The Economic Consequences of Annexation: Alsace-Lorraine and Imperial Germany,

1871-1918
Author(s): Dan P. Silverman
Source: Central European History , Mar., 1971, Vol. 4, No. 1 (Mar., 1971), pp. 34-53
Published by: Cambridge University Press on behalf of Central European History
Society

Stable URL: https://www.jstor.org/stable/4545591

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 The Economic Consequences of Annexation:
Alsace-Lorraine and Imperial Germany, 1871-1918
DAN P. SILVERMAN*

? relatively simple operation; it took only a few weeks for Prus?

GERMANY'S annexation
sian armies to rout the French ofthisAlsace-Lorraine
forces. But integrating prize in 1871 was a
of war into Imperial Germany proved far more difficult than any one had
imagined. It is indeed a rather pathetic spectacle. While some of the
highest civilian officials ofthe territorial administration sought to inte-
grate the Reichsland into the Reich, the highest military officers sought to
impose a military dictatorship; and on the sidelines, powerful German
textile, tobacco, and iron and steel interests hoped to minimize competi-
tion from Alsace-Lorraine by sabotaging all government efforts at con-
ciliation and integration. It is this latter aspect ofthe problem, what one
might term the economic subversion of political integration, which we
shall examine here.
Germany incorporated Alsace-Lorraine into the empire as a Reichsland,
an imperial province subject to control by all ofthe German states acting
through the Federal Council. The Kaiser, representing the Federal Coun?
cil, exercised direct executive powers in the Reichsland. Three major
administrative districts, Upper Alsace, Lower Alsace, and Lorraine,
comprised the territorial administration, which had its seat in Strasbourg.
At the head of the territorial administration stood the high president
(after 1879, the governor), appointed by the Kaiser and responsible to
higher authorities in Berlin. Local control over local affairs did not exist.
Until 1874, the Kaiser and the Federal Council made laws governing the
Reichsland; after 1874, with the introduction ofthe imperial constitution
in Alsace-Lorraine, territorial legislation was created by the Reichstag
and implemented by the Kaiser. Alsace-Lorraine elected fifteen Reichstag
deputies, but had no voting representation in the Federal Council, since
she was an imperial province rather than a state ofthe empire.
Late in 1874, the imperial government made some minor concessions
* This is a slightly revised version of a paper presented at the American Historical
Association meeting, Boston, Dec. 29, 1970.

34

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 Dan P. Silverman 35
to territorial demands for self-administration. The Ka
territorial council (Landesausschuss), a thirty-four m
committee. The council possessed no power of initiati
government could (but was not required to) seek the
on proposed legislation relating to the Reichsland. The
in no way bound the government. In effect, the territoria
assent to legislation which the Reichstag probably wou
but it could not prevent bills it opposed from being en
Further concessions in 1877 appeared to give the terr
wider powers. Stung by embarrassing public debates in
the imperial government now declared that laws for the R
be made with the agreement ofthe Kaiser, the Federal
territorial council. The most critical modification ofth
ministration came in 1879, when the office of high presid
by a governor (Statthalter), and the territorial council
fifty-eight members and granted the right of initiati
legislation required only the approval ofthe territorial
Federal Council; the Kaiser implemented but did not ac
territorial laws. Still, the desire for self-government rem
The Kaiser continued to appoint the governor and othe
istrative officers, most of whom were Prussians. The Fede
which Alsace-Lorraine still had no voting representatio
play a critical role in territorial legislation. Finally, there
threat that the governor might invoke a section ofthe org
law known as the "Dictatorship Paragraph," which ga
virtually unlimited emergency powers without requirin
mality of a declaration of a state of siege.
So long as the imperial government regarded Alsace-
first line of defense against an anticipated French attemp
verdict of 1871, strict limits on territorial self-administr
military influence on the territorial bureaucracy were
Nevertheless, some progress toward the political conci
gration of Alsace-Lorraine was recorded. The infamou
Paragraph was repealed in 1902. In the same year, the t
istration established a Catholic theological faculty at t
Strasbourg, a major concession in a predominantly Cat
The high point of political conciliation came in 1911 with
a new "constitution" for Alsace-Lorraine. The new con
legislative power in a freely elected Landtag empowere

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36 The Economic Consequences of Annexation
territorial matters; no longer did the Federal Council play a direct role
in legislating for the Reichsland. But the Kaiser's sanction was required
before any bill passed by the Landtag could become law. And there was
still the governor, always an outsider appointed by the Kaiser. Alsace-
Lorraine received three votes in the Federal Council, but they were not
to be counted if they furnished a majority for Prussia, since it was the
Kaiser (who was also the Prussian king) who instructed the Reichsland's
delegates. But was Alsace-Lorraine still a "Reichsland" after 1911? The
question never received a clear answer. The territory lacked powers
generally attributed to "states," namely the right to amend her own
constitution and appoint her own officials. While the 1911 constitution
no longer referred to the region as a "Reichsland" Article One ofthe
imperial constitution never listed Alsace-Lorraine among the federal
states.

