Topic 3: The Industrialisation of Germany

Question 1

Provide an overview of the Industrialisation of Germany

Answer 1

• In the second half of the nineteenth century Germany industrialized to become the most dominant economic power of Europe. Indeed, by the outbreak of WWI in 1914, its productive capacity surpassed Britain and was only bettered by the United States.
  
  • Yet the living standards of Germans lagged behind the British and Americans and was not much better than the French.
  • A feature of German industrialisation is that the process was intricately connected to the political formation of the German State (i.e. ‘Reich’) completed in 1871.
    ○ Before this, there were multiple German states
    There was one that dominated the others; Prussia

Question 2

What was the German Confederation and when was it created?

Answer 2

• The formation of the German state began in 1815 with the treaty for the German Confederation at the Congress of Vienna. It marks the beginning of the unification of over 30 German-speaking self-governing territories which, excluding the Austrian Empire, consisted of 5 Kingdoms, including Prussia, 7 Grand Duchies, 9 Duchies, 10 Principalities and 4 Free Cities, including Hamburg and Frankfurt.
• These German ‘states’ were remnants of the Holy Empire dissolved by Napoleon in 1806. They were all autocracies, varying from enlightened rule in the western territories (on Rhineland) to absolutism in the eastern territories (i.e. East Prussia).

Question 3

What happened to Prussia in the German Confederation Treaty?

Answer 3

• In the Treaty creating the German Confederation at the Congress of Vienna, Prussia lost her Polish territories to Russia in exchange for receiving the Rhineland and the duchy of Westphalia. This doubled the population of Prussia and shifted its centre of gravity to Germany with responsibility for guarding west Germany from France.
• Prussia was thereby made the most powerful German state (after Austria), encompassing most of eastern to western North Germany. Prussian policy began to focus on extending its influence over the territories separating its eastern and western parts.

Question 4

What was the state of the German economy in 1815 and what was Napoleon’s impact?

Answer 4

• In 1815 the German states’ economy was backward with 80% of people employed in agriculture. Only in Saxony, Westphalia of the lower Rhine and Silesia (thanks to Prussian government support) were there manufacturing industries of substance which offered the promise of modernisation.
• The German states of the Holy Empire were feudal in nature with little social and economic mobility, racked by government mercantilist regulations that discouraged private entrepreneurial enterprise. Shaped by long wars in 17C and 18C state budgets were devoted overwhelmingly to military defence.
• Being inland, German states did not benefit much from the commercial revolution of the 18C which prospered the coastal nations of western Europe.
• Napoleon helped spark nationalism
• Napoleon’s occupation of the German states, especially on the Rhineland, had a modernizing effect both by a more enlightening approach to government and law but on their economies. Protection given by the Continental Blockade of 1806 gave a boost to textiles industries on the Rhineland.
  ○ Forebade privileges based on birth, allowed freedom of religion and government jobs by merit
  ○ Continental blockade - provided protection against British goods

The most powerful state, Prussia, invested in the Silesian coal mining and iron industries, bringing in British iron masters to introduce modern techniques.

Question 5

How did the Napoleonic wars stimulate German policy reforms?

Answer 5

• The Napoleonic Wars was a watershed for stimulating reform by German states:
  ○ removing the economic power of the guilds (Prussia) and other interests with monopolies
  ○ removing feudal-based regulations on manufacturing
  ○ emancipation from serfdom of much of the peasantry, including in Prussia (an ongoing process until 1850s and 1860s for the poorest peasantry)
  ○ education reform (by Prussia)
• A major effect of these reforms was to increase labour mobility and to release agricultural labour for other industries (as peasants bought their freedom with their land) as well as to consolidate the land size for farming.

Question 6

How did Napoleon affect German nationalism?

