Published by EH.Net (September 2022).

Richard H. Tilly and Michael Kopsidis. *From Old Regime to Industrial
State: A History of German Industrialization from the Eighteenth Century to
World War I. *Chicago: University of Chicago Press, 2020. 327 pp. $75
(cloth), ISBN 978-0226725437.

Reviewed for EH.Net by Simone A. Wegge, Department of Economics, College of
Staten Island and the Graduate Center, City University of New York.



Richard H. Tilly and Michael Kopsidis have produced an interesting new book
and effectively present an updated history of German industrialization.
They cover a wide range of topics including agricultural innovation,
demographic change, labor markets, entrepreneurial activity, patent
activity, regulation, banking developments and more and provide a roadmap
for most of the main events in the history of German industrialization in
the two centuries leading up to the First World War. While doing so they
draw on their own research as well as much new scholarship in Germany
economic history. The reference section, at almost 40 pages, emphasizes the
authors’ extensive and deep reading and serves as an excellent source for
works in both English and German on the topics of German industrialization
and economic growth.

The monograph is broken up into four parts, the first part describing
Germany in the eighteenth century, the second part early industrialization,
the third part the growth of industrial capitalism up to the 1870s, and the
fourth and concluding section Germany’s takeoff as an industrial power from
unification in 1871 to the year 1914.

One of the more interesting sections of Part I is Chapter 2, which provides
an intensive account of industrialization in three important economic
regions in Germany, Saxony, the Ruhr/Rhine region and Württemberg. All
three had vibrant proto-industrial textile sectors in the eighteenth
century, and this feature seemed to be important for rapid
industrialization in both Saxony and the Ruhr/Rhine region but not in
Württemberg. One thus cannot conclude that an active proto-industry
necessarily led “directly to industrialization” (p. 57). Interestingly,
Württemberg is one of the most industrialized parts of the German economy
today. Chapter 4 is the other highlight of Part I and explains reforms in
agrarian property rights and citizens’ rights, the adoption of compulsory
schooling, the decline in the power of guilds accompanied by the rise of
manufacturers, and the ascendancy of the bureaucratic Prussian state. This
chapter is crucial, as it helps one to understand the overwhelming
influence of Prussian customs and institutions on the rest of Germany. Note
that “unification of Germany in 1871” is considered by some to be an
oxymoron for a “Prussian takeover.”

A valuable section of Part II is the material (Chapter 5) on the
Zollverein, the common market that evolved between various German states in
the decades leading up to 1871. Incorporating research from Dumke (1981,
1984) and more recent work from Keller & Shuie (2014), Tilly and Kopsidis
argue that the main effects of the Zollverein were not tariff protection,
as Friedrich List had claimed in 1841, but were instead to eliminate
internal trade barriers and to expand and integrate markets. The authors
also cite intriguing work from Ploeckl (2009) to show that the development
of the Zollverein was a complicated sequential game that Prussia devised in
the interest of bringing all its neighboring states into the fold.

The authors round off Part II with a discussion of the financial and
agricultural crises that culminated in a hunger crisis in the mid-1840s and
eventually the 1848 Revolution; they argue that a significant result was
that the bourgeoisie gained political power but that not much else changed
for the vast majority of people in German regions, most of whom were
farmers, laborers and artisans. The authors are very much focused on
Prussia, where in 1807 with the Prussian Edict (p. 70), many farmers were
able to pay off obligations and benefit from a more modern semblance of
land ownership (*Bauernbefreiung* or “farmer emancipation”) and thus a more
market-oriented rural economy. In various parts of Germany, however, this
transformation took place in later decades: for example, in Bavaria farmers
were first given the option in 1848 of paying off obligations in 1848; in
the Electorate of Hesse-Cassel legislation to this effect was passed in
1832 and finalized in 1848. The authors may be underestimating the positive
effects of the 1848 Revolution for a sizable number of German farmers
outside of Prussia (p. 118). In general, the topic of *Bauerbefreiung* in
understudied, and there are other possible connections that economic
historians will find interesting: many farmers used loans to achieve these
economic freedoms, which may have in turn spurred on the founding of more
local credit institutions in the 1830s and 1840s.

