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Capitalist transformation without political participation: German capitalism in the first half of the nineteenth century

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Abstract

The paper analyzes the political economy of capitalist transformation in nineteenth century Germany. The emergence of capitalism after 1806 gives an example that economic freedom can precede political freedom, leaving the political power of the “dominant coalition” intact. The paper argues that the German capitalist transformation was instigated by competition among the European states. Primarily it was conducive to the monopolization of the coercive power of the state. As a result competition among the states drove a wedge between the interests of the monarch and his supporting dominant coalition (landed gentry). The increasingly independent public administration in Prussia which was influenced by Adam Smith’s liberal ideas organized a political bargain which established economic freedom in various sectors but took the economic interests of the landed gentry into account. In various aspects the sweeping institutional change was Pareto-superior for groups, which made capitalism also acceptable for the elite group.

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Notes

  1. Compare Streeck (2013) for a renewed argument that democracy is at variance with capitalism. Schumpeter (1987) supports the idea that political and economic orders are independent from each other, which is strongly rejected by Eucken (2004, 182).

  2. For an analysis of the post-revolutionary restoration period in France which has brought about a new elite group formed by the nobility and the land-owning bourgeoisie (“notables”) see Haupt (2006, 1989). After the revolutionary shock, the nobility managed to retain much of the confiscated land, while Napoleon’s legislation constrained the recently attained freedom movement of the workers by re-establishing the so-called working book (“livret”) in 1803; coalitions for workers remained forbidden until 1864; see Haupt (1989, 37 and 43).

  3. See Congleton (2011) who supports the view that constitutional change in Germany resulted from constitutional compromises “rather than imposed by victorious armies” (ibid. 483–484).

  4. See Dedinger (2006, 231) and Grimmer-Solem (2014).

  5. See also Zweynert (2011).

  6. Since only men aged 25 or older had the right to vote, the fast growing and younger working class was underrepresented in the parliament but nevertheless provided a strong faction in the Reichstag after 1890; in 1912 the SPD (German Social Democratic Party) became the largest faction. In the decades after 1871, the voter turnout rose to more than 80 % and a political public discourse which is an element of vivid democracy was present as in other Western democracies. It is therefore a misperception if the Kaiserreich is proclaimed as a perfect example of an authoritarian political order; for a re-assessing see Grimmer-Solem (2014) and Kroll (2013).

  7. For the historical description, see Wehler (2008, Vol. I).

  8. See Gray (1986, 16).

  9. Inherited manorial subordination must not be mixed up with serfdom in the middle ages.

  10. According to Wehler (2008) the variety of social conditions was one of the reasons why a French Revolution did not occur in Germany; since dependency differed largely across regions ranging from serfdom in the East to rather mild impersonal rent duties in the West and South, peasants did not form a coherent and solidly united class.

  11. Guilds had also a political dimension because it were the guilds through which the citizens participated in governing the cities in medieval towns.

  12. See Gray (1986, 24). The guilds system of the late eighteenth century apparently was more flexible than usually considered. In Saxony it was formally abolished rather late (in 1848) but formed the basis for a new industry that successfully integrated into the market, which is why Saxony became a center of industrial development based on consumer products.

  13. See Reckendrees (2010, 55).

  14. See also Wolf (2008).

  15. Acemoglu et al. (2011) apparently are not aware of the crucial importance of the “Rheinschiffahrtsakte” which created a transnational capitalist market in Western Europe.

  16. For a general view on competition between the states see Bernholz and Vaubel (2007).

  17. See the in-depth study of Koselleck (1989).

  18. Formally, they became subjects of the remaining sovereigns but retained a privileged legal and social status up to the 1848 revolution.

  19. See Wischermann and Nieberding (2004, 57–65).

  20. Since the political influence of the nobility was severely reduced by the French absolutist regime, no allodification took place which transformed feuds into property rights in France.

  21. Nevertheless, the nobility regained much of the confiscated land after the revolutionary period when Louis XVIII came into power (Haupt 1989, 37).

  22. This is the famous verdict of Marx/Engels (1848); in contrast to this view, Haupt argues that the importance of land instigated a capitalist order based on small-sized firms which became the point of departure for modern capitalism in France.

  23. See Acemoglu and Robinson (2012, 85) as quoted above.

  24. This finding differs from Marx and Engels’ (1848) interpretation of the French Revolution; according to their diagnosis, the new bourgeois class deposed of the nobility and prepared the ground for introducing capitalism. However, a capitalist bourgeoisie developed in France many decades later which paralleled the development in Germany. Besides, the motivating forces of the French Revolution also encompassed parts of the nobility (which opposed to the absolutist regime of Louis XVI), the lower part of the clergy, the peasants which radicalized in the second part of the French Revolution after 1792, and the city proletariat in Paris which was ready to use violence. Hence, the French Revolution can hardly be interpreted as the revolution of the bourgeoisie against the nobility.

  25. See Koselleck (1989, 167, 170).

  26. See Wischermann and Nieberding (2004, 82); for a highly-informed analysis of the institutional change in the Western territories of Prussia see Reckendrees (2010).

