Modern Germany: Birth of an Industrialized Nation - Essay Sample

Introduction

The industrialization of Germany in the nineteenth century led to the birth of the modern German nation. The country’s revolution came a bit late as compared to other places in Europe, like France and England (Kemp, 2014). However, industrialization in Germany would accelerate starting in the 1840s, and by 1900 the Germans had the largest economy in the whole of Europe (Kemp, 2014). Over the years, people have praised the development of the railway system, citing it as the most significant contributor to the revolution. However, not everyone agrees with that position, and some economists claim that the banking sector was the most significant in accelerating the Industrial Revolution in Germany. Either of the two contrasting sides has a significant point. Both areas contributed significantly to the industrialization of Germany in the nineteenth century, but which correctly played a more significant role than the other.

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Different economists have taken different positions, probably informed by their preference for either of the two sectors. Engineers and construction workers are likely to hail the railway’s role in the growth and development of Germany. In contrast, accountants and experts in the banking sector would most likely claim their area to be the most critical in the industrialization process. Some opinions could be split into emotions and others on merit. All in all, the significance of each of the two sectors in the industrialization cannot be overemphasized. However, a critical observation proves that the banking sector played a more vital role when compared against the railway sector.

The Railway Sector

The role of the railway sector in the industrialization process in Germany is undoubtedly one of the most significant. Some economists have gone ahead to dub the rail system as the ‘hero’ of revolution in Germany (Edwards and Ogilvie 1996). The rail development was significant in many different ways. First, it is essential to note that Germany was not a political unit until late in the nineteenth century (Watkins and Alley, n.d.). Therefore, there were legal limits to trade within the German territory.

Nonetheless, the railway system ensured that the market’s legal limits became broader and broader with free movement of goods. The local differences that existed were broken through the railway line; strong trade links between different local areas broke down the past particularisms that had subdivided Germany for long (Kemp 2014). This developing unity of purpose among the different regions and states in present-day Germany was a catalyst for the revolution.

The industrial revolution is incomplete and absent without economic integration. The construction of the railway had ripple effects in the German economic sector. It expanded the trade and transport sectors and opened up the avenues of engineering and opening up of the coal reserves in Germany in the mining sector (Watkins and Alley n.d.). The Germans could not afford to develop the railway on their own. Therefore, the government had to open intimate relations with other nations and gain support from other developed areas across Europe. The connections injected financial capital in Germany and established trade relationships that would help the country’s economy grow. By this time, the German Customs Union had already eliminated the existing artificial trade barriers that had taken down Germany for a while in the preceding years.

Apart from opening up Germany’s internal structures and uniting the different local areas, the railway transport connected Germany to the rest of Europe and created international trade lines for them (Watkins and Alley, n.d.). Through the railway, the country was now ripe for international relations and trade, gaining from other countries’ technologies to develop and grow their economy. On that account, it is clear that the railway line's role was quite significant in the revolution. Even the people who support the banking sector as the more critical one appreciate the role played by railway construction. The main reason the railway is taunted as the hero in the revolution is how it managed to bring together so many sectors. However, they forget what made it possible to make the railway.

The Banking Sector

The banking sector is vital in any economy, and it undoubtedly played a remarkable role in Germany’s industrial revolution. Edwards and Ogilvie (1996) posted that the relationship between universal banks and industrial companies in Germany was a distinctive feature in the industrial revolution. At the time the revolution began, Germany could be counted among the backward economies of the time. The universal banks stepped in to ensure there was access to finances for the companies at the time. Economists agree that without access to investment finance, growth is almost impossible. This finance factor is the reason why universal banks were essential to the German cause.

Universal banks were significant contributors in Germany’s industrializing, providing loans to firms; an act that was vital in helping businesses to overcome the constraints of liquidity (Burhop 2006). In any development, banks are at the centre of it. Through the provision of finance and ensuring that the players do not go to the point of liquidity problems. With banks in action, the circulation of money becomes more manageable as there is a controlling force away from the actual industry players. This balancing act ensured that growth happened in the best way possible without interruptions that could have occurred in the absence of the universal banks.

Some economists view banking as catalysts to the industrial revolution. According to Cameron (2011), financial institutions made a potent contribution to the country’s economic growth and industrialization. In the discussion, Cameron (2011) exerts confidence that Germany is an instructive example of the role of banks in industrialization. With the support of the political system, Germany’s financial system was vital in its contribution to the growth and development of the industrial sector. Post-industrialization would also see banks play a vital role in the German economy's continuous progress and development.

The Most Vital Contribution

The German States played a significant role in funding the railway line. This act has always overshadowed the significant role that banks played in the same development. Without the role played by the banks, the rail system as it was at the peak of industrialization could not have been achieved. This fact is not to downplay the German states' role, but they could not have done it on their own. The banking sector came in to accelerate where the states could not get. For a fact, at times, the states also sought assistance from the banks through loans, which they would then inject into the contraction of the railway line. This construction spurred economic growth. The banks were not only playing a part in the development of the rail; but also in other sectors of the economy. They provided finances to investors in the construction and development of factories and companies in the German territory.

Consequently, the banking sector played a more vital role in the industrial revolution of the country. Working hand in and with different sectors, the banking sector provided a necessary boost with a role that could not have been played by any other area of the economy. There is no development without money, and the epicentre of financial control is with the baking industry. If the banking sector had withheld the necessary resources and created liquidity challenges, industrializing Germany would have been impossible. On this account, it is correct to argue that the baking sector played a vital role in ensuring industrialization succeeded in Germany.

References

Burhop, C., 2006. Did banks cause the German industrialization?. Explorations in Economic History, 43(1), pp.39-63.

Cameron, R., 2011. Banking in the early stages of industrialization a preliminary survey. Scandinavian Economic History Review, 11(2), pp.117-134.

Edwards, J. and Ogilvie, S., 1996. Universal Banks and German Industrialization: A Reappraisal. The Economic History Review, 49(3), p.427.

Kemp, T., 2014. Industrialization in nineteenth century Europe. Routledge. [online] Available at: <https://books.google.co.ke/books?id=bcgFBAAAQBAJ&pg=PA93&lpg=PA93&dq=role+of+railway+in+german+industrialization&source=bl&ots=f7MEW8hgj7&sig=ACfU3U2mCuS3E4el1I8adn2ilT4v41jAGg&hl=en&sa=X&ved=2ahUKEwjXo4vEsuXpAhXMTMAKHXQoDSIQ6AEwCXoECAwQAQ#v=onepage&q=role%20of%20railway%20in%20german%20industrialization&f=false

Watkins, T. and Alley, T., n.d. THE ECONOMIC HISTORY OF GERMANY. [online] Sjsu.edu. Available at: <https://www.sjsu.edu/faculty/watkins/germany.htm#:~:text=The%20Industrial%20Revolution%20of%20Germany,than%20it%20did%20in%20England.&text=In%201870%20the%20modern%20German,full%20fledged%20industrialization%20of%20Germany> [Accessed 3 June 2020].