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The Roles of Government and Private Enterprise in German Industrial Growth, 1870–1914

Published online by Cambridge University Press:  03 February 2011

Ralph H. Bowen
Ralph H. Bowen
Affiliation:
Columbia University
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Extract

The problem to which this paper addresses itself may be posed as follows: What part in bringing about the phenomenally rapid industrial growth of Germany between about 1890 and 1914 was played by governmental activities; what part was played by the private enterprise of businessmen; and what was the relative importance of each?

Type
Rise of Modern Industry
Information
The Journal of Economic History , Volume 10 , Supplement S1 , 1950 , pp. 68 - 81
Copyright
Copyright © The Economic History Association 1950

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References

1 This view was by no means the monopoly of the more sensational writers. Scholars of the distinction of Henri Hauser, for example, were virtually unanimous in their endorsement of the thesis that, as Hauser expressed it, “… modern Germany is above all a state. No kind of national activity is even conceivable there outside the framework of the state. If anywhere the phrase ‘providential state’ is more than a figure of speech, that place is the German Empire…. By this concentration of all energies, by this unity of direction, economic Germany has become a power no less to be feared than military Germany, and a power of the same order; a power bent on domination and conquest.” Les Méthodes allemandes d'expansion économique (7th ed.; Paris, 1917), 258 f.

2 Ruggiero, G. de, The History of European Liberalism (London, 1927)Google Scholar; Hallowell, J. H., The Decline of Liberalism as an Ideology (Berkeley, 1943).Google Scholar

3 A good account of the activities of municipal governments in business enterprises may be found in chapter xiv of Fife, R. H., The German Empire between Two Wars (New York, 1916).Google Scholar

4 An exact calculation of the proportion would be extremely difficult, but it is probable that the capital value of governmental enterprises did not exceed one tenth of the national wealth in 1914, according to the reckoning of Helfferich, K., Germany's Economic Progress and National Wealth, 1888–1913 (New York, 1914)Google Scholar, and that of Roberts, E., Monarchical Socialism in Germany (New York, 1913), p. 2.Google Scholar

6 Liefmann, R., Cartels, Concerns and Trusts (London, 1932)Google Scholar; for the inauguration of compulsory cartels as a war emergency measure, see Rathenau, W., “Deutschlands Rohstoffversorgung,” in his Gesammelte Schriften (Berlin, 1918), V, 25 ff.Google Scholar; also Bruck, W. F., Social and Economic History of Germany from William II to Hitler, 1888–1938 (Cardiff, 1938), pp. 134 ff.Google Scholar; and the same author's The Road to Planned Economy (Cardiff, 1934); Redlich, F., “German Economic Planning for War and Peace,” The Review of Politics, VI (1944), 315–35.CrossRefGoogle Scholar

6 Clapham, J. H., The Economic Development of France and Germany, 1815–1914 (3d ed.; London, 1928), pp. 329 ff.Google Scholar

7 For example, Roberts, Monarchical Socialism, pp. 116 ff.: “The monarchy and the powers of government associated with it have advanced in swiftly succeeding stages to a peculiar aristocratic socialism. Political power remains in ancient forms and yet takes over the direction of modern economic forces.” Bruck, Social and Economic History, p. 136, speaks of the pre-1914 Reich as “state-Socialist Germany.”

8 This view of the government's role was expressed by Veblen, Thorstein, Imperial Germany and the Industrial Revolution (New York, 1915), p. 179: “What has been said … would seem to imply that the material success of the German people during the imperial era has been achieved not by furtherance of the imperial state, but in spite of it…. Yet there is a substantial body of economic gains, subsidiary but none the less consequential, to be set down to the credit of … the Imperial policies on the country's material welfare.” And on another occasion he says more specifically (p. 171), “This furtherance of trade and industry by the statesmen was almost wholly of a negative or permissive sort, in that it consisted in the removal of restrictions previously enforced; … The good effects are traceable to the removal of obstacles.” It is interesting that Veblen, writing in 1914, began his preface with an apology for “offering at this season so unwarlike a study on the case of Imperial Germany …. “It is perhaps no coincidence that his study is one of the most perceptive accounts, even at the present day, of the Imperial Government's relation to private business.Google Scholar

9 Gerschenkron, A., Bread and Democracy in Germany (Berkeley, 1943).Google Scholar

10 Clapham, Economic Development of France and Germany, pp. 329 ff.

11 Public borrowing of all kinds has been calculated at roughly 295 million marks for the year 1894; after dwindling to only 139 million in the following year, it rose to a level of 660 million in 1899. It averaged 631 million per year over the next five years, after which it rose steadily, reaching a level of 1,770 million in 1908, when public borrowing accounted for about half the market value of all securities issued in Germany; ten years previously the ratio had been only one tenth. Figures from Der deutsche Oekonomist cited by Riesser, J., Die deutschen Grossbanken und ihre Konzentration (3d ed.; Jena, 1910), pp. 275, 291.Google Scholar

12 According to Roberts, Monarchical Socialism, p. 2, “The imperial government and the governments of the German states took profits in 1911 from the various businesses conducted by them of $282,749,224…. Taking the federated states together, 38 per cent of all the financial requirements for governmental purposes were met last year [1912] out of profits on government owned enterprises. Including the imperial government, a newcomer with relatively few possessions, about one quarter of all the expenses of the state and the imperial governments … were paid out of the net profits on government businesses ….”

13 Gerschenkron, Bread and Democracy, pp. 56–64, gives a good, brief account of this transaction.

14 The largest compendium of detailed information about the evolution of the German capitalization banks before World War I is that in Riesser, Die deutschen Grossbanken. A more adequate theoretical treatment is Schulze-Gaevernitz, G. von, Die deutsche Kreditbank. (Tübingen, 1922).Google Scholar

15 Bruck, Economic and Social History, pp. 81 ff., observes that “The actions of German banks were always accompanied by a greater risk than those of the sister establishments in England…. Wide distribution of risks led the German deposit banks into activities upon which the English banks, with their ideal of liquidity, would never have dreamed to venture.”

16 Whether is was “typical” or not is probably beside the point. Werner Sombart once recommended: “If one wants to form a notion of what the outlook for capitalism in the twentieth century may be, I know of no better suggestion to make than to study our great banks and the electrical enterprises allied to them.” Die deutsche Volkswirtschaft im neunzehnten Jahrhundert (7th ed.; Berlin, 1927), p. 367.Google Scholar