GERMANY UNDER THE EMPIRE
=480. Effect on economic development of the establishment of the
Empire.=—Leaving now the topic of commercial policy until we return
to it in a concluding paragraph, we must attend to the material
development of Germany. Down to the foundation of the Empire in 1871,
progress, if steady, still was slow. The best energies of the people
were absorbed in the great political conflicts out of which united
Germany was to emerge; delicate questions of the relations between
the German states had to be settled, and much needed still to be
accomplished in the reform of industrial legislation inside the states.
As late as 1862 it was estimated that five-eights of the people were
still engaged in agriculture or in other extractive industries. In
comparison with this period of preparation the progress which Germany
has made since 1871 is startling. The direct gains which Germany made
in the war with France, the acquisition of the rich provinces of
Alsace and Lorraine, and the receipt of about $1,000,000,000, as a
war indemnity, were large, but still they were less than the indirect
results: the establishment of national unity on a lasting basis,
freeing the people from political anxieties, and encouraging them to
face their economic problems with a new energy and pride in their
strength, and with a new hope in the future. This political factor,
vague and intangible as it may be, is still most important; without it
the recent economic development of Germany could be regarded only as a
miracle.
=481. Development of commerce, 1870-1913.=—In the period between
the founding of the Empire and the outbreak of the World War the
population of Germany increased from 41 to 67 million, about 63%,
while the foreign trade increased almost exactly 250%, _four_-fold as
fast. Comparing the figures in the accompanying table with those given
for the United Kingdom in a preceding chapter we see that in 1872 the
Germans were much behind the English, separated roughly by an interval
of ten years of development, but that they were closing the gap as time
passed, and at the end of the period had passed the English in the
value of their export trade.
SPECIAL COMMERCE OF GERMANY, SELECTED YEARS IN MILLIARDS
OF MARKS AND OF DOLLARS.
=====+================+================
| Imports | Exports
-----+------+---------+-------+--------
| Marks| Dollars | Marks | Dollars
-----+------+---------+-------+--------
1872 | 3.5 | .9 | 2.5 | .6
1875 | 3.6 | .9 | 2.6 | .6
1880 | 2.8 | .7 | 3.0 | .7
1885 | 3.0 | .7 | 2.9 | .7
1890 | 4.3 | 1.1 | 3.4 | .8
1895 | 4.2 | 1.1 | 3.4 | .9
1900 | 6.0 | 1.5 | 4.8 | 1.2
1905 | 7.4 | 1.9 | 5.8 | 1.5
1910 | 8.9 | 2.2 | 7.5 | 1.9
1913 | 10.8 | 2.7 | 10.1 | 2.5
=====+======+=========+=======+========
While in 1871 60 men out of 100 were engaged in agriculture, the
proportion had fallen in 1907 to 27. The change was brought about not
by an absolute decline of the number in agriculture, though sometimes
that was observable, but by the young men leaving the country for the
mines, factories, and commercial centers. Germany had in 1840 only 12
cities of over 100,000 inhabitants, while at the end of the century
it had 28, of which the chief, Berlin, was growing more rapidly than
Chicago; and in 1910 it had 48. The industrial development during the
generation ending in 1900 may be inferred from the following: coal
production increased over 250 per cent, pig iron production nearly 400
per cent, and shipping 500 per cent.
=482. Character of recent German commerce.=—England was characterized
in a preceding paragraph as “offering one of the most remarkable
examples of advanced commerce in the world.” In an earlier period
England stood alone; it offered _the_ most remarkable example. In 1913
Germany stood alongside England, not merely as regards the quantity
but also as regards the quality of her trade. In Germany as in England
manufactures formed the major part of the exports; their proportion of
the total value approached if it did not reach the English. Exports
of raw materials and crude food stuffs had declined to less than
one-quarter of the total, and among exports of this character coal, as
in England, took the dominant place. On the other hand the imports of
raw material and food stuffs had grown until they amounted to about
three-quarters of the total imports. Of the total value of imports
finished manufactures formed only 13 per cent, a proportion actually
less than that of the English, whose policy of free trade permitted
wares to be brought in which were excluded from Germany by the customs
tariff. If we arrange the wares imported in 1913 in the order of their
value we do not find a single finished manufacture among the first 26
items, which include all those exceeding 100 million marks in value;
crude copper was fifth on the list, but we find no product of factory
industry until we reach the twenty-second item, woolen yarn, which
itself was destined to feed the German factories and in large part to
be exported in a finished form. To understand recent German commerce
we need first of all, evidently, to study the development of Germany’s
manufactures.
