Social Foundations of German Unification, 1858-1871, Volume I: Ideas and Institutions
444
Social Foundations of German Unification, 1858-1871, Volume I: Ideas and Institutions
444Hardcover
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Overview
Originally published in 1969.
The Princeton Legacy Library uses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These editions preserve the original texts of these important books while presenting them in durable paperback and hardcover editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.
Product Details
| ISBN-13: | 9780691642826 |
|---|---|
| Publisher: | Princeton University Press |
| Publication date: | 04/19/2016 |
| Series: | Princeton Legacy Library , #1839 |
| Pages: | 444 |
| Product dimensions: | 6.20(w) x 9.30(h) x 1.30(d) |
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The Social Foundations of German Unification 1858-1871
Ideas and Institutions
By Theodore S. Hamerow
PRINCETON UNIVERSITY PRESS
Copyright © 1969 Princeton University PressAll rights reserved.
ISBN: 978-0-691-05174-1
CHAPTER 1
The Economic Environment
It was March 1858. Germany lay in the grip of an economic depression. A boom built on paper profits and wild hopes had just collapsed, bringing in its wake panic, bankruptcy, unemployment, and hunger. In the pervasive mood of bitter disillusionment there was little inclination to commemorate those other March days of ten years before, when the nation had risen in revolution to seek security through freedom and unity. But in Frankfurt am Main an anonymous publicist contrasted the spirit of the spring of 1848 with that which he felt about him now: "Our nation of 'forty million dreamers and idealists' has learned a good deal in the hard school of reality, and it has also fortunately forgotten some things. Above all, it has become more practical. Romanticism and sentimentality, transcendental philosophy and supranaturalism have now withdrawn from the public life of our people into private life. For realism and steam, machines and industrial exhibitions, the natural sciences and practical interests now fill the great market place of life and work at the humming loom of our time."
The Germany which was about to enter upon a new period of political turmoil was indeed less romantic and sentimental, less interested in the transcendental and supranatural. The late 1840's with their famine, depression, revolution, and civil war had been followed by years in which the efforts of the nation had turned from politics to economics. It was as if the popular energies frustrated in the task of national unification had now concentrated on the creation of material well-being. The 1850's became the period of a great capitalistic boom, displaying all the characteristic traits of an expanding industrial economy. A bold program of railroad construction created the foundations of a modern transportation system. Mines, foundries, and factories proliferated in an atmosphere of high profits and higher expectations. Lending institutions organized on the joint-stock principle began to compete with older private banks, providing a significant volume of risk capital for industrial undertakings. On the stock exchange new issues were oversubscribed five, ten, and twenty times by jobbers who knew that a show of spurious confidence would enable them to sell their shares to a gullible public at inflated prices. The annual report of the Cologne chamber of commerce for 1855 boasted that "probably in no country on the Continent has industry made more rapid progress these last years than in the Zollverein. A few more years of peace and unrestricted exercise of all our forces in this field, and the Zollverein will be in a position of complete equality with France and Belgium." Even three years later, after the bubble had burst, the liberal economist Max Wirth looked back with pride at what German industriousness had achieved:
The stagnation, the utter paralysis of business in the years 1848, 1849, and 1850 had ended after the fall of the French republic. The totally depleted warehouses had to be filled again, and when at the same time the effects of the introduction of California gold and of the low discount rate made themselves felt by way of England, there gradually developed a spirit of enterprise more powerful than any experienced in Germany up to that time. And although now the magnificent wave of expansion has to be paid for with a business depression, its appearance was so beautiful that we can never forget it. The steamboat traffic on the rivers, the shipment of goods on the railroads, the construction of ships and machinery grew at an extraordinary rate. Railroads and machine shops, coal mines and iron foundries, spinneries and rolling mills seemed to spring out of the ground, and especially in the industrial regions of Saxony, the Rhineland, and Westphalia smokestacks sprouted from the earth like mushrooms.
There were those, to be sure, who had recognized the risks inherent in the mania of promotion and speculation. About eighteen months before the crash, the eminent financier David Hansemann warned the directors of the Disconto-Gesellschaft that "we are at present on the road leading to a not insignificant crisis. The gambling fever in shares is more and more affecting almost all classes of the population. Almost everybody is buying, not to retain, but to sell again at a profit after the first installment payment or even earlier, if possible. However impressive the rise in prosperity may be, not enough new capital is being created to absorb this mass of new values in any sound fashion, since nearly every day creates not a few but very many millions of these values suitable for speculation, and the people who have thus acquired or are still acquiring a large fortune are insatiable." The danger signs soon began to multiply. The price of coal reached its highest point in 1856 and then began to decline, while iron passed its peak even earlier. It was disturbing that the shares of an important enterprise like the Darmstädter Bank, which stood at 417 on July 1, 1856, fell by the end of the year to 346. Those of the Disconto-Gesellschaft went from 146 to 122, and those of the Cologne-Minden Railroad from 162 to 156. On September 22 the conservative state-controlled Preussische Bank, sensitive to every shift in the wind, raised its discount rate from 5 to 6 per cent, keeping it at that level for almost half a year before reducing it again. An important Hamburg firm reported in April 1857 that a vague uneasiness seemed to prevail on the stock exchange, that despite the sizable importation of silver the discount rate remained at a high 7 per cent, and that merchants were encountering difficulty in selling their commodities because of the shortness of credit.
