation, which they combined with older arguments from the physiocrats on the importance of agriculture to point out the evil social and economic consequences of 9 10 Germany in 1815 serfdom. Thus on both sides there was agreement that the abolition of serfdom would have far-reaching consequences. The aristocracy feared, and the liberal bourgeoisie hoped, that agriculture would be based on free wage labour and the introduction of the capitalist mode of production to the rural economy. Whereas in France the feudal system had been destroyed in the revolutionary edicts of August 1789, August 1792 and July 1793 and confirmed in the Code Napoleon of 1804, the system remained virtually intact in Prussia. Peasants lived in a condition of hereditary serfdom, the forms of that serfdom differing in various areas. They were unable to move, or to marry, without the permission of the lord to whose estates or person they were bound. Their children were obliged to work on those estates. Even those peasants who owned land were forced to provide labour service on the aristocratic (Junker) estates, and such peasants were also bound to the land, for their ownership depended on the performance of feudal duties. Harsh punishments were meted out to those who failed to meet their obligations, frequently involving brutal floggings, from which women were not excluded. The hunting rights of the aristocracy were a particular hardship which excited the indignation of the reformers. There were many compelling arguments in favour of the liberation of the serfs. Reformers like Stein felt that free wage labour was far more efficient and productive than forced labour service. The great architects of the new Prussian army, Scharnhorst and Gneisenau, were convinced that only free men would be prepared to fight and to die for the liberation of their country. Humanitarians were outraged at the primitive conditions on the land which were so harsh a contrast to their ideal of the basic human right to a dignified life and to opportunities for self-betterment. Others argued that without a ‘revolution from above’, involving measured and cautious steps towards economic, social and political reform, Prussia could well fall prey to a social revolution ‘from below’. The French Revolution thus provided an important external stimulus to reforms which were long overdue. Some of the peasants on the royal estates in Prussia were freed from feudal obligations, but as these obligations were commuted, the King made a handsome profit from this enlightened reform. The suggestion that a similar reform could be carried out on the estates of the nobility was greeted with the outraged indig­ nation of the majority of Junkers, who were unwilling to abandon their old way of life whatever the immediate economic advantages of such a move. The defeat of Prussia at the twin battles of Jena and Auerstädt