The visit of the Three Emperors went extremely well and established a foreign policy construction which remained a set and fixed element of Bismarck’s foreign policy to the moment of his resignation. How much he planned that outcome can never be established. He was a brilliant diplomatic chess player who always saw moves well in advance, but whether he foresaw the future Three Emperors’ League cannot be shown. On the other hand, as we saw in Chapter 5, Bismarck had always supported a Russian connection, had established intimate relations with the Russian royal family, and had enjoyed his embassy in St Petersburg more than any other post. He never forgot how much Prussia and his success depended on Russian support.
On 12 September the British Ambassador to Berlin, Odo Russell, wrote to the Foreign Office on the origins of the meeting of the Three Emperors in Berlin and what Bismarck had told him about it:
In an after dinner conversation I had with Prince Bismarck at the Imperial Palace, the Chancellor, who was unusually cheerful, pointed to the three Emperors and made the following remarks in English, which, quaint as they were, I must endeavour to give verbatim: ‘We have witnessed a novel sight today; it is the first time in history that three Emperors have sat down to dinner together for the promotion of peace. My object is fully attained, and I think your Government will approve of my work … I wanted the Three Emperors to form a loving group, like Canova’s three graces, that Europe might see a living symbol of peace and have faith in it. I wanted them to stand in a silent group and allow themselves to be admired, difficult as it was, because they all three think themselves greater statesmen than they are.’51
This was the foundation of the Three Emperors’ League, which was formally signed on 22 October 1873. In the long run the attempt to hold the two great Eastern powers together proved to be impossible. The slow but steady decline of the Ottoman Empire sucked Austria-Hungary into Balkan affairs in a competition with Russia, a rivalry which contributed to the outbreak of the First World War. The Balkans and the Orthodox kingdoms of Serbia and Bulgaria were an area of Russian ‘interests’. The Russian Tsar saw himself ‘protector of the Balkan Slavs’. The dilemma for Bismarck, given Austrian-Russian rivalry in the Balkans, was how to stay ‘one of three’ in Eastern Europe. The Three Emperors’ League provided an answer, although temporary. It allowed Germany to achieve two objectives: first to avoid the choice between Austria and Russia and, second, to maintain France in isolation. In the end France was bound to be the natural ally of Russia against a growing and ever more powerful Germany, even though France was a Republic and Russia an autocracy. As long as Bismarck ran German foreign policy, he prevented that alliance but by the time he fell he could only do so by subterfuge and deceit so alarming that his successors could no longer continue it. The drag in foreign affairs meant that Bismarck’s combinations worked steadily less well. Of the sixty-four squares on the chessboard, half—the enmity of France and the alliance with Austria—were covered. German foreign policy see-sawed from 1873 on between Russia and Great Britain. Bismarck spun his web with great skill and subtlety but he had no permanent solution. The forces against his combinations proved too strong.
Just before the conclusion of the Three Emperors’ League, an epoch-changing event occurred, now unfortunately so familiar that the story tells itself; there was an economic ‘crash’. Between 1866 and 1873, in the euphoria of the victories of 1866 and 1871, Germany had moved from the long wave of growth since 1849 until the final stage of a bubble economy. The post-war boom in the years 1870 to 1873 gained the nickname the Gründerzeit (the time of the founders), because of the sheer numbers of new companies which had been founded, many as solid as the ‘collateralized debt obligations’ of 2008. For example, the now famous Deutsche Bank was founded in 1870 in the euphoria of unification. There was a stock market boom because the French paid off in four years the huge reparations payments which the victorious Germans had imposed on them: it amounted to the stupendous sum of 5 billion gold marks. If the sum is converted using the retail price index, it amounts to 342 billion, using GDP deflator to 479 billon and much more with other indicators such as GDP per head but all these conversions understate the actual value at the time, for these were gold francs.52 Imperial Germany, a semi-developed economy with chronic capital shortage, suddenly floated up on this vast flood of liquidity, the perfect conditions for an asset bubble. The resulting property boom, the unjustifiable mortgage deals, the enterprises lifted by artificially low borrowing rates, the fraud in banking and brokerage business, the sudden enthusiasm to get rich quick, all that occurred in more or less exactly the same way in the first years of the unified Reich as it did between 2001 and 2008. Arthur von Brauer (1845–1926), a young lawyer from Baden, joined the Prussian Foreign Ministry and moved to Berlin in 1872. He had, as a Korpsbruder (a member of the same duelling fraternity as Bismarck), good connections to the Chancellor and rose to be an important official relatively quickly.53 Here are his impressions of his new home:
The hunger for profits and wealth possessed the new capital of the Reich, and even a large part of the once so solid Prussian officialdom and officer corps had joined the dance around the Golden Calf with no pangs of conscience. Swindlers gained large fortunes in a few days. Everyone, from princes to workers, gambled on the bourse. An obtrusive, undignified opulence predominated everywhere.54
That could have been written in July 2008 in London or New York without changing a word except ‘princes’, who had disappeared from the scene.