Alsace-Lorraine's political status remained shrouded in ambiguity

throughout the period of German rule. While German attitudes toward
the political integration ofthe Reichsland were ambiguous, both official
and private attitudes toward the economic integration of Alsace-Lorraine
showed positive hostility. The enormity of the economic crisis facing
the Alsace-Lorrainers in 1871 possibly outweighed the political disaster.
Not only was their land torn from France in a political sense, but it was
also amputated from the French market and tariff system and incorpo?
rated into the foreign world ofthe German Zollverein. What ensued was
a forty-seven-year period of economic * 'adjustment" which pointed
toward the economic subversion of political integration. The story is
best told by examining textiles, tobacco, and iron and steel.
The focal point of Alsace-Lorraine's economy in 1871 was the textile
industry centered in Mulhouse. Significant both qualitatively and quanti-
tatively, the Alsatian textile industry produced nearly as much cotton
goods as the entire German Zollverein in 1870. The annexation created a
totally new situation for both Alsatian and German textile interests.
Separation from the French market represented a disaster to the Alsatian
textile industry; but it also created serious problems for the German
textile industry. A German textile industry still relying on manual equip-
ment in 1871 faced Alsatian factories utilizing modern power-driven
equipment, manufactured locally by the Alsatian machinery industry.
While peace negotiations were still going on between Germany and
France in 1870-71, the Committee of South German Industrialists peti-
tioned King William of Prussia to renounce annexation of the upper

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 Dan P. Silverman 37
Alsatian industrial region.1 Other south German ind
the French and German governments to give the A
region to Switzerland; as compensation to Germany
transfer territory to Imperial Germany. Bismarck s
during the 1870-71 Brussels negotiations with the Fr
government refused to embroil itself in the Franco
Failing to obstruct annexation, the south German
turers implored their government to protect them fro
tition. They argued that the only effective means o
guarantee the Alsatians their traditional French ma
tariff barriers between Germany and France. One p
twenty-year transition period, during which the G
would pay all or part ofthe tariff on Alsatian goods ex
On their part, the Alsatian industrialists recognized
heavy capital investment in existing plants; production
tastes of the German market would require massiv
new equipment. Industrial leaders on both sides realized
economic arrangement would have to be made for
While peace negotiations were still in progress in
made to reach a Franco-German agreement on specia
Alsace-Lorraine's foreign trade. The burden ofthe effor
Alsace-Lorrainers themselves, since Adolphe Thiers,
French executive power by the Bordeaux National
direct overtures by the Alsatians in Berlin or at the
would produce the best results.4 To strengthen their
tiating with Bismarck, Alsatian industrialists organ
tive associations, most prominent of which was the
Society's "Committee for the Protection of Alsatian
Auguste Dollfus, part of the Mulhouse committee
with Bismarck at Versailles beginning February 23,
ment ofthe Mulhouse group, headed by the young
Jean Dollfus, consulted with officials in Berlin. Colm
followed Mulhouse in forming committees to prot

i. Andre Brandt, "Le Sort de Mulhouse en 1871,'* Bulletin de la

Mulhouse (hereafter BSIM), (1951), 26-30; A. Staub, Die Baum
Annexion von Elsass-Lothringen (Berlin, 1870), p. 9.
2. Brandt, in BSIM (1951), 31-35. Peace negotiations, begun in
to Frankfurt May 6, 1871.
3. Staub, pp. 2-11.
4. Frederic Eccard, UAlsace sous la domination allemande (Paris

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38 The Economic Consequences of Annexation
interests, and also sent delegations to Berlin in April of 1871. Their aim
was to conclude an agreement permitting Alsatian industrialists to sell
existing stocks of goods under prewar tariff conditions, an objective
which they partially achieved. For a few brief months, the threat of
annexation compelled the Alsatian textile interests to unite. As planned
by the Germans, the new Franco-German boundary would leave the
various segments of the textile industry on different sides of the tariff
barrier. Spinning and weaving operations would be denied free access to
the finishers, dyers, and printers. The textile industry would be destroyed
unless the French and German governments reached an agreement pro?
tecting the economic interests of Alsace-Lorraine.
The industrialists' delegations in the spring of 1871 achieved limited
success. In political matters, the talks failed completely. But the delega?
tions did secure important economic concessions. Under the additional
act to the Frankfurt Treaty, signed October 12, 1871, products from
Alsace-Lorraine would enter France duty-free until December 31,1871.
After that date, the tariff was to be increased gradually until it reached the
full normal rate by January 1,1873. French products and raw materials
entering Alsace-Lorraine received a reciprocal low tariff rate.5 While the
additional act did not provide the twenty-year transition period desired
by some German and Alsatian industrialists, it was nevertheless a worth-
while achievement. The German government was not completely in-
sensitive to economic dislocation caused by the annexation. Negotiations
on the German side were carried out by no less a personage than Count
Harry von Arnim, the German plenipotentiary in Paris. Germany made
rather significant concessions to France in order to win a period of
economic grace for Alsace-Lorraine. The French insistence on reci-
procity for French goods entering the Reichsland received recognition.
Even more surprising in view ofthe militaristic origins ofthe Second
German Empire was the agreement to reduce by fifty thousand the
number of German occupation troops in six eastern departments in
return for French tariff concessions for Alsace-Lorraine.
Special tariff arrangements for Alsace-Lorraine granted Alsatian tex?
tile interests a reprieve from immediate loss of their French markets, and
gave German industry some time to prepare for competition from

5. German currency was not required in Alsace-Lorraine until 1876. Had they been
required to use German currency, the Alsatian industrialists would have lost about il/2%
on all foreign transactions, because ofthe lower value ofthe German mark on the inter?
national money market. See the Frankfurter Zeitung, Aug. 23, 1874.

