How an Industrial German Elite Could Have Shaped the Modern World in the late 19th Century

Germany was an upstart, a wealthy region that wanted and was about to conquer the world, but saw its plans vanished after the Treaty of Versailles in 1919

Photo illustration. ’Europe in 1914'. Source: National Archieves UK Government

1914. The Great Powers of Europe were divided into two rival alliances: The Triple Entente (France, Britain and Russia) and the Triple Alliance (Germany, Austro-Hungary and Italy).

Germany was about to become Europe’s new strongest power. Notwithstanding, a sudden, unexpected ocurrence took place on June 28, 1914 in the city of Sarajevo, and which was the spark of the First World War (July 28, 1914 — November 11, 1918). The Archduke Franz Ferdinand (heir to the Austro-Hungarian throne) was assassinated by a 19 year-old Slav nationalist named Gavrilo Princip. After the occurrence, Austro-Hungary accused Serbia (its Balkan rival) of having aided the assassin. After Serbia rejected the ultimatum from Austro-Hungary, Austro-Hungary declared war.

Nicholas II (Russian Tsar) defended Serbia and ordered the Russian army to mobilise (Russian Mobilisation on 30th July). German Emperor Wilhelm II promised support to Austro-Hungary. Germany declared war on Russia. (Germany Mobilisation on 1st August). Germany also declared war on France (Russia’s ally) mobilising 6 million men and passing through the neutral territory of Belgium.

Italy remained neutral. The United States declared its neutrality as well. President Wilson had no desire to entangle in Europe’s war. Britain, at first neutral, declared war after the German tropes advanced through Belgium and Germany ignored an ultimatum from Britain.

Over a span of days, the War at Sea started. British warships were winning the naval battles (Battle of Heligoland Bight, 28th August 1914). Britain imposed a naval blockade on Germany preventing goods from reaching it by sea. They wanted to bring Germany’s economy to its knees. German submarines led undetected attacks which destroyed British cruisers, such as the famous HMS Pathfinder, among others.

The Turkish Ottoman Empire joined the Central Powers (Germany, Austria-Hungary and Bulgaria) and declared war on its old enemy, Russia. In the Caucasus Mountains, Russian troops crossed the Turkish frontier.

The war raged in far-flung European colonies and beyond Europe. German troops crossed into British East Africa (now Kenya) and occupied Taveta. Allied forces (Britain and France) seized the Germany colony of Togoland (now Togo). Germany colonies were under pressure from subsequent attacks in its colonies.

In Asia, Japan honoured its treaty with Britain and declared war on Germany. In the Middle East, Britain secured the access to the Persian oil which fueled the British fleet, in the Ottoman port of Basra.

This was the beginning of a devastating World War One which lasted four years and killed more than 17 million humans. A catastrophy for humankind.

Germany’s aggressive expansion was one of the factors that brought the World War One to being.

Nevertheless, how far was Germany from becoming a worldwide superpower and which were the socio-economic consequences that ensued from the war?

German politics in the 1980s

‘Platz an der Sonne’ (‘Place in the Sun’)— Bernhard von Bülow

‘Weltpolitik’

During the 1890s, Germany adopted the ‘Weltpolitik’ policy. In 1897, Bernhard von Bülow (1849–1929), who was the Secretary of State, Chancellor of Germany and Minister of Foreign Affairs, gave his famous speech on Germany as a colonial power when he was foreign minister. Germany wanted to ensure itself a ‘Platz an der Sonne’ through a naval expansion. Alfred von Tirplitz affrimed the future was ‘auf dem Wasser’ (‘on the water’) and turned the German navy into a dominating powerhouse.

Germany lacked colonial power compared to Great Britain and France, but she had a strong industrial engine.

‘We do not want to put anyone in the shadow, but we too long for our place under the sun’ — Bernhard von Bülow

These changes in Germany brought other great powers in Europe to wonder about the future balance of power in the region. Those powers would not let German to spread their ideology around the world which could meant a clear attack on the other territories’ survival, having Germany a predominating and well-organized economy.

“. . .those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.” (William the First, Germany’s Emperor)

The first ever old-age social insurance program

Germany’s Chancellor, Otto von Bismarck (1862–1890), designed the first social insurance program on earth in 1889. William the First, wrote in a ground-breaking letter to the German Parliament: “. . .those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.”

Photo illustration. ‘Otto von Bismarck, Germany’s Chancellor from 21. März 1871 to 20. März 1890'. Source: Social Security Administration

Bismarck promoted the well-being of workers in order to keep the German economy operating at maximum efficiency. Despite being called a socialist for introducing this idea, Bismarck replied in a speech (1881): “Call it socialism or whatever you like. It is the same to me.”

This impeccable system provided contributory retirement benefits and disability benefits as well. Participation was mandatory and contributions were taken from the employee, the employer and the government. The Germans made this system complete when they added unemployment insurance in 1927.