One of those who profited from the property boom was Field Marshall Albrecht von Roon. On 8 June 1875 he sold his estate Gütergotz, bought with money granted him by a grateful Emperor and for which he paid 135,000 thaler (roughly equal to 402,000 marks) to the Jewish banker Gerson Bleichröder, for a price of 1,290,000 marks, a tidy profit for the old soldier who had lived for so long on his salary. Waldemar von Roon, his son, when he published the papers of his father in 1892, omitted from the memoirs the name of the buyer and thus the uncomfortable fact that his father, hero of the Reich, had sold his estate to a Jew.55
On 9 May 1873 the Vienna Stock Market crashed, ushering in the first modern globalized financial crisis. Within a week Bismarck reported to William I that the Austrian Emperor had enabled the Austrian State Bank to issue a larger volume of bank notes than had been previously authorized. His experts argued that the crisis arose because ‘the Vienna Stock Exchange had been the arena in which speculation had called forth a lot of companies, mainly joint stock limited companies, for which the existing capital proved insufficient.’ As in 2008 the lenders had simply withdrawn capital from good as well as speculative investments which in turn worsened the crisis.56 The next day Bismarck wrote to the Emperor to reassure him that a similar crisis would not occur in Berlin because ‘the stock of metal is greater here and fraudulent business has not reached in our case the same dimensions as in Vienna’.57 That reassurance proved to be as false as similar reassurances by governments in 2008 who were certain that it could not happen to them. It did. London and Paris followed and on 18 September, the leading Philadelphia banking firm, Jay Cooke and Company, went bankrupt. The worldwide crisis ushered in a period of slow growth and falling prices which continued from 1873 to 1896/7 and has been called the ‘Great Depression’.
The depression fell into two distinct parts, an agricultural depression and the first modern industrial depression in which the heavy industrial sector suffered badly and revealed certain vulnerabilities that recurred from 1929 to 1938. The agricultural depression arose because from 1869 with the completion of the first trans-continental railway in the United States, the supply of very good American and then also Canadian grain began to flood the European markets. Henckel von Donnersmarck complained bitterly to Thiedemann about the sixfold increase in American exports of grain, flour, and meat ‘in truly unbelievable numbers, for German agriculture, there must be a grain, flour and meat tariff as an unconditional necessity if we are not to expose it to the same fluctuations as industry’.
58 Michael Turner provides a useful set of indices of agricultural prices for the period 1867 to 1914 for the UK which can be used as a surrogate for the German price level as well.
The list makes clear that it took two generations for the agricultural price level even to come near to the level it had reached by 1873. The fact that the European upper classes including the Russells of Woburn Abbey and the Bismarcks of Schönhausen depended on agriculture made these price falls a matter of survival. Hence Bismarck’s class faced a crisis of survival by 1878 and remained in it until their estates disappeared under Russian tanks in 1945. The Junkers could not—even with heavy application of fertilizer—compete with the vast riches of the American and Canadian Great Plains, the Argentinian Pampas, or the Russian Black Earth regions.