=483. Rapid development of factory industry.=—Before the founding of
the Empire most of the people engaged in manufactures in Germany still
worked at home, with simple machinery and no steam power. In Saxony,
for instance, now one of the industrial centers of the country, the
manufactures of cloth, stockings, lace, etc., were still carried on
outside of factories in 1868. The proportion of people working in this
simple way is still large in Germany, but the number has declined in
many lines of work (weaving, milling, shoemaking, etc.), and the great
growth of the recent period has been in the modern factory industry.
Since 1882 the rate of growth of the factory population has been
about fourfold that of the general population. The results of this
development have been indicated in the previous paragraph, and they
furnish a striking contrast to conditions as they were at the time
of the Centennial Exposition of 1876, when the German representative
reported that in the industrial field Germany had received a defeat
equal to two Sedans, that German industry produced only articles of
poor quality and of slight value (“schlecht und billig”), and that
Krupp guns were the only product of which the Germans could be proud.
=484. Resources of coal and iron.=—Germany was favored by some
important physical resources in building up its modern industry. The
country had a rich supply of coal, the great source of modern power,
and took in Europe a place barely second to England in coal production,
far ahead of any other country. Germany was well supplied also with
the raw materials for the staple products, iron and steel. The ore
supplies in the province of Lorraine, taken from France in 1871, are
the most extensive in Europe. At the time when they were acquired they
were thought to be of poor quality, because of the phosphorus contained
in them, but under the basic process they were made to yield metal
of excellent grade, and in addition a valuable fertilizer, obtained
from the phosphate slag. Germany has developed its iron resources
with a rapidity exceeded only in the United States. It contributed
only one-twenty-seventh of the world’s iron supply in 1866, but had
raised its share to one-sixth at the end of the century, and to about
one-fourth before 1914. It passed England in steel production shortly
after 1890, and in iron production about ten years later; it raised
constantly the figure of its output while that of England remained
relatively stationary, and in the decade before the war it was
advancing at a rate seven-fold that of England.
=485. Quality of the people.=—The richest resource of Germany, however,
was its people. The past poverty of the country and the trials through
which it had gone nurtured a steadiness and thriftiness among the
working classes which made them admirable members of the modern
productive organization. An effective system of elementary education
was established in parts of Germany long before a similar step had
been taken in most other countries; and practically all the people had
not only the rudiments of education, but also, what is perhaps more
important, a respect for knowledge, a desire to learn and to make the
best use of their learning, which were in striking contrast with the
careless spirit of other peoples. It has been said that it was the
primary school-teacher who won for the Germans the victories of 1866
and 1870; and the Germans could hope now to beat their industrial
rivals as they beat their military opponents, by method and steady
application rather than by brilliancy and dash.
=486. Superiority in technical training.=—The effects of careful
training were as evident in the class of the responsible managers of
Germany’s industries as in the laboring class. Nowhere in Europe had
technical education reached so high a development. Not only were the
appliances, methods, and system of organization superior to those
of other states; the technical schools reached a larger part of the
population, training them not only in the fundamental subjects of
science, but also in the special branches of production (mining,
weaving, dyeing, etc.).
