The Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times (The Kauffman Foundation Series on Innovation and Entrepreneurship) by Joel Mokyr & William J. Baumol David S. Landes

Author:Joel Mokyr & William J. Baumol David S. Landes
Language: eng
Format: mobi
Publisher: Princeton University Press
Published: 2012-02-25T14:00:00+00:00

Figure 10.1. The German Confederation and the German Customs Union in 1834. (Source: http://www.ieg-maps.uni-mainz.de/mapsp/mapz834d.htm, accessed October 10, 2007.)

Figure 10.2. The Federal Republic and the GDR 1957. (Source: http://www.ieg-maps.uni-mainz.de/mapsp/mapp957d.htm, accessed October 10, 2007.)

Prussia, which had absorbed many territories in the west after the defeat of Napoleon and the dismantling of ecclesiastical territories, was also in a privileged position when it came to natural resources. Germany's main hard coal, lignite, and iron ore deposits were all in Prussian territory. The most valuable asset was an enormous hard coal deposit in the Ruhr district close to the river Rhine. This area became the powerhouse of the German economy well into the twentieth century. It was not coal mining, though, that kicked off industrialization in Germany but railway construction (Fremdling 1985; Holtfrerich 1973). In the absence of suitable waterways—the main rivers run from south to north while the potential domestic market stretched from west to east—railways were to become the integrating infrastructure of the nascent industrial economy. Railway construction, mostly private, but backed by some state guarantees in Prussia, was a great opportunity for the financial sector as well as for iron-making and machine-building. Once the railways were in place, they supported the division of labor within the economy and transport of cheap fuel to places outside the mining areas. Only heavy coal consumers like the chemical industry (Hoechst, BASF) would go for locations along the navigable parts of the river Rhine but closer to consumers in traditionally more urbanized southern Germany. Berlin, the Prussian and later German capital, became a center for modern mechanical and electrical industries, which had to rely on state support in their formative years (von Weiher 1987). A more traditional center of mechanical engineering was Saxony, a semisovereign kingdom south of Berlin. A second coal basin was in Prussian Upper Silesia, in southeast Germany, about the same distance from Berlin as the Ruhr district. The east-west orientation of the German economy as well as the dominance of coal-based industries persisted until the end of World War II.

With the east-west division of Germany after World War II and the loss of the eastern coal basin and agricultural surplus regions to Poland, however, the economic geography of both German postwar states was fundamentally transformed. Geographically and hence economically, post–World War II Germany is a country very different from the former “Reich.” Together with this geographical reorientation, hard coal lost its competitiveness in the late 1950s, leaving only lignite in both German states as a domestic if largely insufficient source of energy and the very last natural resource that could be exploited profitably (Abelshauser 1984). While Germany started with comparatively good resource endowments in the nineteenth century, today only ecologically highly controversial lignite is left for some electricity generation. According to an often evoked self-perception in postwar Germany, its only natural resource is the gray matter in German brains.

Human Capital Formation

Human capital formation was an early success story in Germany. Primary education was fairly advanced in Prussia. Vocational training had traditionally been a stronghold of the guilds and trades.

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