Industrialization in Germany
Germany’s path to industrialisation stands in sharp contrast to that of Britain — beginning roughly a century later, and hampered for decades by political fragmentation between rival German states, most notably Prussia and Austria. Yet once political unification was achieved under Bismarck in 1871, Germany’s industrial rise proved extraordinarily rapid, propelling the country to European leadership in steel and chemicals within a few short decades. This transformation was driven by a distinctive combination of factors: the pre-unification groundwork laid by the Zollverein customs union, Bismarck’s own political and economic statecraft, a heavy state role in protection and welfare, a strong emphasis on technical education, an expanding railway network, rich natural resources, and a uniquely close relationship between German banks and industry. This article traces Germany’s economic development from the fragmented pre-unification period, through the specific factors driving its post-1871 industrial boom, to a detailed comparison of how the German industrialisation process differed in character from that of Britain.
Germany Before Unification (Up to 1871)
- The Industrial Revolution began roughly a century later in Germany than it did in England.
- Before 1871, Germany was not properly united, owing to the ongoing power struggle — mainly between Prussia and Austria — that dominated the period.
- This disunity did not provide the stable conditions needed for a flourishing economy.
- The southern side of the Rhine Valley in Germany was incorporated into France under Napoleon.
- At that time, France — despite its own economic shortcomings relative to England and Belgium — was still considerably more economically advanced than Germany.
- This period of forced integration with France helped stimulate economic change within the Rhine Valley.
- In 1815, this area became independent of France once more, but retained some of the economic and institutional reforms introduced during the Napoleonic period.
- Serfdom and the guilds were abolished.
- Other remnants of feudalism, which had long restricted commerce and industry, were similarly ended.
The Zollverein
- Initially conceived by the Prussian Finance Minister Bülow as a Prussian customs union in 1818, the Zollverein, or German Customs Union, was finally formally organised through the 1833 Zollverein treaties, coming into official existence on 1 January 1834.
- The Zollverein linked together the many separate Prussian and other German princely territories. Over the following three decades, many other German states — with the notable exception of Austria — went on to join.
- The Zollverein of 1833 abolished tolls between the various German principalities, effectively turning Germany into a single common market.
- The Zollverein helped substantially reduce protectionist barriers among the German states, especially improving the transport of both 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 proved particularly important for Germany’s emerging industrial centres, most of which were located in the Rhineland, the Saar, and the Ruhr valleys.
- For a period of several decades, up until roughly the 1860s, there were repeated attempts to imitate, within Germany, the industrialisation already taking place elsewhere in Europe.
- This imitation, however, proved only moderately successful.
Factors Behind Germany’s Rapid Industrialisation After 1871
Unification of Germany
- In 1871, a united Germany was finally formed under the Chancellor of Germany, Bismarck, bringing the previously divided German states together.
- A newly united country meant that goods and natural resources could now be distributed across all of Germany far faster than before — business thrived directly as a result of unification.
- A unified country was, moreover, considerably better coordinated in its actions, and therefore less vulnerable to political, social, and military attacks — which correspondingly lowered the costs and risks associated with owning a business.
Government’s Role: Protection and Welfare
- The German government actively supported not only heavy industry, but also crafts and trades more broadly.
- In 1879, industrial protection was introduced through the application of tariffs on foreign imports — a measure that encouraged domestic trade, employment, and business activity.
- The government accumulated substantial revenue from these tariffs on foreign goods, which in turn allowed it to reinvest money back into the economy, and to introduce genuine social welfare measures — including Health Insurance, Accident Insurance, and an Old Age Pension.
- This social welfare system — introduced for the first time by Bismarck — made ordinary people think twice about how genuinely “bad” the government actually was, deterring many from drifting towards the communist end of the political spectrum.
- These welfare measures also helped deter the migration of skilled Germans to other countries, such as the USA.
The Contribution of Bismarck
- Bismarck’s contribution to German industrialisation can be summarised in four key steps: first, he unified the country; second, he brought its economy into line; third, he made sure it stayed that way and actively encouraged its continued growth; and fourth, he worked to prevent anything from badly damaging the economy.
