There has been a good deal of scholarly work on the history of the political economy of the German Empire. This is particularly true for the history of customs and trade policy, which historians identified quite early as a central arena of political conflicts and disputes and to which historians quite often assigned a key role in their competing interpretations of the history of the German Empire.

An especially influential view, traced back to the Berlin historian Eckart Kehr, who died prematurely in 1933, and later developed further by Alexander Gerschenkron, Hans Rosenberg, and Hans-Ulrich Wehler, sees the durable and long-lasting political coalition of heavy industry and large landowners as the driving force behind German tariff and trade policy.Footnote ¹ This view argues that since the late 1870s, this “coalition of ‘rye and iron’” not only put into practice a protectionist tariff policy centered on defending its class interests and hostile to consumers, but that it was also able to determine, as a conservative, antisocialist “cartel of the patriotic and productive classes,” the course of German politics to a large degree. It contends that “Junkers and industrial tycoons [Schlotbarone]” ruthlessly pushed through their protectionist interests and implemented a protective tariff policy that was shamelessly to their advantage at the cost of consumers and exporters. At the same time, the unfortunate coalition of heavy industry and large landowners, through its defensive efforts to sustain its position, contributed significantly to leading Germany into the catastrophe of World War I, thus burdening German history with a heavy mortgage. Against this backdrop, some historians have even portrayed the protectionist turnaround of 1879 which was supposed to be the birthplace of the unholy “coalition of ‘rye and iron’” as “one of the most important wrong decisions in German history and thus in the European history of the nineteenth century” with consequences reaching all the way to National Socialism.Footnote ² At the same time, historians depicted this coalition as an important conduit of the fatal German “Sonderweg” into modernity.Footnote ³

This sweeping interpretation has not gone unchallenged. James C. Hunt has argued that not only those who owned large farms, but also those who owned smaller and middle-sized farms, who in theory were manipulated by the large agrarians, profited from the German grain tariffs. These tariffs, together with a series of de facto protectionist measures, such as laws and protective measures against animal diseases, effectively shielded the farmers from international competition. In other words, it is a mistake to speak of an agrarian protectionism that gave preference in a lopsided manner to the East-Elbian grain producers.Footnote ⁴ In general, since the end of the 1970s historians have increasingly questioned the “Kehrite” interpretations of the amount of influence wielded by the elite of the German Empire. According to this criticism, the key to the history of the German Empire does not lie in a “manipulation from above”—this has been emphasized above all by a group of British historians—but in a self-mobilization “from below.”Footnote ⁵ Last but not least, the durability and resilience of the agrarian-industrial coalition has been questioned. The phase of the so-called “politics of rallying together” (Sammlungspolitik), when the government at the turn of the twentieth century reinvented the protective tariff alliance of 1878/79, according to these critics especially displayed the structural fragility and disunity of the coalition of agriculture and heavy industry.Footnote ⁶

This critical challenge to an explanation that sees the dominant influence of the agrarian-heavy industrial power cartel in German protectionism has done little to dislodge the formula of a “coalition of ‘rye and iron’” from its central position in the historiography on the German Empire. This interpretation can be found not only in numerous standard historical works and textbooks, but it has also become an established part of the accepted wisdom in political science and economics, part of the standard repertoire of prominent historical examples that are repeatedly cited when there is need for an example or to test an empirical theory.Footnote ⁷ Against this background—and this is the primary goal of this essay—it is worth reexamining and testing the historical truth of the thesis that there was an alliance between the “noble estates (Rittergut) and the blast furnaces (Hochofen)” and that this alliance determined the tariff and trade policy of the Kaiserreich. This essay will do that by means of a longitudinal analysis that examines the three major turning points of German foreign trade policy before World War I and the political constellations that formed their basis. First, I will examine the role of the “coalition of ‘rye and iron’” in the protectionist turnaround of 1878/79. Second, I will examine the discussions and debates concerning Caprivi's trade treaties at the beginning of the 1890s, before turning, third, to a discussion of the significance of the agrarian-industrial “politics of rallying together” in the formation and conclusion of the customs tariff of 1902.

Next—this is the second goal of this essay—I will sketch an alternative explanation of German trade policy. I will try to overcome the limitations of a perspective shared both by those who emphasize the importance of the alliance of Junkers and heavy industrialists and by those who criticize that interpretation. Both give too much weight to the internal social and political power constellations in Germany when they attempt to explain the decisions and the tendencies of German tariff and trade policy. The historians in both schools practice the traditional historical method in which the nation-state functions as a “container,” as the self-evident unit for historical analysis. This corresponds to an endogenous understanding of development: the conviction that social and political conditions and processes can be best explained by examining the internal structures and the internal conflicts of the national societies themselves.

In contrast to these interpretations, I believe that the first wave of economic globalization before 1914, a development that transcended the boundaries of the national state, helps to explain a great deal. This is not to argue for an economic reductionism or to suggest that the history of German foreign trade policy must be fully rewritten from the perspective of globalization. Still, what is involved here is more than just a transnational complement to the traditional way of looking at things through the glasses of national history. Rather, my argument aims to link together the advancing global economic integration before World War I causally with economic, social, and political processes within the German national state. In so doing it will become clear that much of what historians have described in regard to German protectionism as the result of endogenous forces was really part of an international reaction to the challenges of globalization in the nineteenth century. Of course, although globalization was international, its specific repercussions were different in every country and can only be fully understood by taking into consideration factors drawn from national histories.

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The year 1879 was a turning point not only in German but in European trade policy. The era of free trade, which was heralded in 1860 by the Cobden Treaty between France and England and which within a very short time had brought about something resembling a single European market, was coming to an end. In 1879, at the same time as a number of other continental European states, Germany turned to protectionism—initially in the form of a moderate protective tariff system, accommodating above all the concerns of heavy industry and the textile industry, with only moderate agricultural tariffs, which rose significantly, however, in 1885 and again in 1887.

The two economic factors that made the turnaround in trade policy possible and promoted it have often been described. The first of these was the economic depression that began in 1873 and brought to an end the economic boom of the so-called “Gründerjahre.” Within a short period, the downturn had extended to all important industrial countries, leading to the first major worldwide economic crisis and making people painfully aware of the global character of industrial capitalism. In Germany—but not only there—the grave economic crisis led to numerous bankruptcies and stagnation in the market, to weak economic growth, and to a decline in prices. The crisis fundamentally discredited economic liberal ideas. Given the economic hard times, belief in the harmony of the economic interests and the self-regulating power of the market as a sort of natural law quickly lost much of its attraction. The loss of prestige for economic liberalism was drastic and all encompassing, and this of course had an impact on the popularity of the idea of free trade.