Answer 6

• Besides the Code Napoleon modernising the system of government administration of the German states, Napoleon’s occupation planted enlightenment ideas of the French revolution.
• The invasion by Napoleonic France also sparked German liberal nationalism among the middle class bourgeoisie who advocated the creation of a modern German nation-state based on liberal democracy, constitutionalism, representation and popular sovereignty. From ‘romantic nationalism’, they appealed to the distinctiveness of the German language, tradition, arts and literature for a common identity.

Question 7

What was the Deutscher Zollverein?

Answer 7

The Deutscher Zollverein was the German Customs Union, that began with Prussia’s new tariff law in 1818. It was a major step toward economic integration of the German states.

The new law abolished most internal customs tariffs (67 of them), allowed most raw materials into Prussia duty-free, imposed a 10% ad valorem duty on manufactured goods and imposed a substantial transit duty, calculated by weight, on any goods passing through Prussia. The latter provision was a powerful measure for coercing other adjoining German states to join its customs regime.

Question 8

Which significant state joined the German Customs Union?

Answer 8

By 1831 nine small states whose frontier adjoined Prussia joined its customs union. More significantly, in 1828 Hesse-Darmstadt, a large German state whose frontier did not adjoin Prussia, also signed up under a separate revenue-sharing agreement and administrative arrangements.

Question 9

What was the key threat and other threat to the Prussian-Darmstadt union?

Answer 9

In 1828 Bavaria and Württemburg formed a customs union and Saxony, Hanover, Brunswick and several small central German states formed the ‘Mid-German Commercial Union’. The latter posed a potential threat to the Prussian-Darmstadt union as its command over the North Sea coast and major rivers allowed it to appropriate lucrative transit trade.

Question 10

Detail the 1834 progression of the German Customs Union

Answer 10

• Prussia soon won the economic battle with the Mid-German Union which lacked the cohesion of the Prussian system. Prussia outflanked it by (i) building a road linking Prussian Saxony with South Germany and (ii) by securing Dutch agreement in 1829 to a considerable reduction of the tolls levied on Rhine shipping.
• The Mid-German Union disintegrated and Bavaria and Württemburg came to terms with Prussia to create the Deutscher Zollverein in 1834. It included 18 states with a population of 23 million. Most remaining states joined the union by 1852.

Question 11

What was the significance of the German Customs Union?

Answer 11

The German Customs Union is a most important development in contributing toward unification by generating a considerable growth in trade for economic development and from customs revenue it provided a reliable source of fiscal revenue.

It essentially created the foundations for a German national market according to the liberal economic principles of Adam Smith. It opened up labour and capital mobility to greater Germany. There remained differences in currency, banking laws, labour regulations and commercial rules between states that still presented obstacles.

Question 12

How did agricultural production change pre-Industrialisation? What was the role of agriculture to Industrialisation of Germany?

Answer 12

Besides the Customs Union and reforms to government civil administration a major factor that provided the foundations for industrialisation was the increased productivity of German agriculture:

Agricultural production increased considerably in the first half of the 19C and greater than population growth mainly as a result of the emancipation of the peasantry (creating ‘free’ farmers and greater labour effort), larger unit sizes of farms and the adoption of improved farming techniques, especially in crop rotation methods that extended farming on arable lands.

According to Hoffman (1965: pp. 100-104) in the period 1816-1865: population grew by 59%, agricultural output grew by 135%, consisting of 62% growth in vegetable products and 213% growth in animal products. Between 1816 and 1861 average growth of agricultural output per worker is estimated to be 1.3% per annum. There was both an increase in yield per acre and the number of acres used for farming. It is also estimated that the proportion of persons employed in agriculture fell from 65% to 52%.

• By producing a surplus of agricultural output to domestic requirements, Germany was able to export one of its few goods in foreign demand to purchase capital equipment (i.e. machinery etc.) needed in the early stages of industrialisation.
• By generating income in the agricultural sector, it promoted greater demand for domestically produced manufactured consumer goods (i.e. textiles) and expanded the pool of savings (in banks or public debt) to assist finance investment of other industries.
• By releasing labour needed by other expanding industries in Germany.

