Why is Germany so Rich?
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- Research: Mrs Scope
- Animation: rbbrduck.nl
- Audio: Seb. Soto
- Writing and Voice Over: Avery from History Scope
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Germany’s economic success began in the Holy Roman Empire, where hundreds of German-speaking states traded along rivers like the Rhine. This network turned cities like Hamburg and Solingen into manufacturing and export powerhouses, famous for steel and cutlery. Prussia discovered vast coal and iron deposits, accelerating German industry by creating the Zollverein, a customs union that removed trade barriers among the German states.
Infrastructure played a key role. Canals, macadam roads, and the first German railways connected regional markets, fueling more economic growth and letting German manufacturing flourish. By the mid-19th century, German states invested in vocational education and technical schools, training skilled workers to innovate in steel, chemistry, and electrical devices. Companies like Siemens became global leaders, laying telegraph lines across Europe.
After German unification in 1871, the new German Empire protected its domestic industries with tariffs while building a world-class industrial sector. Although Germany lagged in agriculture, its steel mills, chemical plants, and machine production soared. Two World Wars devastated the country, but post-WWII reconstruction (the “Wirtschaftswunder”) revived West Germany through significant investment, a focus on Small and Medium-Sized Enterprises (SMEs)—often called the Mittelstand—and a strong apprenticeship system. This system nurtured high-quality manufacturing, where specialized SMEs excelled in niche products.
In 1990, German reunification merged East Germany and West Germany at great financial cost. Despite immediate recessions, Germany re-emerged as Europe’s largest economy. Membership in the European Union, coupled with the introduction of the euro, furthered Germany’s position as a dominant export nation. It encouraged the EU’s eastward expansion, leveraging lower-wage production sites in Central Europe while developing new consumers for German goods.
Though Germany enforced austerity to keep debt under control—both in the 1980s and during the eurozone crisis—it now faces challenges like infrastructure underinvestment and social inequality. Nevertheless, it maintains its reputation for high-quality exports, world-class vocational training, and efficient SMEs. Today, Germany continues to rank among the wealthiest countries, thanks to its industrial diversity, robust trade networks, and a centuries-long tradition of innovation and cooperation.
Sources
Websites
https://www.deutschland.de/en/topic/business/why-is-the-german-economy-so-strong-seven-reasons
https://kpmg.com/de/en/home/insights/overview/economic-key-facts-germany.html
https://www.bbc.com/news/business-18868704
https://www.worlddata.info/europe/germany/economy.php
https://www.dw.com/en/germany-what-poverty-looks-like-in-a-rich-country/a-63393501
https://worldpopulationreview.com/country-rankings/median-income-by-country
Books
K. Hoyer (2022) Blood and Iron – The Rise and Fall of the German Empire 1871-1918. The History Press. Gloucestershire.
J. Heinzen (2018) Making Prussians, Raising Germans. Cambridge University Press. Cambridge.
U. Pfister - Economic Growth in Germany, 1500–1850. The Journal of Economic History , Volume 82 , Issue 4 , December 2022 , pp. 1071 - 1107
C. Brinkmann - The Place of Germany in the Economic History of the Nineteenth Century. The Economic History Review, Vol. 4, No. 2 (Apr., 1933), pp. 129-146
R. Fremdling, R. Tilly – German Banks, German Growth, and Econometric History. Journal of Economic History, Vol. 36, No. 2 (June 1976), pp. 416-424
G. Fels, H-P. Froehlich - Germany and the world economy: a German view. Economic Policy (April 1987), pp. 178-195
N. H. T. Albers, C. Bartels, M. Schularick (2020) : The Distribution of Wealth in Germany, 1895-2018, ECONtribute Policy Brief, No. 001, University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
G. Alfani, V. Gierok, F. Schaff - Economic Inequality in Preindustrial Germany, ca. 1300–1850. The Journal of Economic History , Volume 82 , Issue 1 , March 2022 , pp. 87 - 125
H. Herr, Z. M. Nettekoven (2017) The role of small and medium-sized enterprises in Development. What can be learned from the German experience. Freidrich Ebert Stiftung.
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Video Summary & Chapters
No chapters for this video generated yet.
Video Transcript
Germany is one of the richest countries in the world with one of the most prosperous
people in the world.
It ranks as the 19th most productive people, the 3rd wealthiest country overall, and the
7th most developed country in the world.
So let's look at how Germany got there.
Chapter 1.
Early Germany
What we think of as Germany has existed for only 150 years.
Before then, Germany was a collection of hundreds of smaller states.
And those smaller states were largely combined into the Holy Roman Empire.
Look at this map.
This is a map of the Holy Roman Empire at the end of the 18th century.
controlled territory all the way from modern-day Poland to Belgium to Slovenia.
The majority of the people living in this area were German, and these German states
were connected via a series of rivers, such as the Rhine, the Weser, and the Elbe.