Nonetheless, Bismarck’s most disturbing fear became true in 1894, when the French-Russian alliance was established. Germany was landlocked between two powerful enemies. This inevitable situation meant a threat for Germany’s advanced economy.

‘Einkeiserung’ (Encirclement)

Matters became worse over a span of years. In 1904, the British established the Entente Cordiale with France, and the Triple Entente started to breathe.

Germany became politically isolated. As the Germans put it: ‘Einkeiserung’ or Encirclement. Germany wanted to break the Tripple Entente but failed (Marroc-Crises 1905–1911 and Balkan Wars 1908, 1912, 1913).

Several political crisis in the Balkan led to the First World War in July 1914.

Germany ‘and its discontents’: The German economy in the 1890s

‘Drang nach Grösse’ (the desire to increase in seize)

Germany Empire’s economy gained momentum. Germany became the strongest industrial state in the European continent.

From ‘Klein Venig’ (‘little Venice) in the Americas to Jiaozhou Bay (concession in China): The defiant German colonial empire

Imperial Germany’s colonial efforts began in 1883. Germany had included Northern Italy, Austria, Switzerland, Holland, Liechtenstein, Luxembourg, and what is now the Czech Republic, Slovenia, Belgium and Poland. These territories were under the rules from the German government.

Photo illustration. ‘German colonies’. Source: New World Encyclopedia

Germany came late to the imperialist scramble for remote colonial territory as she wanted to secure her interests in Europe (‘German question’) through an economic and political integration, rather than trying to unify the political structures and the economy in her colonial territories, efforts which left much to be desired in her neighbors’ colonial empires.

As a matter of curiosity, Germany’s tradition of foreign sea-borne dated back to the Hanseatic League enabled an outflow of human capital through other territories (eastward in the direction of Russia and Romania and westward to North America).This, in turn, meant an opportunity for north German merchants and missionaries, who showed lively interest in overseas lands, and led the expansion of the German empire thorough America, the Pacific and China.

Bismarck had always opposed the idea of seeking colonies and he found Europe as the space in which German imperialist ambition found expression. However, the public opinion supported the idea of colonial interests and led Germany to participate in the ‘’Scramble for Africa’’ during the 1870s.

Photo illustration. ‘Colonial Africa in 1914: The size of the various colonial territories in Africa’. Source: New World Encyclopedia

Having Germany a more conservative and discreet posture in her interests, Germany restricted use of German to a small number of elite colonial subjects, whereas France and the United Kingdom promoted institutional policies that spread their language and cultures. This small detail, who some would consider a meaningless trifle, played an important role in Germany’s Europe territory and helped her to preserve a ‘badge of quality’ or ‘exclusiveness’ (Made in Germany) in the emergence of a new industrial superpower, a ‘badge’ that remains nowadays in the Eurozone.

Nonetheless, the several rebellions in the colonies, and since the expenses were greater that the revenues generated, made Germany to rethink her attitude to colonialism.

Germany’s defeat in the World War I resulted in the expropiation of its territories and which were distrubuted to the victors according to the measures adopted by the League of Nations in the Treaty of Versailles in 1919.

From ‘Golden age’ to ‘Silver Age’

Before the 1870, parts from the small continent of Europe specialised on their own products and Europe became, on the whole, self-subsistent. Food was exported from the United States to satisfy the increasing number of population in Europe. During this period, there was a remarkable growth in population, especially in Germany and in Russia.

The population in Germany grew from 40,000,000 in 1870 to 50,000,000 in 1892 and to 68,000,000 in 1914. This was coupled with a shift from Germany being agricultural to an industrial machine. Only with this machine was able to find occupation for its increasing population.

The population in the European Russia increased in a degree greater than Germany, from less than 100,000,000 in 1890 to 150,000,000 at the outbreak of war.

The German pre-war foreign investment amounted to £1,250 million, £500 million being invested in Russia, Austria-Hungary, Roumania, Bulgaria and Turkey.

It’s clear that Germany built an industrial engine in Europe, with significant growths in population and in foreign investments, but it was also well-known for being one of the leading countries based on natural resources.

Coal distribution grew in Germany. The output of German coal grew from 30,000,000 tons in 1871 to 70,000,000 tons in 1890, 110,000,000 tons in 1900 and 190,000,000 tons in 1913. New companies were established during this flamboyant times, Siemens and Bayern among others.

She possessed a far-reaching amount of coal mines in various territories, such as Upper Silesia, a district without large towns, in which laid one of the major coalfields in Germany with a porduction of about 23 percent of Germany’s coal total output, and which was about to be ceded to Poland after the Treaty. Saar, another coal district, which had been German for more than 1000 years and was retained for France in the first Treaty of Paris in 1814, remained attached to Germany (and she owed the economic development to that connection) until the Reparation program after the war. Alsace-Lorraine was another relevant territory in the German coalfields. With the loss of these three fields, the coal supply of Germany diminished by one-third.