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 Dan P. Silverman 39
Alsace-Lorraine in the German market. But this wa
situation, and when the Alsace-Lorraine industrialists f
impact ofthe economic consequences of annexation
drew to a close, there was much speculation as to ho
to their new German Fatherland.
Faced with a political and economic crisis of unpre
tions, the Alsatian textile industry in particular demon
little solidarity. While some ofthe industry's leaders
German League of Alsace, others sought to make t
situation by working with the German regime. Fin
house Industrial Society, the League of Alsace brand
industrialists who had negotiated tariff arrangements w
in the spring of 1871, and encouraged Alsace-Lorra
French citizenship under the terms ofthe Frankfurt Tr
trauma of annexation could instill among the capital
Alsace-Lorraine a sense of class solidarity.
The varied reactions of Alsatian industrialists to t
can be understood in the context ofa long-standing
policy. Ignited by the 1860 trade agreement with B
Cobden Treaty, controversy between free-traders
split the French nation during the decade ofthe 186o's.
Alsatian textile industry play ed a most important role
and printers all supported the free importation of r
contrasting positions on the importation of yarn and f
Treaty proved beneficial to the calico printers, wh
production by one-third in four years; but 155 own
weaving operations, threatened by imports of com
sent a strong protest to the French minister of comme
The most explosive aspect ofthe tariff controvers
cerned the practice of "temporary admissions." An
authorized temporary duty-free import of raw mat
manufactured into fmished products, or products inten
processing in France. So it would not compete with F
domestic market, material entering France under te
had to be processed and reexported or placed in bond
When imperial decrees of 1861 and 1862 revived the
sion system, protectionist critics claimed the 1836 la
6. Alphonse Barthelme. Le Developpement des courants commerci
guerre (Strasbourg, 1931), p. 15.

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 40 The Economic Consequences of Annexation
importing cotton goods to be printed. Nevertheless, the government
permitted temporary admission of both low-grade cottons produced
more cheaply in Britain, and fine grades which textile printers could
have purchased just as reasonably from French producers.7
Temporary admission of textiles deeply divided the Alsatian textile
industry. Cotton spinners and weavers generally opposed the practice,
while the textile printers, always seeking the least expensive source of
cotton goods, favored it. One ofthe most powerful Alsatian proponents
of temporary admission was Jean Dollfus, owner of some ofthe largest
textile printing factories. Dollfus had collaborated with his British friend
Richard Cobden to help consummate the Franco-British trade agree?
ment of 1860. The temporary admission issue became a major political
question during the 1860's, and Dollfus eventually paid a heavy price for
his position. In Mulhouse, the 1869 French parliamentary election pitted
the free-traders represented by Jean Dollfus against protectionists led by
Pierre-Albert Tachard. Dollfus lost, for although the textile printers
supported him, most ofthe spinners and weavers opposed him. Family
ties proved weaker than economic considerations, as Jean Dollfus's
nephew Auguste joined the protectionists.8 On the eve ofthe Franco-
Prussian war, the tariff controversy still boiled in Alsace. Fighting for
higher tariffs, owners of spinning and weaving mills formed a "Cotton
Syndicate of the East." Their pressure led to the discontinuance of
temporary admission by an imperial decree of January 10,1870. A rival
"Syndicate of Printers" secured a parliamentary hearing which resulted
in restoration of temporary admission in a modified form making it
slightly less advantageous to the printers.9
In explaining the varied reaction of Alsatian industrialists to the Ger?
man regime after 1870, we must stress the continuity between the French
and German regimes. The post-i 870 schism among Alsatian industrialists
was still based on differences over the tariff question. The only new
factor was that the incorporation of Alsace-Lorraine into the German
customs union occasioned a realignment of opposing factions. Most
leaders ofthe Alsatian textile industry became free-traders, even if they
had been protectionists before 1870. They recognized that only a free-
7. Chambre de Commerce de Mulhouse, Admissions temporaires des tissus ecrus. Rapport
de M. Edouard Koechlin (Mulhouse, 1867), pp. 3-5.
8. Andre Brandt and Paul LeuilHot, "Les Elections a Mulhouse en 1869," Revue
d'Alsace, xcrx (1960), 109, n3-14.
9. Societe Industrielle de Mulhouse, Histoire documentaire de Vindustrie de Mulhouse et de
ses environs au XIX* siecle (Mulhouse, 1902), n, 935-37.

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 Dan P. Silverman 41
trade agreement between France and Germany could
access to the traditional French market. Those who
tionists after the annexation were businessmen who
transfer most of their operations to French branch fac
maintain contact with their regular customers with
Franco-German trade agreement. When it became cl
nent Franco-German economic agreement concerni
would materialize, the tariff and temporary admissi
once again.10
Financial considerations, rather than patriotism or lack of patriotism,
determined the attitudes taken by Alsatian industrialists toward the
German regime. The annexation severed the Alsatian textile industry,
the brain resting at Mulhouse, the rest ofthe body still lying in France.
The new political boundary confronted Alsatian industrialists with a
dilemma which taxed their financial genius far more than their patriot?
ism, Some Alsatian companies continued operations within the French
market and tariff system by transferring the bulk of their operations to
factories within France. Other firms, lacking the necessary capital and
flexibility, continued to operate in Alsace-Lorraine, and tried to adjust
to the German market structure. At Mulhouse, for example, operators
began to manufacture worsted, which was preferred on the German
market. Such adjustment generally required extensive, costly modifica-
tion of production techniques; and rapid price increases in the construc?
tion and metallurgy industries after 1871 forced the cost of retooling out
of reach for many firms. German tariff policy, however, provided con-
tinuing pressure for production modification. Before the annexation,
much ofthe cotton thread spun in Alsace was number 40 or above, a very
fine thread for the French luxury market. The progressive ad valorem
tariffs of 1860 guaranteed adequate protection for the fine threads, but
after 1871 the German flat, nonvariable rate produced much greater
protection for coarse than for fine numbers. The new German tariffs

