German Industry and German Industrialisation

Essays in German Economic and Business History in the Nineteenth and Twentieth Centuries

Robert Lee

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351840361
• Edition: 1
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

Originally published in 1991 this book brings together 9 essays which address a number of central issues relating to the nature of German industrialisation, including the role of foreign competition in fostering technological change, the importance of market integration for economic development and the response of German banks to industrialisation. The book also provides an important corrective to the traditional interpretation of German industrialisation and reassesses the economic impact of the customs union (Zollverein). The reappraisal of some dominant themes in German economic and business history is distinctive in its explicit use of economic theory in historical analysis of long-term growth processes. It also emphasises the importance of sectoral analysis and illustrates the usefulness of a differential regional approach for understanding the process of German industrialisation.

Chapter One

THE PARADIGM OF GERMAN INDUSTRIALISATION: SOME RECENT ISSUES AND DEBATES IN THE MODERN HISTORIOGRAPHY OF GERMAN INDUSTRIAL DEVELOPMENT

W.R.Lee.

In seeking to explain the aberrant pattern of recent German history, the various protagonists in the debate on the Sonderweg have inevitably focused attention on the economic framework of political change. Germany’s failure to develop politically along the lines of a western-style liberal democracy is increasingly seen as a result of ‘a fateful discrepancy between economic development on the one hand, and social values and political forms on the other’.(1) However a rigorous assessment of this hypothesis is hampered by the fact that a leading actor on the stage of German historiography is apparently not fully prepared for its role. German economic history, it is argued, has been ‘relatively neglected’, primarily because of structural and administrative factors implicit in the organisation of the West German educational system.(2) Not only was Richard Tilly entirely justified in bemoaning the absence of a theoretical analytical framework in his earlier critical survey of German economic history, but, according to Krohn, despite a relative growth in productivity in the 1960s and 1970s, this critical branch of historical research is still characterised by ‘a certain backlog’.(3) It is not surprising, therefore, that Blackbourn and Eley consistently refer to the general accounts of German economic development provided by Boehme and Kitchen, despite their limitations, and even view Clapham’s pioneering work of 1921 as a volume which ‘retains high value among the works in English’.(4) The study of German economic history has been distorted by a ‘national consensus’, based upon the continuing subordination of economic history to political developments and the process of national unification, despite Sheehan’s claim that, like German culture, the German nineteenth-century economy remains a heuristic abstraction ‘which encourages us to focus our attention on one sort of historical experience at the expense of others’.(5)

It is within this context that the present book has been devised. It brings together nine essays, none of which has previously appeared in English, on German economic and business history in the nineteenth and twentieth centuries.(6) In terms of the overall process of German industrialisation the individual contributions focus on a number of key sectors of the economy: the iron industry, both in the period from the late 1820s to the 1840s and between 1871 and 1913; the banking and house construction sectors; the electricity and chemical industries, which played an increasing role within the German economy from the late nineteenth-century onwards, and the coal industry, within the context of economic reconstruction after 1945. At the same time this collection of essays addresses a number of central issues relating to the nature of German industrialisation: the role of foreign competition in fostering technological change; the importance of market integration for economic development, within the framework of the customs union (Zollverein), the response by German banks to industrialisation; the effectiveness of the market in responding to the unprecedented need for urban housing in the second half of the nineteenth-century; and the political framework for structural change and economic growth both in relation to the development of the electricity and chemical industries, and within the context of the problems of reconstruction in the Ruhr coal mine industry. Broader questions, such as the role of putative leading sectors in European economic development, as in the case of the German pig-iron industry in the latter decades of the nineteenth-century, as well as the validity of Gerschenkron’s general propositions concerning the dependence of Europe’s relative latecomers in the development of modern industry, such as Germany, on the banking infrastructure and the state for investible capital and entrepreneurial assistance are also critically assessed. The international framework of Germany’s economic development during the nineteenth-and early twentieth-century is evident in the analysis of the impact of British exports on the modernisation of the German iron industry at the beginning of this period, in the important re-appraisal of the role of German inflation in 1920 and 1921 in facilitating international economic recovery, and in the critical assessment of the wider foreign policy considerations behind British man-power policy in the Ruhr mines between 1945 and 1947. No collection of essays can ever be entirely comprehensive, but the present volume focuses on a wide range of issues of central relevance to our understanding of the process of German economic development during this period. They provide collectively a clear illustration of the extent of recent developments within the sphere of German economic history, particularly in relation to conceptual, methodological and theoretical issues, and help to provide an important corrective to the traditional paradigm of German industrialisation in the nineteenth-and twentieth-centuries, which still informs many of the writings of political historians concerned with such broader issues as the German Sonderweg.