Under the pressure of international competition, real in part, but also in part grotesquely exaggerated by the parties involved, those industrial interests that desired the state's protection against global competition quickly organized to make their demands heard. At the very front were those branches of the economy that had traditionally supported protective tariffs, above all the heavy industry in western Germany and the textile industry in southern Germany. Their trade associations, founded shortly after German unification, such as the Association to Protect Common Economic Interests in the Rhine and in Westphalia (Verein zur Wahrung der gemeinsamen wirtschaftlichen Interessen in Rheinland und Westfalen, known as the “Langnamverein”), as well as the Association of South German Cotton Industrialists (Verein Süddeutscher Baumwollindustrieller), quickly became the central meeting point for protectionist interests. With the founding of the Central Association of German Industrialists (Centralverband Deutscher Industrieller, or CVDI) in February 1876, the nature of the industrialist support for protective tariffs achieved a new quality. For the first time, the representatives of the various branches with a protectionist orientation joined together to push through their demands in this organization, the first umbrella organization for German industry. In its early years the Central Association, in which heavy industrialists set the tone from the very beginning, almost exclusively pursued one goal, and to achieve this, it immediately developed and unfurled a broad publicity campaign to “protect national labor” through a system of protective tariffs.Footnote ⁸

The second economic force behind the turnaround in support of protectionist policy was the emergence of a well-functioning world market for foodstuffs; this market developed as a result of the transportation revolution in the last third of the nineteenth century. The dramatic decline in transport costs, together with the opening up of enormous new agricultural areas, above all in North America, meant that Europe was awash with inexpensive overseas grain. The amount of grain available in the global market expanded immensely. After the middle of the 1870s, the German grain business increasingly faced stiff, international, low-cost competition, both in its export markets as well as inside Germany itself. Although demand also increased continuously, it rose more slowly than supply, and as a result grain prices began to decline steadily, in an unprecedented manner.

Given the different circumstances, the firm free trade front, which had previously characterized the agrarian groups—especially among the large landowners to the east of the Elbe, who were primarily export-oriented, started to break down very quickly. More and more farmers moved into the protectionist camp. The Association of Tax and Economic Reformers (Vereinigung der Steuer- und Wirtschaftsreformer, or VSW), an association close to the Conservative Party, quickly developed into a spearhead of the agrarian demands for protective tariffs. Owners of Prussian feudal estates dominated among its almost 700 members.

Against this background, a “coalition of ‘rye and iron’” moved into the realm of possibility. Before, given the political alignment on trade policy, this would have been completely unthinkable. The CVDI saw the chance to close ranks along protectionist lines and declared that it “cannot remember having found anything that would speak, from the position of protecting national industry and commercial activity, against a corresponding protection of the nation's agriculture, in other words, nothing that would speak against a moderate tariff on grain and meat products.”Footnote ⁹ In return, the agrarians invited the chairman of the CVDI to be a guest at the Congress of German Farmers (Kongreß Deutscher Landwirte) on February 24–25, 1879. Here the industrial-agrarian alliance that had been prepared by the leaders of the associations was publicly sealed. The chairman of the CVDI, Schwarzkopff, appealed at the meeting for all “to come together unanimously”; the president of the “Congress,” Freiherr von Mirbach, came out publicly and unmistakably in favor of a “steadfast coalition” between agriculture and industry.Footnote ¹⁰

Although at the time of the turnaround in trade policy in 1879 there were extensive signs suggesting that the industrial and agricultural trade associations had joined together in solidarity, there appears to be good reason to question the extent and the significance of this coalition. Two limiting factors especially need to be emphasized.

First, especially on the side of agriculture, the decision in favor of protective tariffs and for an industrial-agrarian collaboration was by no means as one-sided and unanimous as later historical accounts have often portrayed it. This lack of decisiveness was in part because of the weight of the free-trade tradition, but it reflected as well the confusion that still existed in regard to agricultural prices. In the second half of the 1870s, the average price for wheat in Prussia remained as a whole lower than the average price of 1866–1875, which was 228 marks per ton (1876 = 210, 1877 = 230, 1878 = 202, 1879 = 196 marks per ton); the price remained, however, within the range of normal fluctuations that occurred the previous decade. Only in 1883, when the price fell noticeably to 185 marks per ton and then sank further through 1886 to 157 marks, did the degree of the price decline become clear.Footnote ¹¹ Given that in the 1870s the direction prices were going to take remained unclear, before 1879 most farmers joined the protectionist camp only hesitantly, not at all as “suddenly” as, for example, the famous German economist, Lujo Brentano, later claimed.Footnote ¹² Even the VSW, in its founding charter of 1876, did not unambiguously endorse agricultural protectionism, but rather stated that the group stood in principle “on the fundament of free trade” but viewed “however, introductory tariffs and consumption taxes as an open question.” Up through 1879, the association pushed through a clear protectionist position only slowly and against considerable opposition in its own ranks, based on the demand for equal treatment of agriculture and industry in regard to protective tariffs.Footnote ¹³

The German Agricultural Council (Deutscher Landwirtschaftsrat), founded in 1871 as the official representative of all German agriculture, was even more clearly divided and reserved in its position toward protective tariffs. At a meeting held only a few months before the adoption of the customs tariffs in January 1879, the Agricultural Council could not muster enough support for an unambiguous resolution in favor of protective tariffs. Not even the moderate demand to “introduce moderate introductory tariffs, taking into account equally the interests of agriculture and industry,” could obtain a majority.Footnote ¹⁴ Unlike what is suggested by the formula of the “coalition of ‘rye and iron,’” it is interesting that it was not the large landowners in northeast Germany who took a pronounced protectionist position. The representatives of West and East Prussia, who were still oriented economically toward export, together with the representatives of Schleswig-Holstein, Oldenburg, Mecklenburg, Alsace-Lorraine, Baden, and Hessen, belonged to the most energetic opponents in the Agricultural Council of any protective tariff. It was rather the representatives of the three provinces in western Prussia—Hannover, Hessen-Nassau, and Rheinprovinz—as well as the delegates from Upper Silesia, who voted overwhelmingly for grain tariffs.Footnote ¹⁵ Further additional centers of agricultural protectionism could be found in Saxony and Westphalia; this is shown by the analysis of the activities of the regional agrarian associations and the agricultural councils.Footnote ¹⁶ It appears that the demand for agricultural tariffs did not come first from the Prussian Junkers; the VSW in this regard led the way, but it was not representative. Rather, it came from the regions of German agriculture characterized by smaller farms, which were in or near industrial centers, and which were strongly oriented toward internal and not export markets. Here, also, there was more openness toward and willingness to go along with the protective tariff wishes of industry.

