THE GERMAN STATES
=468. Connection of the commercial and the political development of
Germany.=—Standing next to England in the extent of its commerce about
1900 is a country which at the beginning of the century, if not among
the last, was certainly far below the leaders. This country is Germany.
We shall have to note, in this sketch of commercial development in the
nineteenth century, two remarkable examples of commercial expansion.
One of them, furnished by the United States, was due to the spread of
a people, originally small, over a great area rich in resources. The
other, furnished by Germany, was due to different causes. The Germans
of 1800 occupied a territory not greatly different from that which
composed the Germany of 1900, and to which nature has given but a
moderate endowment of resources. There was no Germany at the earlier
date, however; the people were divided up among a great number of petty
states, and their economic forces were cramped thereby so as to hinder
their development. The commercial progress of the century has depended
largely on the reform of these political conditions.
=469. Summary of the political development.=—It will be necessary,
therefore, in the following pages, to refer frequently to the events
of political history, and for the convenience of the reader a brief
summary is here given of the course of that history. The Napoleonic
wars wiped out the smallest and most backward of the German states,
reducing the number from over three hundred to about forty. Then, until
near the middle of the century, progress depended on negotiations
between these states by which the worst effects of their separation
were removed. In 1848 a liberal movement reformed the government of
some of the important states on modern lines, and strengthened the
demand for a unified Germany, leaving still undecided, however, the
question whether Prussia or Austria was to be the leading state. The
war of 1866 between the two states gave the leadership to Prussia; and
the war of 1870 with France led finally to the foundation of the modern
German Empire, under which at last the people found room for commercial
expansion and advanced with astonishing rapidity.
=470. Conditions of Germany about 1815.=—In spite of the service which
Napoleon did Germany by abolishing the smallest states, the country was
still splintered into pieces in 1815. A network of tariff frontiers
covered the land, cutting the great rivers and the natural high-roads
of commerce, and preventing the movement of wares. Not only did each
state have its own tariff; some had internal tariffs in addition.
The single state of Prussia had altogether some sixty tariffs. Some
of the states were made of scattered pieces, interspersed among the
territories of their neighbors; even a small state might consist of
eight or ten fragments. A merchant, to reach the center of the country
from the national frontier, crossed about sixteen tariff boundaries.
Not only the customs tariffs consumed time and money. The separatism
which they represented spread into all parts of the organization;
there were seventeen different postal systems in the country; nearly
threescore different laws on bills of exchange; hundreds of different
coins.
=471. Backwardness of commerce and manufactures.=—The difficulties
of internal commerce were so great that the life of the people was
arranged in large part to enable them to exist without trade. Most of
the people were engaged in agriculture and supplied themselves with
nearly all the necessaries of life. Manufactures were still carried
on almost exclusively by scattered artisans. The German governments
still clung to the old ideas of the gild system and public regulation.
Little by little these ideas fell into the background in the first half
of the nineteenth century, but it is important to note that they were
still a living force in Germany when England had discarded them and was
in the full rush of the developing factory system.
=472. Factories dependent on antiquated sources of power.=—Hindered in
development by the persistence of old institutions, and by the lack of
any considerable market for the product, German manufactures remained
on the same stage on which they had been for centuries previously.
Even the textile and mining industries were conducted according to
the time-honored methods of the past; little progress had been made
in the application of machinery, and the steam-engine was practically
unknown. In Electoral Saxony, the seat now of a great cotton and woolen
manufacture, all spinning was done by hand up to 1786, and in 1812
the small factories were still dependent on this source of power. The
factories of medium size got their power from oxen and horses; only
the large factories were run by water; and no spinning was as yet done
entirely by steam.
=473. Commerce small, and marked by the export of raw materials.=—No
statistics exist which would give an accurate picture of the
development of German commerce in the early part of the nineteenth
century, but we can gain some idea of its backwardness from an estimate
made for so late a date as 1842. At this time German foreign trade was
little over _one-tenth_ of what it was in 1900, and it must have been
considerably less in earlier years, before the reforms which will be
described immediately. The fact that the country was predominantly
agricultural is shown in the fact that the most important items in
export were raw materials and foodstuffs, especially grain. The
industrial population had not advanced far enough to work up even the
raw wool produced in the country, of which considerable quantities
were exported to England. Germany did export, it is true, a number of
manufactured wares, but they were in general those which could be
made from raw materials produced at home, and in the manufacture of
which cheap hand labor was still the important factor. In the products,
however, affected by the improvements which had been introduced in
English factories, Germany confessed her weakness, and purchased large
quantities of yarn and iron of English manufacturers for use inside the
country.
[Illustration:
DEVELOPMENT
OF THE
GERMAN ZOLLVEREIN
]
=474. Formation of the Zollverein (customs union).=—Such conditions
called forth, naturally, remonstrances from the mercantile classes.
Business men and manufacturers in all parts of Germany began soon after
1815 to agitate for a reform. We must content ourselves with noting
only the main steps. Tariffs inside the separate states were reformed,
and the navigation of the great rivers was made easier. Finally, and
most important, the separate states began to draw together in groups,
forming a customs-union (_Zollverein_), with a common tariff on the
frontier and with free trade inside. The movement, slow at first,
culminated rapidly in 1828, when three such groups were formed, one
in the North (Prussia and others), one in the South (Bavaria and
Würtemberg), and a third including states from central Germany to the
coast. No state liked to remain isolated when consolidation had once
begun. Out of this transition stage there had developed by 1834 one
great union, embracing about two-thirds of the area and population out
of which the German Empire was later to be formed. From this time the
union grew more slowly, but the people within it could now afford to
wait, utilizing its new commercial opportunities, and confident that
the other Germans could not long resist its attractions.