io. Numerous sources indicate the importance ofthe temporary admission issue after
1871. See August Lalance, La Crise de Vindustrie cotonniere (Mulhouse, 1879), pp. 24-27;
Charles Grad, Lettres d'un bourgeois sur lapolitique en Alsace (Mulhouse, 1881), pp. 63-69;
Chambre de Commerce de Colmar, Rapport de M. Kiener sur le tissage et les importations
temporaires (Colmar, 1884), pp. 1-4; Ferdinand DiefFenbach, Elsass-Lothringen und der
Freihandel (Strasbourg, 1877), passim; Gustav Bergmann, Zur industriellen Enquete (Stras-
bourg, 1877), passim; Die Zollfreie Admission temporaire von Baumwollengamen vor dem
Reichstag (Berlin, 1885), PP- 25-29; Reichs-Enquetefur dieBaumwollen- undLeinen-Industrie
(Berlin, 1879), pp. I98ff.

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42 The Economic Consequences of Annexation
amounted to about 20 per cent for coarse numbers, but only about
one-half of 1 per cent for fine thread. Production statistics soon reflected
German tariff policy, as the average thread number produced declined
from 38 in 1869 to 30 in 1877.11
Textile firms which could afford to do so established branch factories
in France, and continued to direct business from home offices in Alsace-
Lorraine. They did not, as a rule, simply close down their Alsatian
operations and move to France. The precise extent of economic migra-
tion across the Franco-German border after 1871 remains unclear. Henri
Laufenburger and Pierre Pflimlin have pointed to "a veritable migration
of our industry to nearby French departments," and J. H Clapham
wrote that "many Alsatian manufacturers refused to accept German
citizenship and made a fresh start on the French side ofthe Vosges."12
Clapham's implication that French patriotism accounted for the realign-
ment of Alsatian industry is overdone. By opening French branch fac?
tories, Alsatian industrialists could take advantage of both French and
German markets. Those who could afford to shift part of their operations
to France possessed a formidable competitive advantage over their less
fortunate Alsatian rivals. They could well afford to be anti-German,
since they did not depend on a Franco-German tariff agreement to pre-
serve their share ofthe French market. Charges by the League of Alsace
that the 1871 commercial delegations to Berlin and Versailles sought to
protect their own interests were true; but the industrialists opposing
negotiations with the Germans had just as much at stake. Some indus?
trialists protected their interests through large capital investment in new
plants and equipment. Others had to turn to the German government
for a tariff agreement which would enable them to remain competitive.
Expiration ofthe special Franco-German tariff arrangement at the end
of 1872 forced Alsace-Lorraine into the open market. Although the
general European depression ofthe 1870's undoubtedly accounted for
most of their problems, the Alsatians, along with other German in-

ii. Henri Laufenburger and Pierre PfHmlin, Cours d'economie alsacienne (Paris, 1930-
32), 1, 142; n, 33. The higher number represents finer thread.
12. Ibid., n, 36; J. H. Clapham, The Economic Development of France and Germany,
1815-1914 (Cambridge, 1921), p. 246. For lists of factories which shifted operations to
France see Marie-Joseph Bopp, "L'Oeuvre sociale de la haut bourgeoisie haut-rhinoise au
XIXe siecle," in La Bourgeoisie alsacienne (Strasbourg and Paris, 1954). P- 402; Andre
Brandt, "Apports alsaciens a rindustrie textile de la Lorraine et de la Franche-Comte au
XVIIP et XDCe siecles," in Trois Provinces de VEst: Lorraine, Alsace, Franche-Comti
(Strasbourg, 1957), PP- 133-38.

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 Dan P. Siherman 43
dustrialists, blamed the government's free-trade polic
business activity. From 1873 to 1879, Alsatian indu
protective tariffs in Germany. Largely as the result of
the Alsatian Industrial Syndicate, government inqu
duced evidence ofthe need for higher tariffs. These f
coincided with Bismarck's shift from free-trade t
means of finding new revenue for the imperial go
1879 thus brought some relief to Alsatian interests; in
thread in particular, a new progressive system placing
fine numbers assured the Alsatian textile industr
complete retooling.
Shortly after Bismarck's resignation in 1890, Ger
embarked on a most ambitious series of trade agree
was to reduce German tariffs just as the French were
the Meline legislation.13 Hoping to secure concessions
factured goods in return for reductions in German ag
Caprivi government, between December 1891 a
signed trade agreements valid until 1903 with Sw
Italy, Austria-Hungary, Serbia, Rumania, and Rus
terests in Germany reacted violently to what they
on the integrity ofthe landed aristocracy. Alsace-L
landed aristocracy, but it did account for 26 per
wine-growing acreage in 1898, more than any othe
agreement with Italy most directly affected the Al
Caprivi made important concessions to the Italians
French wine off the German market by introducing s
tition. Getting squeezed in the middle, without m
Caprivi, was the Alsatian wine industry, which see
most from the Italian agreement. As Caprivi expected,
wine did rise after 1892, but imports from France
net result was that the Alsatians now faced comp
France and Italy.14
Of most direct concern to the Alsatian textile in
with Switzerland. The Alsatian textile industry was
as a result ofthe French Meline tariffs. By severing

13. For Caprivi's trade agreements, see J. Alden Nichols, Germa

Caprivi Era, 1890-1894 (Cambridge, Mass., 1958), pp. 113-53.
14. Leo Berkholz, Die Wirkung der Handelsvertrdge auf Landw
Gewerbe in Elsass-Lothringen (Tubingen and Leipzig, 1902), pp.

