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The Zollverein, or German Customs Union, was a coalition of German states formed to manage customs and economic policies within their territories. Established in 1818, the original union cemented economic ties between the various Prussian and Hohenzollern territories, and ensured the economic consonance of the non-contiguous holdings of the Hohenzollern family, which was also the ruling family of Prussia. It expanded between 1820 to 1866 to include most of the German states. Austria was excluded because of its highly protected industry; this economic exclusion exacerbated the Austro-Prussian rivalry for dominance in central Europe, particularly in the 1850s and 1860s. With the founding of the North German Confederation in 1868, the Zollverein included approximately 425,000 square kilometers, and had produced economic agreements with non-German states like Sweden and Luxembourg.

Beyond the economic consonance of Hohenzollern territories, the goal of the Customs Union was the generation of a domestic market for German-made products and the economic and commercial unification of member states under fiscally sound economic parameters. While the Union sought to limit trade and commercial barriers between and among member states, it continued to uphold the protectionist barriers with non-member states. The political strength of the Customs Union lay with the Prussians, whose promotion of the Little Germany solution of national political unification mirrored the Customs Union's economic solution. After the founding of the German Empire in 1871, the Empire assumed the control of the Union. Although not a state in the German Reich, Luxembourg belonged to the Union until 1919 as a German customs region.

Background


The splintering of territory and states over generations meant that in German-speaking Central Europe, within The Holy Roman Empire, by the 1790s there were approximately 1800 customs barriers. Even within the Prussian state alone, not including Hohenzollern lands in the southwest, there were at the beginning of the 19th century over 67 local custom and tariffs with as many customs borders. In one transport from Königsberg in Prussia to Cologne, for example, the shipment was inspected and taxed 18 times. Friedrich Seidel: Das Armutsproblem im deutschen Vormärz bei Friedrich List. Found in: Kölner Vorträge zur Sozial- und Wirtschaftsgeschichte – volume 13, Köln 1971, S. 4. The problems of such an organization are inherently obvious:  each customs inspection at each border slowed the shipment's progress from source to destination; each assessment on the shipment reduced the profit and increased its price. thumb|left|At each border, merchants had to pay a tariff on the product they were shipping; they usually had to unload the products or raw materials from their wagons, and reload the materials on to local wagons.

The defeat of theSecond Coalition led to the Mediatization of 1803, also called Principal Conclusion of the Extraordinary Imperial Delegation (or, in German, Hauptschluss der außerordentlichen Reichsdeputation, usually called the Reichsdeputationshauptschluss). Their last piece of major legislation re-arranged the map of Central Europe, especially in the southwestern territories. The Reichshauptschluss resulted in the secularization of many ecclesiastical territories, and the so-called mediatization of many of the formerly free imperial territories, including most of the imperial cities. Furthermore, considerable portions of the Habsburg family territories in southwestern Central Europe were "mediatized," or given as compensation, to the princes and dukes who had themselves lost territories to French expansion to the banks of the Rhine River. Most of the imperial cities, imperial abbies, and ecclesiastical states and cities were mediatized or secularized in 1803; with the final dissolution of the Holy Roman Empire in 1806, many of the tiny principalities were annexed by larger neighbors.

Initial Efforts at a Single Toll System
During the Napoleonic Era, efforts toward economic unity in the Rhineland had mixed success. The Confederation of the Rhine, and the other satellite creations of Napoleonic France, sought to establish economic autonomy in European trade. By 1806, as Napoleon I sought to secure his hegemony in Europe, the Continental System offered a semblance of unified effort toward a widespread domestic market for European goods. However, the Continental System, through which Emperor Napoleon believed Europe (meaning French-dominated Europe) could bring Britain to its economic knees, relied on the actual function of domestic markets independent of trade for external raw materials, and independent of external markets for manufactured goods; by placing an embargo on imports and exports, indeed a prohibition of such with Britain, or with any state outside France and its satellite states and dependencies, the goal to ruin the British economy did not work. The result was instead the near ruin of the Central European economy, especially the economies of the Lowlands and Rhineland states, which relied heavily upon imports of raw materials from throughout the world, and on the ability to export finished products. The domestic markets in Central Europe had not reached the point at which their own consumption was sufficient to sustain their production. Furthermore, excise taxes and tolls were the main source of state income; to remove these sources meant the near bankruptcy of the states.

