Between 1870-1935, Germany alternated between supporting free trade and turning insular, shifting drastically between different economic policies. Germany’s stance towards free trade was largely shaped by the politicians in power— the political goals of Germany’s leaders overshadowed economic goals of efficiency and growth. Beginning in the late 1870’s, German leaders abandoned liberalism in favor of protectionist and autarkic policies.

The unification of Germany under the Second Reich strengthened economic ties between previously independent German states, encouraged free trade, and propelled Germany into participation in the world economy, where she rose to dominance in steel production and established a worldwide reputation as a leader in the electrical and chemical industries. However, the German leadership would soon reverse its stance towards free trade when the German heavy industries and agriculture faced competitive threats. Farmers and industrialists united against the bankers, finished goods industries, and the export sector in an alliance now known as “the marriage of iron and rye,” opposing free trade in favor of protection for agriculture and heavy industry. The German government shifted its policies again when facing a forced autarky during World War I, adopting a policy of “war socialism.” She commandeered her economy and regulated consumption, eventually rationing food, raw materials, and manpower to extend the life of her resources. After losing the war, post-war reparations further crippled Germany’s economy, slowed her recovery, and diminished her future capacity to pay while hyperinflation destabilized the economy. After the U.S. finally took leadership in the global economy by sponsoring the Dawes and Young Plans, Germany was able to quickly rebuild. Within six to seven years, her industries returned to their pre-war positions as leaders of the chemical, electrical, and optical industries; her exports returned to prewar levels by 1926. However, soon after, the consequences of the Great Depression drove the Nationalist Socialists into power, and Germany shifted its economic policies once again, returning to a planned economy with fixed prices and regulated foreign trade.

Despite the consequences of the German leadership’s political endeavors, Germany’s leading industries established Germany as a global industrial power and returned her to economic leadership and integration, even after facing the disruptions and consequences of a world war.