Period of promoterism

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Period of promoterism in Germany

In Germany as period of promoterism the epoch is designated after the French-German war of 1870/1871. The using upswing by the money from the French reparations (5 billion gold Franconia) was used, in order to catch up the projection/lead of the other European nations in the area of the industrialization.

The beginning of the period of promoterism is quite clearly defined with the economic upswing after the French-German war. The end against it is rather flowing. A crucial event was the founder noise, with which the share quotations burst such as Seifenblasen and their savings lost many Kleinanleger. The founder crisis, which brought the break with the economic liberalism in politico-economic regard with itself, followed the noise.

Economics

Founder years

"„Founder years "“one calls the time interval of the establishment of the German empire up to the beginning of the economic crisis (founder crisis), thus from January 1871 up to the center of the yearly 1873.

The time is coined/shaped by numerous establishments of companies and corporations, the strong extension of the industrial production and the expansion of the Eisenbahnnetzes, which in the German Reich considerably by the railway pioneer Bethel Henry Strousberg was operated. This growth was caused and favoured by several factors.

A factor was the war (1870/71), won against France, which affected itself in mehrerlei regards. First French reparation payments flowed at a value of approximately five billion francs (about 4.5 corresponds to billion Mark) to Germany by the peace from Frankfurt, from which about 2.5 to 3 billion francs benefitted directly the German capital market (credit institutes and Further during the war a large part of the industrial production had been aligned to the war, so that now long overdue could be realized. The upswing adjusted thus only the reduction of the industrial production in the previous years.

A further reason for economic growth was that in Germany 1870 the concession obligation for corporations was waived; that is called the establishment of corporations was subject less legal restrictions. For example a corporation could be equipped with only 50% of the nominal value. The consequence was the establishment of over 500 corporations from 1871 to 1873 alone in Prussia. Thus ever more private capital was invested into the economy. The economy grew rapidly; likewise the courses of the shares rose. That created confidence into the market and caused further shareholders to share purchases.

Founder noise of 1873

The consequence of the rapid economic Auftstieges was that the camps filled and a merciless competition was inflamed, which let the profits sink again. Thus gradually also the share quotations sank starting from May 1873.

When in the middle of the yearly 1873 a banking house in Budapest demands for deposit had to follow, already short time later further banks in Vienna became insolvent. By these events ever more investor and banking customer became distrustful, sold their securities and "„vacated their accounts "“from fear of depreciations. Thus much money was extracted from the capital market, whereby the crisis expanded on ever more European and American until in October 1873 also Berlin was concerned. At the same time at Germany the last Kontributionszahlung was transferred.

For the German industry equivalent two possibilities were thus omitted for the raising of funds. For an increase of the productivity, which failed compared with England smaller, however money would have been urgently necessary. Like that imported industrial goods were more favorable around approximately 30% than Germans made of England.

Offenbarungseide, suicides and family tragedies accumulated themselves up. Production decreased/went back, it came to extensive dismissals and wage cuts. The economy was from now on in a crisis. Many humans emigrated into the USA.

Causes of the founder crisis

In the course of the national enthusiasm the capital invested preferentially into the domestic market. Altogether 61 new banks at the stock exchange were established. The stock exchange became at this time the scene of speculations, whereby the substantial increases in value increased additionally the speculation desire. This led to the fact that already soon the principles of respectable financing and also credits were ignored were if necessary no longer covered. Generally often the almost naive way of thinking prevailed forwards, the banks could ever more capitals make available.

The in Germany

Released by the inability to pay citizen of Berlin of a banking house, introduces itself in October 1873 also in Germany a large-scale collapse of stock exchange, share and speculation enterprises. This as "“founder noise"” designated break-down was mainly banks and credit collapse. It showed also psychological effects after a phase of the overheated economic situation, after a time of the continual economic upswing, above all, since the naive confidence was broken into a boundless economic upswing. One can speak with this economic crisis actually not of a depression, but only of a stagnation, since in this time only in the preceding years the superelevated growth rates became balanced

Consequences of the founder crisis

The founder crisis had the consequence that the state intervened again more in the economic developments and said good-bye thus to the economic liberalism. This concretely meant the break with the idea of the free trade. It be also simultaneous the the beginning the of the Neomerkantilismus and Bismarck policy of customs protectionism, the the state should thus contrary to the economic liberalism, again cause in the the control intervene.

Thus one introduced protective duties on foreign imported goods, in order to protect the German market. In the German Reich the price level was held artificially over that of the world market level. These tariffs were raised both on raw materials and finished goods and on agricultural products.

Thereby the prices for industrial goods, the long continuing upward motion actually increased were missing however. During the founder years the created over-capacities existed finally still and could not be set off still yet abroad, since many other European states likewise seized to protectionist measures.

The lost faith in the liberal economic policy was expressed also thereby that the national liberal a party occupied 1871 with 125 seats in German Reichstag about 31% of the places, 1881 however with 47 seats only a portion of approximately 12% had.

The economic sectors concerned by the crisis supplemented the national measures by own. Trusts and similar unions were created, in order to meet competition-obstructing arrangements, which should protect against a further price purge. Prices of products, production numbers and areas of distribution were negotiated among the companies.

Syndicates united, in order to implement demands in relation to the government. Employers' associations were created; on the other side developed ever for more trade unions.

Consequences of the new legal regulations

Due to the import duties the cost of living in the future rose; particularly food and industrial goods became more expensive. Before the import duties had been raised on grain, it was imported substantially more favorably from the foreign country. This increasingly reduced, so that the prices for bread and other Getreideprodukte lay around the turn of the century with approximately 130 % of the world market level, however full employment in the agriculture was reached by the rising tariffs.

The prices for industrial goods sank also in the German empire. However the price reductions on the world market failed substantially more highly, so that one can speak relative to the world market level of a price increase. Nontheless on industrial goods 1886 compared with 1871 about 80 % more was spent. This was connected with the fact that such goods were ever more frequently consumed and the population despite the emigration wave had grown.

Based on the creation of value in industry and handicraft, the capital stick and overall economic growth the economy developed thus positively starting from 1879/80.