The Birth of Economic Modernization in Prussia

Long before Britain embraced free trade in 1846, Prussia had already pioneered this approach through its groundbreaking 1818 Customs Law. Under the Hohenzollern dynasty, Prussia embarked on a path of economic modernization that demanded entrepreneurial innovation rather than reliance on protective tariffs like those of France and Austria. This bold strategy proved remarkably successful—within years, Prussia emerged as the industrial leader among the German states.

The vision behind Prussia’s economic policy was ambitious: to create a unified customs territory across northern and southern Germany, eliminating internal tariffs that hindered trade. This dream became reality on January 1, 1834, with the formation of the German Customs Union (Deutscher Zollverein). Initially encompassing 18 states across 425,000 square kilometers with over 25 million inhabitants (15 million in Prussia alone), this “union within a union” excluded Austria but included major states like Bavaria, Württemberg, Saxony, and Thuringia.

The Expansion and Mechanics of the Zollverein

Originally established for eight years, the Zollverein proved so successful that it attracted new members including Baden, Nassau, Frankfurt, and Brunswick. Even Hanover—which had initially formed a rival “Tax Union” (Steuerverein)—joined in 1854. By 1868, the Mecklenburg duchies became members, though the Hanseatic cities of Hamburg and Bremen held out until 1888, long after German unification.

The Zollverein operated through a sophisticated system:
– Uniform external tariffs for non-member states
– Revenue distribution based on population size
– Annual conferences to coordinate policies
– Standardized weights, measures, and currency regulations

This economic integration created what historian Friedrich List called a “school of unity,” preparing Germans for political unification decades later.

Austria’s Deliberate Exclusion and Economic Philosophy

The Habsburg Empire’s absence from the Zollverein reflected fundamental economic divergences. Austria’s multi-ethnic territories ranged from industrialized Bohemia to backward agricultural regions like Galicia, making a unified trade policy impossible. Vienna instead adopted protective tariffs aligned with Friedrich List’s theory of “educational tariffs” (Erziehungszölle)—designed to nurture infant industries.

List, ironically one of the Zollverein’s most passionate advocates, had envisioned a Central European customs union including Austria. While unrealized in his lifetime (he died in 1846), his ideas gained traction among Austrian reformers after 1848. The economic divide between Prussia’s free-trade bloc and Austria’s protectionism would later prove decisive in the struggle for German leadership.

The Zollverein’s Political Consequences

The customs union transformed Prussia’s role in German affairs:
1. Economic Leadership: Prussia became the undisputed economic hegemon among non-Austrian German states
2. Bourgeois Alignment: Rhineland industrialists tied their fortunes to Prussian-led economic expansion
3. National Market Creation: The 250,000-square-mile free trade area fostered German economic nationalism

As Prussian minister Motz declared: “Through the Zollverein, Prussia must economically conquer Germany for itself.” This strategy succeeded brilliantly—by 1842, even skeptical southern states recognized Prussia’s economic dominance.

The Enigmatic Reign of Frederick William IV

The 1840 accession of Frederick William IV initially raised liberal hopes across Germany. Unlike his conservative father, the new king:
– Restored dismissed professors like Ernst Moritz Arndt
– Rehabilitated “Turnvater” Jahn, founder of the gymnastics movement
– Hired three of the “Göttingen Seven” scholars, including the Brothers Grimm

Yet these symbolic gestures masked deeper conservatism. Frederick William rejected constitutionalism, declaring in 1840: “I feel my power is wholly divine… Paternal rule should be the German princes’ governing principle.” His romantic medievalism and refusal to grant meaningful reforms would later spark the 1848 revolutions.

The Zollverein’s Enduring Legacy

The customs union’s impacts reverberated far beyond economics:

### Economic Unification Before Political Unity
By creating a unified market, the Zollverein made German political unification economically logical. As List predicted, “The Zollverein will train Germans for unity through the pocket.”

### Industrial Transformation
Prussia’s industrial output grew 450% between 1834-1865, while railway mileage exploded from 6 km in 1835 to 11,000 km by 1850—physically connecting the Zollverein states.

### The Prussian-Austrian Rivalry
The Zollverein created two German spheres:
– Prussia’s northern industrial bloc
– Austria’s southern agricultural orbit

This economic division foreshadowed Austria’s exclusion from the 1871 German Empire.

### Model for European Integration
The Zollverein inspired later customs unions, including the 1957 European Economic Community. Its success demonstrated how economic integration could overcome political fragmentation.

Conclusion: The Invisible Hand of Unification

The German Customs Union achieved what armies and treaties could not—it made German unification economically inevitable. By binding medium states to Prussia’s economy, creating shared infrastructure, and fostering national consciousness, the Zollverein laid foundations for Bismarck’s later political unification. As contemporary observer Joseph von Radowitz noted: “The Zollverein is the German Union in embryo.” This pioneering experiment in economic integration remains one of history’s most successful examples of how trade policy can reshape political destinies.