Iron Kingdom : The Rise and Downfall of Prussia, 1600-1947 (33 page)

In the case of the silk industry, the state was the chief investor and the foremost entrepreneur. The same pattern could be observed across a range of other industries deemed to be of strategic or fiscal importance. There was a royal shipyard at Stettin, for example, and state monopolies in tobacco, timber, coffee and salt, managed by businessmen under the supervision of state officials. There were also a number of private – public partnerships, like that with Splitgerber and Daum, a Berlin firm specializing in war-related industries, including the purchase and resale of foreign munitions, which operated as a private enterprise but was protected by the state from competition and provided with a regular flow of government orders. A much celebrated example of state-driven entrepreneurship was the consolidation of the Upper Silesian iron ore industry. In 1753, the Malapane Hütte in Silesia became the first German ironworks to operate a modern blast furnace. The government also assisted in the expansion of the Silesian linen industry, attracting new workers and technicians through special settlement schemes offering various incentives (such as free looms for newly arriving immigrant weavers).
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All of these enterprises were protected by a regime of protective tariffs and import bans.

Intervention, at this level of depth, involved the state, and indeed the sovereign himself, in the time-consuming micro-management of specific sectoral problems. We can see this in the government’s handling of the ailing salt industry in Halle, Stassfurt and Gross Salze towards the end of Frederick’s reign. The salt-works of these towns had lost their traditional markets in Electoral Saxony and repeatedly petitioned the
king for help. In 1783 Frederick entrusted one of his ministers, Friedrich Anton von Heinitz, with the task of finding out ‘whether it would be possible to process some other product from the salt-pit, such as a saltpetre or whatever, so that these people can help themselves to some extent and then sell this product’.
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Heinitz hit upon the idea of manufacturing blocks of mineral salt and selling them on to the domains administration in Silesia as saltlicks for grazing cattle. He persuaded the local salt-miners’ corporation (
Pfännerschaft
) of Gross Salze to conduct the necessary experiments and provided them with a royal subsidy of 2,000 thalers to cover costs. The first experiment failed because the ovens in which the mineral salt was to be extracted were of inadequate quality and collapsed during firing. A substantially larger subsidy from ministerial discretionary funds was required to finance the construction of higher-quality ovens. Heinitz also requested Carl Georg Heinrich Count von Hoym, the Minister for Silesia and a particular favourite of the king, to purchase 8,000 hundredweight of his product in the summer of 1786. Hoym acceded in the first instance but refused to renew the order in the following year because the salt from the new works at Gross Salze was of poor quality and far too expensive. Here we see a readiness to improvise and innovate combined with an ultimately counterproductive preference for government-(as opposed to market-) driven solutions.
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As his heavily interventionist and controlling approach revealed, Frederick II was out of touch with those contemporary trends in (especially French and British) economic thought that had begun to conceptualize the economy as operating under its own autonomous laws and saw individual enterprise and the deregulation of production as the key to growth. There was growing controversy – especially after the Seven Years War – as businessmen began to chafe under the government’s economic restrictions. During the 1760s, independent merchants and manufacturers in the Brandenburg-Prussian cities protested against the restrictive and discriminatory practices of the government. They found some support from within the king’s own bureaucracy. In September 1766, Erhard Ursinus, Privy Finance Secretary of the Fifth Department, submitted a memorandum criticizing government policy and focusing in particular on what he saw as the over-subsidization of the velvet and silk industries, both of which produced material of inferior quality at much higher prices than imported foreign equivalents. The network of government monopolies, Ursinus went on to argue, created an environment
hostile to the flourishing of trade.
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Ursinus was not rewarded for his candour. After revelations that he had been accepting bribes from powerful figures in the business community, he was imprisoned in the fortress at Spandau for one year.

17.
Frederick the Great visits a factory.
Engraving by Adolph Menzel, 1856.

A more historiographically influential critique was that of HonoréGabriel Riquetti, Count Mirabeau, author of a widely discussed eight-volume treatise on the agricultural, economic and military organization of the Prussian monarchy. A passionate partisan of physiocratic free trade economics, Mirabeau found little to commend in the elaborate system of economic controls employed by the Prussian administration to sustain domestic productivity. There were, he declared, many ‘true and useful ways’ of encouraging the growth of industry, but these did not include the monopolies, import restrictions, and state subsidies that were the norm in the Kingdom of Prussia.
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Instead of allowing manufacturies to ‘establish themselves of their own accord’ on the basis of the capital naturally accumulated in agriculture and trade, Mirabeau argued, the king had wasted his resources on ill-advised investment schemes:

