Saturday, December 6, 2014

Prussian Economy Under Frederick the Great

Frederick the Great
Germany, today, is one of the most powerful countries in Europe, not to mention that it dominates the affairs of the European Union. Because of its great immense wealth and influence, one can be curious enough to study its history. In the course of studying its history, besides Otto von Bismark and off course, Hitler, another personality that would also be notable is the 18th century Prussian King, Frederick II the Great.

Frederick II "The Great" was a king that made his kingdom, Prussia, into a powerful force in Europe, not just militarily but also economically. He was a patron of various local industries. He gave incentives and protection to these domestic enterprises so that they can thrive, grow, and provide jobs for the population. He utilized the strong and powerful army of this German kingdom to develop its economy.

The economy that Frederick the Great inherited was still dominated by the ideas of mercantilism. Under the idea of mercantilism, the wealth of countries were based on the amount of precious metals that they own. The more silver and gold the country owned, the wealthier and powerful it was. And so, to keep silver and gold in the country, the economy must not rely heavily in importation. Because to buy imports was to spend away silver and gold reserves. As a result of this, many countries had a protectionist policy when it came to trade and promoted import-substitution strategies. And Frederick the Great was among its believer. He showed this by supporting local industries as well as enterprises that could substitute import products.

The king showed avid interests in local industries of various fields, from light and agricultural, to the heavy and capital intensive industries. He promoted industries of metal, armaments, porcelain, sugar refining, and, most of all, textile. The silk industry became one of his pet project. He showed enthusiasm over this industry. He started t implement regulations that watched over the care of the silkworms that produced the silks. The handling of the newly produced silk became also a business for the government to watch. Even the weaving of the silk came under government control. Porcelain was another product that received support from the King. He established the Royal Berlin Porcelain Factory that employed many Prussians in the city. The factory also served as a model for other porcelain manufacturers to emulate.

The reason for Frederick’s attention to silk and porcelain reflected an aim to reduce importation. Silk and porcelain were highly luxurious goods imported from China and the orient. Such items cost a lot of silver, which would be a lost to the treasury of the kingdom. Hence, in order to cut the importation of the items, Frederick aimed to bring its production within Prussia.

To nurture the growth of local industries that he so full-heartedly engaged, King Frederick gave wide programs of incentives and protection from foreign competitors. Domestic companies received economic stimulus in form of export subsidies, capital investment by the state, monopoly rights, for example, the monopoly on distribution of coffee and spirits. Management consultation was also given to local businesses, especially in the industries of sugar-refining and metal. Frederick himself done a lot of things to help startup companies. In the textile industry for example, he gave ideas on designs, looked for new markets for exports, and, again, how to manage the business. High tariffs kept foreign companies away from entering the kingdom and helped local industries to grow within Prussia.

The policies on the economy also military aspects. For example, Frederick II annexed a province of Austria called Silesia. Silesia was rich of minerals and natural resources. Because of this, putting it under Prussian control would be a great benefit for the kingdom. After the conquest of the province, the Kingdom of Prussia established a steel manufacturing industry. Its establishment became symbolized by the installment of the first blast furnace of Prussia in Silesia. With the steel industry in placed, Prussia acquired the capacity to produce weapons for its army. Another industry developed in Silesia was textile, in particular, linen. It helped to produce huge amount of uniforms for the soldiers of the Prussian Army. Silesia became virtually the arsenal of Prussia.

With his economic policies, the wealth of the kingdom increased and helped to fund the defense or the conquest of Prussia for a long time. The great patron of this economy, Frederick II the Great, passed away on 1786, leaving Prussia a great power in Europe.

Chang, H. Kicking Away the Ladder: Development Strategy in Historical Perspective. London: Anthem Press, 2003.

Ritter, G. Frederick the Great: A Historical Profile. Los Angeles: University of California Press, 1968.

Collier, P. Germany and the Germans From an American Point of View. Middlesex: The Echo Library, 2007.

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