The impression that the concept of an alliance of “Junkers and industrial tycoons” in 1878–79 does not do justice either to the agrarian protective tariff movement in its full breadth or to the divided position of the large landowners to the east of the Elbe becomes even stronger when one examines the signatories of a resolution in favor of protectionism, introduced to the newly elected Reichstag on October 19, 1878, by the Free Economic Association (Freie Wirtschaftliche Vereinigung), an association that transcended party lines.Footnote ¹⁷ The party political profile of those in favor of protective tariffs can be shown much better by the distribution of the signatures on the “Declaration of the 204” than by the final vote on the customs tariff, for here members of the Reichstag were required to follow the party line, and broader, more important political considerations played a major role. Eighty-one members of the Center Party, thirty-nine Free Conservatives, thirty-six Conservatives, and twenty-seven National Liberals signed the “Declaration”—that is, eighty-seven percent of the members of the Center Party fraction, but only sixty-nine percent of the members of the Free Conservative fraction, only sixty percent of the Conservative Party fraction, and only twenty-eight percent of the National Liberal fraction. The Center Party, with its strongholds in the rural areas of the Rhine and Westphalia, Bavaria, and Upper Silesia, pursued a pronounced protectionist course more or less unanimously in this early phase. Both conservative parties, in contrast, still had a strong minority of free traders. Precisely in the case of the Conservatives, who openly represented the interests of agriculture, this suggests once again the undecided position of German, or at the very least, of east-Elbian farmers toward trade policy at the end of the 1870s. This impression becomes even stronger if one looks at the members of the Reichstag from the agrarian eastern Germany. Among these, only fifty-two percent signed the protective tariff resolution.Footnote ¹⁸

Second, the key role played by Bismarck in the course of the turnaround of tariff policy in 1879 also speaks against overestimating the importance of the agrarian-industrial alliance. Nothing could be more incorrect than the notion that the chancellor was forced to pursue a protectionist course, more or less nolens volens, by the combined pressure from industry and agriculture associations. Indeed, the opposite was the case. Of course, Bismarck did not create the protectionist movement. The coalition was a product of economic and political processes that had started in the 1870s and that with all likelihood would have (at least, this is suggested by the international triumph of protectionism in the last quarter of the nineteenth century) eventually found their way into German tariff policy. Bismarck's influence, however, was the most important reason that the trade policy turnaround came when it did, in the political conditions that prevailed, and in the form that the new departure took. He was the “man of action” of 1879, who with the transition to the protective tariff—even if only partially successful—also pursued far-reaching goals of a fiscal and internal nature that transcended tariff policy. And he was also to a large degree the architect of the “coalition of ‘rye and iron.’”

From the very beginning Bismarck left no doubt that he would only accept a protective trade tariff that took into consideration both the interests of industry and agriculture. The intentional linkage of agrarian and industrial tariffs, however, met considerable opposition because of the different interests of the parties. On the one hand, those agrarians who worked hard to protect agriculture from international competition felt little desire to support the introduction of tariffs on industrial products. These would most likely lead to an increase in the prices for agricultural equipment and machines; they had fought fanatically only a couple of years earlier for such tariffs to be abolished. On the other hand, industry—both export industry and industrial branches that faced competition from imports—had no interest in tariffs on agricultural products, for this would lead to increased food prices, which would in turn lead to increased wages and thus costs. Despite all the oaths swearing solidarity between the agricultural and industrial trade associations, this basic discrepancy in their interests continued to arise again and again, and as a result, the structure of the agrarian-industrial alliance was extremely fragile.

Bismarck's significance was that he was able to sustain the interlinking of the industrial and agrarian tariffs, that he was able to bring together two groups that were repeatedly going in different directions both to support tariffs. To accomplish this, he used all the tactical means at his disposal. At the beginning of the negotiations for the tariff commission, Bismarck even warned the chairman of the commission, von Varnbüler, a former government minister in Württemberg “that he would only float along down the protective tariff river as long as agriculture is also protected. If this is not the case, then he will return to the free traders.”Footnote ¹⁹ A little later he encouraged the Bavarian “tax reformer,” von Thüngen, in a public exchange of letters, to put forward the agrarian demands for a protective tariff with more strength and vigor. Bismarck claimed to be doing all in his power, “to keep agriculture pari passu with industry.” He needed, “however, more practical assistance both from government agencies and the press.”Footnote ²⁰ All in all—this is the point here—one can doubt whether without Bismarck and his constant efforts there would have been any common agrarian-industrial battle formation at all, or whether it would have proven to have been as stable and, in the final analysis, as successful.

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By the beginning of the last decade of the nineteenth century, it became apparent that a precarious situation was developing in the area of trade policy for Germany, which had become dependent upon world trade. The world-wide increase in protectionism since the end of the 1870s had reached a level that threatened to damage German exports seriously and thus to damage the economic development of Germany as a whole. Two important export markets increasingly closed their borders to German industrial products. In the United States the McKinley Tariff of 1890 marked a new peak in U.S. protectionism, which had worsened since the Morill Tariff of 1861. Immediately after 1890, German exports to the U.S. declined drastically—between 1890 and 1894 they fell from 417 to 271 million marks.Footnote ²¹ In the course of the 1880s, Russia, too, increasingly closed its borders to industrial imports. Repeated Russian increases in trade tariffs, which had their origins in part in a strategy of forced industrialization, but in part also represented a direct response to the increase in German agricultural tariffs, led to a decline in German exports to Russia from 1880 to 1887 of almost fifty percent.Footnote ²² The Russian government did not change its protectionist course even when Bismarck prohibited the placement of Russian loans and acceptance of Russian securities in 1887. Those decrees rather only worsened the economic policy conflict between the two countries. In June 1891 Russia introduced the so-called Mendeleev Tariff, even higher than the new American tariff in its level of protection, which effectively prohibited German exports to Russia in a number of important commodity groups.