What finally toppled the house of cards was the economic crisis which started in the New World and then overwhelmed the Old. The Swabian publicist A.E.F. Schäffle compared its course with that of an elemental force of nature:
The avalanche from the banks of the Ohio, where it was set in motion by the insidious activities of a few speculating rascals, advanced with devastating violence irresistibly eastward. It crushed the Atlantic states of the great republic, and after a mighty leap across the ocean fell upon England and the mainland of the European continent, reaching as far as the plains around the Baltic Sea (North Germany, Poland, Scandinavia). Everywhere it has brought all branches of business more or less to a standstill. Like a thief in the night it has surprised the world of speculation and production which had climbed to dizzying heights. In a time of the most profound political peace, after a generally rich harvest, that same edifice collapses which in years of scarcity and of a great war had towered on high like a fairy castle springing out of the wilderness. Its rise as well as its fall border on the incredible.
Admittedly, not all parts of Germany were equally affected by the financial collapse. Agricultural regions like Bavaria or East Prussia were less vulnerable than the industrialized Rhineland or Saxony, while most factory towns were not as hard hit as mercantile Hamburg, Leipzig, and Frankfurt am Main. Yet when wholesale prices were falling drastically, some by nearly a third; when shares on the stock exchange were selling for as little as half of par; when the foreign trade of the Zollverein was declining by 300,000,000 marks; when the nominal value of the national wealth was estimated to have shrunk by 25 per cent or more, everyone was bound to feel the hard times directly or indirectly.
The economic depression was all things to all men. Baron Heinrich von Testa, the Austrian minister to the Hanseatic cities, wrote to his government during the days of panic in November 1857 that the ultimate cause of the catastrophe was the "abandonment of patriarchal morality, that weakness for senseless luxury, that resentment of wealth engendered by pride, that overstimulation of the spirit of speculation." The daughter of the eminent Hamburg merchant Justus Ruperti, on the other hand, was convinced that the disaster was an expression of divine displeasure: "It is surely the punishment for the excessive luxury and presumption of our city in recent times. For it certainly cannot be denied that they have been very widespread. Just think of the luxury of the parties and costumes of last winter. The contrast with this winter is truly frightening."
Across the North Sea in England, Marx and Engels were inclined to read a dialectical rather than providential meaning into the economic collapse. Although his father's firm in Barmen was close to bankruptcy, Engels exulted at the prospect of exchanging his life as a businessman malgrè lui for that of a revolutionary leader. He found it "absolutely impossible to think of anything except the general crash. I could neither read nor write." The time for action was finally approaching. "Everything is now at stake. Therefore my military studies will at once become more practical. I shall immediately devote myself to the study of the existing organization and basic tactics of the Prussian, Austrian, Bavarian, and French armies, and beyond that only to riding, that is, fox hunting, which is the only real school." At the same time Marx, more comfortable at his desk than on horseback, was preparing for the impending crisis of capitalism by dropping his hack work for the New American Cyclopaedia and returning to theoretical analysis: "I am working like a madman day and night on the synopsis of my economic studies, so that I will at least have the outline clear before the deluge." The deluge never came, but the synopsis on which he worked with such intensity appeared two years later as Zur Kritik der politischen Ökonomie.
For most Germans the depression meant above all business failures, lost savings, falling incomes, and disappointed hopes. What made it even worse was that there appeared to be no rational explanation for the disaster which had overtaken them. "All relationships seemed to be topsy-turvy," puzzled the Preussische Jahrbücher. "Amid supplies of merchandise greater than ever before, amid rich harvests there was universal privation; in the presence of excellent means of transportation there was no exchange of goods anywhere; notwithstanding large imports of precious metals there was everywhere a shortage of money; despite the most extensive credit institutions there was a rate of interest higher than any the century had known."
The financial crisis ended even more abruptly than it began. The stock market, which had been declining slowly but steadily since the summer of 1856, began to fall precipitously in September 1857. Two months later it reached bottom. But by the end of the year it had managed to stage a mild recovery, and the worst was over. The movement of the discount rate of the Preussische Bank during those critical weeks told the story. It had risen to 7.5 per cent on November 7 at the height of the panic, was then reduced to 6.5 on December 21, on January 5 it fell again to 5.5, then on January 16 to 5, and finally on February 2 it was set at 4 per cent, the lowest point in about a year and a half. Yet the economy at large was slow to respond to this display of revived confidence by the banking community. There had been too many bitter losses and thwarted hopes. The index of wholesale prices for articles of commerce (1913 = 100) went from 99.5 in 1857 to 84.2 in 1858, then up to 86.0 in 1859, and 94.2 in i860. The foreign trade of the Zollverein, which had totaled 2,988,000,000 marks in 1857, declined to 2,688,000,000 in 1858 and 2,661,000,000 in 1859, before rising again to 3,018,000,000 in i860. The turnover of the Preussische Bank, amounting to 2,667,000,000 marks in 1857, stood at 2,463,000,000 in 1858, 2,448,000,000 in 1859, and 2,298,000,000 in i860. During the years 1855-57, 67 joint-stock companies had been formed in the Zollverein in mining, 43 in metallurgy, and 29 in textiles. During 1858-60 the corresponding figures were 9, 2, and 1.