At the Congress of Vienna, in 1814-1815, diplomats, principally those from the Great Powers, confirmed the remapping of Europe, and broadly, the rest of the world, into spheres of influence. Central Europe, or German speaking Europe, remained largely within the influence of the Austrian Habsburgs, balanced at the periphery by the Russian empire in the east, and the French in the west; it was expected that Prussia would also play some role in these spheres of influence, but the ambiguities of the Austrian and Prussian relationship were unresolved. The German states themselves remained autonomous; however, the old imperial institution of the Reichstag was reinvented in the form of a Confederation Diet that would meet in Frankfurt. The Habsburg dukes, now Kings of Austria, were to serve as permanent presidents of this institution. Isolated voices, such as those of Joseph Görres and Freiherr vom Stein, called for the abolition of domestic tolls and the creation of a German tariff on imports. The mandate from the Vienna Congress, however, established the German Confederation, but did not deal with the economic circumstances, nor did it make any effort to achieve economic and trade standardization. Instead, the articles that established the Conferation simply suggested that trade and transportation questions be discussed at a later date.

Problems with Unifying the Customs and Toll Agreements
In Prussia and in the south- and central- western states of Hesse-Nassau and Hesse Darmstadt,Württemberg, Baden, and Bavaria were leaders in the modernization of the toll system within the German states. In the Prussian case, the experience of the Confederation of the Rhine in removing customs barriers offered an example of how it could be done, and Hans, Count von Bülow, who until 1811 had been the Finance Minister in Westphalia, and who had accepted this position in 1813 in Prussia, modeled the Prussian customs statues on those of the former states of the Confederation. The addition of territory to the existing Prussian state made elimination of customs barriers a powerful factor in Prussian politics. The significant differences between "old" Prussia and the newly acquired territories complicated the debate. The "newer" Prussian provinces in the Rhineland and Westphalia, with their developing manufacturing sectors, contended with the heavily agricultural territories of "old" Prussia. The dissimilarities in the two sides of Prussia confirmed regional perceptions for the need for their own political and administrative units, which became an important element of the customs debate. Within "old" Prussian itself, the customs statues from 1818 reduced domestic customs barriers. After 1818, goods coming into Prussia and leaving Prussia were charged a high tariff. Goods moved freely within the state itself. The Prussian toll was therefore very simple and efficient. Manufactured goods were heavily taxed, especially textiles, and the most important taxes were for food, necessities and luxury goods.

Similarly, in the southwest German states, it became urgent to integrate the newly acquired territories into the states' existing economic systems. The territorial growth of the southwestern middle-sized states, in particular the two Hessian principalities, but also the growth of Baden and Württemberg, had split the territorial continuity of Prussia; the Prussian state was no longer linked entirely by territory, but rather was separated from many of its newer acquisitions by territories newly acquired by other states. These states often saw their own interests as conflicting generally and specifically with Prussian expansionism, and resented Prussian dominance and authority. Furthermore, these newly expanded states, usually referred as "middle-sized states" (or, in German, Mittelstaaten), faced problems in integrating their newly acquired territories and populations into an existing political, economic and legal structure.

These problems were exacerbated by European wide economic woes following the Napoleonic Wars. Unemployment, high prices, especially for foodstuffs, characterized an economy not yet converted back to peace-time needs. The problem in Britain was particularly severe and the British response created a ripple effect that worsened problems in the German states: In trying to manage the post-war economy, the British government was caught between the Malthusian understanding of the relationship of wages, prices, and population, and the Ricardian model. On the one hand, adherents to the Malthusian model believed it was dangerous for Britain to rely on imported corn, because lower prices would reduce labor’s wages, and landlords and farmers would lose purchasing power. On the other hand, adherents to the Ricardian model thought that Britain could use its capital and population to advantage in a system of free trade. . The problems in Britain established precedent for problems in the German states; the British limitation on grain imports, through the   1815 Corn (Grain) Law blocked economic recovery in the German states, particularly in eastern Prussia, by limiting the amount of grain that could be imported into Britain. Not only did the Corn Laws keep the price of grain in Britain high, it undermined the viability of Junker producers in east Prussia, and limited their access to external markets.

