Nineteenth-century proponents of nationalism often argued that the realization of the German nation-state would spur new commerce and drag the German lands out of a long-lamented state of backwardness. History seems to have proven them right. It is certainly true that the founding of the German Empire in 1871 fell squarely inside a twenty-year period of rapid economic expansion, far-reaching technological innovation, and wrenching social change, one that is now widely associated with Germany’s initial transition to modern economic growth. But were these two “epochal” events—national unity and the transition to modern economic growth—in fact causally linked (11)? This is the question that Ulrich Pfister and Nikolaus Wolf turn to in their edited volume of nineteen short essays examining a wide range of topics, from patent law and tax policy to the postal service and municipal road construction. Comparative studies on Italy, the United Kingdom, and the Habsburg Empire round out this in-depth examination of the historical relationship between nation-state formation and economic transformation.
The verdict advanced by the contributors in this volume is that a causal link is indeed plausible. The founding of the German Empire unleashed an extraordinarily wide range of cultural, social, institutional, and administrative changes, many of which can readily be linked to better resource mobilization, deepening market integration, and accelerating technological innovation—all key features of modern economic growth. While acknowledging that it can be difficult to isolate the effects of a single policy or political change, the authors propose grouping the economic consequences of national unification into four thematic “channels.” The first channel regards the consolidation and promotion of a shared national identity, which the authors propose may have “conditioned choices at the household level,” synchronized “behavioral expectations,” and ultimately facilitated “supra-regional cooperation” (5). A second channel refers to changes in the financial system, in particular the introduction of a common currency, as well as new national standards in labor and patent law. A third channel encompasses improvements to the state’s administrative efficacy and the provision of public services, especially at the local level, which the contributors argue may have been attributable to the federalized power structure of the German Empire. Federalism facilitated national integration by harnessing member states’ credibility with local populations in order to implement what may otherwise have been unpopular reforms associated with distant policy makers in Berlin. A fourth channel concerns the quality of institutions like the corporation, statistical knowledge, or intellectual property markets. Here, too, it can be shown that unification lowered transaction costs and facilitated market integration.
Despite such a strong endorsement of the causal argument, however, the authors warn against rushing to conclusions. Important research gaps remain and there is at least some countervailing evidence to consider. For example, even decades after the founding of the empire there was still no such thing as a national economy. Economically vibrant regions that long predated the founding of the nation-state continued to predominate, and they often did so precisely because of advancements in market integration—not in spite of them. As Sebastian Till Braun and Jan-Otmar Hesse show in their essay on technical infrastructure like railroads and telegraphy, the often-observed national “convergence” in this sector did not so much “level out economic heterogeneity” across the empire as it “exacerbated regional disparities by drawing economic activity to those German regions that were [already] characterized by a higher level of industrial development” (124). This tendency to advantage heritage industries in turn raises doubts about the extent to which national unity could have spawned important changes with respect to the quality and character of economic growth. As Ulrich Pfister reminds us, in the 1860s and 1870s, the German economy transitioned from a post-Malthusian growth regime characterized by agrarian rhythms and labor-augmenting innovation towards a modern growth regime centered around the industrial business cycle, capital accumulation, and human capital. Pfister contends that understanding this particular shift requires zooming out from the national economy and considering developments across the global economy. In particular, he points to a sudden influx into Europe of large quantities of cheap grain and other foodstuffs produced in the western territories of the United States in the years immediately following the Civil War. The evidence suggests that this so-called American “grain invasion” forced the observed structural reorientation within the German economy. Pfister concludes that Germany’s ability to enter a new phase of modern economic growth ultimately may have had far more to do with such “globalization shocks” than with local institution-building in the wake of national unification (87).
The nod towards globalization is an important one, and it echoes a growing consensus in the literature regarding the global impulses behind Germany’s remarkable growth in this period. Yet it is also true that the globalizing dynamics Pfister identifies did not constitute an entirely exogenous process that unfolded independently of the concomitant rise of powerful nation-states. Certainly, the American grain invasion would not have been possible in the absence of intensifying nation-building efforts in the United States in the wake of the Civil War, which compelled the federal government to pour immense resources into the development, peopling, and integration of “land-locked areas in the interior of the American continent” (87). As to Germany, Wolf-Fabian Hungerland and Markus Lampe show that well-integrated national markets, while they might have exacerbated regional inequalities, were also critical to German manufacturers’ ability to develop the economies of scale, product differentiation, and monopolistic structures that formed the bedrock of the emerging global economy. Conversely, a state’s failure to mobilize domestic resources and integrate markets typically undermined its industries’ ability to compete effectively on the global stage. In his study of the economic trajectory of the Habsburg Empire since 1870, for example, Max-Stephan Schulze finds that the empire’s persistent struggle to overcome the geographical isolation of its 22 regional economies reduced Habsburg producers’ average market potential to approximately half that of their German counterparts. “It is here,” Schulze concludes, “where at least part of the gap in the [two countries’] total factor productivity growth likely originated” and why the Habsburgs found themselves “on the periphery” of European and global markets (347).
Given that the global economy was in part a product of nation-state formation, it may make sense to think of the globalization process as yet another channel—a fifth one, that is—through which national unification catalyzed the transition to modern economic growth in Germany. Such a re-classification seems all the more useful if one takes into account the fact that contemporary global markets, dominated as they were by the British Empire and the United States, were by no means universally accessible and instead were characterized by rigid geopolitical, cultural, and even racial hierarchies. Thus, whereas significant parts of the world were forced to accept commerce on British or U.S. terms or risk becoming sidelined, German industries were often able to trade, and trade favorably, on their alleged kinship ties to Anglo-Saxondom. Here the development of a particular variety of national identity, boasting an ethno-cultural affinity with the global hegemons of the day, did not just serve to integrate domestic markets, as Kersting and Wolf show, but may also have eased the Germans’ way into the global economy. Once again, the contrast to the Habsburg case is instructive: as a multi-national, -lingual, and -ethnic polity, the empire was unable to construct a national identity that could similarly form the basis of imagined kinship ties to the Anglo-Saxon world—a point that is perhaps most visibly reflected in the divergent reception in the United States of immigrants from Habsburg eastern Europe and from Germany.
That state formation promotes economic development is, to some degree, a commonplace. What the research in this volume reminds us of is the particular capacity of the modern nation-state, with its powerful integrating ideology, to overcome political opposition to modern economic growth by enforcing common laws and standards, integrating markets, and mobilizing resources. At the same time, this study highlights the striking contingencies that shaped this process. What is revealed here is that a nation-state’s power is as much a function of its capacity to integrate domestic markets as to provide access to supra-regional and global ones. The collection of essays in this volume offers a compelling re-examination of why the German nation-state that emerged in 1871 succeeded in both respects.
