German Industrial Development

Ruhr Valley, Germany - WorldAtlas
The Ruhr Valley, historically the industrial heartland of Germany.

As I said on Monday, I have decided to stop posting daily as school has started and I now have less time. I intend instead to write longer posts on more general topics. Each week, I plan to pick a topic and write a summary of it and and provide analysis and historical context. The one I have chosen for this first post is German industrial development from the 18th to the 20th century.

While Germany is today the industrial heart of Europe, that was not always the case. The industrial revolution began in Britain in the late 18th century with the invention and practical use of the steam engine. Britain was the first nation to have railroads and build steamships, and initially held a monopoly over large-scale manufacturing. France, however, soon followed Britain and with extensive government involvement began to industrialize. The different German states were controlled mostly by conservative leaders who opposed economic change as it threatened their political control. Further, political disunity and internecine conflicts prevented region-wide industrialization until the 18th century. However, Germany did have certain advantages. It had a well-educated populace. The Prussian education system and systems like it in other German states ensured a literate and skilled populace. Further, Germany had a great deal of coal and some iron, allowing it to build and fuel machines. Germany also had a shortage of high quality land for farming, which forced it to turn to other methods to gain wealth.

In 1834 Prussia and the other non-Austrian German states formed the Zollverein, a customs union which facilitated intra-German trade and established tariffs on non-German goods. This union ensured a market for German goods and protected nascent industries from foreign competition. Further, the introduction of potatoes and other crops led to higher yields which created a surplus population that could move to cities. This combination of cheap labor and ready markets led to a boom in industry which was concentrated along the Rhine River. Similarly to Britain and the US, Germany experienced a railroad boom which connected the disparate states and allowed for the transportation of goods and, in times of war, soldiers. Following unification this first German economic miracle only expanded. German industry was organised into a series of cartels which determined output and prices in order to protect industry for international competition. By the turn of the 20th century Germany was the world’s largest producer of chemicals and second largest producer of steel and coal. By 1914 Germany’s economy was the largest in Europe and second largest in the world, behind only that of the USA.

However, the First World War put enormous strain on the economy. Germany was cut off from international trade by the British blockade and thus lost national resources which were necessary for production. It could not produce enough synthetic nitrates to satisfy the demand for fertilizer, leading to the collapse of domestic agriculture in 1917. Workers moved from civilian to military industries which led to a decrease in domestic consumption. Most importantly, millions of laborers joined the army and millions died. By the end of the war, the German economy had decreased by 40% relative to its prewar size. Following the war, Germany lost territory and was forced to pay large war indemnities. However, the economy rebounded towards the end of the 1920s with US loans facilitating a economic expansion known as the Weimar Golden Age. The start of the Great Depression derailed this period of growth and led to massive poverty and unemployment and a steep decline in industrial output. The Nazi Party came to power amid the chaos and set about instituting a series of massive public works and rearmament programs meant to end unemployment and rejuvenate the economy. While the German economy did rebound somewhat, the underlying financial schemes used to fund these project would have led to collapse if not for WWII.

The Second World War opened with Germany again losing connection to world markets. However, it was able to loot occupied nations, especially France, to sustain its military and civilian industries for the first years. As the war dragged on, however, Germany had to shift to a militarized economy. From 1943 on Germany suffered extensively from losses of manpower and from allied bombing. Strict rationing was introduced and consumer goods production decreased to almost nothing. When the war ended in 1945 Germany was in ruins. Most of its cities were destroyed and the US and the Soviet Union attempted to de-industrialize what remained by removing factories. However, Germany still possessed an educated and hard-working populace. Under the leadership of Konrad Adenauer and with aid from the US, West Germany rebuilt its economy and quickly surpassed pre-war production levels. This Wirtschaftswunder saw miraculous growth which again made Germany the largest economy in Europe even before unification with the east. Since the 1990s, German industry has continued to advance and today the country has one of the highest rates automation. Although Germany experienced some manufacturing decline along with the rest of Europe, it remains a major industrial nation and is still one of the largest exporters of goods in the world.

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