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44 The Economic Consequences of Annexation
ties between Alsace-Lorraine and the French market, the French tariffs
of 1892 unwittingly contributed to the success of Berlin's policy of
minimizing contacts between France and the Reichsland. Indeed, the
French tariff of 1892 may have been as much a shock to the Alsace-
Lorraine economy as the annexation itself in 1871. It produced many of
the same effects, including renewed interest in the establishment of
branch factories across the French border.15 In addition to losing what
was left of her French market, Alsace-Lorraine now faced increasing
competition from British textile manufacturers, who had also been
driven from the French market by the Meline tariffs and sought to
replace their losses in Alsace.
Caprivi disregarded Alsatian textile interests when he negotiated the
Swiss trade agreement. The Swiss made few concessions, and in some
cases the new Swiss tariffs on Alsatian textile products were higher than
before the agreement. Alsatian fine cottons received no protection.
Alsatian production of fine cotton thread number 60 and above had
dropped from 2% million kilograms in 1870 to an average of 838,600
kilograms between 1887 and 1892, but there was absolutely no justifica-
tion for the government's contention that the Swiss agreement would
harm no German textile interests because none of them manufactured
fine thread above number 60.16 One can hardly blame some Alsatian
textile manufacturers if they refused to think of themselves as Germans,
since the government apparently did not consider them to be Germans
either.
Viewed as a whole, German tariff policy after 1872 did little to help
integrate Alsace-Lorraine's economy into the imperial structure. In fact,
German tariff policy generally sacrificed Alsatian interests to those ofthe
empire, under both Bismarck and Caprivi. But we should not attribute
all ofthe Reichsland's economic problems to German tariff policy. The
French tariffs of 1892 did their share of damage, too. And if some of
Caprivi's trade agreements opened Alsace-Lorraine to foreign competi?
tion, it is equally true that treaties with the eastern European countries
opened new markets for the Alsatian textile industry. Alsace-Lorraine's
economic vitality depended on factors other than German tariff policy,
as important as that tariff policy might be. In the general European
depressions ofthe 1870's and 1890's, Alsace-Lorraine suffered as did

15. Ibid., pp. 150-53.

16. Ibid., p. 88.

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 Dan P. Silverman 45
every other state, and for this type of general slump t
ment cannot be held responsible.
Looking beyond tariff policy, one can find instan
financial and economic policy did coincide with the
Lorraine. But when there did happen to be a comm
uniting the imperial government and territorial in
business interests, fearing competition from the Reich
aged to generate enough Reichstag opposition to de
ment's programs. Such was the case with the propos
monopoly in 1882.
Bismarck wished to overhaul the federal tax struct
imperial government dependent on state contribut
"matricular" contributions) to the federal treasury.
major tariff and excise reforms, but an amendment
Georg von Franckenstein (known as the "Francken
tically limited the imperial share ofthe new revenues. T
formula provided that revenues from customs duties an
in excess of 130 million marks were to be distribute
states in proportion to their population. The gover
new tax package in 1880, but the Federal Council r
Bismarck now decided to try for an imperial tobac
fate ofthe highly developed Alsace-Lorraine tobacco
on the outcome of the monopoly project, and w
finally rejected it, the Reichsland\ tobacco industry
fatal blow.
Actually, the government already manufactured t
Alsace-Lorraine. Under the French regime, manufa
tobacco products had been a state monopoly; with t
state-owned tobacco factory in Strasbourg fell int
German government. Third largest ofthe French im
tories, the Strasbourg plant was a fine war prize. W
officials in Alsace-Lorraine resigned rather than accept
tion to serve a new emperor, Bismarck abolished th
in the Reichsland, since he had no experienced administ
But although the monopoly was technically abolishe
continued to direct the Strasbourg tobacco factory.1
State ownership of the factory aroused opposit
17- Paul Dehn, Die kaiserliche Tabaksmanufaktur in Strassbur
deutschen Tabaksmonopol (Berlin, 1880), pp. 4-5.