The results were everywhere apparent in German industry; to instance
chemicals, sugar, glass, and electrical appliances is to pick only a
few examples from a list which could be greatly extended. Especially
noteworthy was the readiness of the Germans to adopt a new process or
machine which was first brought out in some other country. Englishmen
invented processes to make a fast black aniline dye, to manufacture
potassium cyanide for the reduction of gold, to make steel by the basic
process; all these inventions were developed first into commercial
successes in Germany. The Germans imported, if necessary, foreign
machinery and foreign foremen to superintend its action, until they had
mastered the principles of operation and had firmly established the
industry in its new home.
=487. Efficiency of the mercantile organization.=—Similar
considerations account for the success of the Germans in commerce, and
explain the rapid development of their export trade. They took pains
to find out what wares their customers wanted, and to sell them when
they had been made. The report of a consul of the United States in
Chile suggests the methods which led to their success. “Thirty years
ago,” he wrote in 1902, “the trade coming to the Pacific ports was
monopolized by the British and a few American houses. The Germans were
represented only by jobbers and shopkeepers in the coast towns. The
Germans, appreciating the importance of this trade, made well-conceived
plans to gain it. They carefully trained a number of able young men.
When these were versed in commercial affairs and in the language of the
people among whom they were to live, considerable shipments of goods
were made to the British and American houses, and the young men found
places as clerks and were given special charge of these consignments.
They remained there till they acquired a complete knowledge of the
coast trade; then they were provided with ample funds and stocks and
opened German houses, with brilliant success. In many branches they now
have a monopoly, and the British and American houses no longer attempt
competition.”
=488. Commercial travelers and trade papers.=—No country in the world
had commercial travelers so well trained, especially in the command
of languages, as Germany. The Germans were said to be the only
foreign people who had a thorough knowledge of Russia in a business
way; they were able to meet the demand for long credits in that and
other eastern countries, and so build up their trade and still avoid
serious losses. The exporters were not content with sending abroad
their ordinary trade catalogues, as were the English, Americans, and
others; they sent personal representatives speaking the language
of the country, or at least reached a prospective customer by some
communication in his own language. Trade papers for foreign circulation
were printed in Germany in the following languages: English, French,
Russian, Spanish, Portuguese, Turkish, Japanese, and Chinese.
=489. Other factors in commercial development.=—The rapidity of
their industrial and commercial development forced a departure from
the methods of the past, and stimulated new forms of co-operation
in business. The same period which was marked in the United States
by the rise of the great aggregations of capital known generally
as “trusts” produced in Germany the “cartel” of a somewhat similar
nature, which had its shady sides but which made some very important
contributions to efficiency in the making and marketing of goods.
German banks followed a course which in contrast to the conservative
methods of the old established banks of England and the United States
appeared speculative, but which in this period when so many conditions
were favorable proved immensely profitable and effective. The great
German banks promoted and financed to a successful conclusion many new
enterprises in industry and trade. The government played an active
part, not merely by such services as were expected of the State in
other countries, but also by more positive contributions. Its control
of internal transportation, by the system of state-owned railways
and canals, gave it great power in directing and assisting economic
development; and it supported most generously the development of
shipbuilding, and the extension of German lines of shipping, for the
benefit of the exporter.
=490. Deductions to be made in estimating German progress.=—We must
note some factors which help to account for the great development of
German commerce, but which should be offset by other considerations,
and which therefore do not represent net contributions to the world’s
welfare. The Germans themselves were being taxed for the particular
benefit of the export trade. The government so far as possible freed
the export industries from the burden of the tariff, which weighed
heavily on some classes in the country, and beyond that, gave actual
bounties to stimulate exports. These were commonly concealed, for
instance in the form of special rates in transportation, but had
nevertheless to be paid out of the pockets of the German taxpayer and
business man. Furthermore, private organizations followed substantially
the same practice. The great “cartels,” kept prices high at home to
gain resources with which they might finance their fight against
competitors in foreign markets. They won much trade, but they won
it at costs, borne sometimes by Germans and sometimes by outsiders,
which need to be taken into account if a fair balance is to be struck.
