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HI136 The History of Germany Lecture 3

HI136 The History of Germany Lecture 3. Germany’s First Economic Miracle. “The great questions of our day cannot be solved by speeches and majority votes but by iron and blood.” Otto von Bismarck, Speech to the Prussian Landtag , 30 Sept. 1862.

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HI136 The History of Germany Lecture 3

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  1. HI136 The History of GermanyLecture 3 Germany’s First Economic Miracle

  2. “The great questions of our day cannot be solved by speeches and majority votes but by iron and blood.” Otto von Bismarck, Speech to the Prussian Landtag, 30 Sept. 1862

  3. “The German Empire was built more truly on coal and iron than on blood and iron.” J. M. Keynes

  4. Industrial Revolution • Late 18th, early 19th c. Started in Britain, then spread over the whole European continent. • Industry replaces agrarian sector as most important economic sector • Economy based on manual labour was replaced by industry, manufacturing and machinery. It began with the mechanisation of the textile industry and the development of new iron-making techniques. • Improvement of transportation (canals, roads, railways) • Steam power – fuelled primarily by coal and powered machinery • Dramatic increase in production capacity and productivity • Fundamental socio-economic and cultural changes

  5. Second Industrial Revolution • Since middle of the 19th c. • Development of chemical, electrical, petroleum and steel industries • Mass production of consumer goods • Mechanisation of manufacture of food and drink, clothing and transport • Employment for increasing number of population whose needs were satisfied by mass production

  6. Spread of the Industrial Revolution

  7. Paths to Industrialization • The ‘British’ model of coal & iron-fired industrialisation (Germany had many of the same raw materials as GB) • Late-comer industrialisers benefit from technology transfer • Role of foreign investors in early industrialisation • Role of state in German investment (Prussian government interest in railways, coal mines) • Role of big investment banks (often represented on board of companies)

  8. Hans-Ulrich Wehler, Deutsche Gesellschaftsgeschichte, vol. 3 (Munich, 1995

  9. Data from: Paul Bairoch, "International Industrialization Levels from 1750 to 1980" JEEH 11

  10. New Technologies in Industrial Production in Germany 1870-1900 Heavy industry English blast furnace technology Coal from Silesia and the Ruhr Ores from Lorraine Bessemer process 1879 Stainless steel 1912 Mechanical engineering Locomotives Internal combustion engine 1876 Cars 1889 Diesel engines 1896 Zeppelins (airships) 1900 Airplanes 1905 Electrical Industry Dynamos (Siemens) Electrical engines Telephones Power stations Films X-ray units Chemical Industry Artificial fertilizers Dyes Plastics 1885 Pharmaceuticals Safety explosives 1885

  11. Famous companies/industrialists • Stumm • Krupp • Thyssen • Bosch • Siemens • Daimler • Benz • AEG - Rathenau • Bayer • BASF

  12. Siemens pointer telegraph, 1847 Electrical industry - Siemens Electrical dynamo, 1866

  13. Krupp steelworks, Essen, stages of growth 1819, 1852, 1912 Pioneering of seamless railway wheels Alfred Krupp, 1812-87, the ‘Cannon King’ Develops Bessemer process for purifying steel Close contacts with arms industry Steel – Krupp, Essen

  14. Krupp’s cast-steel cannon at the 1851 Exhibition in London Krupp’s 42cm ‘Dicke Bertha’ siege gun (used to reduce Liege in 1914 and shell Paris) Krupp & munitions

  15. Some consequences of the Industrial Revolution • Population effects: productivity increases, health improvements, lower birth rates • Urbanisation – industry as “city forming” activity • Class society • Environmental damage • Growth of global markets & international trade

  16. Social Consequences of the Industrial Revolution • Clearer distinction between ‘work’ and ‘leisure’. • Creation of an industrial working class • Rise of organised labor • Growth of bourgeoisie (merchants, entrepreneurs) – economically dominant • Craftsmen (old Mittelstand - middle class) become less important • Civil servants and white collar workers (new Mittelstand - middle class)