- Bismarck won the support of both industry and skilled workers through his high tariff policies, which protected domestic profits and wages from American competition — though these same policies alienated the liberal intellectuals who favoured free trade.
- Even before unification, his celebrated “Blood and Iron” policy directly included iron, which in turn helped fuel Germany’s industrialisation.
Education
- Germany implemented a technical education curriculum that placed particular emphasis on the technical areas of industry — electrics, chemistry, and physics.
- Through this emphasis, Germany was set to become genuinely strong in the technical fields.
- The country accordingly possessed a large pool of people capable of both developing and using technology and resources to their greatest possible capability.
Population
- As the country prospered, it became an increasingly desirable place to live, drawing many people in from other countries — this immigration boosted the economy further, allowing the country to grow.
- This economic growth, in turn, raised living standards and wages, allowing people to afford larger families — and so the population increased once again in a virtuous cycle.
- The country became progressively more urbanised, meaning more workers became available for industry — and industry, in turn, prospered further as a result.
Agriculture
- German farmers abandoned traditional, inefficient agricultural practices in favour of modern new methods, including the use of new fertilizers and new tools.
- The sugar beet was introduced specifically as a form of import substitution.
- Even so, farms in Germany remained relatively small in size, and women continued to perform much of the fieldwork — freeing up many additional male workers to become available for industrial work.
The Perceived Threat of France
- German politicians, industrialists, and academics alike all felt a genuine sense of threat from France, fearing potential retaliation following the Seven Weeks’ War of 1866.
- Germany accordingly strove to make herself economically and industrially stronger, as a precaution against any future attack.
The Role of Railways
- Railways played a genuinely vital part in Germany’s overall economic growth.
- Germany was, initially, a relatively slow starter in the broader European “railway race,” but she soon caught up.
- Railways significantly increased economic efficiency, since goods could reach their destinations faster, speeding up the overall tempo of business.
- Germany became the effective centre of activity for the wider European business community.
- Germany faced particular geographical challenges that prevented her from shipping directly south, since all her main rivers flowed North, away from the majority of her trading partners — meaning she often had to ship goods through other, intermediary countries.
- The railway system, in this context, allowed Germany to trade with a greater number of countries, effectively working around this geographical constraint.
- The expanding rail system also dramatically increased demand for steel and coal, providing a further significant stimulus to the broader German economy.
Natural Resources
- Germany was genuinely rich in natural resources.
- These included substantial coal and iron ore deposits in the Ruhr, the Saar, and Upper Silesia; large quantities of sodium and potassium (which enabled the development of a substantial chemical industry); and, not least, an abundant supply of skilled people.
- Germany also benefited greatly from the settlement made with France following the Seven Weeks’ War, which awarded Germany a sum of five billion francs.
- This settlement additionally included the French territories of Alsace and Lorraine — regions rich in both minerals and fertile soil, and consequently a considerable boon for the German economy.
Banks and Cartels
- German banks gave over money to industry far more willingly than their counterparts elsewhere, and a special breed of financial institution grew up specifically to serve this need — the “credit bank,” entirely devoted to banking within the business sector.
- Different banks went on to form cartels within different industries.
- Notably, such cartel contracts were accepted as legal and binding by German courts, even though equivalent arrangements were held to be illegal in both Britain and the United States.
Examples of German Industrial Success
Steel
- Germany became Europe’s leading steel-producing nation by the late 19th century, thanks in large part to the protection afforded against American and British competition through tariffs and cartels.
- The “German Steel Federation” was established in 1874.
Leadership in Chemicals
- Building on its leadership in chemical research across universities and industrial laboratories, Germany became genuinely dominant in the world’s chemical industry by the late 19th century.
- Major firms such as BASF and Bayer led the way in the production and distribution of artificial dyes and pharmaceuticals, ultimately driving German near-monopolisation of the global chemicals market — accounting for roughly 90 percent of the entire share of international trade volumes in chemical products by 1914.
