The relentless revolution: a history of capitalism (27 page)

An inquisitive history of capitalism was slow to be written because inevitability hung over such transformations as those of horse-drawn railway cars in coal mines to railroad locomotives chugging across the world’s continents. People found a name for this unabating improvement. They called it progress. Earlier “progress” had just indicated going from one place to another, as in “progressing across the countryside.” Now it gathered new meanings. Progress flipped the value assigned past and future. Change no longer frightened; it confirmed progress.

Within twenty years of the Crystal Palace Exhibition Germany and the United States overtook the great pathfinder to take the lead in the insistent march of capitalism. The volume of American steam power passed that of Great Britain in 1850 and had far outdistanced it by 1870, with Germany following within a decade. To take the measure of steel production as another measure, the United States surpassed Great Britain in 1886; Germany did the same seven years later. Other indicators followed the same trajectory.
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And Germans and Americans did more than belch out smoke and steam. They started a new wave of innovations in chemistry, electricity, and internal combustion machines. For the first time the front-runner that had astounded the world for two centuries lagged behind—not just in productive capacity but in innovation. Latecomers to industry had the advantage of newer equipment and untapped capital. Their farms were still shedding workers to meet the labor needs of industrialists. It may seem a bit perverse to drop Great Britain just as it reached the zenith of its technological achievements, but this history is following the relentless revolutions of capitalism rather than cataloging its various successes.

Germany and the United States are so unalike that their economic successes clinch the larger point: Once the key elements of industrialization were exposed, they could be adapted to different settings and cultures. The successful economic trajectory of two such dissimilar countries cautions against relying on one formula for economic success. But passing up the pacesetter took some special gifts. The United States was an obvious contender for economic preeminence. During its colonial tutelage to Great Britain, colonists had shown an impressive capacity to fit their economic ventures into the larger scheme of European commerce. Independence liberated them from Britain’s prescribed channels, freeing their commercial smarts as well. Germany too possessed great assets for economic development if they could be dug out from the thick layers of tradition and inherited privilege. German strengths were both material and cultural: great natural resources, an educational system that fostered science and technology, and a work force proud of its skills and disciplined habits.

For the United States the push to advance economically became an intrinsic part of its emerging national character. Americans celebrated their enterprise and efficiency as a way to differentiate themselves from decadent, feudal Europe. Bereft of any strong aristocratic traditions, they valued audacious qualities, often exaggerating the grip of the dead hand of the past on countries abroad. At the first census of 1790, a population of almost four million men and women, mostly young and inured to work, lived on the edge of the most fertile land on the globe. On their way to this national domain, they would discover coal, iron, gold, and oil in great abundance. That first census also counted more than three-quarters of a million enslaved persons. The value of slaves soared with the invention of the cotton gin, which made profitable the short-staple cotton grown throughout the region. Any hopes spawned by the ideals of the Revolution that slavery might decline throughout the South died.

In 1789 the United States adopted a constitution designed to create a single nation from its thirteen semiautonomous states. In that same year Germany was more a name than a country. It referred geographically to more than three hundred separate kingdoms, principalities, and municipalities, including Austria. For the United States nationalism abetted economic development while in Germany the task of modernizing the many different German economies supplied the means for creating a nation. Americans suffered from having been colonies, accustomed to playing a subordinate role to the mother country. Germany bore the burden of fragmentation long after its neighbors—England, France, Belgium, the Netherlands, Russia, Spain, and Portugal—had acquired strong national identities. Nationalism resonated through the nineteenth century. Different as they were, both the United States and Germany embarked on nation building. This drive gave to economic endeavor a moral, romantic, and aesthetic appeal.

German nationalism owed a lot to the French Revolution and its Napoleonic aftermath. Napoleon had honed the revolutionary army into a mighty military force. He reformed institutions wherever he conquered, carrying his modernizing impulses along as his army marched across Europe in the first decade of the nineteenth century. He erased the Holy Roman Empire, which had tied together a loose confederation of German-speaking Central European states since 800. He formed in its place a confederation of thirty-nine states, including Austria. Napoleon’s legacy and the name of that small town in the Austrian Netherlands where he met defeat would long be remembered.

After Waterloo, a coalition of European powers met in Vienna and created a peculiar entity called the Concert of Europe. The French Revolution’s excesses had been so frightening that even former enemies cooperated to defeat Napoleon. The exhausted, participating countries in the concert basically used diplomacy to shuffle lands around to achieve some kind of balance of power. A century of hostilities made peace seem worth a few sacrifices. The British succeeded in getting the others to condemn the slave trade, but the major purpose of the concert was to calm the Continent down. There was no returning to the past, so the job of conservatives was to maintain the status quo that they had established. They blamed the radical ideas of the Enlightenment for fomenting the French Revolution. To them, the rallying cry of “Liberty, fraternity, and equality” represented an attack on religion, the family, and standing authorities. The lesson was clear: People needed an iron glove, and the hand within it had best be one attached to a distinguished heritage. The postrevolutionary conservatives didn’t want to replace one set of ideas for a better one; they wished to eliminate ideas from politics altogether. Far better to rely on customs and customary habits of obedience.

On the other side of the learning curve, European liberals cherry-picked those novelties from the creed of the French Revolution that fitted well with their notion of reform. They detested Napoleon’s megalomania but applauded his rationalization of the law. They championed natural rights and added to them a commitment to free trade and economic development. They also supported a broader suffrage to counteract the influence of the aristocracy newly empowered by Napoleon’s defeat. Round two of the confrontation between stalwart defenders of the status quo and enlightened representatives took place in Germany. Only now it wasn’t a contest between two sets of ideas but rather arm wrestling between liberals and the aristocrats who had engineered the Congress of Vienna.
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Germany, especially the kingdom of Prussia, which gained two cities and the iron-rich Ruhr Valley, came out of this extended European trauma very much on the winning side. Still, like Italy, “Germany” represented an agglomeration of duchies, principalities, and independent cities.