Finally, there must be put on the debit side of the account some gains
which the Germans made in commerce, not by greater efficiency but
by less honesty: by the imitation of trade marks, by the bribery of
agents, etc. In this regard they were not the only offenders. They did
not win the bulk of their trade in this way. Their departures from
accepted standards of commercial morality were, at least, sufficient to
establish for German trade methods an unenviable reputation.
=491. Examples of German success in trade.=—If we add all these
influences helping Germans to market their goods, to those which enable
them to manufacture to advantage, we can understand the development
of the German export trade, and can see why German wares, even when
they were no better than the wares of other countries, won foreign
markets. A French brewery got the first prize at Baden Baden, but
German beer was sold all along the Parisian boulevards. German brewers
sent an increasing amount of their beer to the British colonies and
India, because they had learned not only all that English brewers can
teach them, but they had learned, too, the tastes of their customers
in distant countries, and had adapted their product to suit these
tastes, while English brewers clung fast to the old methods. They
had greatly extended their trade in textiles, carpets, etc., “not so
much because they are cheaper, as because they are quicker and more
dexterous in fitting their supply to the changing demands of the
market.” They had taken away a large part of the French export trade
in dolls, by taking pains to fit the doll for the country to which it
is going, getting English cloths in which to dress a doll for England,
reproducing exactly national types of furniture, etc. German wares,
wrote the British consul at Paramaribo, displaced Sheffield wares in
his district, not because they were more serviceable, but because they
were cheaper, were polished and painted, and arranged for display in
shop windows, while the English wares were laid away in brown paper on
a shelf. Measuring German commerce as we have measured that of England,
by noting the percentage which German sales to any country formed of
the country’s total imports, we find that in the period from 1881 to
1909 Germany’s share of sales fell off in only one foreign market of
importance, the Netherlands, and, on the other hand, its share grew,
and in some cases grew greatly, in nine of the ten great markets of the
world.
=492. The German tariff and the agrarian party.=—It is impossible to
say just how far the progress of Germany in this period was furthered
by the government’s commercial policy, for, as will appear, this
policy retarded development in some lines to favor it in others. This,
at least, may be said with assurance, that the policy was strikingly
characteristic of the attitude of the German state, and throws much
light on the conditions preceding the outbreak of the World War. The
recent history of commercial policy in Germany may be discussed under
two aspects: its relation to domestic politics and its relation to
foreign politics.
The protective tariff of 1879 was designed particularly to favor the
growing manufactures of the country. Agriculture had been in the past
an export industry, and the agrarian representatives had favored free
trade. Already, however, there were signs of that far-reaching change
by which cheap food stuffs from distant parts of the world were enabled
to under-sell the domestic product; and a moderate protective duty on
the cereals was granted in the tariff of 1879. The German producers
of bread stuffs and meat found, however, that they had underestimated
the danger to which they were exposed, and that they could keep their
home market only by sacrifices which appeared to them desperate. They
obtained additions to the duties; they managed, under the guise of
sanitary precautions, to subject the importation of certain foods to
expense and delay, even when it was not altogether prohibited; and
in the general revision of the tariff, in 1902, they obtained not
only a general increase in the agrarian duties but also a specific
provision which prevented the government from reducing these duties
below a certain point, in treaties which it might make with other
powers. These favors to the agrarian interest were accompanied by the
revision of rates in the interest of manufacturers, but the government
was evidently taking with one hand from the producer what it appeared
to offer him with the other hand. There is unmistakable evidence that
the higher duties on food stuffs restricted consumption and checked
the rise in the standard of living. The policy threatened to impair
the ability of the industrial and mercantile classes to compete with
foreign rivals who were not thus burdened in getting the necessaries of
life. On the other hand, it offered but slight advantage to the major
part of the German agriculturists, who carried on mixed farming on a
small scale; its benefits were mostly restricted to the owners of large
estates, east of the Elbe river, who specialized in the production of
grain and meat with hired labor. What, then, is the explanation of the
policy? It was, to use the German phrase, a _Machtfrage_, a question
of power. The characteristic agrarian was a Junker, a Prussian squire,
devoted to the military ambitions of the Hohenzollerns, endowed by
custom and indeed by law with superior political influence. In spite of
its industrial development, and in spite of some democratic features
of its constitution, Germany was still at heart a military monarchy.