German foreign trade policy was forced to act against this backdrop of a partial loss of important export markets. Germany was also forced to act because it was clear that the existing European customs treaty system teetered on collapse. Until then, the network of long-term customs treaties, which had been founded by Cobden und Chevalier in 1860 and at whose center stood France, had remained largely intact and had limited the protectionist movements in the countries involved. Despite the fact that Germany had left the system under Bismarck, it had continued to profit from the relatively low tariff level of the French treaty system because of its most favored nation treaties and Article 11 of the German-French peace treaty, without being forced to make concessions in regard to tariffs. In other words, Germany had, as the state secretary in the Foreign Office, Adolf Marschall von Bieberstein, put it, eaten the “fruits of a tree” that “we did not own, that we had not planted, and to whose upkeep we had not contributed.” When this tree “was cut down … in the night” because political powers had come to power in France that did not want to renew the customs treaties and that instead wanted to move toward an “autonomous” customs policy, then “we have now lost those fruits” that Germany had enjoyed without having had to do anything in return.Footnote ²³ The year 1892 was in danger of becoming an annus miserabilis in the history of German trade policy and German exports. Most European trade treaties, no fewer than fifteen, were due to expire at the beginning of this so-called “comet year.”Footnote ²⁴ In 1892, if there were no new treaties in place—and there was no new French initiative—high duty rates, which in many cases had already been prepared, would take the place of the conventional tariffs in many of the European states, and this would move the level of protectionism drastically upward. A “war of all against all” in terms of trade policy was close at hand.Footnote ²⁵

The new chancellor, Leo von Caprivi, and the civil servants who advised him were well aware of the German dependency on exports and of the need to replace the imploding French treaty system. “We must export,” Caprivi said to the Reichstag, explaining his ideas, “either we export goods or we export people. With our increasing population, if we do not have a similar increase in industry at the same time, we will not be able to continue to exist.”Footnote ²⁶ Caprivi also allowed for the increasing political relevance of trade policy issues by rejecting Bismarck's postulate of a clear separation of economics and politics in the realm of international relations. Although Bismarck had always taken this position, the postulate had become increasingly unrealistic. Caprivi considered trade policy one of his central concerns, one that could not be separated from the realm of “high politics.” Caprivi embarked on a new direction in foreign trade policy, breaking with the “autonomous” tariff policy pursued until then, and he concluded a series of trade treaties that committed Germany to long-term tariffs, namely for twelve years. He signed treaties with Austria-Hungary, Italy, Switzerland, and Belgium in 1891; with Serbia and Romania in 1893–94, and also with Russia, after a short customs war that produced heavy losses on both sides. All treaties followed the same principle. Germany lowered its tariffs on agricultural products—the tariffs on bread grains (wheat and rye), for example, sank from fifty to thirty-five marks a ton. In return, the other side agreed to reduce tariffs on German industrial exports. The system to protect agriculture that had been built up and expanded under Bismarck was cut back moderately to create more space for German industrial exports. For the producers, perhaps even more important than the easing of customs restrictions was the relative certainty they received with respect to planning—created by the setting of customs tariffs and the long length of the treaty.Footnote ²⁷

It is not surprising that the various associations of German farmers, who suffered increasingly from global competition, showed little enthusiasm for reduced agricultural tariffs, which had just been increased in the 1880s. When news of the upcoming trade treaty negotiations with Austria-Hungary spread, the agrarian pressure groups sped into action. In a series of petitions, various regional agricultural associations opposed the intended tariff concessions in the agrarian sector.Footnote ²⁸ The national agrarian pressure groups—the German Peasant's League (Deutsche Bauernbund), the Congress of German Farmers, the Association of Tax and Economic Reformers, and the German Agricultural Council—all expressed their opposition.Footnote ²⁹

This agrarian opposition proved unsuccessful, and the first group of treaties was passed with an overwhelming majority in the Reichstag. At the same time grain prices, which had recovered for a short period around 1890, began to decline again starting in 1892. As a result of these two developments, pressure to protect agriculture increased. Reduced agricultural tariffs in the Caprivi treaties, which materialized more or less by chance at the same time that wheat and rye prices declined in the 1890s, proved the decisive catalyst for an unprecedented wave of mobilization organized by the agrarian interests.Footnote ³⁰ The most important expression of this mobilization, and one of its most far-reaching consequences, was the founding of the Agrarian League (Bund der Landwirte, or BdL) in February 1893.Footnote ³¹ In the period leading up to the passage of the second round of trade treaties with Romania, Russia, and Serbia in 1893–94, agrarian pressure associations and their auxiliaries in the Reichstag, above all the Conservative Party, took on an increasingly strident tone. When Graf Mirbach claimed to the Reichstag that Caprivi's trade treaty system “culminated in carrying out measures that will harm the agriculture of our country and give preferential treatment to foreign agriculture,” this was still a relatively moderate statement.Footnote ³² Graf Kanitz's opinion of the consequences of the trade treaty with Russia and of its ten-year span was much more drastic. He claimed that “the ten years lying ahead of us” would cost German agriculture more “than a miserable war.”Footnote ³³ The editor of the Kreuzzeitung, Wilhelm von Hammerstein, claimed that the Russian treaties were not, as State Secretary Marschall in the Foreign Office had claimed, a “milestone,” but were rather a “gravestone” with the inscription “here lies German agriculture.”Footnote ³⁴

While the agrarians rose up furiously against Caprivi's trade treaties and fought for the maintenance of the tariff protection they had achieved under Bismarck, a broad front friendly to the ideas of trade treaties was being formed on the other side of the political spectrum. In the following years of bitter political conflicts, this group would develop into the counterpart of the agricultural pressure groups. This group, however, came from quite different sources. On the one hand, a short-term but significant increase in food prices at the beginning of the 1890s, caused by bad harvests, led to a considerable protest movement against agricultural tariffs in general and against tariffs on grain products in particular. The Social Democrats defended the consumer and unleashed a massive campaign against the agricultural tariffs. On the other hand, those branches of industry that depended on exports now expressed their support for the trade treaties that the government envisioned and desired. The Association to Protect the Interests of the Chemical Industry of Germany (Verein zur Wahrung der Interessen der Chemischen Industrie Deutschlands) let it be known that German industry “saw no reason at all to come out in favor of unconditionally retaining the agricultural tariffs at their present level” if it was necessary to reduce them to achieve advantageous trade treaties.Footnote ³⁵ The German Chambers of Commerce (Deutscher Handelstag) likewise favored the trade treaty policy pursued by Caprivi.Footnote ³⁶

