Why did Germany lead the Second Industrial Revolution?

The short answer

• Science became a source of invention. By the 1860s, chemistry and physics had produced knowledge that practical tinkering alone could not reach, including the structure of carbon-based molecules and the laws of electromagnetism. Firms could turn that knowledge into goods if they employed people trained to use it. BASF, Bayer and Siemens hired university-trained researchers to develop synthetic dyes, drugs, electric generators called dynamos, and electric light. Invention increasingly entered the laboratory, and Germany, with more universities and technical colleges than any rival, gained most from the shift.
• Cheap steel replaced iron. Making steel cheaper gave manufacturers a stronger alternative to iron. Bessemer’s 1856 converter blew air through molten iron, the open-hearth furnace of the 1860s produced larger batches, and the basic process of 1878 made phosphorus-rich ore usable. Steel rails lasted many times longer than iron rails; steel ships could be lighter and larger. Steel spread into rails, ships, bridges and machines. Germany and the United States possessed coal and suitable ores and built the largest steel industries, so geology helped determine the leaders of heavy industry.
• Unification, tariffs and banks. German unification in 1871 brought together the market of the Zollverein, the customs union founded in 1834, a single currency and a dense railway network run by individual states. The empire also had access to Ruhr and Lorraine coal and ore. From 1879 Chancellor Otto von Bismarck’s tariffs protected industry and agriculture, while great banks financed mergers and cartels, agreements among firms to fix prices or output. Protected firms with finance and large markets could invest in research and plants bigger than any in Britain. Critics then and since have also argued that their price fixing came at consumers’ expense.
• Followers started with the newest technology. A late starter building a power station or steelworks could install the newest design from the beginning. Britain had older industries still using machinery and methods from the 1850s. American economist Thorstein Veblen called this disadvantage the penalty of taking the lead. The followers also had larger or faster-growing populations; their eventual lead in total output was partly a matter of arithmetic. First place brought costs along with its advantages.

What it changed

An arms race of steel and chemistry. Factories became part of military competition. Krupp made guns, steel went into battleships, and chemistry supplied explosives. The Haber–Bosch process made ammonia from nitrogen captured from the air, freeing Germany from imported Chilean nitrate, a nitrogen-rich mineral. During the First World War this later allowed Germany to keep producing explosives despite the British blockade. Industrial capacity had become a source of military power.

Commodity frontiers move. A synthetic blue dye could destroy a crop’s market: indigo planting in Bengal and Bihar in India was ruined by factory-made indigo. Nitrogen captured from air would later undermine Chile’s exports of mined nitrate fertilizer. At the same time, electrical and motor industries drew new sources of rubber, copper and oil into the world economy, often by force. Historians call these extraction zones commodity frontiers; they stretched from the Congo to Persia, today Iran. Laboratory discoveries could make or break economies far from Europe.

America takes the lead. The United States had a continental market on which to apply the new technologies. It built the largest steel industry, the first great electric power systems and mass-produced cars; Carnegie Steel and General Electric matched German giants in scale. By 1913 America produced about a third of the world’s manufactured goods, more than Germany and Britain combined. Market size had become as important in the new industries as being first.