=475. Development following the formation of the Zollverein.=—The
introduction of free trade inside of Germany was opposed then, as the
establishment of free trade in the world at large would be now, by
producers who feared the competition of others in the same line of
business. Some producers lost by the change, and were compelled to
seek other lines of work. Many manufacturers, however, who opposed
the change because they feared it would hurt them, found that it led
actually to a great increase in prosperity; it extended their market
and gave a rich reward to those who best served their customers. German
manufactures developed and began to supply a demand which before had
been met by purchases abroad. The importation of foreign manufactures
was checked, while there was an increase in the imports of raw and half
manufactured materials (dyes, coal, iron) and of colonial products
(sugar, coffee), indicating a growth in industrial power and in
welfare. The non-industrial population gained both as consumers, by the
better supply of manufactured wares, and as producers, selling products
to the developing industrial class.
=476. Protection and the free-trade movement.=—The tariff of the
Zollverein of 1834, based on the liberal Prussian tariff of 1818,
was less restrictive and less complicated than that of most of the
European states of the time. Duties which had been moderate, however,
at the time when they were framed, became protective or prohibitory as
prices fell; and some changes toward protection were made consciously
to stimulate manufactures or to retaliate against other countries.
About the middle of the century the current set in the other direction.
Germany was still an agricultural country, exporting grain, and the
agricultural classes secured the aid of merchants and of political
liberals in a contest for lower duties.
=477. Political factors in the tariff question.=—The free-trade
movement was curiously intermixed with matters of national politics,
especially the question which was acute from 1848 to 1866, whether
Prussia or Austria was to lead in the unification of Germany. Austria
had not entered the Zollverein, partly because the Austrian government
had retained the protective or prohibitive duties of the previous
century, and was unwilling to reduce them by entering the German
customs union. It was the policy of Prussia, therefore, to keep the
duties low and to make them even lower, that Austria might be excluded
from influence on the other German states. Neglecting the details,
which are extremely complicated, we may note only the result, which
was a victory for Prussian statesmanship and for the free-trade party.
Treaties with France and with many other states reduced the duties far
in the direction of free trade.
=478. Reaction in customs policy after the founding of the German
Empire.=—At the time of the foundation of the German Empire, therefore,
the tariff was low and the free trade movement was in the ascendant.
The free traders gained one more victory, in 1873, by securing the
abolition of the duties on iron; and in 1877 about 95 per cent of all
imports entered duty free. This victory of the free traders was their
last. The founding of the empire stimulated the growth of national
feeling, and “Germany for the Germans” was a rallying cry of which the
protectionist made good use. A great commercial crisis, following the
war and the expenditure of the huge indemnity received from France,
caused urgent demands for relief from the manufacturers who had greatly
extended their works and found now that they could not market the
product at profitable prices. Of the iron producers it was said that
one-third could continue under the existing tariff, that one-third
could continue only with the aid of protection, and that one-third were
bound to be ruined whether they received protection or not.
=479. Return to protection in 1879.=—Even the agricultural classes
now joined the protectionists; they found their foreign market
appropriated and their home market threatened by grain imports from
Russia, America, and India; they were largely in debt and were paying
the heavier taxes of the empire. Finally, political factors united with
the economic to induce a change. Bismarck found it politic to reverse
his position and to advocate protection instead of low duties or free
trade; with remarkable adroitness he engineered the change which was
realized in the tariff of 1879. The existing duties on manufactures
were raised; old duties which had been abolished were restored; and
duties protecting agricultural products were introduced. This tariff,
with changes which we shall notice later, has formed the basis of the
existing tariff.
QUESTIONS AND TOPICS
1. Review in one of the smaller manuals of European history the course
of political development in Germany during the century.
2. Political condition of the German states at the beginning of the
century. [Seignobos, first parts of chaps. 12, 14; Henderson, vol. 2,
chaps. 6, 7; Bigelow, vol. 3, chap. 1.]
3. The Zollverein. [Rand, Ec. hist., chap. 8; Bigelow, vol. 3, chap.
4; Seignobos, end of chap. 14.]
4. The Prussian tariff of 1818. [Bigelow, vol. 3, chap. 17.]
5. The conflict between Prussia and Austria. [Henderson, vol. 2, chap.
9; Seignobos, chap. 15.]
6. The return to protection. [“Veritas,” chap. 5.]
BIBLIOGRAPHY
The best single reference is J. H. Clapham, **The economic development
of France and Germany, 1815-1914, Cambridge, 1921. Ogg, ** Econ.
development, chap. 10, industry, and chap. 14, commerce, is brief on
the earlier part of the century but gives notably full bibliographies.
A bibliography of Germany, including references to a number of
articles in English will be found in Homans, Cyclopedia of commerce,
N. Y., 1858, p. 814. The student who is confined to reading in
English must seek in Homans, M’Culloch and similar books, or in the
general encyclopedias published before 1870, the descriptions there
given of German commerce in the earlier parts of the century. Most
of the English reading which is readily available takes up economic
development only in connection with political history. Topical
references have been given above to the general narrative histories:
**Seignobos; Ernest F. Henderson, A short history of Germany, 2
vols., N. Y., Macmillan, 1902; Poultney Bigelow, History of the
German struggle for liberty, 3 vols., N. Y., Harper, 1896-1903. An
anonymous book, by “Veritas”, The German Empire of to-day, London,
Longmans, 1902, includes chapters on the history of German commercial
policy which make it a convenient source of information to readers
of English. The best book in English, however, on German commercial
policy is W. H. Dawson, **Protection in Germany, London, King, 1904,
which covers the whole century; it is a book to be studied, not merely
read. A valuable summary of the history of German American commercial
relations throughout the nineteenth century is given by G. M. Fiske in
Review of Reviews, N. Y., March, 1902, 25: 323-328.