The CVDI, the industrial coalition partner of the agrarians in 1879, at first expressed solidarity with agriculture. In a statement in the Berliner Politische Nachrichten on February 6, 1891, controlled by heavy industrialist Carl Ferdinand von Stumm, the board of directors of the CVDI emphasized “that German industry does not desire any advantages that can only be achieved at agriculture's expense.”Footnote ³⁷ Given the worsening economic depression in the beginning of the 1890s and against the backdrop of the increasingly clear divergence of interests within industry, leading finally in 1895 to the founding of the Industrialists' League (Bund der Industriellen) as a second industrial umbrella organization that set itself apart from the CVDI, the solidarity between heavy industry and agriculture proclaimed by the CVDI, however, began to break down bit by bit. By the end of April 1891, the CVDI moved quickly to assure the government that it strongly supported the conclusion of trade treaties in principle. In a roll-call vote in the Reichstag at the end of 1891, those members associated with the CVDI voted for the first four trade treaties and thus for lowering grain tariffs.Footnote ³⁸

It came to an open breach in the “coalition of ‘rye and iron’” when the German-Russian trade treaty, which the agrarians had so fanatically fought against, came onto the agenda. After the German-Russian tariff war of 1893, which had badly hurt German exports to Russia, industrial and trade circles reached a broad consensus about the need to end the economic conflict and to reach an agreement with Russia on a trade treaty. This consensus included heavy industry, which had a strong interest in the Russian market. At the beginning of 1894 the CVDI therefore greeted “the conclusion of the German-Russian trade treaty with joy” and stated that it “would view a rejection of this treaty by the Reichstag as something that would seriously damage business, industry, and trade, indeed, harm the general economic condition of our country, and be especially detrimental to the workers.”Footnote ³⁹ Although representatives of heavy industry, such as Freiherr von Stumm and General Secretary of the CVDI Henry Axel Bueck, tried hard to emphasize the “common interests of industry and agriculture,” and although they repeatedly proclaimed their loyalty to the agrarians,Footnote ⁴⁰ this step signaled without a doubt the demise of the trade policy alliance between heavy industry and agriculture and was widely understood as such. In the elections of 1893 the Agrarian League (BdL) had already refused to support von Stumm's candidacy for the Reichstag, as von Stumm refused to promise to oppose a trade treaty with Russia. The BdL functionary Heinrich Suchsland informed him cooly that the BdL did not care “whether the votes to approve the trade treaties come from extreme or moderate free traders.”Footnote ⁴¹

The alienation and estrangement between the former partners reached its peak when it became clear that those members of the Reichstag associated with industry were going to vote for the Russian treaty in the decisive vote. According to Hammerstein, industry had “broken its agreement” with agriculture.Footnote ⁴² Mirbach accused the industrialists of “great ruthlessness” because of their support for the trade treaty and declared that “the solidarity of interests between agriculture and industry … has with this become almost worthless, existing only on paper”; “in practice” the solidarity of interests had “been long forgotten.”Footnote ⁴³ The SPD member of the Reichstag, Bruno Schoenlank, commenting with great pleasure on the conflict breaking out among his political enemies, noted that “the natural differences between heavy industry and agriculture have already begun to be expressed” and that in the future these differences “would only become stronger.”Footnote ⁴⁴

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The ink had scarcely dried on the last of Caprivi's trade treaties when the infuriated agrarian interest groups began to push for its revision. For this purpose they instigated an unprecedented press and publicity campaign. Influenced by this campaign, the Kaiser ordered the new chancellor, Prince Chlodwig zu Hohenlohe-Schillingsfürst, to “come up with a program that the agrarians could accept” early in 1895.Footnote ⁴⁵ Although the treaties negotiated by Caprivi were to expire in 1903, the responsible government agencies began work on a new customs tariff in 1897 to replace the general tariff that had been in place since 1879. The rates of the new tariff—and this was its political significance—were to form the foundation for all future trade treaty negotiations. At the same time, with the revised classification and arrangement of the new tariff, the German government aimed to allow for an increasing differentiation and specialization in the production of goods. When the tariff reform finally passed the Reichstag five years later in December 1902, contemporaries could look back at a political debate that was among the bitterest, longest-lasting controversies in the history of the German Empire and that had serious consequences.Footnote ⁴⁶ Unsurprisingly, the most heated debates surrounded the tariffs on agrarian products. Although the agricultural pressure groups loudly protested against the Bülow Tariff, as it is generally called, in recognition of the man who was chancellor when the Reichstag passed it, the tariff went a long way toward meeting their protectionist demands. They achieved obligatory minimal rates for the four main grains—wheat, rye, oats, and barley—which were not to be undercut in any further trade treaty negotiations and which were significantly higher than the existing tariffs of the Caprivi treaties.

In the historical literature the Bülow Tariff is seen broadly as one of the major accomplishments of the industrial-agrarian “politics of rallying together.”Footnote ⁴⁷ And indeed the renewal of the “coalition of ‘rye and iron’” was exactly what the central actors in the Prussian-German government, above all Prussian Finance Minister Johannes von Miquel, had in mind. In the upcoming reform of the trade tariffs, von Miquel said in a meeting of the Prussian Ministry of State in November 1897 the government should “take no political measures without being certain that these enjoy the support of the propertied classes.” The existing “political differences have to recede into the background and the basis for an understanding has to be found in economic matters.” For this, a “national economic policy, especially the cooperation of the large and significant economic groups” was well “suited.”Footnote ⁴⁸

In line with this plan, which aimed to reestablish the protective tariff coalition of 1879, the government founded a trade policy advisory board. The Economic Committee (Wirtschaftlicher Ausschuß) fell under the Reich Ministry of the Interior and consisted of important representatives of the pressure groups. The initiative to set up such an institution initially came from the general secretary of the CVDI, Henry Axel Bueck. “[I]n its manner, in its fashion, in its composition and purpose, as well as in its effectiveness, so far as can be seen,” the Economic Committee corresponded, Bueck stressed “by and large … to those recommendations made in a memorandum” that he had written and distributed in June 1897.Footnote ⁴⁹ A conversation among Miquel, Bueck, and Russel, who was both a member of the board of directors of the CVDI and a member of the board of directors of the German Chambers of Commerce, set the course that led to the foundation of the new committee.Footnote ⁵⁰ The composition of the membership of the Economic Committee, carefully planned, left no doubt that its main goal was to lay the groundwork for an agrarian-industrial coalition on the basis of the shared goal of protectionism. One half of the committee was to be composed equally of the German Agricultural Council, CVDI, and the German Chambers of Commerce; the other half was to be composed of representatives of industry and agriculture appointed by the government. There would be ten representatives of trade and the export industries vis-à-vis ten heavy industrialists and ten agrarians who all favored protectionism. A “phalanx of men in favor of protective tariffs” would be able to form a majority in all important questions.Footnote ⁵¹