On 9 June 1873 the Reichstag passed the Reichmünzgesetz (the Reich coinage law) which established the legal exchange rate of the new German mark to the old Prussian thaler at 1 thaler = 3 marks and proclaimed that the new German currency would have ‘in principle’ a gold basis.60 The adoption of gold as the basis of the new Germany currency in 1873 added a deflationary element to the other changes in the economic conditions. The amount of gold depended on its production. When economic growth exceeded the growth of money supply which it did until the late 1890s, then something had to give. When too many goods chase too little money, prices fall. By the 1890s in Junker Prussia and American Kansas, gold and its advocates had become the villains. As William Jennings Bryan cried out at the Democratic Party Convention in 1896, ‘thou shalt not crucify the American people on a cross of gold.’ Hans Count von Kanitz (1841–1913) read Jennings Bryan’s speech into the records of the Prussian House of Lords.
Falling prices in industries with heavy fixed investment raised the cost of the interest they paid to investors and banks at the very moment when revenues fell below marginal costs and approached fixed costs. Competition among heavy industrial enterprise ended in a zero sum game and bankruptcy for some of the players. It made sense to limit production, cut wages or fire workers, and to combine in Kartells or Trusts, so by the 1880s, big industry had tightened its cost bases, employed accountancy to manage its outgoings, and worked out anti-competitive policies of all sorts.61 A moment’s reflection will suggest that all the developments in the depression of 1873 undermined liberal economic attitudes. By 31 October 1874 Baron Abraham von Oppenheim wrote to Bleichröder to say that he shared Bleichröder’s ‘pessimistic attitude entirely, and I do not see whence an early recovery could come. We did not—alas!—reduce our security holdings and must await better times. I have been in business now for almost fifty-six years and cannot recall such a protracted crisis ever before. According to my view the national wealth of Germany has shrunk by one-third, and therein lies the chief calamity.’62 The crash of 1873 thus ushered in a new era, one which nobody had experienced before in human history: an international crisis of capitalism. The full impact took several years to work its way through society and into the priorities of Otto von Bismarck, a landowner, a timber merchant, and a tight-fisted country squire.
In 1873 and 1874 Bismarck and his Liberal colleagues continued their battle against the Catholic Church. A year before the Vienna Stock market crashed, on 14 May 1872, the Reichstag had passed a motion asking the Reich government to introduce a draft bill governing the legal status of Catholic religious orders and their subversive activities, particularly the Jesuit order. On the same day Bismarck sent a circular to German missions abroad in which he accused the Prussian Catholic bishops of being agents of the Pope:
The bishops are only his tools, his subordinates, with no responsibility of their own; toward the government they have become officials of a foreign sovereign, of a sovereign who, because of his infallibility, has become an absolute one—more absolute than any absolute monarch in the world.63
On 3 June 1872 Bismarck wrote to Delbrück from Varzin that the Jesuit law must make clear that government will take action against those undermining state authority. ‘It is a case of emergency defence and we cannot defend ourselves with Liberal phrases about civil rights.’64 A week later he urged Falk to make sure that the state helped the lower Catholic clergy by arranging better salaries.65 Here again we see the Bismarckian technique of alternating strategies—carrots and sticks. In July, the Jesuits were legally banned from Reich territory. However shocking this may appear now, it may be easier to imagine if instead of Jesuit you insert communist and think back to the Cold War. To European liberals in the nineteenth century, Jesuits stood for a pernicious, secret conspiratorial order of ‘Soldiers of God’, capable of anything.
Even democratic Switzerland banned Jesuits from all Swiss territory in the new Federal Constitution of 29 May 1874. According to Article 51 of the new Constitution
the Order of the Jesuits and organizations affiliated to it may not seek a place in any part of Switzerland and every activity in church and school is forbidden to its members. This prohibition can be extended by Federal decision to other religious orders whose activity endangers the state or disturbs religious peace.66
It took ninety-nine years for Swiss voters to approve the repeal of this article, which they duly did on 20 May 1973. Bismarck’s Jesuit Law was not more severe than the Swiss expulsion by constitutional amendment.