A number of the present contributors are concerned either directly or indirectly with the role of the state in the process of German industrialisation, whether in the context of tariff policy (Rainer Fremdling) and market structure (Rolf Dumke), or the political framework affecting the development of ‘new industries’, such as electrical power and chemicals in the second phase of industrialisation from the late nineteenth-century onwards (Hermann Schaefer and Gottfried Plumpe respectively). Richard Tilly’s innovative analysis of long swings in German urban development, also touches upon the increasing pressure for the state, both nationally and at the local authority level, to resolve the urban ‘housing problem’, although urban housing remained essentially a market product in the pre-1914 period. Finally, within this context, Mark Roseman’s essay on the problems of post-war reconstruction in the Ruhr mining industry provides an important insight into a different facet of the role of the state, embodied in this instance by the occupation policy of the British authorities; a transitional and externally imposed state form, not necessarily sympathetic to narrowly defined German interests.

Many commentators view the role of the state as having been a critical factor in promoting or facilitating economic growth and industrialisation in Germany. The state apparently had a crucial role to play in clearing away many of the obstacles in the way of economic development, and economic advance has been portrayed as at least a by-product of ‘real politik’.(7) German industrialisation, within the framework of this paradigm, was achieved with the support of the state, and, at a regional level, the state frequently provided the pre-conditions for long-term industrial development.(8) Indeed in the absence of enterprising state authorities it has been argued that the bourgeoisie, as a social class, was not able to fulfil its required function within the developing capitalist system, which, in turn, acted as a contraint on economic growth.(9)

In a broader sense the overall political environment is a key determinant of the dynamic of economic development. The legislative, administrative and entrepreneurial function of the state inevitably involves a continuing process of interaction with the economy, and the role of the state as a consumer and investor has immediate implications in the economic sphere.(10) A particularly positive role is ascribed to the impact of state intervention in Germany in the educational sphere, which Kocka has viewed as the ‘single most important contribution’ to the development of an industrial system.(11) However state intervention could also assume a more direct form, within the context of tariff and patent policy, or exercise an indirect function by providing the appropriate legal and administrative framework for stimulating innovation within the economy.(12) The nature and scale of state intervention in the German economy varied substantially over time. There has been an increasing concern, therefore, with the temporal scale of state involvement in economic affairs, and whether clearly delineated stages can be detected in the development of state-industry relations, culminating in the so-called ‘command economy’ of the Third Reich.(13) It is difficult, however, to quantify with any accuracy the absolute extent of state intervention in the economy, particularly during different phases of economic development and political ideology. Despite a visible neo-mercantilist legacy, the separate economic functions of the state in the early nineteenth-century were seldom coordinated, and in terms of influencing regional specialization, product cost, and rates of technological innovation, state intervention was frequently only passive.(14) Moreover the temporal evolution of state-industry relations seldom followed narrowly prescribed paths. Even during the period of increasing liberalisation in the second half of the nineteenth-century, entrepreneurs and state administrators remained closely interrelated, particularly at the lower and middle levels. Despite the shifting influence and effectiveness of business representation, state intervention in many economic spheres remained durably persistent.(15) Equally it is frequently assumed that the Nazi state after 1933 was invariably willing and able to enforce its policies against the particular interests of individual companies.(16) Although Nazi economic policy undoubtedly benefitted big concerns by reinforcing the existing tendency to monopolisation, by 1936–37 entrepreneurial autonomy had been significantly curtailed. The debate on the exact definition of the German economy between 1933 and the out-break of the Second World War will undoubtedly continue, but it is important to note that it may well have fallen short of functioning as a ‘command economy’.(17) The direction of state economic policy was often confused and inconsistent, reflecting an intense rivalry between the state and party bureaucracies as well as internal divisions within the party hierarchy.(18)