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46 The Economic Consequences of Annexation
wholesalers in both Alsace-Lorraine and Germany, all of whom ob?
jected to the state's interference with the free-enterprise system.18 The
Saxon delegate to the Federal Council charged the factory administra?
tion with incompetence. One hundred German tobacco manufacturers
petitioned the Reich Chancellery to give up the Strasbourg factory. The
Reichstag empowered Bismarck to sell the factory in 1872, but despite
a reasonable offer from a tobacco syndicate in 1875, no sale was ever
consummated.19
Supported by Alsatian planters who feared they would be ruined by
loss of their French market, Bismarck pursued the idea of an imperial
tobacco monopoly. In 1879, Alsace-Lorraine's Landesausschuss passed a
motion supporting a state tobacco monopoly.20 The government had
already begun a propaganda campaign in Alsace-Lorraine to promote
the monopoly project. They promised planters the highest prices, and
assured taxpayers that income from a monopoly would permit the
government to drop the federal matricular contribution from Alsace-
Lorraine's budget. To smooth the way for an imperial tobacco monop?
oly, Bismarck sent the Bavarian Catholic Georg von Mayr to Strasbourg
as under state secretary for finance.21 The Landesausschuss cooperated in
1880 and again in 1881 by approving government requests for 500,000
marks to expand the sale of Strasbourg tobacco factory products
throughout Germany. Anticipating a larger imperial market once the
proposed monopoly went into effect, the territorial government used
part ofthe special appropriations to increase the stock of cigars in Stras?
bourg, and also spent a considerable portion to purchase branch factories
in neighboring Baden.
Establishment in Baden of branches ofa state-owned tobacco factory
alarmed German private tobacco interests. Selling tobacco products di?
rectly to consumers at factory prices constituted unfair government
competition. As the liberal publisher ofthe Frankfurter Zeitung, Leopold
Sonnemann, observed, private industry could not simply annex capital

18. L. H. Marx, Denkschrift iiber die Nothwendigkeit der Einstellung des Betriebs der
kaiserliche Tabaksmanufaktur zu Strassburg, which appeared as a special edition ofthe Neue
Strassburg, Oct. 9, 1875, P- 3-
19. Dehn, Die kaiserliche Tabaksmanufaktur, p. 6; Frankfurter Zeitung, Dec. 11, 1875.
20. Elsass-Lothringen, Landesausschuss, Verhandlungen, 3rd Sess., 1877, n, 20-21; 7th
Sess., 1879, n, 191.
21. Ibid., 10th Sess., 1883, n, 668, speech by Baron Hugo Zorn von Bulach; Dehn,
Die kaiserliche Tabaksmanufaktur, pp. 7, 16-17; Leopold Sonnemann, Die Strassburger
Tabaksmanufaktur und das Tabaksmonopol (Mannheim, 1880), p. 3.

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 Dan P. Silverman 47
as the state had done in the case ofthe Strasbourg f
pointed to an embarrassing contradiction in Bismar
he persecuted the working class with strong anti-so
moted a socialist tobacco monopoly.22 The Augsburg
merce raised its voice, and the Association of Germ
facturers sent two delegations to hold conversations
of Alsace-Lorraine, Field Marshal Edwin von Mante
who supported Bismarck's monopoly plan, proved u
governor's task as he saw it was to promote the interes
and he believed the development ofthe Strasbourg
bring greater prosperity to the territory.
When the purchase ofthe Baden factories became
the initial enthusiasm in Alsace-Lorraine for the monop
siderably. Members ofthe Landesausschuss felt they
the government; one complained that, "I would ne
the supplemental appropriations had I known that p
capitalized in real estate in the Grand Duchy of Bade
huge stock of cigars in the Strasbourg warehou
Landesausschuss delegates, their anxiety temporarily su
of assurances that the forthcoming imperial mono
dispose ofthe surplus. South German tobacco manuf
were not so easily placated, and controversy over the S
highlighted many sessions ofthe Federal Council.
Extension of the Strasbourg factory's operations t
raised the question ofjurisdiction in the affairs ofthe R
an imperial province, presumably subject to control by
states acting through the Federal Council. Did not th
the right to protect themselves from Strasbourg's
German state governments supported the Federal C
intervene in the tobacco question. In defense of th
ment, Georg von Mayr argued that the laws govern
delegated authority in the Reichsland to the territo
thus became the final authority. The Federal Coun
given up its right to meddle in Alsace-Lorraine's affair
Brunswick supported Mayr.24

22. Ibid., pp. 5-8.

23. Landesausschuss, Verhandlungen, 9th Sess., 1881-82,11, 407.
24. Archives departmentales du Bas-Rhin (Strasbourg), AL 27,
to ManteufFel, May 20, 28, 1881.

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 48 The Economic Consequences of Annexation
The controversy over the Strasbourg factory still occupied the Federal
Council in 1882 as the government introduced legislation for an imperial
tobacco monopoly. The Federal Council's debate on the Strasbourg
factory suggests that Bismarck might have waited for a more opportune
moment before trying for the monopoly. After discussing the monopoly
proposal April 24,18 82, the Federal Council reluctantly gave its approval
by a 36-22 vote. The most spirited defense ofthe monopoly proposal
came from Wurttemberg, whose representative simply admitted that
the imperial government needed money, and there seemed to be no
other way to get it. Baden and Hesse objected to the monopoly, con-
tending it would damage important private tobacco works in their
states, create unemployment, and incite either emigration or riots among
the displaced workers. Bremen's delegate warned that his city's entire
economy would collapse if the monopoly went through.25
When the bill came before the Reichstag, private tobacco interests
rallied Germany's economic liberals to their cause and defeated the to?
bacco monopoly by a 277-43 vote in June 1882. The bill's failure spelled
disaster for the Strasbourg factory and the Alsatian tobacco planters.
Anticipating the monopoly, the Strasbourg factory had been over-
stocked with what were now derisively termed "monopoly cigars."
Without the tobacco monopoly, the lower Alsatian tobacco industry did
not thrive. Acreage planted in tobacco declined by 36 per cent between
1875 and 1913. The number of tobacco planters likewise plunged from
12,562 in 1872 to 8,000 in 1913. The quality as well as quantity of Alsatian
tobacco declined, as planters refused to invest in improved methods of
cultivation without a guaranteed market for their crop.26
Bismarck's defeat on the tobacco monopoly bill marked not only a
setback to his general financial program, but also damaged government
attempts to conciliate the Alsace-Lorrainers. Local condemnation ofthe
government's tobacco policy was extremely bitter. The priest Landolin
Winterer characterized the monopoly project as "a dangerous experi?
ment in the satisfaction of imperial policy at the expense of Alsace-
Lorraine's state treasury." "What has happened here," he complained,
"could not have happened in any other state ofthe German Empire,

