Monday, April 21, 2014

German Customs Union - Zollverein

Proclamation of Wilhelm I as Emperor of the German Empire
Palace of Versailles, 1871 – Prussian King Wilhelm I was proclaimed the first Kaiser of the new united German Empire. After a decade of fighting, finally, Prussia succeeded in unifying a long time divided nation. Unification was indeed brought by “blood and iron.” But unification seem to had been brought closer by economic ties brought decades before the pronouncement the German Reich in Versailles. Similar to the Hanseatic League of the Medieval Ages, the Zollverein brought economic unity between numerous German States.

The Zollverein was a customs union formed by several German States during the 19th century. This meant that trade between members states were free and liberal. Alongside, a uniform customs policy would also be enacted by its members. Its economic implication brought energy in trade and ushered the rise of industrial Germany. But perhaps its political implication, it allowed Prussia to prepare for its conquests to unify all of Germany.

The Zollverein began during the early 1800’s when the idea of free trade began to spread to mainland Europe. During the time of the Napoleonic Wars, several German state began to liberalized and stimulate their local trade by abolishing internal tariffs. Internal tariffs involved the payment of a certain percentage of the price of a product once in crossed a region of the state. This caused for distribution of local goods to slump and dragged down the rise of local products. Many states saw the hindrance of local tariffs and one by one, some states began to abolish this system. In 1807, Bavaria abolished its internal tariffs. A year later, Wurttemberg followed and then four years later, the German state of Baden removed it as well.

However, the most celebrated abolishing of internal tariff was made in May 1818, when the leading German Kingdom of Prussia decided to abolish its internal tariffs. But what made the Prussia’s decision was also incorporating free trade with its neighboring German states.  Many intellectuals welcomed and rejoiced upon the decision of Prussia. The famous German economist Friedrich von List that promoted free trade hailed the decision. Also, the Finance Minister of Prussia, Friedrich von Motz, supported the idea of free trade among German states and even played a role to the formal creation of the Zollverein in 1833.

Prussia welcomed and invited some of the German states to join their customs union during the 1820’s. Some took notice of the promise of prosperity and vibrant state if they joined Prussia. Some were harassed by Prussia in order to join their customs union. Infrastructure development was offered by Prussian diplomats to other German states to persuade them to join. Little by little, other German states joined Prussia.

In the 1820’s other German states decided to form their own customs union to compete with the of Prussia. In 1820 a customs union was attempted to be formed by the German states of Wurttemberg, Baden, Bavaria, Hesse-Darmstadt, and some Thuringian states. The negotiations went into deadlock. But the idea of a separate customs union was still sought by Wurttemberg and Bavaria and proceeded with the negotiations for the formation of the Southern German Zollverein in 1828. At the central region of Germany, another customs union was formed. The German states of Hanover, Brunswick, Nassau, and Hesse-Darmstadt decided to form their own Central German Trade Union in 1828 also.

Eventually, Prussia wanted to expand its customs union as it also meant prestige and economic growth for the Kingdom. Negotiations for the merging of the three unions, from 1828, underwent with the two other customs union. In 1829, a Prussian Zollverein and the Southern German Zollverein concluded a trade treaty. It was a first step towards the final combination of the three Zollverein in 1833. The Deutscher Zollverein was finally established. However, there remained some resistance from Prussian economic aggression. Hanover, Brunswick and Oldenburg ceded from the Central German Union in order to form their separate customs union – the Steuerverein. The resistance of the Steuerverein continued for several decades. Other little German states had no match for Prussia and its Zollverein and decided to join. By 1840’s, twenty eight out of thirty four German States were members of the Zollverein. A decade later, being surrounded and isolated by the Zollverein, the Steuerverein surrendered and in 1854 it joined the Zollverein.

The Zollverein created a huge common market at the center of Europe. It orchestrated infrastructure development through its members, including roads and railways. It fostered future industrialization. Trade was promoted through the establishment of a uniform currency based on the Prussian Taler during the 1850’s. Standards of weight and measurements were issued. 

Prussia utilized the Zollverein into its political ambitions. During the early years of the Zollverein, Austria as part of the union was being discussed in Vienna. The chancellor, Metternich, was hesitant to the membership of Austria. Under economic implication, Austria could be placed under the influence of Prussia that used its currency as the most widely used in the union. For political implication, Austria joining the Zollverein meant that it was conceding to Berlin in the leadership race of Germany. So Austria never joined the Zollverein.

Meanwhile, in Berlin, Chancellor Otto von Bismarck used the Zollverein in unifying Germany. He saw that economic integration was important for political integration to follow. He also saw the Zollverein as a way to influence other German states into recognizing Prussia as the future leader of a unified Germany.

In 1871, after the Franco-Prussian War, the German Empire was proclaimed. Many German states were hesitant in being part of the empire and losing their identity and their sovereignty. So an imperial and centralized government had to come slowly. Alongside political autonomy still being retained, some economic autonomy was also given. Thus, the Zollverein continued to flourish even under the period of Imperial Germany.

The customs union Zollverein would remain existent until the early 20th century. It would then meet its end as the Great War became unfavorable for imperial Germany. Alas, after the signing of the treaty of Versailles, the monarchy of Wilhelm II was deposed, along with him was the dissolution of the Zollverein.

See also:
Delian League: The Athenian Empire
Hanseatic League: Economic Group of Germany
Holy League: The Victors of Lepanto
Kalmar Union
Schmalkaldic League
Swabian League


Anmer, C. & D. Anmer. Dictionary of Business and Economics. New York: The Free Press, 1984. 

Hodge, C. (ed.). Encyclopedia of the Age of Imperialism, 1800 – 1914. Connecticut: Greenwood Press, 2008. 

Kitchen, M. A History of Modern Germany: 1800 to the Present. Maryland: Wiley-Blackwell, 2012.

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