Customs Union: 1820s and 1830s


Surmounting the domestic customs, and the individual states‘ dependence on those customs as their primary source of income, proved to be a difficult problem. The political and customs divisions hampered the industrial development of the German states, specifically and generally. Important stimuli to shift traditional policies in this sector came from external forces. With the repeal of the Continental System, the German tradesmen stood in direct conflict with the English industries. A united German Trade and Tradesmens Union demanded protection from the developing English industries. Their spokesman, the liberal economist Friedrich List, feared that the German people would end up as "drawers of water and hewers of wood for Britain." Similarly, Karl Friedrich Nebenius (1784-1857), later president of the ducal ministry of the Grand Duchy of Baden and the author of Baden’s 1819 proposed customs initiative with the German Confederation, offered a widely publicized description about the difficulties of surmounting such protections.


 * The 830 toll barriers in Germany cripple domestic traffic and bring more or less the same results: how if every limb of the human body were bound together, so that blood could not flow from one limb to the other?  In order to trade from Hamburg to Austria, from Berlin to the Swiss Cantons, one must cut through the statutes of ten states, study ten tolls and toll barriers, ten times go through the toll barriers, and ten times pay the tolls.  Who but the unfortunate has to negotiate such borders? To live with such borders?  Where three or four states collide, there one must live his whole life under evil, senseless tolls and toll restrictions.  That is no Fatherland!

In 1820, Württemberg planned to start a Customs Union among the so called Third Germany, the middle sized German states, including itself, Baden, Bavaria, and the two Hessian states. Importantly, this Customs Union ‘‘excluded‘‘ both Austria and Prussia, primarily because the two major German powers were considered too overbearing. Plans foundered on the differing interests of the affected states. While the economic development in Baden proceeded relatively well, with its long borders and well entrenched infrastructure for trade, economic development in Bavaria lagged well behind it, and the Bavarian regime enacted a protective tariff on goods produced outside its border. The result was a short lived trade agreement between Baden and Hessen-Darmstadt. Nevertheless, a second agreement, reached in Stuttgart in 1825, established rapport between Württemberg and Bavarian, with the foundation of the South German Customs Union. Hannover, Saxony, Hesse, and other states (Austria, France, Great Britain, and the Netherlands), developed their own economic agreements. While they promised one another not to join the Prussian union, they did develop trade agreements of their own. Ultimately, the Union remained unsuccessful, because it only sought to maintain the status quo, not to fix the problems created by toll barriers, rather, it emerged from anti-Prussian sentiment. The South German Customs union was financially not viable; over 40 percent of the income was lost in litigation.

At the same time, the Prussian Finance minister Friedrich Christian Adolf von Motz, and his successor Karl Georg Maaßen sought to include several states into the Prussian union. Through persuasion and lucrative promises to the states not bound by the southern or the middle unions,  they enticed the small and middle sized states to join the Prussian system. In 1828, the Grand duchy of Hessen became the first large state to join. In 1829, the agreements among the middle-sized states began to break apart, as Kurhessen left the middle German Zollverein. In 1829, the Prussian and South German unions reached an agreement, largely through the efforts of the publisher Johann Friedrich Cotta. They saw the advantages of customs free exchange of internally produced products. By 1835, the Prussian Union, now called German Customs Union, had expanded to include the majority of the states of the German Confederation, even Saxony, Thuringia, Württemberg and Baden, Bavaria, and the Hessen states. Functionally, it removed many internal customs barriers, while upholding a protectionist tariff system with foreign trade partners. Their concurrence created a middle Europeanish free trade one, with close to 30 million residents. There remained, then, prior to 1848, several major problems: how to create a viable and healthy domestic market for raw materials and finished products without the financial destruction of the state economies; how to compete with the English manufacturers in the domestic and external markets; and how to protect the livelihoods of the German industrialists and workers.

Contributions of Key Individuals in Economic Unification
Cotta List Nebenius

Timeline



 * 1815 Establishment of the German Confederation left the question of economic and customs authority to future negotiation.