Bismarck welcomed the Swiss as allies in the war against the Black International and on 23 February 1873 the Swiss Minister to Germany, Johann Bernhard Hammer, who was Swiss Envoy in Berlin from 1868 to 1875, wrote to the President of the Swiss Confederation and head of the Political Department, Paul Jacob Cérésole. Hammer had received a telegram that the Swiss Federal Council had refused to allow Monsignor Gaspar Mermillod to remain in Switzerland as ‘Apostolic Vicar’. Hammer informed Bismarck who invited him to a private talk, the kind of invitation that a diplomat from a small state could only dream about.
You well know how difficult access to Prince Bismarck is for personal exchanges with diplomats … He said ‘We fight on the same ground in the same cause’ … He takes pleasure in his awareness of the attitude which Switzerland takes in response to clerical presumptions and emphasized how the character of our situation makes freedom of action much more favourable, whereas he has been lamed by a variety of obstacles to his freedom of action and hemmed in. In detail he named the opposition of ‘high placed ladies’ as especially obstructive … The Prince closed the conversation with these words: ‘I hope at least Switzerland will stand by the principle in its present struggle with the church that on its territory it will tolerate no other sovereignty than its own.’67
This attitude led to the infamous May Laws of 1873, a set of laws passed in the Prussian Chamber that stipulated (1) future clergymen of both confessions had to be ‘German’ and fully educated in German gymnasia and universities; (2) only German ecclesiastical authorities could exercise disciplinary powers over clergy and such discipline was subject to review by the provincial governor and by a state court, ‘the royal court for church affairs’; (3) ecclesiastical appointments were to be subject to the provincial governors; (4) clergy guilty of disobeying these laws would be fined and jailed; (5) Kirchenaustritt, leaving the church, was made easier for an ordinary person.68
The May Laws were an outrage in two senses. They violated the rights of subjects under the Prussian constitution and every principle of liberal society. They attacked the very idea of the Roman Catholic Church as ‘the mystical body of Christ Incarnate’. The Roman Catholic Church cannot be treated like a civilian organization and it had no intention to accept such treatment. On 9 May 1873 Windthorst announced ‘passive resistance against the May Laws: Against this passive resistance everything that is intended in these laws will sooner or later be dashed to pieces. God grant that the Fatherland not suffer harm thereby.’ When on 15 May the Prussian May Laws passed anyway, the Prussian bishops declared themselves ‘not in the position to cooperate in the execution of the laws published on the fifteenth of this month.’69 The failure of Bismarck’s policies became
clear in the Reichstag elections of 1874. The Centre doubled its vote from 718,000 in 1871 to 1,493,000 in 1874, in percentage of votes from 18.4 to 27.7 per cent with 95 seats.70 The Catholic population had rallied to the cause.
Odo Russell, who saw Bismarck regularly and enjoyed his confidence, believed that Bismarck had made a big mistake in starting the Kulturkampf. On 18 October 1872 he wrote to Lord Granville:
I fancy that Bismarck utterly misunderstands and underrates the power of the Church. Thinking himself more infallible than the Pope he cannot tolerate two infallibles in Europe and fancies he can select the next Pope as he would a Prussian general … Hitherto the anti-clerical measures have produced the very state of things the Vatican was working for through the Oecumenical Council, namely, unity and discipline in the clergy under an infallible head, or the Prussian military system applied to the Church.71
These measures bred hatred and violence on both sides. In September Georg Count von Hertling (1843–1919), later to be Reich Chancellor during the First World War,72 wrote from Belgium to Anna von Hertling on the hatred of Catholics by their fellow Germans:
Again and again I have the same experience: scarcely has one exchanged two words with a countryman, than in some place or other, crude or refined, hatred of Catholics comes out.73
By June of 1875 the Frankfurter Zeitung reported that in the first four months of the year, 241 clergy, 136 editors, and 210 other Catholics had been fined or imprisoned; 20 newspapers had been confiscated, 74 houses searched, 103 people expelled or interned, and 55 public meetings broken up; 1,000 rectories, nearly a quarter of all parishes in Prussia, were vacant. By 1876 all Prussian bishops were either in custody or in exile.74 Odo Russell, who had predicted that Bismarck would lose the Kulturkampf, reported to his brother Hastings on the Catholic hierarchy’s reaction to these severe measures:
Bismarck: A Life Page 45
