As Britain was beginning to decline economically, Germany was undergoing rapid industrialization. Yet, just as British industrial development during the eighteenth and nineteenth centuries was quite unique, so was Germany’s. Since there was no "Germany" until 1834 in the economic sense (the creation of the
Zollverein, or German customs union) and until 1871 in the political sense, economic and thus industrial growth was stymied by an antiquated political and economic system. This system was further antiquated by the "persistence" of what historian Arno Mayer called in his
The Persistence of the Old Regime in Europe Until 1914 the "old regime" until World War I. This dominance extended beyond politics into social and cultural life. Unlike in Britain where the middle class was able to increasingly escape manufacturing and begin living like the upper classes, historian Clive Trebilcock in his
Industrialization of the Continental Powers points out that this was not allowed in Germany. Germany’s overtaking Britain in the last decade before World War I, I think can be explained at least in part by this inability of the German middle classes to "emulate" the German upper classes as their British counterparts were able to.
German industrialization was further unique in that unlike in Britain or for that matter the rest of Europe, in Germany bureaucratization and the development of a large state apparatus occurred decades before industrialization. This, Jürgen Kocka points out in an influential article entitled
"Capitalism and Bureaucracy in German Industrialization before 1914," published in P.K. O’Brien’s
Industrialization in Europe During the Nineteenth Century, led to a heavy state presence in economic and industrial decision-making. Lastly, and most importantly, the single most unique characteristic of German industrialization vis-à-vis Britain’s is that Germany was, according to Alexander Gerschenkron in his Economic Backwardness in Historical Perspective, a “backward” economy and thus had to undergo a much faster rate of industrialization if it were ever to catch up with Britain and stop being economically dependent on her.
As a result German industrialization occurred in a much different fashion vis-à-vis Britain’s or other countries. Though one can speak of a "first" and a "second" industrial revolution when speaking of Britain or France or other countries, in Germany the two conflated as there was much more continuity in industries, social and cultural attitudes, and in politics. Furthermore, as a result of the need to catch up as well as Germany’s prior bureaucratization, German industrialization was much more centralized with a focus on large industry such as steel, railroad building, and chemicals, among others. Since at the beginning of its industrialization Germany had neither a skilled workforce nor much startup capital, the government took a proactive role in loaning money to startup companies, and encouraged large industry because it was much more efficient. This focus on large industry was continued later on as the government encouraged collusion between banking and industry, a phenomenon which led often to cartelization as banks did not want ruinous competition eroding their profits.