If all signs seemed to point in the direction of a protectionist coalition of agrarians and industrialists in the beginning, as the political decision-making process continued the utter and increasing instability of this coalition became clear. Given the especially exorbitant demands of the Agrarian League, which aimed to break with previous trade policy and fundamentally protect German agriculture from world markets, industrial exporters articulated their interests with increasing vehemence, even within the CVDI. At the same time, pressure from upcoming tariff policy decisions brought to the surface the internal divergence of industrial interests between producers and processors of semi-finished goods, which had always been latent in the Central Association. This divergence of interests for a while made the CVDI almost incapable of action in the tariff question. Admittedly, vis-à-vis the agrarians the CVDI never left any doubt that in principle they were ready to support an increase in agricultural tariffs; however, it became quite clear that most industrialists set limits to the extent of the increase. If the strengthened protection of German agriculture prevented concluding new trade treaties, that is, if it seriously endangered the continuation of Caprivi's trade treaty policy, it would exceed the industrialists' limit. This ambivalent position toward agrarian demands can be seen clearly in the resolution passed at a meeting of the delegates of the Central Association in early February 1901, with only one delegate voting against it. On the one hand, delegates acknowledged “that the present difficult state of German agriculture demands a sufficient increase in the grain tariffs.” On the other hand, however, they “expected” “that this increase should only take place to the degree to which it can be reconciled with the common good, especially that this increase does not make it impossible to conclude long-term trade treaties.”Footnote ⁵² To be sure, moderate agrarians accepted this compromise.Footnote ⁵³ On the other hand, however, the extensive tariff demands of the BdL and the BdL's publicity campaigns against the trade treaties always called the compromise into question and made it fragile.

Following Eckart Kehr, historians have repeatedly claimed that there was a close relationship between the trade tariff bill and the second Naval Law of 1900 in the sense that these two were part of a “Do-ut-des” pact between industry and agriculture that was mediated by the government. This pact aimed to counterbalance the diverging interests and to create a solid economic foundation for this coalition.Footnote ⁵⁴ In Kehr's classic description of this compromise and strategic package deal, “Industry received the fleet, Weltpolitik, and the colonial expansion; agrarians received the tariffs and would be able to uphold the preeminent social position of the conservatives.”Footnote ⁵⁵ Subsequent interpreters have modified this interpretation in a number of ways. Volker Berghahn, unlike Kehr, distinguished between Miquel's “small” “politics of rallying together,” which aimed to renew Bismarck's cartel of 1887, and the “large” “politics of rallying together” developed by Bülow und the State Secretary of the Naval Office, Alfred von Tirpitz. These men developed a concept of the “politics of rallying together” that used the shipbuilding program and Weltpolitik as two aspects of a program to win over the Center Party and the export-oriented industrialists as well.Footnote ⁵⁶ Both Berghahn and Kehr, however, agree that tariffs and the building of the fleet were the essential components of a comprehensive strategy to secure conservative leadership and rule.

Geoff Eley strongly criticized this interpretation as early as 1974.Footnote ⁵⁷ Eley pointed out, among other things, that both Miquel, the architect of the “politics of rallying together,” and Tirpitz, who was the driving force behind the shipbuilding project, followed their projects independently of each other and that each perceived the other as a potential obstacle in his policy field. It cannot be denied that before the second German Naval Law, government representatives attempted to create an affiliation between the tariff issue and shipbuilding. For example, the state secretary of the Ministry of Finance, Max von Thielmann, promised the agrarians on May 1, 1900, in front of the budget committee of the Reichstag that they would take their interests duly into consideration in the upcoming reform of the trade tariffs.Footnote ⁵⁸ This was more than anything a tactical consolidation of two political processes that happened to culminate at the same time, more or less by chance, however, and was not the expression of a long-term strategic coupling of customs tariff and naval policy. There is no evidence of a master plan that had existed for a number of years in which the naval shipbuilding program and the increase in tariffs were part of a comprehensive agrarian-industrial tit for tat behind the decision-making process leading up to the Bülow Tariff, either at the level of government or that of the Reichstag. Indeed, unlike the short-term tactical merger of these two issues, such a long-term strategic coupling—and Eley has already pointed this out—was bound to fail because naval policy and Weltpolitik were very poorly suited as a means of integration. They called up associations with strong German trade, with industrial growth, and with a trade policy friendly to exports and thus had a specifically anti-agrarian slant. The precarious “coalition of ‘rye and iron’” was not expected to be stabilized by this.Footnote ⁵⁹

Open crisis only emerged between the two coalition partners after publication of the government's customs tariff proposal in summer 1901. The double tariff contained in the government's draft, with mandatory minimum tariffs for wheat, rye, barley, and oats, prompted the CVDI's board of directors to raise “serious doubts about the provisions of the draft law … according to which under no conditions are the duty rates for grain to be allowed to be decreased through any agreements in any treaties. This is likely,” the CVDI continued, “to make it very difficult or even impossible to conclude any new trade treaties. Industry cannot accept such a danger, just as the Central Association has never had the intention of agreeing to higher tariffs on grains without concluding new trade treaties at the same time.”Footnote ⁶⁰ The polarization of the CVDI factions became public at a meeting of delegates on October 1, 1901.Footnote ⁶¹ On the one side were the “agrarian industrialists,” represented by Koenig und Vopelius, who were also members of the Economic Committee, who wished to maintain the coalition with agriculture at any price, even accepting the arguments of the extremists within the BdL.Footnote ⁶² They defended the principle of the double tariff and saw the solution in the creation of a minimum tariff as well for all industrial goods. On the other side, the rest of the members of the Central Association gathered around their general secretary, Bueck, who was open to agrarian demands in principle, but nevertheless took up the fight against Koenig.Footnote ⁶³ These members came out resolutely against the double tariff, and in the final analysis—despite a voting formula that attempted to hide the dissent—they were able to prevail.Footnote ⁶⁴ That Bueck with his position friendly to trade treaties spoke not only for the concerns of the industrialists within the CVDI who sold finished goods but also equally for the west German heavy industrialists, who were worried about exports, can be seen from the fact that only three days later the Association of German Iron and Steel Producers (Verein Deutscher Eisen- und Stahlindustrieller) likewise protested strongly against the “setting of minimal duty fees for grains, as, indeed, it was against the setting of any and all minimum duties.”Footnote ⁶⁵