  27. North repeatedly stresses the importance of ideas and ideologies for institutional change; for instance, see North (1990, 86).

  28. See Fehrenbach (1993, 57).

  29. See Kant’s discussion with the Prussian king Frederick, who forbade written criticism of the church despite his liberal stance in many other affairs; see also Clark (2008, 293–332).

  30. One famous example is Friedrich Schiller’s escape from the absolutist state of Württemberg to the tiny states of Thuringia where the dukes guaranteed freedom of opinion and speech.

  31. See Kraus (1776) quoted by Wehler (2008, Vol. I, 405).

  32. See Priddat (1998) and Gray (1986) for the early reception of Smith in Göttingen and Königsberg.

  33. Only in a few archbishoprics which were dissolved in 1803, secular and clerical powers have not been separated.

  34. See also Kocka (Ed. 1995).

  35. Clark (2008) revises this depiction of Prussia which traces back to Marx, Veblen and Churchill.

  36. Among these journals, the “Berlinische Monatsschrift” as well as the “Allgemeine Deutsche Bibliothek” organized the public discourse; see also Gray (1986, 29).

  37. See Wischermann and Nieberding (2004) who argue that in the late eighteenth century, the Prussian state generously allowed the foundation of firms and implicitly opened market access (ibid., 63). Occasionally, the Prussian state protected firms from competition if they installed innovative technologies such as spinning machines (e.g. the patent for the Brüggelmann spinning company in Ratingen).

  38. This answer by Metternich’s assistant, Friedrich von Gentz, was reported to Robert Owen.

  39. Therefore it was a classical Malthusian subsistence crisis brought on by rapid population growth outstripping the productive capacity of the land.

  40. See Rodrick (2007, 62–63).

  41. See Gray (1986, 16).

  42. See Rasch (2006).

  43. See Koselleck (1989, 321–322); pointing to Adam Smith, Prussian entrepreneurs viewed themselves as “victims of abstract theories that are not confirmed by reality”, while Hardenberg argued that “public administration has to explain liberal economic policy to the public but cannot put the principles of free trade up for discussion” (ibid, own translation.). Industrial capitalists in Berlin praised the British tariff system and export subsidies and bitterly asked: “Will our government preserve our existence or is our destruction a done deal?” (ibid. 321, my own translation). As illustrated by historical documents, German capitalists were unhappy about the fact that British industrial policy had a blind eye regarding the Smithian policy rules they had to obey.

  44. See Dedinger (2006, 231).

  45. The founding members were Prussia, Hesse-Darmstadt, Hesse-Kassel, Bavaria, Württemberg, Saxony and the states of Thuringa; Baden and Hesse-Nassau joined the Custom Union in 1835.

  46. In 1868, all remaining obstacles to free trade were removed. This is probably the main reason for the economic prosperity of the region rather than the French occupation as stated by Acemoglu et al. (2011, 2009); while the French occupation isolated the region from the English market, the Prussian regime introduced a free trade regime that promoted economic growth in the region to the levels of the Netherlands and Britain. Hence, the argument by Acemoglu et al. (2011, 2009) that the civil code introduced by the French occupation and retained by the Prussian governments has made the difference does not hold.

  47. Koselleck points to the local opposition against the abolishment of the guilds, which failed due to the decisiveness of the state; see Koselleck (1989, 591).

  48. Recently Pfister et al. (2012) have raised the question whether pauperism was only a local rather than a general phenomenon of that time; according to wage data average wages for industrial workers were rising in Germany even in the first half of the nineteenth century. This result is puzzling, given the wide discussion of pauperism in that time.

  49. Of course, the ideological differences are prevailing; as Goldschmidt in a comment of an earlier version of this paper agued, Adam Mueller favored a holistic approach to society which stressed the necessity of social inclusion of all layers of society.

  50. As Dedinger puts it, “imperial government ‘toyed’ with protectionism rather than decidedly embraced it” (Dedinger 2006, 233).

  51. For a theoretical investigation of the relationship and tensions from an evolutionary point of view see Wegner (2012) and Wegner (2008).

  52. However, the Kaiserreich did not lag behind the standards of modernity of that time; see Kroll (2013).

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Acknowledgments

For valuable comments on an earlier version I wish to thank Michael Baurmann, Peter Bernholz, Charles B. Blankart, Geoffrey Brennan, Roger D. Congleton, Lars Feld, Robert Fritzsch, Alan Hamlin, Charles B. Blankart, Nils Goldschmidt, Erik Grimmer-Solem, Christian Kirchner, Hartmut Kliemt, Stefan Kolev, Alfred Reckendrees, Martin Uebele and Joachim Zweynert; particularly Alfred Reckendrees’ and Erik Grimmer-Solem’s historical comments were helpful.

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Wegner, G. Capitalist transformation without political participation: German capitalism in the first half of the nineteenth century. Const Polit Econ 26, 61–86 (2015). https://doi.org/10.1007/s10602-014-9171-1

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