Germany’s maximum pre-war output of coal was reached in 1913 with a total of 191,500,000 tons; 19,000,000 tons consumed at the mines, on balance 33,500,000 tons were exported and 139,000,000 tons left for domestic consumption. The latter tones were employed in many fields such as railways, gas, water and electricity, bunkers, and industry. The diminution of production to the loss of Alsace-Lorraine (3,800,000 tons), Saar Basin (13,200,000 tons) and Upper Silesia (43,800,000 tons) accounted for almost 60,800,000 tons. Moreover, Germany undertook to send out of her supply a significant number of tons to French, as compensation for damage done to French mines, and to Belgium, Italy and Luxembourg. On this basis, Germany was left with 78,000,000 tons for her own use as against a pre-war consumption of 139,000,000 tons. This was one of the main consequences ensued from the devastating World War One, thus, having a great impact in the German economy.

Then, the Reparation program, led by the Reparation Comission, put into motion new mandates (apart from those on coalfields mentioned above) on the European economy with devastating effects for Germany. There was a lot at stake for Germany, if she didn’t send coal to her neighbors she may have failed to secure imports essential to her economic existence.

As a matter of cat, according to the Treaty, Alsace-Lorraine was free to export into Germany, without paying customs duty, but it was not the same for German exports into Alsace-Lorraine.

The Treaty had also the pretext for taking the river system of Germany under foreign jurisdiction, which exacerbated even more the German economy, hindering her from freely transporting her goods through the waterways into its neighbors.

There was another effect for Germany, although not of a greater importance as the others already mentioned: Emigration. After the war, there were 25,843 emigrants from Germany, of whom 19,124 went to the United States.

‘Compensation will be made by Germany for all damage done to the civilian population of the Allies and to their property by the aggression of Germany by land, by sea, and from air’ — President Wilson’s speech before Congress, Frebruary 11, 1918

There is no doubt that, once the Treaty concluded and the Allied Powers imposed important regulations and expropiated quite a significant amount of parts from Germany’s industrial engine, the German territory was left with much less it had in pre-war period and with catastrophical long-term effects for its economy and society. The nightmare wasn’t about to end for Germany. In addition, considering the words from President Wilson’s speech on February 11, 1918, there was a total claim against Germany of £8,000,000,000 to repair the damages caused during the war in the different territories.

In his book The Economic Consequences of the Peace, John Maynard Keynes (1883–1946), argues the reasonable Germany’s capacity to pay, mentioning its actual economic position after the Treaty. Keynes presented three main forms in which Germany could discharge the sum she engaged to pay: ‘transferable wealth in form of gold, ships, and foreign securities, value of property in ceded territories and through annual payments spread over years’ (The Economic Consequences of the Peace, page 460). He specifies the uncomprehensive amount claimed throughout chapter 5, pinpointing a trade deficit for Germany in 1913, before the war began, having imports of about £538,000,000 and exports of £505,000,000, thus, imports exceeded exports by £33,000,000 (page 472). For more information on this matter, please read Chapter 5. Reparation, in The Economic Consequences of the Peace.

After the World War One ended and the Paris Peace Conference took place, Germany was worse off with the obligations and payments demanded by the Reparation Comission. No doubt, Germany caused significant damages during the war and the Victors found a way to diminish its economic power.

However, history teaches us that imposing austerity in a defeated and struggling nation didn’t prevent it to demonstrate its impeccable long-term capacity to adapt to hard times and commit to a prosperous future. After being hit by harsh effects from the Treaty, the unprecedented economic development of Germany shows us the fruitful future that it brought to its society, and also to its neighbors, enabling them to export to the region. We must bear in mind the current importance that Germany had during the foundation of the European Coal and Steel Community (ECSC) back in 1957, which morphed into the European Communtiy (EC) in 1993 during the Maastricht Treaty, and latter formed the European Union.

References to the article

[1] Germany Before World War 1. House of History. Retrieved August, 2020, from https://www.youtube.com/watch?v=v2WVK-DR5j0&list=PLvaiB105rEEbSlE7sxHIRmrGEm5c62m-M&index=3&t=167s.

[2] World War One 1914. Epic History TV. Retrieved August, 2020, from https://www.youtube.com/watch?v=PbwH1ZBnYds&list=PLvaiB105rEEbSlE7sxHIRmrGEm5c62m-M&index=2&t=1s

[3] John Maynard Keynes, The General Theory of Employment, Interest & Money and The Economic Consequences of the Peace. Wordsworth Classics of World Literature.

Economics student at University College London who strives to understand the complexity of today’s world writing stories on Monetary Economics, Economic History

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