25. Heinrich von Poschinger, Furst Bismarck und der Bundesrat (Stuttgart and Leipzig,
1897-1901), v, 94-102.
26. Laufenburger and Pflimlin, Cours d'economie alsacienne, 1, 34-36; Emil Thisse, Die
Entwicklung der elsdssischen Landwirtschaft in der zweiten Halfte des 19. fahrhunderts (Berlin,
I9ii),pp. 57-6o.

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 Dan P. Silverman 49
because no where is the imperial interest so domina
friends ofthe government such as the tobacco plant
von Bulach criticized the government's tobacco pol
vinced monopolist," he admitted, "but improper dir
bourg tobacco factory ruined the monopoly plan w
Local criticism ofthe government's tobacco monop
up to a certain point, really unfair. A tobacco mono
conflict of interest between the empire in general and
particular. The territorial economy would have been
ary, for while the income from a monopoly would
imperial finances, the expanded market would have f
tobacco industry. It is indeed true that Alsace-Lorraine
a testing ground for imperial reform projects, but the
between Reichsland and empire came only when th
ment lost its gamble with the Reichsland's financial
Reichstag refused to implement the monopoly proje
ofthe government's tobacco policy became wholly ju
Reichstag rejected the monopoly bill, the governme
protect the Alsatian tobacco industry. Bismarck quickly
tobacco monopoly, dropped the issue, and ignored go
suggestion in 1885 to revive the monopoly bill.
Reichslandwhm he felt it might help him achieve large
financial and foreign policy; but when he failed in his
had no interest in the fate of Alsace-Lorraine.
German business associations had sought to prevent
Alsace-Lorraine in the first place. Later they had c
Bismarck's tobacco monopoly project, which wou
Alsace-Lorraine at their expense; and now they blo
for the Moselle and Rhine rivers which would have
iron-ore and Strasbourg commercial firms to compe
with German companies.
The failure ofthe Moselle canal project forms part
of a conflict of interest between iron and steel interest
Rhineland-Westphalia. Canalization ofthe Moselle to
have enabled owners of Lorraine's iron ore to ship it ch
processors in the coal-rich Rhineland-Westphalia are
the coal and steel interests in the Rhineland, amon
27. Landesausschuss, Verhandlungen, ioth Sess., 1883, n, 679.
28. Ibid., p. 688.

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 50 The Economic Consequences of Annexation
Thyssen, favored a canal project. There was as yet no competition be?
tween the two regions; on the contrary, there was an agreeable division
of labor between Lorraine, which produced east iron from local iron ore
and coke from the Ruhr, and Rhineland-Westphalia, which manufac-
tured steel products from east iron purchased in Lorraine. So long as that
division of labor persisted, nothing could have better suited the German
steel interests than improved transportation along the Moselle.
By 1894, cooperation was giving way to competition, as iron and steel
firms in both Lorraine and the Ruhr integrated and consolidated them-
selves into units capable of performing all functions from the smelting of
raw iron ore to the manufacture of finished steel products. Lorraine
manufacturers now built their own blast furnaces and converted east iron
into steel and steel products, in direct competition with German firms in
the Rhineland.29 Simultaneously, Ruhr steel plants were importing an
increasing proportion of their iron ore from Sweden, and no longer
depended so heavily on ore from Lorraine. At a time when the coal and
steel giants of the Ruhr were expanding at breakneck speed, firms as
large as Krupp and Thyssen had little capital to spare for investment in
Lorraine; to fill the vacuum, Belgian and Luxemburg capital now
stepped in to develop Lorraine's steel potential. Alsace-Lorrainers were
losing control over their territorial steel industry to Germans, Belgians,
and Luxemburgers.
As a result of these objective changes in the organization ofthe iron and
steel industries, the Rhineland interests vigorously opposed the Moselle
canal project after 1895. Such a canal would have done much to tie
Lorraine closer to Imperial Germany; but the Ruhr steel interests were
determined to limit competition and thereby obstruct the economic
integration ofthe Reichsland into the Reich. The Prussian government
rejected a canal plan in 1910. The imperial government recognized this
as a hazardous policy, and tried unsuccessfidly to win approval for a
Moselle-Saar canal under a program which would have integrated all
waterways into a national system subject to imperial legislation and
control. Rhenish-Westphalian steel interests broadened their attack
against the government's integration program by opening a vicious
campaign against the conciliatory policies of Count Karl von Wedel, the
governor of Alsace-Lorraine. The voice of these industrialists, the
Rheinisch-westfalische Zeitung, ultimately accused Wedel of "failing to

29. Robert Parisot, Histoire de Lorraine (Paris, 1924), m, 408; F. Sauvaire-Jourdan, "Un
Conflit dans la metallurgie aXlemande,"Revuepolitique etparlementaire, lxtx (1911), 253.