  17. New Technology and Social Change • Electric street lighting allowed people to keep later hours and stimulated the entertainment industry. • Railway travel created a more mobile population • Class distinctions on the railways • Even so, complaints that rail travel was ‘too democratic’ • Plumbing, piped water and developments in drainage and sewers improved public health • Germany lagged behind Britain in the introduction of new sanitation and public health technology • At the turn of the century indoor plumbing was still expensive and a luxury item

  18. Demographic Revolution • Inhabitants of German Empire: 1864: 39,392,000; 1871: 40,997,000; 1910: 64,568,000 • Growth of urban population • More big cities

  19. Demographic Revolution • Inhabitants of German Empire: 1864: 39,392,000; 1871: 40,997,000; 1910: 64,568,000 • Growth of urban population • More big cities • Urbanisation of daily life • Migration and “uprooting” • Relative decline of agrarian population • Emigration and immigration • Improvement of health care – decline of infant mortality (since 1900) and higher life expectancy

  20. Class • In Marxist terms a class is a group of people defined by their relationship to the means of production. • Social class is based on economically determined relationship to the market (owner, renter, employee etc.) – Max Weber • Similar life chances • Common interests • Subjective factor: Identification with class

  21. Der Sozialist, Robert Koehler, 1885, DHM, Berlin

  22. Winners and Losers • Rapid industrial and economic growth brought about social change. • Some in society were obvious beneficiaries, others didn’t do quite so well. • The most obvious beneficiaries were the industrialists and bankers who owned German business. • The working class were essential to the growth of the German economy, but often lived in poor conditions.

  23. Elendsquartier in der Berliner Spreestr. 6, Berlin, about 1910 (DHM, Berlin)

  24. Winners and Losers • Rapid industrial and economic growth brought about social change. • Some in society were obvious beneficiaries, others didn’t do quite so well. • The most obvious beneficiaries were the industrialists and bankers who owned German business. • The working class were essential to the growth of the German economy, but often lived in poor conditions. • Landowners lost out in the transition to an industrial economy. • The old middle class also declined. • The benefits of growth were unevenly distributed, but there was a general improvement in prosperity.

  25. Some Peculiarities • Important role of state investment (coal mining in Saarland belonged to Prussian state) • Important role of finance capital (long-term investments, directors of banks in supervisory boards of shareholder companies) • Important role of industrial associations (lobbyism) • Important role of cartels

  26. Associations, lobbyism and trade unions Centralverband Deutscher Industrieller 1876 (Central Union of German Industrialists) Bund der Industriellen 1895 (Union of Industrialists) Hansabund 1909 Vereinigung der deutschen Arbeitgeberverbände 1913 (Union of German Employers’ Associations) Free = Socialist “Generalkommission” general commission Christian “Gesamtverband” “yellow” = liberal Organising the working class, representing interests of workers, indirect successes – state intervention and “welfare state” Exert pressure on the government and Reichstag deputies Successes: Tariffs 1878/79

  27. Cartels • Cartels created in times of crisis (1873 ff), 70 in 1887, 143 in 1895 • Agreements between companies to fix prices, regulate output • Legally binding (in USA cartels were forbidden) • But… • So successful and useful, that even more cartels were founded after 1896, 673 by 1910 • Not all sectors dominated by cartels: potash industry (100%), paper industry (90%), coal (82%), iron and cement industries (less than 50%), electrical industry (less than 10%), almost no cartels in chemical industry

  28. Conclusion • Causes for Germany’s First ‘Economic Miracle’: • Population growth provided both a work force and a market for manufactured goods • Germany had ample raw materials • Geography – rivers and railways provided transport • Good education system provided a skilled workforce • Expansion of banks free from regulation encouraged investment and a close relationship between banking and industry

  29. Conclusion • Consequences of Industrialization: • Demographic change • Population growth • Growth of towns • East-West migration • Social Change • Creation of an urban working class • Separation of ‘work’ and ‘leisure’ • Growth of literacy • Growth of service industry and mass entertainment

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