The King of Prussia recently gave six thousand écus for the establishment of a watch factory at Friedrichswalde. Such a small project was not worthy of this gift. It is easy to foresee that if this factory is not continually fed with further benefits, it will not sustain itself. Of all useless accoutrements, there is none more useless than a bad watch.
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The legacy of nearly half a century of Frederician rule, Mirabeau concluded, was a grim landscape of economic stagnation in which production chronically exceeded demand and the spirit of enterprise was stifled by regulation and monopoly.
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This was an overly negative assessment, whose ultimate purposes were polemical (Mirabeau’s real target was the French
ancien régime
, which he helped to overturn in June 1789). In defence of the Frederician experiment, one could point out that a number of the state projects launched during this era established the foundations for longer-term growth. The Silesian iron industry, for example, continued to flourish after Frederick’s death under the supervision of Count von Reden, Special Industrial Commissar for Silesia. Between 1780 and 1800, its workforce and output increased by 500 per cent. By the mid nineteenth century, Silesia possessed one of the most efficient metallurgical industries in continental Europe. Here was an example of successful state-induced long-term growth and development.
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The same point can be made for the state-sponsored wool industry established in the Luckenwalde district in the Mittelmark to the south of Berlin. The state may not in the first instance have created a congenial climate for free competition and entrepreneurship, but it did successfully substitute for the absence of a local entrepreneurial elite. No merchant, however wealthy or enterprising, would have seized upon the idea of settling artisans in an area such as Luckenwalde, where there was as yet no industry to speak of. The fructifying activity of the entrepreneurs could begin only at a later point, when a settlement, together with the necessary concentration of local resources and expertise, had already been established with the encouragement of the state. In other words, state-induced development and entrepreneurship were not mutually exclusive – they could be successive stages of the process of growth. As one nineteenth-century social and economic historian, Gustav Schmoller, put it: the regime of protectionism and state-induced growth ‘had to fall in order that the seeds it had sown could bloom under the sun of [nineteenth-century] industrial liberalism’.
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In any case, mid eighteenth-century Brandenburg-Prussia was not an economic wasteland in which the state was the only innovator and the only entrepreneur. The importance of the royal administration as the manager of large-scale manufacturies should not be exaggerated.
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In the Berlin-Potsdam residential city complex, the dominant centre of economic growth in the Prussian central provinces, only one in every fifty factories (
Fabriquen
) belonged to the state or to a public corporation. To be sure, these included some of the biggest concerns, such as the Lagerhaus founded by Frederick William I to supply the army, and the porcelain, gold and silver manufacturies. However, a number of these enterprises were not controlled directly by the state, but leased out to wealthy businessmen. The role of the state was less prominent in the western provinces, where there were major independent centres of metallurgy (in the county of Mark), silk manufacture (in and around Krefeld) and textiles (around the city of Bielefeld). In these areas, the dominant force in economic life was a confident mercantile and manufacturing bourgeoisie whose wealth derived not from state contracts but from regional trade, especially with the Netherlands. In this sense, the western territories were an ‘object lesson in the limits of state influence on economic developments’.
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Even in the central provinces of the Prussian conglomerate, growth in the state sector was dramatically outstripped by the expansion of private sector enterprise. Especially after the Seven Years War, the rapid growth of privately funded and managed middle-sized manufacturing enterprises (employing between fifty and ninety-nine workers) bore witness to the declining importance of government-steered production. Particularly striking was the growth of the cotton sector, which unlike those of wool and silk, received little governmental assistance. Although Berlin-Potsdam and Magdeburg were the only two production centres of supra-regional importance to compare with Hamburg, Leipzig or Frankfurt/Main, there were many lesser centres of production in the middle provinces of the kingdom. Even in quite small towns, where the chief source of income was agriculture, there could be substantial local concentrations of craft-based manufacturing activity. Stendal in the Altmark to the west of Berlin, for example, boasted no fewer than 109 master artisans in the textile sector. In many such locations, the second half of the eighteenth century saw considerable structural change, as individual workshops were gradually integrated into dispersed manufacturies. Even
small craft towns could be important ‘islands of progress’ capable of laying the foundations of later industrial development.
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Overseeing this accelerated growth outside the state sector was a diverse entrepreneurial elite whose relationship with the government’s economic agencies was more complex than the mercantilist model allows. The decades after 1763 saw the rapid consolidation of a new economic elite of manufacturers, bankers, wholesalers and subcontractors. Although they remained closely tied to the old town oligarchies, their economic activities gradually dissolved the structures of the traditional corporate social order. These were not craven ‘subjects’ whose highest ambition was to capture a few crumbs from the table of the state enterprises, but independent entrepreneurs with a strong sense of their individual and collective interests. They frequently sought to influence the behaviour of the government, sometimes through open protest (such as during the depression of the 1760s, when there was collective protest against government trade restrictions) but more often through personal contacts. This could occur at many levels, from petitions to the monarch himself, to letters to senior central or provincial bureaucrats, to contacts with state agents in the locality, such as tax commissioners and factory inspectors (
Gewerksassessoren
) . The investigation into the alleged corruption of Privy Councillor Ursinus of the Fifth Department threw up abundant evidence of private and official contacts with the most respected merchants and manufacturers of Berlin – Wegely, Lange, Schmitz, Schütze, van Asten, Ephraim, Schickler. Such contacts between businessmen and officials were commonplace. We find evidence of them, for example, in the correspondence of Privy Finance Councillor Johann Rudolf Fäsch, Director of the Fifth Department after the departure of Marschall. In Frankfurt/Oder, local officials and businessmen even held regular conferences at which they debated the government’s measures to stimulate trade. In 1779, for example, a posse of cotton entrepreneurs – de Titre, Oehmigke, Ermeler, Sieburg, Wulff, Jüterbock and Simon – marched down to the Fifth Department to deliver a stiff protest against recent government measures.
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The state, for its part, was more open to influence from this sphere than Frederick’s famed contempt for merchants might suggest. The king counted at least a dozen renowned entrepreneurs and manufacturers among his closest personal advisers. The textile entrepreneur Johann Ernst Gotzkowsky, for example, and the Magdeburg merchant
Christoph Gossler were sometimes asked for formal reports on matters of state policy, as were the powerful Krefeld silk manufacturers Johann and Friedrich von der Leyen, who were awarded the title ‘Royal Commercial Councillor’ (
ko niglicher Kommerzienrat
) in 1755 for their services to the king.