The reaction of the agrarian press shows how fundamentally this endangered the agrarian-industrial coalition. Immediately after the statement of the CVDI's board of directors about the government bill at the beginning of August 1901, the BdL newspaper, Deutsche Tageszeitung, explained that “the so-called coalition has come to an end” if “the Central Association” held to its “beliefs.” The BdL stated that the agrarians “as is well known” only agreed “to support long-term trade treaties” if the other side “agreed to support the introduction of legally determined minimum duties.”Footnote ⁶⁶ The Kreuzzeitung, which usually was less extreme in its formulations than the BdL newspapers, threatened that there would be open confrontation this time: “Herr Bueck will find out in the Reichstag that the friends of agriculture will vote against any increase in any sort of industrial customs duties, in other words, against all planned tariffs if they are not granted a minimum tariff for grain… . Herr Bueck will stop laughing when that moment comes.”Footnote ⁶⁷

This was not an empty threat. Although the introduction of minimum tariffs on grains appeared to be politically secure in the meantime, in the Reichstag committee at work on the customs tariff the “friends of agriculture” did not shy away from working with left liberals and Social Democrats to disassemble a series of industrial tariff rates when they saw that they were not going to be able to put through their extreme positions on agrarian customs duties. He “was voting with a heavy heart for no import duties,” explained the director of the BdL, Diederich Hahn, when he once again voted to abolish an industrial tariff. He “hoped, however, that in the second reading, if the National Liberals come out in favor of an increase in agricultural tariffs,” he “would be able to vote in favor of industrial tariffs.”Footnote ⁶⁸ The Deutsche Tageszeitung had already announced that the agrarian right-wingers would behave this way. The “increases in the agricultural duty rate” that the customs tariff committee had already agreed were “so insignificant that it is not to be expected that they will have any significant effect on improving the prices of agricultural goods.” Accordingly, “agriculture has been denied the necessary, effective protective tariff it needs to be able to compete on an equal footing with industry.” There was now only one path to “achieve complete parity in the degree of agricultural and industrial protection through tariffs,” which in theory at least was what the agrarians intended: a “strong reduction in the industrial customs duties.” Admittedly, this would harm “the principle of effectively protecting all national labor.” This was, however, the result of the “dilemma” into which the agrarians had been pushed because of the unfriendly behavior “even of the decisive industrial representatives.”Footnote ⁶⁹

A part of the conservative agrarians came around only under the threat that the whole tariff reform would collapse, including the increase in the level of agricultural protection through protective tariffs that the government had already promised agriculture. Confronted with the government's stubborn refusal to increase the bill's provisions for customs duties on agricultural products, the majority parties in the Reichstag, who were generally friendly to protectionism, agreed under the Center party's leadership to the so-called “Kardorff compromise” at the end of 1902. Ultimately most agrarians also voted for this compromise.Footnote ⁷⁰ Given the conflicts that had preceded this vote, it was an amazing accomplishment for the chancellor, and it speaks for his tactical ability that he was finally able to bring about this compromise, which permitted the passage of the Bülow Tariff. How little this can be interpreted as the successful product of an agrarian-industrial coalition is shown, however, by the sharp rebuke of the Kardorff compromise by the Agrarian League (BdL). The BdL not only denounced the protection provided to agriculture by the new tariff as completely inadequate, but it also called ostentatiously on those members of the Reichstag who were committed to its program to vote against it. The BdL accused those members of the Reichstag who did not follow their instructions “of giving up everything that we have worked and fought for during the last ten years, to which we have devoted all our strength, and for which we have made heavy sacrifices.”Footnote ⁷¹ In 1902–03 on the issue of the tariff, the BdL had its only serious quarrel with the Conservative Party before World War I after the majority of the Party's Reichstag delegates had dared, despite the warnings, to vote for the Bülow Tariff.

* * *

It is not easy to answer the question concerning the reality, the stability, and the historical significance of the “coalition of ‘rye and iron.’” There can be little doubt that as an ideological construction the “coalition of ‘rye and iron’” was present in the political understanding of contemporaries at the very latest since the late 1870s—as an idea, as a call for unity on the political right, as a well-loved object of polemical attacks from the left. Furthermore, there were also efforts to give the coalition of heavy industry and agriculture an organizational structure, and repeated attempts to make the closing of ranks became a political reality. Yet one should not overestimate the actual resilience or depth of the industrial-agrarian coalition or the degree of its political influence. The protectionist turnaround of 1878–79 is perhaps most easily understood as the success of the coalition of “noble estates and blast furnaces.” But here, too, this new political alliance only came about with powerful political assistance from Bismarck. Furthermore, the image of the “Junkers and industrial tycoons” neither does justice to the protective tariff coalition of 1879 in its full breadth nor takes into account the fact that many east-Elbian landowners were still outside the coalition at this time. The first serious quarrel in the realm of trade policy between the pressure groups of industry and agriculture came in the early 1890s as a result of Caprivi's trade treaties. To be sure, the policy of an agrarian-industrial coalition, initiated shortly before the turn of the century under the leadership of Prussian Finance Minister, Johannes von Miquel, patched over this break once again for a short time. During the period leading up to the passage of the Bülow Tariff, however, the complete instability of this coalition became clear, an instability based on the fact that the foreign trade interests of the coalition partners conflicted in decisive ways.

What were the reasons that industry and agriculture were unable to forge a permanent and stable trade policy coalition, despite all the appeals to stay together and numerous efforts to give this alliance an organizational basis, and why were attempts to do this ever less successful as time moved on? The answer to this question cannot be found—as has been suggested above—by looking exclusively at the social and political power constellations inside Germany, as is generally done in the historiography, which is fixated on the framework of nation-states. This is especially true for those interpretations of German foreign trade policy that see trade policy as the product of a “coalition of ‘rye and iron.’” The answer does not lie within the boundaries of the German nation-state; this change in perspective is suggested in the long run by the present processes of globalization that are all around us and that have effected a radical change in experiences. The answer lies rather in changes in the international economic framework that took place in the second half of the nineteenth century, changes that were radical and transformative. The most important driver of this development was worldwide economic integration, which had rapidly increased since the middle of the century. In the past few years economic historians have begun to call this era the first wave of economic globalization. This economic globalization was made possible and pushed forward by revolutionary transformations in the fields of transportation and communication. In only a couple of decades at the end of the nineteenth century the world achieved a degree of economic integration that in many ways resembled that of today, and in some ways was even greater than now. As shown by the convergence of prices for international merchandise and factors of production, Germany was already integrated at the turn of the twentieth century into a functioning world market, the development of which can be followed in the level of world trade, in the expansion of the mobility of international capital, and even in the new wave of mass migration.Footnote ⁷²

To a large degree the German economy before 1914 was integrated in the powerfully developing global economy, above all by means of world trade. Germany had been able to increase its percentage of world trade continually. In doing so, Germany was increasingly able to challenge the traditional leader, Great Britain, for the position of the most important trade nation in the period before World War I. The reverse was also true, of course: foreign trade became increasingly important for the German economy itself. Both imports and exports grew more quickly than gross domestic product. In the last five years before World War I, German integration into world markets reached an unprecedented degree, with an export share of 15.8 percent and an import share of 19.2 percent.Footnote ⁷³ This meant that, on the one hand, the German economy was dependent more than ever on the import of foodstuffs, raw materials, and industrial unfinished and finished products. On the other hand, the export markets were a demand factor of decisive importance for German industry.

