The Economy

The period directly after unification was one of economic prosperity for Germany. The Crash of 1873
slowed this growth but the 1880s saw the economy pick up again. Large sums of money were
invested in technological development. Germany led the way in the sciences and her industry
enthusiastically adopted the new scientific developments of the period.

Successful innovations included:

● The invention of the internal combustion engine (1876)

● Electric train (1879)
● Telephone network introduced into Berlin (1881)
● Four Wheel Cars were patented by Daimler and Benz

As a result production increased dramatically in the textile, coal and steel industries. By 1900
Germany rivalled the more-established British economy as Europe’s largest.

The table below shows some of the impressive growth in these years:

1875 1900

Railways (miles) 27,970 46,500

Coal (tons) 47,800,000 142,650,000

Iron (tons) 1,759,000 7,550,000

Germany's population also expanded rapidly, growing from 41 million in 1871 to 50 million in 1891.
The rapidly industrializing economy changed the way this expanding population earned its
livelihood. By the 1880s a majority of Germans were living in towns rather than in the countryside.
There was a continued flight of people from the rural East to the towns of the west. This rapid pace
of industrialisation contributed to the growth of the SPD.

A major economic issue was the question of tariffs. Traditionally Prussia and Germany had favoured
Free Trade. Big business and the large landowners wished to see their introduction. Tariffs were
opposed by the National Liberals. In 1879 in response to a well organised political pressure and
competition from cheap agricultural imports, Bismarck abandoned Free Trade and introduced tariffs.

The 1879 Tariff Act

In July 1879 a tariff bill passed through the Reichstag and duties were imposed on imports. The
political results were far reaching: Bismarck had now firmly committed himself to the conservative
camp, and the National Liberal Party splintered. In that sense, the ‘liberal era’ was effectively at an
end. Historians continue to debate the economic effects of the abandonment of free trade.
Arguably, protective tariffs consolidated the work of unification by drawing north and south
Germany closer together and accelerated the growth of a large internal market. Tariffs did serve to
protect German jobs.

Part of Bismarck’s address to the Reichstag in May 1879:

The only country [which persists in a policy of free trade] is England, and that will not last long.
France and America have departed completely from this line; Austria instead of lowering her tariffs
has made them higher; Russia has done the same…

Therefore to be alone the dupe of an honourable conviction cannot be expected from Germany
forever…

Since we have become swamped by the surplus production of foreign nations, our prices have been
depressed; and the development of our industries and our entire economic position has suffered in
consequence. Let us finally close our doors and erect some barriers… in order to reserve for German
industries at least the home market, which because of German good nature, has been exploited by
foreigners.

Why did Bismarck move to protectionism?

- Trade protectionism was established by Bismarck as he wanted to enhance the economic

unification within the country, by introducing tariffs he encouraged the drawing of the
North and South closer together and he also accelerated the growth of a large internal
market.
- Furthermore there was a surplus of production of foreign nations depressing the prices in
the internal Prussian market
- Bismarck wanted to reserve the development and flourishing of German industries