Question 13

When did the Industrial ‘Take-off’ in Germany occur and what was the major force behind it?

Answer 13

Historians generally agree that the take-off by Germany into sustained growth occurred in 1850s and occupies 1850-1870. It is also generally agreed that the major force behind this take-off was investment in railway that had begun in the mid-1830s. By the mid-1850s nearly 8,000 kilometres of rail had been constructed and opened.
○ Railway construction firstly provided a demand stimulus to the iron, steel and metal processing industries as well as heavy engineering. These allowed steam-power to be employed widely in the economy.
○ It secondly opened up investment possibilities for relocating and re-organizing manufacturing production using coal-burning steam-powered machinery.

It is estimated that from a low base, investment grew at over 20% over the period. Pig iron production averaged 9% growth and the Mitchell index of industrial production shows an average growth of 3.5% over the period.

Question 14

What was the connection between Germany Railway and Manufacturing?

Answer 14

• A feature of German economic development is the close association between transportation and manufacturing. Thus, railway closely linked the manufacturing and coal-mining areas of Lower Rhineland and Westphalia with feeder lines running towards the ore deposits of Luxembourg and Alsace and connecting with the water communication of the Rhine. In the other major German industrial sector, railway linked the manufacturing and coal-mining areas between Saxony and Silesia.
• Railways are estimated to have reduced haulage costs per kilometres of industry by some 80-85%.

Question 15

How did canals function in conjunction with railway and what was the benefit to canals?

Answer 15

• In Germany railway operated alongside and in competition with the extensive canal network in freight transport. Unlike Britain, German authorities were prepared to subsidise canals to maintain artificially low freight charges which made them highly competitive for bulky cargoes on particular long haul routes.
• With its extensive waterways and their favourable geographical disposition to resource areas, especially the Rhine which flowed past the coalfields of Rhineland-Westphalia, barge transport played an important role in Germany right up until 1914.

Question 16

Describe the process of railway construction in Germany

Answer 16

• When railways began in the mid-1830s the German iron industry was rudimentary, using medieval techniques, and the engineering industry was basically non-existent. Hence, railway construction initially relied on foreign supplies of rails, locomotives, trucks, bar irons etc.
  Helped by the tariff regime, slowly a process of import substitution occurred in which the German iron and metal processing industry adopted modern British technology. By the early 1850s most rails laid were domestically produced and nearly all locomotives running were German designed and built.

Question 17

What was Germany’s ‘Railway Kontradiev’ and when was it?

Answer 17

Kontradiev refers to a long period of growth.

• By 1870 nearly nineteen thousand kilometres of railway was constructed and carrying annually 5,300 million tons of freight per kilometre.
• Railway construction accounted for an enormous share of total net investment in this period, with estimates of 19.7% in 1855-59 and 17.6% over the period 1851-1879 (Fremdling 1977: ).
• Railway was clearly the leading sector in Germany’s early industrialisation. Railway demand was vital in the modernisation of the engineering and metallurgical industries and provided the platform for lighter manufacturing such as textiles to modernise by adopting steam-powered techniques.

Question 18

What is mixed banking?

Answer 18

By the development of innovative credit instruments, German banks developed what has been called ‘mixed banking’, which combined investment (or industrial) banking with the more usual commercial banking role of funding long-term investment with short-term credit funds.

The most innovative aspect of Germany’s early industrialisation was its banking that financed the ‘Railway Kontradiev’. The difficulty for Germany in financing railway and other heavy industries in the early stages of its development in the 1840s and 1850s was that its multi-state economy was agrarian based with a low level of income and therefore saving to draw on.

Investment banking involved bankers organizing and underwriting new enterprises by which savings could be mobilised from the mainly mercantile sector where they were concentrated.

Question 19

what was the role of the German Banking industry and how did it evolve?