Economic Development and German Nationality

It was crystal clear that the separate German states suffered economically from being a crazy quilt of states rather than a group under a national blanket. The 350 German principalities lacked uniform weights and measures, excise duties, road rights-of-ways, and commercial practices, not to mention currencies, banking institutions, and toll-free transportation. Rather than promote commerce, the autonomous cities acted as administrative centers for either the church, a university, or a princely court. Armies, especially in Prussia, commanded a large proportion of public funds, and everywhere administrative costs were bloated. While improvements in British agriculture steadily raised the people’s standard of living throughout the eighteenth and nineteenth centuries, impoverished serfs still did the farming in most of Germany.
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The French had eliminated the old feudal dues that bore down on their peasantry in one spectacular night of legislation. Ending serfdom in Germany took a lot more time—in 1807 for Prussia, but not until 1832 in Saxony. In Prussia 65 percent of workers still tilled the soil, so restructuring rural landholding was tantamount to transforming the entire society. Looking enviously at agricultural gains in England and the Netherlands, where only 40 percent tilled the soil, Prussian landlords began to think that free labor might improve agricultural output. The government passed laws freeing all serfs while compensating landlords for their loss of income from fines and rents. The reform gave the land of those serfs who didn’t have enough to farm effectively to the landlords as well. It will not shock modern readers to learn that landlords, who controlled the government, took hundreds of thousands of acres from these newly freed serfs, who were left to fend for themselves as agricultural laborers.
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When the transition from serfdom to free labor was complete, southwestern Germany retained its tradition of small farms. Even in Prussia, the number of farms doubled, going from fewer than a million in 1816 to more than two million in 1858. Those former serfs with enough land to farm worked for themselves while the great Prussian estates were now worked by landless workers. Not until the end of the century did harvest yields markedly increase.

German urban centers were hardly more advanced than the countryside. Guilds suppressed competition and retained the capacity to repel innovations until well into mid-century. Formidable obstacles prevented people, products, and ideas from moving about through these many jurisdictions. Only a common language and the memory of having once been together in the Holy Roman Empire supported the dreams of a united Germany, but that was enough for the leaders of Prussia, whose military made it the likely champion of unification. Prussia had the coal, iron, investors, and political will to sponsor economic development. Its leaders realized that the road to nationhood lay through commercial development even though the Junker aristocrats loathed the urban middle class that dominated commerce. Nothing for it; they needed wealth to maintain their army and its esteemed military traditions.

The potential for a great German nation centered in the kingdom of Prussia, which was bigger than the next three largest states of Bavaria, Hanover, and Westphalia put together. In a fascinating contrapuntal action between economic and political incentives, Prussia lured more and more German states into the Zollverein, the uniform, commercial union that it had started in 1817. Some entrepreneurs benefited from an expanded internal market and protection from foreign competition, but other regions suffered from competition, which their local tariffs had mitigated. Yet year by year the Zollverein grew, helped by Prussia’s willingness to make financial sacrifices to gain the admittance of major states in the south. Economic improvements held out hope of herding the diverse German states into one national fold.

A new concept helped nudge German unity forward. Once economies had been viewed as strong or weak, but now, with England setting a fast pace away from former levels of productivity, people started talking about advanced and backward economies.
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It was a startlingly new way of thinking about economic activities. Previous economies had simply involved the repetitive, age-old tasks of feeding the people, producing useful objects, and making their exchange possible. Economies now were expected to develop or bear the onus of being backward. “Backward” had a different ring from “traditional.” The idea of backwardness exacerbated competition among Austria, Prussia, Russia, France, and England. This linear view of history as a progressive movement is so familiar to us that we can easily miss its initial impact. Before, military might have mattered most, especially in Germany, the ground for so much warfare. The high cost of maintaining a military establishment made the state’s economic development critical to sustaining a position in the international order. With Great Britain continuing its industrial ascent, wealth creating and power exerting became ever more entwined.

Germany’s large domestic market provided the stimulus for development. The great river arteries of the Rhine, Oder, Weser, and Elbe carried most of the commercial traffic with canals aiding navigation. Steamships appeared in the 1820s, followed by more canal building, but the most transformative invention for nineteenth-century Germany was the railroad. Not the horse-drawn wagons on rails that had been used in coal mines for a long time, but locomotive-driven railroads that pulled loads up and down hills, across great plains, and right onto the loading docks in port cities. All it took was laying down track, preferably with standard dimensions. Perfected by the English in 1830s, the railroad shrank the distances between places, people, and products, as measured by time, much as had lateen-rigged ships three centuries earlier. In Germany, as in the United States, canals became important complements to railroad transportation.

The German states sprawled across the center of Europe between the modernizing West of France, Belgium, and the Netherlands and the backward East of Russia, Poland, and the Balkan states still part of the Ottoman Empire. German railroads connected these halves of Europe. Their construction prompted the repair of decaying overland trade routes and stimulated the economies of Germany’s neighbors—always a sound policy if a country has something to sell. The Zollverein expanded, as more German principalities chose to join, coinciding with a speculative boom in railroad building.
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As so often happens with technology, one fruitful area stimulated another; railroad building supported German mining, metallurgy, and machine making. In France railroads radiated out from Paris; in Germany they linked industrial centers.