The course of policy was determined by reference not to the general
economic welfare, but to the interests of those special groups which
shared the political and military traditions of the Prussian monarchy.
=493. International aspects of German tariff policy.=—Likewise in
foreign relations German tariff policy was colored by the traditional
Prussian view that commercial competition was not merely the struggle
of individual producers and merchants, but was a group conflict, in
which the state should take an active part, making the most of the
particular weaknesses of states opposed to it. In 1871 Germany had
forced France to subscribe to the principle that each country would
grant the other all commercial favors accorded another power. Being a
part of the treaty of peace this provision was interminable; it could
be amended only by formal treaty. Germany at the time appeared to get
more than she gave. As she realized her industrial and commercial
strength, however, she became dissatisfied with a position of mere
equality. About 1890, under Chancellor von Caprivi, Germany began the
policy of making special bargains with individual states by treaties
fixing the tariff rates. In the negotiations with Russia each party
stood out obstinately for certain favors, and since agreement appeared
impossible each party sought to punish the other by imposing punitive
rates, amounting to prohibitions. This war of tariffs lasted less
than a year, for it affected so disastrously the commerce between the
two countries, that each was glad to reach an agreement by mutual
concession. The same spirit, however, which marked this contest,
appeared in the commercial relations of Germany with other states;
she conducted similar tariff wars against Spain and against Canada,
and seems to have meditated like action against the United States but
prudently refrained from a breach with a country which was approaching
industrial independence and which was the source of indispensable raw
materials.
=494. The tariff of 1902; Central Europe.=—Before the treaties framed
under Count Caprivi were due to expire Germany prepared for another
commercial campaign. A new tariff was passed in 1902, but was held
in suspense until treaties could be negotiated under it, and was not
put into effect until 1906. The new tariff was ingeniously devised
to enable Germany to offer special favors to individual countries,
in spite of nominal adherence to the principle of granting to every
country with which a treaty was made the concessions granted to the
most favored nation; and gave to the government, on the other hand, if
occasion demanded, the power to wage commercial war by the imposition
of triple duties. Germany is commonly supposed to have driven some
hard bargains in the treaties that were framed under this act, but
did not have recourse, as in the preceding period, to tariff wars as
a means of opening foreign markets. Still, the practice of bargaining
for commercial advantage by treaty, which Germany had so vigorously
developed, introduced a tension in international economic relations
that caused the states of Europe to look forward with apprehension
to the years 1917-1918 when the important German treaties expired.
The project of a customs union of Central Europe, which had long been
discussed in an academic way, and which appeared to many Germans in
the early years of the World War as a practicable plan, shortly to be
realized, did not propose to introduce free trade immediately among
its member states, but it did promise to assure Germany such dominance
over the others that she could use not only their economic but their
military resources as well, to further her plans for commercial
expansion. The plan was characteristic of German ambitions, a summary
of the tendencies that had long been manifesting themselves in German
policy, and a significant index of results that would have followed if
Germany had won the war.
QUESTIONS AND TOPICS
1. What other examples can you find of countries apparently
invigorated by a war for independence or national unity?
2. Recent political development of Germany. [Seignobos, chap. 16;
Dawson, chap. 11; Schierbrand, chap. 6.]
3. Development of commerce under the Empire. [Whitman, chap. 12;
Dawson, Evolution, chap. 4.]
4. Prepare, in the manner suggested in the chapter on England, graphic
representations of the chief imports and exports. [Statistics in
Statesman’s Year-Book.]
5. Recent commerce of Germany. [Schierbrand, chap. 13; Arndt, Germany
in international commerce, International Monthly, 1902, 5: 526-546;
Bernstein, Growth of German exports, Contemporary Review, 1903, 84:
775-787; Williams, Made in Germany—five years after, National Review,
1901-2, 38: 130-144; Gastrell, chap. 8 (statistical).]
