INTRODUCTION

Although we are examining the German Empire from the late 1800s, we thought that an introduction here would be appropriate.

At the beginning of the 1800s, Germany existed as so-called Holy Roman Empire. Basically, it consisted of 300 odd states, which were in no way linked together. Since numerous tolls and different currencies existed in each state, commerce and business were extremely difficult and expensive to conduct. Most of the industry and commerce in Germanic territories were controlled by traditional guilds. These were strongly opposed to factory construction and unrestricted commerce, thus slowing down the unification of Germany.

In the Austro-Prussian War of 1866, Prussia defeated Austria. Otto van Bismarck, the head of Prussia, grouped the states north of the Main River in a new North German Confederation led by an expanded Prussia.

Figure 1. The unification of Germany 1866-1871. Prussian expansion, Austrian expulsion from the old German Confederation, and the creation of a new German Empire all went together.

For the first time, this single economic entity experienced an economic boom, since all internal trade barriers were lifted. The new, single currency was established, and Germany was able to get the capital for building railroads and other construction projects. This caused intense financial speculation, resulting in the stock market crash in 1873.

GERMAN EMPIRE

Despite the crash and several subsequent periods of economic depression, Germany's economy grew rapidly. By 1900 it rivaled the more-established British economy as the world's largest. German coal and steel production surpassed British production by far.

Figure 2. German coal production, about one-third of Britain's in 1880, increased six fold by 1913, almost equaling British yields that year.

Because industrialization came to Germany much later than it did in Britain, German economy was not significant until the late nineteenth century. Germany's industrialization began with the building of railroads in the 1840s and 1850s and development of iron, steel and coal mining. This, so called First Industrial Revolution, was followed by the Second Industrial Revolution, that was the growth of chemical and electrical industries. Because of great investments into research and development, Germany was producing half the world's electrical equipment, thus becoming the continent's industrial giant. German population also expanded rapidly, growing from 41.0 million in 1871 to 49.7 million in 1891 and 65.3 million in 1911. Many cities, including Berlin, tripled or quadrupled in size.

HITLER’S GERMANY

Born in Austria, Adolf Hitler became convinced that Slavs and Jews were responsible for the troubles of Austria and Germany. In the years of prosperity and relative stability between 1924 and 1929 Hitler concentrated on building the Nazi party. In 1929 the Great Depression began striking down economic prosperity.

Figure 3. In the 1930s, many people starved to death, like this little boy in the picture above.

Unemployment jumped from 1.3 million to 5 million and industrial production fell by one-half. The economic crisis contributed to Hitler’s rise to power.

Figure 4. Adolf Hitler and Hermann Goring greet the participants in the parade on January 30, 1933, when Hitler was legally appointed Chancellor.

Hitler’s promise of “work and bread”, was delivered. He launched a large public works program and lifted Germany out of depression by building superhighways, offices, sports stadiums and public housing, though most government spending began to concentrate on the military.

After the Allies won the war in 1945, the country's economy was shattered. Whatever survived was taken by the Allies.

Figure 5. Supreme Allied Commander Dwight Eisenhower inspects the valuable art. Such stolen valuables from conquered European countries contributed to the increased wealth of the German Empire

However, Germany was able to lift itself back on its feet after receiving powerful support from such sources as the European Recovery Program, known as Marshall Plan, production for Korean War, and German readiness to work hard for low wages.

Figure 6. Most German cities, like Dresden lay on ruin. Marshall plan was directed at getting the German economy back into shape.

MODERN TIMES

Today, Germany has one of the world's biggest economies and most dominant central banks. At the core of Germany's success and influence lies it currency, the deutsche mark, which gave West Germany's its international financial and economic success.

FYI: The Deutsche mark has become the second-largest currency component of global monetary reserves, second only to United States dollar.

Figure 7: The Deutsche Mark.

In 1991, in Maastricht, Germany played a major role in shaping currency provisions, which would assure a stable European currency. In 1994, it led the creation of the European Monetary Institute. Today, Germany is leading the final stage of monetary reform in the European Community - a single European Central Bank, a European System of Central Banks, and a common currency, the Euro.

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