Within the context of this debate Gottfried Plumpe’s analysis of I.G.Farben provides the basis for an important critique of existing interpretations of state-industry relations during the Third Reich, which also has wider implications for understanding the long-term pattern of state intervention in the German economy. I.G.Farben is justifiably viewed as one of the most important German industrial enterprises during the entire inter-war period, with the chemical sector as a whole regarded as a special feature of German industrialisation from the 1870s onwards. Nazi economic policy, it has been argued, effectively integrated entrepreneurs within a state controlled system of contracts and marketing, and within the framework of the drive for autarchy German industry achieved a position of leadership in the field of technological research.(19) However it is important to break away from a discussion of state-industry relations during this period from traditional interpretations which examine the interplay between the Nazi state and ‘big business’ within the framework of competing paradigms of either the ‘primacy of politics’ or the ‘primacy of economics’.(20)

The precise nature and shifting balance of state-industry relations can only be effectively analysed on a micro-level basis by concentrating on the individual firm. Certainly in relation to I.G.Farben there can be little doubt as to its ability to successfully represent its own interests, to preserve its autonomy and to influence state economic policy.(21) German business in general from the 1880s onwards had sought a more effective presentation of collective interests and sectoral attitudes in its dealings with the state and its administrative agencies.(22) However in seeking to maximise the potential of interest representation and to exploit the increasing willingness of the state to provide price and sales guarantees German industry was by no means exceptional. Government support for the development of the hydrogenation process by the Imperial Chemicals Industry (I.C.I.) in Britain was of fundamental importance and reflected very much the firm’s claim that investment in this field would provide immediate relief to the depressed coal industry and contribute significantly to the defence both of the Realm and of the Empire. Close government-industry links also existed in both cases at the personnel level. If former employees of I.G.Farben, such as Karl Krauch, played a central role in the implementation of the Four Year Plan, I.C.I. was not without significant ‘public service’ connections.(23) Equally from an organisational point of view, the management structures of I.G.Farben were not in essence dissimilar from those of its major international rivals.(24) To some extent, therefore, the institutional evolution of a firm such as I.G.Farben reflected broader economic forces operating in this sector of industry internationally. New production processes were often high risk undertakings, which could only be implemented initially with state support.(25) The increase in international competition during the inter-war period as a whole reinforced the perceived necessity for tariff protection, both pre- and post- 1933. Undoubtedly ‘big business’ in general and I.G.Farben in particular benefitted substantially from Nazi re-armament objectives (26), which also served to reinforce, in turn, the existing trend towards a more t...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Preface
• List of Tables and Figures
• 1 THE PARADIGM OF GERMAN INDUSTRIALISATION : SOME RECENT ISSUES AND DEBATES IN THE MODERN HISTORIOGRAPHY OF GERMAN INDUSTRIAL DEVELOPMENT Robert Lee
• 2 BRITISH EXPORTS AND THE MODERNISATION OF THE GERMAN IRON INDUSTRY FROM THE 1820s TO THE 1860s Rainer Fremdling
• 3 ZOLLVEREIN AS A MODEL FOR ECONOMIC INTEGRATIONR.H.Dumke. Ian Jeffries and Manfred Melzer
• 4 IN GERMANY IN THE NINETEENTH-CENTURY AND THEIR CHANGING RELATIONSHIP DURING INDUSTRIALISATION Wilfried Feldenkirchen
• 5 CYCLICAL TRENDS AND THE MARKET RESPONSE LONG SWINGS IN URBAN DEVELOPMENT IN GERMANY, 1850–1914 Richard Tilly
• 6 SECTORAL PERFORMANCE AND ECONOMIC DEVELOPMENT : THE BACKWARD LINKAGES OF THE GERMAN PIG-IRON INDUSTRY, 1871–1913, AS A FACTOR IN MACRO-ECONOMIC GROWTH. Jochen Krengel
• 7 ‘NEW INDUSTRIES’ AND THE ROLE OF THE STATE : THE DEVELOPMENT OF ELECTRICAL POWER IN SOUTH GERMANY FROM c. 1880 TO THE 1920s Hermann Schaefer
• 8 THE POLITICAL FRAMEWORK OF STRUCTURAL MODERNISATION : THE I.G. FARBENINDUSTRIE AG, 1904–1945 Gottfried Plumpe
• 9 GERMANY AND THE INTERNATIONAL ECONOMY : THE ROLE OF THE GERMAN INFLATION IN OVERCOMING THE 1920/1 UNITED STATES AND WORLD DEPRESSION Carl L. Holtfrerich
• 10 OCCUPATION POLICY AND POST-WAR RECONSTRUCTION: BRITISH MANPOWER POLICY IN THE RUHR COAL-MINES, 1945–1947, AND WEST GERMAN ECONOMIC RECOVERY Mark Roseman
• List of Contributors
• Index