In a very short period, globalization and the massive changes associated with it in regard to supply, demand, and price divided Germany into winners and losers. Those sectors of German industry that depended on the import of raw materials and preliminary products and that exported a high percentage of their products profited, as did those sectors of the economy that were part of the intensifying intertwining of the world markets, such as shipping and other service sectors, or that were involved, either directly or indirectly, with foreign trade. As long as one looks at globalization purely from a consumer standpoint, consumers profited as well, for reduction in prices for foodstuffs resulting from international competition meant a significant increase in real income. The ever-increasing integration of the world markets, however, had negative effects on those industrial branches forced to compete with superior foreign competition. The largest “loser” of globalization in Germany, however, was agriculture. Despite considerable advances in productivity, German agriculture was unable to compete with its international competition in a free world market at the end of the nineteenth century; foreign competition was simply less expensive. This is true especially for farmers who specialized in grains. Since the middle of the 1870s, these farmers saw the prices for their products continually fall. This was true as well but to a lesser degree for the cattle industry.Footnote ⁷⁴

The dramatic shift in income and wage relations that resulted from globalization and the ensuing disputes contributed significantly to breaking up German society and politics along social-economic lines before World War I. Beginning in the early 1890s, the latent discrepancy in the interests of the agricultural producers and urban consumers became clear in the politically charged debates on important tariff and trade policy issues. The chasm between the agrarians and heavy industry also became wider. The agrarians, who in part were threatened in their very existence by the globalization of the agricultural markets, pushed to seal off the German market from world markets. Broad sections of industry, including heavy industry, were interested in inexpensive foodstuffs and in the expansion of their export possibilities. A long-term balancing of interests and a common agrarian-industrial battle formation appeared unlikely against this backdrop especially since much more was at stake for both sides because of the increasing importance of the global market.

It can only be sketched here, but German foreign trade policy was a victim of globalization, which imposed increasingly restrictive conditions. In part, trade policy was a direct victim of Germany's increasing dependency on foreign trade, and in part indirectly as a result of the influence of changes in social and internal political conditions.Footnote ⁷⁵ In the half century before World War I, the Prussian-German government lost much of its ability to maneuver in the realms of customs and trade policy. Whereas integration into world markets and pressure from economic interests did not play any significant role in the free-trade remodeling of the “small German” trade policy in the 1860s and early 1870s, changes in the global economic framework—the world economic crisis after 1873 and the development of a worldwide market for agricultural products—were already a necessary precondition for the protectionist turnaround of 1879. At the same time, however, Bismarck was personally able to shape the shift in direction of trade policy and thus to pursue autonomous goals of a fiscal and internal political nature that went far beyond the narrow realm of tariff policy.

One and a half decades later—this can be seen clearly in the conflict concerning Caprivi's trade treaties—this degree of political freedom Bismarck had enjoyed was now limited by globalization. More and more, German foreign trade policy was forced to navigate a course between the Scylla of damaging the interests of German exporters and consumers and the Charybdis of the protest movement to protect agriculture. How dangerous this situation could be is shown in the final analysis by the fact that Caprivi, despite considerable efforts to compensate agriculture, proved unable to escape the storm unleashed by representatives of the agrarian pressure groups and, indeed, this storm ended his political career. If foreign political considerations played at least a secondary role in concluding trade treaties for the second German chancellor, even this limited freedom of movement to instrumentalize customs and trade policy for other purposes had disappeared by the turn of the twentieth century. In the difficult internal political discussions concerning the reform of the customs tariffs in 1902, the government aimed in the end only to be done with it. The subject was full of conflicts, and the government was always in danger of getting caught and crushed between the various interests. Every long-term political strategy—including, indeed especially, the long-term strategy of an agrarian-industrial coalition—remained increasingly less important than a policy of muddling through.

If one accepts that German customs and trade policy before World War I was not the result of an all-powerful influence of a “coalition of ‘rye and iron,’” but rather, as has been suggested here, part of an international reaction to the first wave of economic globalization, then we need to reevaluate our broader historical interpretation. On the one hand, the path is now free for a new view of German foreign trade policy before 1914, which until now has been viewed almost unanimously in negative terms, especially as the literature has tended to see the policy as drifting, at the very latest after the turn of the twentieth century, into high levels of protectionism. In contrast to this, an impartial reevaluation has to take into account not only that the tariff level of the German Empire was at best in the lower middle range in international comparison, but also that alongside the protectionist side, there was also another “modern,” export-oriented side of German trade policy that manifested itself, for example, in the conclusion of new, long-term trade treaties and in retaining the most-favored nation principle.

On the other hand the question must be asked, given the worldwide surge of protectionism that immediately followed the globalization of the nineteenth century whether those politically responsible had any realistic political alternative to building up a system to protect agriculture. At a time when approximately forty percent of the population still worked in agriculture and thus a considerable portion of the population was in danger of being badly hurt in its earning prospects by globalization, and at a time when social security systems and other mechanisms that could help people compensate for losses that resulted from worldwide economic integration were not yet developed, it would have endangered social peace and the stability of the political system to have done anything else. That globalization brought forth its own protectionist countermovement that increasingly strangled it and culminated in the exuberant economic nationalism of the interwar years has often been pointed out in the historical literature on globalization.Footnote ⁷⁶ As suggested by studies on the relationship between trade openness and the extent of the social security spending in OECD-countries, only after World War II did an efficient and productive social welfare state apparatus enable many industrial countries to compensate possible losers from globalization, without having to swing over to the path of a protectionist policy with its negative repercussions to world trade.Footnote ⁷⁷ Given this, we should be skeptical about the claim often heard today of the incompatibility of the welfare state and globalization.