Answer 19

• The German private banks were not only actively involved in financing the enterprise but also in investment decision making and its ongoing management.
• German banking was adept at credit creation from a small liquidity base, employing bills of exchange, drafts and giro facilities as money substitutes and generating bank deposits through their aggressive lending.
• Importantly, ‘mixed banking’ enabled the greater concentration of capital required for railway construction and also for other large-scale industrial enterprises such as iron production, coal mining and engineering, industries all stimulated by the railways.
• From private banks, mainly consisting of limited partnerships, German banking evolved by the 1870s into large joint-stock ‘Kreditbanks’ that formed industrial cartels consisting of a conglomerate of related heavy industries.
• The development of credit-instruments as ‘money substitutes’ by German private banks occurred endogenously partly as a response to the systematic shortage of official state money in circulation under the control of the ‘Prussian Bank’ (i.e. central bank).
• After unification in 1871 and the establishment of the ‘Reichsbank’ as the predominant central bank of Germany, discount facilities were liberally provided to the private banks, effectively allowing them to hold riskier asset portfolios (see Tilly 1991: 182-3).

Question 20

What was the role of technological progress in German industrialisation?

Answer 20

• Another feature of German industrialisation is how quickly industry learnt to adopt the modern techniques and then by the 1860s, especially with the advent of steel technology, to become an engine of innovation.
• The high quality of German state sponsored education, especially technical education, developed from the early 19C supplied not only the scientists for industry-related research but also industrial managers capable of appreciating discoveries as well as implications for production methods. Also, vocational education supplied the required technicians and other skilled industrial workforce.

Question 21

What was the role of the education system on Industrialisation?

Answer 21

• A close relationship developed between the education system and German business. Much of the scientific research of Universities was aligned with the technological needs and problems of many fields of industry, most notably, in chemistry, in textiles, glass, steel and chemical fertilisers.
• German technical education supplied the scientifically-aware industrial entrepreneur manager which played a key role in bold investment decision-making in early industrialisation.
• The flow of scientific knowledge and of trained personnel on a large scale greatly benefitted German industry. With its industrial maturity the large German ‘cartels’, especially in the steel and chemical industries, were the first to use teams of expert researchers for developing technological innovation.

Question 22

When did German unification occur?

Answer 22

1871

Question 23

Who was the architect of German Unification?

Answer 23

Otton von Bismarck, who was ‘Minister President’ and ‘Foreign Minister’ of Prussia

Question 24

How did German Unification happen?

Answer 24

The architect of German unification was Otto von Bismarck, who, as ‘Minister President’ and ‘Foreign Minister’ of Prussia, opportunistically used its greater military power enhanced by industrialisation to defeat Denmark and Austria (for Schleswig and Holstein duchies) in 1864-66, then defeated France in the 1870-71 war. Offering concessions he subsequently persuaded all the southern German states to agree to unification.
○ Engineered a war with Denmark
○ Antagonised Austria - saw them as a major problem to unification

Question 25

Who was Otto von Bismarck?

Answer 25

• The Father of a Unified Germany
• Born 1815, Died 1898
• Also carried the titles of Prince of Bismarck and Duke of Lauenburg. Bismarck was a conservative Prussian from the Junker land-owning aristocracy. He was a statesman who dominated German and European affairs from the 1860s until 1890. He was Chancellor of the German Empire, 1871-1890 (called the ‘Iron Chancellor’).
  Quote: ‘Prussia must concentrate and maintain its power for the favorable moment which has already slipped by several times. Prussia’s boundaries according to the Vienna treaties are not favorable to a healthy state life. The great questions of the time will not be resolved by speeches and majority decisions – that was the great mistake of 1848 and 1849 – but by iron and blood’ (1862).

Question 26

What sort of constitution followed German unification?