 * 1818 Prussia established an internal customs union throughout its state and Hohenzollern territories in southwestern Germany.


 * 1819 Baden proposition for a customs union organized through the German Confederation. Failed at Frankfurt Diet.


 * 1821 Anhalt joined the Prussian Customs Union.


 * 1826 Mecklenburg-Schwerin joined.


 * 1828 Original customs convention between Prussia and the Grand Duchy of Hesse. Hesse-Darmstadt joined.


 * 1831 Hesse-Kassel (or Hesse-Cassel), Saxony joined.


 * 1833 Thuringian States, Bavarian Palatinate joined.


 * 1834 Bavaria, Württemberg joined.


 * 1835 Nassau joined.


 * 1835 Duchy of Baden joined.


 * 1840-1847 Potato blight throughout the southwestern states, Saxony, and parts of Prussia.


 * 1841 Brunswick joined.


 * 1842 Luxembourg joined


 * 1848-49 Revolutions; propositions in Frankfurt for a political and economic union. Presentation of the Lesser Germany solution for political unification.


 * 1851 Hanover joined.


 * 1852 London Protocol of 1852 confirmed the Danish succession and the autonomy of the duchies of Schleswig and Holstein.


 * 1852 Oldenburg joined.


 * 1864 Prussia and Austria engaged in a border war with Denmark, over the autonomy of the duchies of Holstein and Schleswig (Second War of Schleswig).


 * 1865 Sweden signed free trade agreement with the union, linking the German members to the massive Scandinavian market.


 * 1866 Austro-Prussian War, in which Austria lost its political and diplomatic clout in the Confederation.


 * 1867 Reconstitution of the Zollverein.


 * 1868 Schleswig-Holstein, Lauenburg, Mecklenburg joined.


 * 1871 Alsace-Lorraine joined (after being acquired by Germany following the Franco-Prussian war).


 * 1888 The city-states of Hamburg and Bremen joined, 17 years after political unification.

The original Customs Union was effectively ended in 1866 with outbreak of the Austro-Prussian War; a new organization with the same name emerged in 1867. The new Zollverein was stronger, in that no individual state had a veto.

Role in German Unification
Some economic historians, such as Helmut Böhme, use the Zollverein to dispute the general view of Bismarck as the unifier of Germany, insisting that the economic dominance of Prussia made unification inevitable, as it led invariably to military dominance, and thus political primacy. For these historians, the Zollverein, in retrospect, did much more than simply cement alliances between the various German states as its Prussian architects had intended--it set the groundwork for the unification of Germany under Prussian dominance, achieved less than five decades later. Secondly, these historians argue, the Zollverein established an anti-Austrian tradition among the Prussians. By this argument, Bismarck cannot be said to have revolutionized Prussian politics when the Zollverein offers evidence of an anti-Austrian tenor of German unification for 30 years before he became the Chancellor of the Prussian government.

Other historians assert that unification was a process, over time, that drew together a variety of factors, only of one of which was the problems of economic cooperation and the abolition of toll and tariff barriers; furthermore, the "great man," Bismarck, was merely one player in the process of unification. Certainly, the problems posed by economic cooperation were numerous: the individual state economies rested in great part on the collection of tolls; manufacturers, trying to develop domestic markets for their goods, understood the importance of limiting competition while they consolidated their market shares and the import of inexpensive goods, whether grain, fruit, produce, or manufactured goods, was viewed as undercutting the local economies. At the same time, clear advantages encouraged to cooperation: the expense of loading and unloading products at every customs barrier were reduced; technological advances in transportation, such as the emergence of coal generated steam ships on Lake Constance, and the development of railway systems linking rural producers with regional markets, and regional producers with wider markets, improved profits. Thus, for these historians, the larger process of unification included economic cooperation over competition, but was not limited to it, nor was the process of unification solely in the actions of a single actor. The exclusion of the highly protectionist Austrian market made far more economic sense in 1820 than did the exclusion of the Austrian military power at the same time. It was only over time that German dualism, the competition between Austria and Prussia for dominance in economic, social, political, and cultural affairs of all the German states, exposed Austria's military and diplomatic weaknesses, and illuminated Prussia's military and diplomatic strengths.

Additional Reading
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