The third part of the book delves into the actual industrialization of
Germany up to 1870. Leading sectors like railroads, iron and steel, and
coal mining expanded in the 1850s up to the crisis period of 1857 and
again, after a downturn, in the late 1860s. The authors describe the
development as a “cyclical phenomenon,” something they attribute to the
work of Spree (1977), who emphasizes the linkages between sectors, both
forward and backward ones, with railroads being the “initiator” and the
chief consumer of German finished iron production. Since it was expensive
to move coal, the location of coal deposits played a determinative role in
the location of industries, which Gutberlet (2014) expands on. The takeoff
of German industry was helped by two regulatory developments: first,
Prussia paved the way for limited liability corporations in 1843; secondly,
this option was available to most of the rest of Germany (“German-wide”)
with the 1861 ADHGB (Allgemeine Deutsches Handelsgesetzbuch) legislation on
business laws (p. 122).

Other sections of Part III handle the changes to labor and capital markets
as well the increase in agricultural outputs in the takeoff period. A final
chapter addresses changes in the banking sector, where the authors
highlight first, the emergence of universal banks as arising at their
inception as a way to finance railroads and secondly, the growth of German
savings banks and credit cooperatives, which made a difference in
encouraging savings and financing local economic activities.

The fourth and final section of the book, Part IV, covers the period from
1871 to 1914. Chapters 12 and 13 are especially interesting, as they get
into the weeds of German industrialization and describe the takeoff period.
It is a remarkable story, such that by 1907 Germany was ahead of the United
Kingdom in various heavy industries, including the chemical, engineering,
metals, and iron and steel industries. GDP per capita was still higher in
the U.K. in 1914 though, given that the British were more productive in
other sectors, such as in mining, clothing, textile, and food & beverage.

A particular important event was the passage of the German Patent Law,
which established the German Imperial Patent Office in 1871. The authors
use the recent research of Streb et al. (2006) on “valuable patents” to
describe four waves of innovations involving steam and railroads in the
first wave, chemical and dyestuffs in the second wave, pharmaceuticals and
fertilizers in the third wave and electricity in the fourth. Besides
emphasizing patents, economic historians have debated as to whether
entrepreneurial skills or scale economies were more relevant, and the
author come down on the side of the latter, stressing the rise of cartels.
Advanced industrialization also required skilled and knowledgeable workers,
and the story of how German industry, in cooperation with German vocational
schools and technical universities, invested in human capital, is also told
here. By 1900, on an annual basis Germany was producing eight times more
new engineers than Britain. Industrialists increasingly turned to the
corporation as a form of legal organization for their firms, with 80% of
large firms in the latter years of the nineteenth century organized as such
(p. 186). After 1892, many small firms took advantage of the new legal form
of the GMbH (*Gesellschaft mit beschränkter Haftung*), designed for a
private limited liability companies or partnerships (Guinnane, 2021).

Chapter 13 continues with this story of takeoff and describes in more
detail financial developments. The introduction in 1873 of a national
currency, the German mark, and the establishment in 1876 of a central bank,
the Reichsbank, are two notable events. By the 1880s, and especially with
the Company Law of 1884, which paved the way for a greater role for banks
that supplied capital, banks were very much involved in monitoring the
firms they financed: the markets, for instance, viewed firms more favorably
when their bankers served on their corporate boards, something that is
still practiced today. These big banks evolved into large universal banks
and held a lot of capital.

Tilly and Kopsidis claim that this setup and universal banks’ “diversified
branching network and close ties to the Reichsbank” were effective in
bringing more stability to the banking sector of Germany, a stark contrast
to the U.S. banking system prior to 1913 before the creation of the Federal
Reserve Bank (p. 200). The literature on Germany’s universal banks and
their involvement in German industrialization is extensive, and Tilly and
Kopsidis cite many recent scholarly works on this topic (e.g., Burhop 2006;
Fohlin, 2007).

There is much to learn in this book. If I have quibbles, it is that the
authors ignore significant parts of Germany. The book focuses heavily on
Prussia and the regions that developed faster, Westphalia and Saxony. Less
attention though is paid to areas like Bavaria and Baden, or to Württemberg
in the takeoff period. Regions like Hessen, Schleswig-Holstein,
Mecklenburg, and Thuringia are missing in the index. To discuss a less
developed area of Germany, Tilly and Kopsidis repeatedly draw on the
example of the East Elbian parts of Prussia, some of which is today Poland
and quite removed from the rest of Germany. There were however other
“backwaters,” the authors’ term that they could have drawn on. Of course,
no single book can be everything to everybody. For a discussion in English
of relative economic development and backwardness across all German
regions, readers should refer to Oliver Grant’s 2005 monograph.