Answer 26

Under the constitution essentially drafted by Bismarck, Germany was founded as an ‘absolutist’ monarchy in which the King of Prussia became the Emperor of Germany, and the popularly-elected parliament, the Reichstag, had limited powers. This enabled Bismarck, the appointed Chancellor from 1871 to 1890, to control government and to limit or veto liberal policies. The constitution also meant that through the Emperor, Prussia had effective control over the governing power of the enlarged German state.
○ Could manipulate parliament and elections

Question 27

What were the liberal reforms on Unification and what was their effect?

Answer 27

• Bismarck initially enlisted the support of liberals in the Reichstag to implement reforms:
  ○ uniform coinage and currency created and in 1873 Germany went onto the gold standard (Large amount of money paid in indemnity from defeat of France)
  ○ the Reichsbank, Germany’s central bank was established in 1875
  ○ the legal code was standardised and modernised with an Imperial Court of appeal established in 1879
  ○ most remaining internal barriers to trade and on industry were removed
• The effect of these reforms was to complete the formation of a German national market in which internal trade and the mobility of labour and capital was unrestricted. They certainly enhanced the subsequent formation of large industry cartels with a concentration of capital and, thereby, industrial power.

Question 28

Why did Germany abandon Liberalism despite middle-class support?

Answer 28

• Whilst a burgeoning middle class became progressively supportive of economic liberalism (and liberals in the Reichstag), Germany’s government moved in the opposite direction in the late-1870s. The problem was that in Germany’s democratic system reform could only be effectively proposed by the executive and then put to the Reichstag; the latter could only obtain reform by mobilising the electoral opinion to pressure the executive, led by the Chancellor, Bismarck, and ultimately, the Emperor.

- Bismarck was himself a conservative from the Junker aristocratic land-owning class of Prussia which controlled the military. With the declining state of German agriculture, its grain unable to compete internationally on price with Russian and United States grain, Bismarck saw an opportunity to bolster the Junker’s relative economic power and predominant political position guaranteed under the constitution.         
	○ Grain prices were going down - a lot of pressure from the US
	○ Depression in prices also put depression on incomes

Question 29

Why was Fiscal Reform needed, what actions were taken and what was their impact?

Answer 29

• Under the German fiscal system the twenty-five federal states raised revenue through direct taxation whilst the central government in Berlin relied on revenue from customs duties and indirect taxation. Exacerbated by a sharp economic downturn in 1873, government revenue shortfalls emerged and it became clear that fiscal reform was needed, especially in light of the ambitious military and administrative expansions contemplated.
• Bismarck took the opportunity to resolve the fiscal problem and to preserve the conservative class by legislating tariff protection for agriculture in 1879. The debate over protectionism split the Liberals and swung the political pendulum firmly in favour of the conservatives.
  ○ Put up agricultural tariffs to protect the Junker class
• The move to protection put Germany on the road to conservatism and growing militarist influence.

Question 30

What were the tariff protections implemented?

Answer 30

• The initial increases in German tariff rates in 1879 were moderate and they included manufactured as well as agricultural products (‘rye & iron’). Only raw materials used in manufacturing industry were exempt from any increases.
  ○ Also started a wave of tariffs across Europe
• However, later in 1885 and 1887 there were successively larger increases in tariff rates imposed on agricultural imports. Hence, tariffs for wheat and rye rose from about 10 marks per ton in 1879 to 30 in 1885 to 50 in 1887. The tariff response of other European nations kept German tariffs high until WWI.
• This protectionism stimulated domestic agricultural production at the cost of higher food prices for the German consumer.
• Whilst the tariff increase did in the short run increase the revenue going to the Federal Government, in the longer run the policy so successfully squeezed imports that tariffs shrank as a source of revenue.

Question 31

When was the economic crisis after unification and why did it happen?

Answer 31

After German unification the economy experienced an economic crisis in 1873 as a result of stock market speculation.

Question 32

What was the impact of the 1873 Economic Crisis and what was Germany’s Policy Response?