Northern German cities like Hamburg became major trade hubs, trading the goods from upriver
with people in other countries.
As the cities at the mouth of the rivers became larger, they needed more goods to trade, and
And as a result cities located upstream on the river began developing thanks to their
trade with the coast.
And the main trade partners for coastal cities were European colonial empires, in particular
the Dutch, French, and British empires.
Because those colonial empires needed manufactured goods.
The reason they needed manufactured goods is because the way they made money off of
their empire was through trade, such as spices with Asia, slaves with Africa, and sugar with
America. Trade ships did not carry big bags of money to buy these products. No, they needed
to trade for them. And they traded manufactured goods such as steel, guns, textile, cutlery,
and much more. But those empires never had enough manufactured goods to buy all the things they
wanted. And their solution to this problem was to import manufactured goods from other countries.
And in the case of the Dutch, French, and British, the nearest place they could buy those goods
were the German states.
As a result, German industry prospered in the 17th and 18th century and they got a reputation
for producing high-quality steel products.
Because the Holy Roman Empire consisted of hundreds of smaller states, there were also
hundreds of potential states that could trade with the European empires.
Those states began developing industries specifically designed to export.
For example, the city of Solingen is located here, close to the river Rhine.
this city became famous for the production of cutlery. And it was sold all over the European
colonies with Brazil being one of the main buyers of German cutlery. This trade was so
successful that one of the first German companies was established here in 1731 called Zwilling.
And they were so good at it that this company still sells cutlery to this very day. And because
of the success of the German industry, more and more Germans began working as craftspeople.
All those craftspeople need food, and no matter how hard a blacksmith hits his iron, it won't
turn into bread.
With fewer farmers, the price of food went up, and German farmers began adopting new
agricultural techniques to feed everyone.
As a result, both the urban and rural workers benefited from trade with the European empires.
And in the late 18th century, the German economy grew by about 0.1% per year, which was slower
than western Europe but faster than almost anywhere in the world at the time.
But this process came to an end at the early 19th century.
Video Summary & Chapters
No chapters for this video generated yet.
Video Transcript
Germany is one of the richest countries in the world with one of the most prosperous
people in the world.
It ranks as the 19th most productive people, the 3rd wealthiest country overall, and the
7th most developed country in the world.
So let's look at how Germany got there.
Chapter 1.
Early Germany What we think of as Germany has existed for
only 150 years.
Before then, Germany was a collection of hundreds of smaller states.
And those smaller states were largely combined into the Holy Roman Empire.
Look at this map.
This is a map of the Holy Roman Empire at the end of the 18th century.
controlled territory all the way from modern-day Poland to Belgium to Slovenia.
The majority of the people living in this area were German, and these German states
were connected via a series of rivers, such as the Rhine, the Weser, and the Elbe.
Northern German cities like Hamburg became major trade hubs, trading the goods from upriver
with people in other countries.
As the cities at the mouth of the rivers became larger, they needed more goods to trade, and
And as a result cities located upstream on the river began developing thanks to their
trade with the coast.
And the main trade partners for coastal cities were European colonial empires, in particular
the Dutch, French, and British empires.
Because those colonial empires needed manufactured goods.
The reason they needed manufactured goods is because the way they made money off of
their empire was through trade, such as spices with Asia, slaves with Africa, and sugar with
America. Trade ships did not carry big bags of money to buy these products. No, they needed to
trade for them. And they traded manufactured goods such as steel, guns, textile, cutlery,
and much more. But those empires never had enough manufactured goods to buy all the things they
wanted. And their solution to this problem was to import manufactured goods from other countries.
And in the case of the Dutch, French, and British, the nearest place they could buy those goods
were the German states.
As a result, German industry prospered in the 17th and 18th century and they got a reputation
for producing high-quality steel products.
Because the Holy Roman Empire consisted of hundreds of smaller states, there were also
hundreds of potential states that could trade with the European empires.
Those states began developing industries specifically designed to export.
For example, the city of Solingen is located here, close to the river Rhine.
this city became famous for the production of cutlery. And it was sold all over the European
colonies with Brazil being one of the main buyers of German cutlery. This trade was so successful
that one of the first German companies was established here in 1731 called Zwilling. And
they were so good at it that this company still sells cutlery to this very day. And because of
the success of the German industry, more and more Germans began working as craftspeople.
All those craftspeople need food, and no matter how hard a blacksmith hits his iron, it won't
turn into bread.
With fewer farmers, the price of food went up, and German farmers began adopting new
agricultural techniques to feed everyone.
As a result, both the urban and rural workers benefited from trade with the European empires.
And in the late 18th century, the German economy grew by about 0.1% per year, which was slower
than western Europe but faster than almost anywhere in the world at the time.
But this process came to an end at the early 19th century.