How the German Industrialisation Process Differed From That of Britain
With their shared reliance on coal, iron, the steam engine, and heavy industry, Britain and Germany both industrialised along broadly similar lines — yet there remained many significant differences in their respective processes of industrialisation.
A Late Start, But Rapid Catch-Up
- Industrialisation began in Britain, with Germany initially “out of the game.” Germany, though slow to begin, went on to catch up quickly.
- The British, as the first to industrialise, found it easier to establish an early lead, but correspondingly harder to develop further, given ageing machinery and continuously growing competition. This is precisely why Germany experienced such rapid growth, even as British growth gradually slowed.
A Greater Focus on Technical Education
- Britain did not place nearly as much emphasis on technical education as the Germans did.
- Germany focused deliberately on the future, building infrastructure and emphasising basic technical education — an emphasis that Britain, by comparison, largely lacked.
A Focus on the Chemical Industry (vs. British Textiles)
- While Germany focused heavily on the chemical and electrical industries, Britain continued to thrive in the textile industry, owing largely to Britain’s colonial possessions in the Americas, which gave her access to large quantities of cotton.
The Role of Government
- In Germany, the central government’s role in driving industrialisation was considerably greater than it had been in Great Britain.
- This was partly because the German government actively wanted to hasten the process, and catch up with existing British industrialisation.
- In Germany, early industrialisation was led substantially by Bismarck himself — a distinctly “one man focused” approach that was simply not the case in Britain.
Differences in Banking
- Germany was notably ahead of Britain in the willingness — and confidence — of its banks to lend money to industry.
- In Britain, many banks declined to lend money to businesses, fearing the business in question might prove unable to repay the loan.
- In Germany, by contrast, banks gave over money far more willingly, giving rise to the specialised “credit bank.”
- Different German banks formed cartels within different industries — arrangements that remained illegal in Britain.
- Germany made effective use of her rich iron and coal resources to develop heavy industry, such as iron and steel manufacture.
- This environment also proved conducive to the growth of big businesses and corporate cooperation among large firms.
- The German banking sector, for example, was dominated by a comparatively small number of large banks, which actively coordinated their efforts to promote industrial growth.
Geographical Challenges
- Germany had to overcome distinct geographical challenges, since all of Germany’s main rivers flowed North.
- Britain, by contrast, held a clear natural advantage, since many of her rivers flowed year-round and did not flow in only one fixed direction — allowing Britain to transport materials, goods, and resources both quickly and efficiently.
A Greater Focus on War Material
- In Germany, industrial focus on the production of war material was considerably greater than in Britain.
The Role of Railways
- As discussed above, the overall role of railways proved considerably more important to Germany’s industrial development than it was to Britain’s.
Conclusion
Germany’s industrialisation offers a compelling counterpoint to the British model — a case of a politically fragmented, comparatively late-starting economy that, once unified under Bismarck in 1871, rapidly closed the gap with Britain and, in key sectors like steel and chemicals, ultimately surpassed it. This achievement rested on a distinctive combination of factors largely absent, or present in much weaker form, in the British case: an activist central government providing both tariff protection and pioneering social welfare, a deliberate national emphasis on technical education, a banking sector willing to lend aggressively to industry and organise itself into legally sanctioned cartels, and a railway network built explicitly to overcome Germany’s unfavourable river geography. Where Britain’s industrialisation had unfolded gradually, driven substantially by private initiative and colonial trade, Germany’s was consciously state-directed, technically ambitious, and unified around the singular political will of Bismarck — a model that would leave Germany, by the eve of the First World War, as one of Europe’s foremost industrial and economic powers.
Note on the source material: Your notes attribute Germany’s five-billion-franc indemnity and the acquisition of Alsace-Lorraine to the “Seven Weeks’ War of 1866” — the same conflict cited earlier as the source of French “threat” fears. Historically, the Seven Weeks’ War (1866) was fought between Prussia and Austria and did not involve France or an indemnity; the indemnity and the annexation of Alsace-Lorraine actually resulted from the later Franco-Prussian War (1870–71). I have preserved the wording exactly as given in your source rather than silently altering it, but wanted to flag this for your review before publishing, in case your master notes intend a correction here.