Answer 32

• many large bankruptcies and a collapse of prices. There was also a large decline in agricultural prices, which then long persisted to the end of the 19C, with serious implications for the competitiveness of German agriculture.
• The sharp economic downturn of 1873 was shared in Europe and the United States and led to a ‘long depression’ of prices from 1873 to 1879. This downturn was a watershed for liberal economic policy with nations turning to protectionist policies.
• In response German industries increasingly turned to cartel alliances (to protect prices); whilst besides protectionist policies, the German government increased public investment in infrastructure, especially the railways (also electrical communications), to bring recovery. As a result, the economy Started to recover - Germany’s recovers faster than Britain’s - probably as a result of the public investment

Question 33

How did the German economy recover in the 1880s?

Answer 33

• The German economy quickly regained its momentum in the 1880s as result of renewed growth of investment in its heavy industries associated with technological progress. In particular, the ‘Bessemer’ process, adapted to the ‘Gilchrist-Thomas’ innovation, gave considerable impetus to investment in the expansion of steel production that was helped by ongoing growth in railway investment.
  ○ Probably the first country to develop steel
• New technologies in chemicals, dyestuffs and electrical engineering also induced high investment in newer industries along with metals processing.
• Germany became an exporter of precision machinery

Question 34

What was the pace of Germany’s industrialisation after the 1870s slowdown and what was the makeup of exports?

Answer 34

The pace of Germany’s industrialisation quickened with trend growth increasing until 1913, driven mainly by a faster rate of capital formation and export growth (especially from the mid-1890s).

1850-1870: most exports consisted of agricultural commodities
1896-1913: mainly capital goods being exports

Question 35

What underpinned Germany’s industrialisation from the 1880s? (1870-1913)

Answer 35

From the 1880’s it was the newly established electrical engineering and chemicals industries that brought a further impetus to its growth and development.

By the turn of the twentieth-century Germany was pre-eminent in the manufacture of electrical products, chemicals, dyestuffs and precision machinery. Whereas in the early and mid 19C Germany’s exports consisted mainly of agricultural products (i.e. grain) by the end of the century it was weighted towards high-technology capital goods and consumer durables.

Question 36

What was the trend in German capital formation in the second half of the 19th century and what was this reflective of?

Answer 36

• Germany’s trend rate of capital formation progressively increased in the second half of the 19C, reaching in excess of 14% of national net product by the 1890s. Higher than that of the United Kingdom, this reflected the dominance in German manufacturing of the heavy engineering-based industries such metals-mining, electrical and chemicals requiring large doses of capital.
  ○ Even higher rate than that of the united states
  ○ Associated with cartelisation and economies of scale
• This was facilitated after the 1870s by continuous industry concentration orchestrated through giant ‘hyper-banks’ and ‘cartel’ alliances and from the security afforded by the German government’s protectionist measures.

Question 37

What was the underlying problem for the German ‘heavy-industry’ from the early 1880s? What was the response to this issue?

Answer 37

• An underlying problem for the German ‘heavy-industry’ economy from the early 1880s was that productive capacity tended to exceed aggregate demand.
• Protection extended to industry under the 1879, 1885 and 1887 tariffs was largely a response to this problem. Their basis was an ‘iron and rye’ agreement: a monopoly of the domestic market was granted to Westphalian iron interests in return for subsided grain prices to prop up the Junker agricultural interests. The big losers were ordinary consumers with higher food and metals prices.
  ○ In this scenario, Britain moved toward more liberalism
  ○ Germany demonstrates the exact opposite in order to favour one particular class at the expense of wider consumers in Germany
  ○ This stymies consumption

Question 38

What contributed to the overproduction problem and compare this to Britain

Answer 38

• The protectionist policy of the German government contributed to the overproduction problem by suppressing the real income of the population and, thereby, its domestic consumption. It was the slowness in consumption growth that was creating a demand constraint on Germany’s top-heavy economy.
• This compares with liberal minded Britain, whose parliament removed agricultural protection in the 1840s to boost real incomes. The German protectionist policy was imposed not in the national economic interest but in the interest of the ruling conservative Prussian elite who controlled the military (and parliament).