Over this almost 50-year period several notable political changes at the
federal level occurred. German reunification (or “Prussian takeover”) took
place in 1871 under Chancellor Otto Bismarck, who served in this role until
1890. Alongside the chancellor was the German monarch, consisting of a
series of German emperors who stemmed from the House of Hohenzollern and
who had ruled Prussia before 1871. The monarchy lasted from 1871 to 1918,
at which point the political organization of German was switched to a
republic. Did any of this matter? Tilly and Kopsidis do not say too much,
although they briefly discuss the rise of tensions with other nations as
Germany’s economic interests grew beyond its borders. It bears mentioning,
however obvious, that Germany did not fight in any great war between 1872
and 1913, and this all helped provide stability that enabled entrepreneurs
to innovate and businesses to grow.

The authors of *From Old Regime to Industrial State* cover much ground and
discuss the many angles of economic growth, including patents,
technological change, infrastructure development, education and
occupational training, customs unions, evolving market structures,
financial development and the rise of universal banks, agricultural
productivity, and more. There is much here to absorb – the story of German
economic development from many angles. That this monograph is written in
English and not in German is a plus as it makes it accessible to a much
larger audience. The authors’ engagement in many debates about the history
of German economic growth, as well as the extensive references to so many
different scholarly works, especially recent ones, makes this work further
valuable.

For historians of the industrial revolution, contemplating Germany’s rise
to an efficient, innovative and productive industrial economy is a must.
Tilly and Kopsidis provide a fresh perspective on German economic history
by considering many previous explanations and using the most recent
scholarship, their own work as well as their deep reading into the subject
matter. In sum, this work is a very important addition to the fields of
historical economic growth and industrialization.

References

Burhop, C. 2006. “Did Banks Cause the German Industrialization?” *Explorations
in Economic History* 43: 39-63.

Dumke, R. 1981. “Die wirtschaftlichen Folgen des Zollvereins.“ In W.
Abelshauser & D. Petzina, eds., *Deutsche Wirtschaftsgeschichte im
Industriezeitalter*. Düsseldorf: Athenäum-Verlag, pp. 241-73.

Dumke, R. 1984. “Der Deutsche Zollverein als Modell ökonomischer
Integration.“ In H. Berding, ed., *Wirtschaftliche und politische
Integration in Europa im 19. und 20. **Jahrhundert*. Göttingen, Germany:
Vandenhoeck & Ruprecht, pp 71-101.

Fohlin, C. 2007. *Finance Capitalism and Germany’s Rise to Industrial Power*.
Cambridge: Cambridge University Press.

Grant, O. 2005. *Migration and Inequality in Germany, 1870 – 1913*. Oxford:
Oxford University Press.

Guinnane, T. 2021. Creating a New Legal Form: The GmBH.” *Business History
Review* 95 (1): 3-32.

Gutberlet, T. 2013. “Mechanization, Transportation and the Location of
Industry in Germany 1846- 1907.” Ph.D. Diss., University of Arizona.

Keller, W., and C. Shiue. 2014. “Endogenous Formation of Free Trade
Agreements: Evidence from the Zollverein’s Impact on Market
Integration.” *Journal
of Economic History* 74, 1168-204

List, F. 1841. *Das nationale System der Politischen **Ökonomie*.Stuttgart:
Cotta.

Ploeckl, F. 2009. “The Zollverein and the Sequence of a Customs Union.
*Australian
Economic History Review* 33: 277-300.

Spree, R. 1977. *Die Wachstumzyklen der deutschen Wirtschaft von 1840 bis
1880*. Berlin: Dunker & Humboldt.

Spree, R. 2011. Die Industrialisierung Deutchslands im 19. Jahrhundert.
Online publication. www.rspress.wordpress.com.

Streb, J., J. Baten, and S. Yin. 2006. “Technological and Geographical
Spillover.” *Economic History Review* 59: 347-73.



Simone A. Wegge is Professor and Chairperson at the Department of Economics
at the College of Staten Island and a member of the doctoral faculty at the
Graduate Center, both of the City University of New York. Her recent
publications include “Inheritance Institutions and Landholding Inequality
in Nineteenth-Century Germany: Village-Level Evidence from
Hesse-Cassel” (*Journal
of Economic History*, 2021), and, with Tyler Anbinder and Cormac Ó Gráda,
“Networks and Opportunities: A Digital History of Ireland’s Great Famine
Refugees in New York” (*American Historical Review*, 2019).

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