7 - Imperial Germany, Great Britain and the Political Economy of the Gold Standard, 1867–1914

Summary

For Ludwig Bamberger, the chief political architect of German monetary union, the Reichstag's decision to suspend the minting of silver in December 1871 appeared like the ‘de-thronement of a world monarch’. Foreshadowing an age of gold-backed currencies, Germany's coinage laws of 1871 and 1873 marked a caesura in the first phase of globalization. The preceding decade had seen a succession of international conferences and diplomatic efforts to establish a pan-European currency under French leadership. Germany's victory in the Franco-Prussian War of 1870/71 sealed the fate of European monetary integration by inaugurating a multi-polar system of gold standards that persisted until the outbreak of the First World War. Imperial Germany's adoption of a national gold currency has principally been attributed to a ‘modernizing’ desire to emulate Britain's commercial ascendancy. The British Empire's global trading network had long projected national strength, while the pound sterling was revered as an epitome of fiscal prudence. For German liberals and free traders, Britain's currency and banking arrangements constituted a model of ‘enlightened institutional’ practice and a blueprint for industrializing nations. When the German states unified in 1871, the Reich ushered in unparalleled liberal reforms to integrate its federal economies and public finances. In December 1871, the German Empire founded the gold Mark as its common currency, and in 1876 the Reichsbank opened its doors as Germany's central monetary authority. Thirty years after Bismarck's reforms, Georg Friedrich Knapp first ascribed Germany's espousal of a gold standard less to economic calculation than to a fateful tendency to imitate ‘England's successful institution’. Since Knapp's State theory of money, the Reich's currency laws have been portrayed as an artifact of Bismarck's ‘Western orientation’ in his ‘foreign trade policy’, which enabled a raft of liberal measures to pass into law during the founding years of the German Empire.

Emulating Britain's mercantile success was an integral aspect of Bismarckian trade policy, yet there were also crucial domestic and geopolitical motives that have so far eluded analysis. This chapter revisits the Reich's currency reforms by considering how national politics and foreign precedent shaped Germany's monetary constitution.