6. Development of factory industry and condition of factory labor.
[Dawson, chap. 3.]
7. The Krupp iron works. [Schierbrand, chap. 14.]
8. Methods and results of education. [Dawson, chap. 6; Schierbrand,
chap. 18.]
9. Various reasons alleged to explain German superiority in
manufactures and commerce. [Williams, Made in Germany, chap. 7.]
10. The German chemical industry, [O. Eltzbacher, in Contemporary
Review, 1904, 85: 627-639; or Barker, Mod. Germany, chap. 25.]
11. Effect of education on the mercantile organization. [Findlay,
Genesis of the German clerk, Fortnightly Review, 1899, 72: 533-536;
Bashford in Fortnightly Rev., 1905, 84: 692-707.]
12. The German colonial movement. [“Veritas,” chap. 7; Schierbrand,
chap. 20; Birchenough in Nineteenth Century, 1898, 43: 182-191;
Keller, Colonization, chap. 14; Dawson, Evolution, ch. 18, 19.]
13. Development of German shipping. [Bashford in Fortnightly Review,
1903, 79: 287-302; Schierbrand, chap. 15; Barker, chap. 24.]
14. German transportation system and policy. [“Veritas,” chap. 6;
Dawson, Evolution chap. 11; Barker, chap. 22, 23.]
15. German tariff policy to about 1890. [Villard in Yale Review,
1892-3, 1: 10-20.]
16. Commercial treaties about 1890. [Farnam in same, 1: 20-34.]
17. The agrarian movement. [Schierbrand, chap. 9.]
18. Tariff policy about 1900. [Schierbrand, chap. 12; Schoenhof in
Forum, 1901-2, 32: 105-115; Eltzbacher in Nineteenth Century, 1903,
54: 181-196; H. Dietzel in Quarterly Jour. of Econ., 1902-3, 17:
365-416; W. H. Dawson in Econ. Jour., 1902, 12: 15-23.]
19. Effects of German tariff policy. [Lotz in Econ. Journal, 1904, 14:
515-526; Mann in Contemp. Rev., 1905, 87: 347-358.]
20. German methods in the commercial penetration of a particular
country. [See articles in the Quarterly Rev., as follows: U. S.,
July, 1919, 232: 16-37; France, 1916, 225: 383-399; Italy, 1915, 224:
136-149; Turkey, Oct. 1917, 228: 296-314.]
21. German banks and “peaceful penetration.” [McLaren in Quart. Rev.,
Jan. 1919, 231: 76-96.]
BIBLIOGRAPHY
Readers of English will find the recent commercial history of Germany
treated more fully than that of any other country of the Continent.
Besides the books by Clapham and “Veritas” named in the preceding
chapter, may be mentioned: S. Whitman, Imperial Germany, 1901; W. H.
Dawson, German life, N. Y., 1901, and **Evolution of modern Germany,
revised edition, 1918; W. von Schierbrand, *Germany, N. Y., 1902
(better than the later editions); J. Ellis Barker, Modern Germany,
various editions of which the fourth, N. Y., 1912, is to be preferred.
Dawson, Protection, and Ogg will continue to be of service in this
period; and reference may also be made to report of the U. S. Tariff
Commission, 1919, on Reciprocity and Commercial Treaties, 467-487.
G. A. Pogson, Germany and its trade, London, 1903, is a compilation of
statistics for the period preceding 1900, and a convenient statistical
survey for the period since that date is given by Helfferich,
Germany’s economic progress, Berlin, 1913.
Arraignments of German business methods will be found in A. D.
McLaren, Peaceful penetration, London, 1916; H. Hauser, Germany’s
commercial grip on the world, London, 1917; Millioud, The ruling caste
and frenzied trade in Germany, London, 1916; Claes, The German mole,
London, 1915, (for Belgium).