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 Dan P. Silverman 51
perform his duties to the nation" (in other words, trea
200 marks by a civil court in Essen. Wedel supported
tion of 1911; if his program for integrating the Reichs
succeeded, the result would be more economic comp
of Germany.30
There were many similar cases of economic conflic
Lorraine and other German interests. The deepening
the Rhine River, and the development ofthe port o
duced a direct conflict of interest between Strasbourg
for a few months each summer, large vessels could
only as far as Baden's port of Mannheim; thus, it w
than Strasbourg which handled most ofthe river tr
Germany and Switzerland. Baden naturally opposed
would open the Rhine to Strasbourg. Only in 1893
and the territorial administration of Alsace-Lorrain
tive study on how best to improve Rhine navigation
agreement, largely because Baden had little interest
was certain to damage business in Mannheim. Mean
at her own expense, had begun improvements on he
1892, expecting that eventually the Rhine would be
In 1898, Baden, Bavaria, and Alsace-Lorraine finall
to regulate the Rhine and make it navigable up to St
failed to agree on a cost-sharing plan. The funding n
on from 1898 to 1906, when agreement was finally
was set at 13 y2 million marks. Bavaria agreed to pu
Baden agreed to pay 40 per cent ofthe cost, with on
her share being put up by the city of Strasbourg
syndicate; Alsace-Lorraine's territorial administratio
per cent ofthe project, as well as any cost overruns
other contributions. Work on the project began in
Strasbourg was on the way to becoming a major por
Alsace-Lorraine paid the greatest share of regulating th
of Strasbourg paid 700,000 marks of Baden's share;
pay the military treasury 2 y2 million marks for land
port facilities, and paid for the docks and warehouse
while supposedly encouraging Strasbourg's develop

30. Ibid., pp. 252-61; Max Schlenker, Die wirtschaftliche Entwick

1871 bis 1918 (Frankfurt a. M., 1931), pp. 192-98; Hermann Schuma
Eisenindustrie und die Moselkanalisierung (Leipzig, 1910), pp. 22f

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52 The Economic Consequences of Annexation
began work on competing port facilities across the river at Kehl. The
Baden railways gave the Kehl facilities favorable rates, which greatly
reduced Strasbourg's ability to compete for the south German and Swiss
markets.31 Strasbourg was clearly sacrificed to the economic interests of
other German states. Had Strasbourg remained a German city, she prob?
ably would have lost out to Kehl in the long run. What prosperity
Strasbourg did achieve between 1871 and 1914 came in spite of, rather
than because of, the policies of German economic interests.32
Strasbourg's economic history under the German regime simply adds
another chapter to the long story of economic discrimination found
throughout the Reichsland. Competition from Alsace-Lorraine posed a
threat to all German economic interests. The overall performance of
Alsace-Lorraine's economy under the German regime is difficult to
judge. Each sector ofthe economy demonstrated unique performance
characteristics, and new industries controlled by Germans tended to
perform better than old industries dominated by Alsace-Lorrainers.
Commercial development, measured by railway and ship-loading ton-
nage, outstripped industrial growth.33 Industrial development was sig?
nificant, but the manner in which it occurred probably benefited Ger?
mans more than Alsace-Lorrainers. The vast iron-ore deposits in Lor?
raine, Lorraine metallurgy, the important Alsatian potash deposits whose
exploitation began only in 1910, and the Alsatian oil fields at Pechel-
bronn, that is to say most ofthe new industry developed after 1871, was
financed and managed mainly by German or foreign interests.34 The
textile industry, already well established in 1871, remained in the hands
of Alsatian owners. But this segment ofthe territory's economy recorded
one ofthe worst growth records, and barely managed to hold its own.
A survey of Alsace-Lorraine's economy in 1914 indicates thriving new
industries controlled by German and foreign interests, and a stagnating
textile industry held by the Alsatians. Regardless of any gains made
toward the political integration ofthe Reichsland, the Alsace-Lorrainers
could hardly have been pleased with their economic situation. Ever

3i. August Schneider, "Geschichte der RheinreguHerung Strassburg-Sonderheim,"

Elsass-Lothringisches fahrbuch, n (1923), 72-107; Andre E. Sayous, "L'Evolution de
Strasbourg entre les deux guerres, 1871-1914," Annales dltistoire economique et sociale, vi
(1934), 130-31.
32. Ibid., pp. 124-31.
33. Barthelme, Courants commerciaux, pp. 34-35, 42.
34. See Laufenburger and Pflimlin, Cours d'economie alsacienne, 1, 48-52, for the potash
industry, and 1, 44-45, for the oil industry.

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 Dan P. Silverman 53
since the annexation, German manufacturing intere
best to thwart the economic integration of Alsace-
empire; integration meant competition.
Germany, of course, benefited from the develo
Lorraine's natural resources; the Reichsland might
supply and supplement for German industries. In t
German industrialists favored some degree of econo
the Reichsland. The main feature of Alsace-Lorraine's
nevertheless remained constant; economic integratio
because the Alsace-Lorrainers either desired it or de
when and if it suited the interests of German industria
Cut off from their French markets, the Alsace-L
wanted little more than access to the German market. T
to see themselves as Germans, insisting only that th
share in Germany's prosperity. Entrenched economi
many would have none of this; and so long as they resis
integration ofthe Reichsland, the entire process of p
and constitutional reform was jeopardized.

The Pennsylvania State University

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