For that matter, the entire decade following the crash was a period of economic insecurity. Just as the political stagnation of the 1850's had coincided with a financial boom, so the achievement of national unification during the 1860's took place in an atmosphere of recurrent business recessions. No sooner had the effects of the crisis of 1857 begun to wear off, than the outbreak of the war in Italy, which threatened to involve the states of the German Confederation, produced a minor depression. Prussian treasury bills which in January 1859 sold for 83.75 sank in the course of the next few months to 72, while the 4.5 per cent government bonds went from 101 to 86.5. By the end of the year the money market had recovered, but in view of the tense international situation a feeling of uneasiness persisted. Then, after a period of moderate expansion, came another setback in the wake of the Danish War of 1864. Paradoxically, economic conditions remained fairly stable as long as the conflict was in progress. But once victory had been achieved, the outflow of silver became so pronounced that on September 8 the Preussische Bank was forced to raise its discount rate from 5 to 6 per cent and, on October 6, to 7 per cent. Other lending institutions raised their charges to still higher levels, and it was not until December that the cost of credit began to decline.
The most severe financial crisis of the 1860's coincided with the coming of the Seven Weeks' War, although the disintegration of the German Confederation intensified rather than initiated the economic difficulties. The end of the American Civil War and the renewal of the Zollverein in 1865 stimulated the demand for credit at the very time when the Paris Bourse was buzzing with the news of the Mexican fiasco and several important London firms were declaring bankruptcy. The threat of an Austro-Prussian conflict completed the disruption of the money market until the reorganization of Germany had been achieved. Between the middle of March and the end of May 1866 the discount rate on the Berlin stock exchange rose from 6 to 9 per cent, in Hamburg from 4 to 8, and in Frankfurt am Main from 4.5 to 7 per cent. Shares of the Preussische Bank fell from 155.5 to 115, of the Rhenish Railroad from 118 to 94, of the Schaaffhausenscher Bankverein from 126 to 110, and of the Kölner Bergwerksverein from 64 to 57. The Gleiwitz chamber of commerce in its report for 1866 described how "in the second quarter conditions became more and more troubled in every respect, leading naturally to continually falling prices. But when in the month of June the outbreak of war became unavoidable and imminent, business came to an almost complete standstill. The short duration and fortunate outcome of the war could not effect the immediate revival of trade." Long after hostilities had come to an end, economic progress remained fitful. Diplomatic tension between France and the North German Confederation, labor unrest in the Rhineland, famine in East Prussia, all had an unsettling effect on the world of finance. Only with the victorious outcome of the Franco-Prussian War could the government in Berlin justly claim that "the entire economic life in Prussia rests on a healthy and sound foundation." In 1871 as in 1849 the end of political upheaval introduced a period of business expansion.
While the money market was particularly sensitive to the diplomatic crises and military struggles of the years following 1857, the rate of return on industrial investment was also bound to be affected. It is true that the economy as a whole continued to grow, but the dramatic gains of the boom years could not be matched. Of the 79 new enterprises in mining and metallurgy formed in Prussia between 1851 and 1870 with a capitalization of 275,400,000 marks, no fewer than 59, representing an authorized capital of 212,100,000 marks, were established in the period 1852-57. The production of pig iron in the Zollverein increased in value by 173 per cent between 1848 and 1857, climbing from 24,606,000 to 67,228,000 marks, whereas between i860 and 1870 it advanced 103 per cent, from 52,287,000 to 106,365,000 marks. Figures for the output of foundries including nonferrous metals were even less favorable. During the period 1848-57 the value of Zollverein production rose 168 per cent, from 44,329,000 to 118,937,000 marks. Between 1860 and 1870, on the other hand, the growth was only 74 per cent, from 101,412,000 to 176,457,000 marks.
(Continues...)
Excerpted from The Social Foundations of German Unification 1858-1871 by Theodore S. Hamerow. Copyright © 1969 Princeton University Press. Excerpted by permission of PRINCETON UNIVERSITY PRESS.
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Table of Contents
- Frontmatter, pg. i
- Preface, pg. v
- Contents, pg. ix
- 1. The Economic Environment, pg. 3
- 2. The Social Structure, pg. 44
- 3. Class and Reform, pg. 84
- 4. The Liberal Creed, pg. 135
- 5. Conservatism And The Old Order, pg. 181
- 6. The Emergence Of Socialism, pg. 222
- 7. Status And Power, pg. 269
- 8. Civic Organizations, pg. 308
- 9. Public Opinion, pg. 359
- Alphabetical List of Cited Works, pg. 401
- Index, pg. 427