Question 39

What contributed to the demand constraint from the early 1880s?

Answer 39

• Contributing to this demand constraint was the weakness in wage-bargaining of the labour movement (and politically) relative to the giant ‘cartel’ conglomerates which meant real wages did not match productivity growth with productivity gains mostly captured as profits.

Question 40

What movement became popular in Germany in the 1880s? How did Bismark attempt to combat this?

Answer 40

• With a growing urban working class the German socialist movement grew considerably in the 1880s and was radicalised, partially as a result of Bismark’s blundering attempts to suppress socialist political parties.
  ○ Marx’s book was published in 1860s
  ○ Became popular in the 1880s and radicalised the population

- To weaken the growing influence of socialism, Bismark introduced a series of social welfare insurance polices: for medical treatment in 1883; accident and sickness insurance in 1884 & 1886; a pension for disabled workers in 1889; with factory legislation in 1891. These policies to ‘buy off’ the working class essentially represented state paternalism.
	○ Undermined liberalism within Germany

Question 41

When did the demand constraint on industry come to a head and why?

Answer 41

The demand constraint on industry came to a head in the early 1890s with other European countries retaliating with their own tariff protection, curtailing German exports.

Question 42

When did Bismark resign and why?

Answer 42

1890: Bismark resigned as Kaiser Wilhelm II came to power and they clashed - Bismark forced to resign

Question 43

Who succeeded Bismark as Chancellor, what policies were implemented and what was the result?

Answer 43

• Under Chancellor Caprivi, Liberal Policies were implemented. Germany negotiated bilateral commercial treaties with several countries (i.e. Italy, Russia, Austria, Belgium, Romania) between 1891 and 1894, involving the import of cheaper agricultural goods in exchange for the export of its manufactured products. These treaties gave a demand boost to the economy with especially an export outlet for electrical and chemical products.
  
  • Strong growth in exports helped Germany overcome the relative weakness of its domestic consumption, to propel industrial growth in the 20 years leading up 1914.

Question 44

When and why was Caprivi forced to resign?

Answer 44

In 1894, Caprivi was forced to resign due to vehement opposition from the Junkers, cutting short the German liberal policies of the early 1980s.

Question 45

How did the Germans attempt to overcome the demand constraint after Caprivi’s resignation following Junker opposition?

Answer 45

Thereafter, overcoming the demand constraint was left to a more sinister ‘aggressive mercantilism’ based on colonialism (i.e. foreign investment) supported by naval expansion and on export subsidies (and ‘dumping’).

Kaiser wanted to expand German navy and compete with Britain. This started a rivalry with competition pushed by Kaiser. The Germans tried to get new colonies but most good colonies were already occupied. Papua New Guinea was partially owned by Germany as well as some African colonies and an attempt to expand in the Ottoman empire.

Foreign demand always played an important role in German industrialisation with growth of exports persistently exceeding GDP growth. However, whereas early in its industrialisation (1830-70), agricultural exports were important in acquiring foreign capital goods, at a later stage of Germany’s industrial maturity from 1890 to 1913, the reliance on export growth was a consequence of relatively lower growth in the real income of the working population causing relatively weak domestic consumption.

Question 46

Was Germany’s government intervention reactive or proactive?

Answer 46

reactive

Question 47

How were living standards considering productive capacity growth?

Answer 47

By 1914 Germany’s productive capacity had outstripped Britain but living standards generally lagged behind. It was a nation with underlying social tensions in which the working class was not able to enjoy the national economic success felt warranted.

Question 48

What was the impetus for world war I?

Answer 48

Germany’s aggressive mercantilist policies, pushed by the Prussian militarists, to serve the narrow interests of the Junker class, was a major factor in causing the outbreak of World War I.

They perceived a war as a potential way to strengthen nationalism in Germany due to existing conflict between the Elite and the socialists.