IEHC 2006 Helsinki Session 60

Agriculture and Economic Development Oliver Grant

Germany 1870-1939.

I. Introduction.

One of the most important issues in development economics is the role of

agriculture. Does this sector have a purely passive part in the development process, as a
source of surplus labour for the industrial sector? Or, is agricultural modernisation an
essential component of the initial stages of modern economic growth? And, if so, what is
the impetus for change? Does it come out of developments within the agricultural sector
itself? Or is it imposed by outside forces – a development-minded government or
commercialisation consequent on industrialisation in nearby states? 1
German agriculture in the nineteenth and early twentieth centuries provides a
fascinating example of these forces at work. It has rarely if ever been studied in the
context of the debate over development policies, yet it provides a strong and informative
example of a modernisation process which began before the onset of industrialisation,
and which continued throughout the early stages of industrial growth. German agriculture
was a very active part of the growth process.
The initial impetus came from outside forces. The impact of the Napoleonic Wars
was a shock to the national psyche which made possible radical alterations to customary
procedures and to traditional systems of property rights. The humiliating defeat of the
Prussian army at Jena in 1806 set off a reform process which extended into agriculture
and transformed traditional labour services and other contractual duties into market
relationships. Land reforms created a free-holding peasantry from tenants who lacked
ownership rights.
In this, Prussia was a fore-runner of other states which have reacted to defeats
with radical reform processes: Japan post 1945, Taiwan post 1948 and South Korea after
the end of the Korean War have all managed to push through land reforms using the
shock of defeat or other emergencies. These “Jena-like” emergencies create opportunities
for the radical re-organisation of property rights, partly because they are seen as finite
and unusual – property owners do not fear that they presage persistent interference and
repeated re-allocations.
Other transformative forces included the effect of industrialisation elsewhere in
Europe – particularly in Britain. British demand for grain imports were met partly by
German exports, especially from the lands east of the Elbe out of the Baltic ports of
Stettin and Danzig. These was an important impetus to social and technological change
for these areas, which were the regions most suited to large scale grain production but
which were also the most traditional and backward in their social and contractual
organisation. From 1850 onwards the impetus for agricultural change came also from the
expanding population of Germany’s industrial regions as well as continued British
demand.
By 1870, a process was well under way which would make agricultural growth an
important component of the growth of the German economy as a whole.

1
The insistence on the importance of agricultural transformation came initially from Theodore Schultz,
Schultz (1964).
Commercialisation, improved transport links, reformed contractual relations and access
to new technology all played a part in this transformation.

II. Assessing German agricultural growth 1870-1914.

a. Structural change.
Broadberry’s estimates of Total Factor Productivity by sector in Britain and
Germany provide the context for this discussion of the performance of German
agriculture in the late nineteenth and early twentieth centuries. The figures raise some
interesting questions. Between 1871 and 1911 German agricultural TFP converges on the
British figure, rising from an index of 55.7 (Great Britain = 100) to 67.3. But after 1913
the gap widens. In 1925 German agricultural TFP is 53.8% of the British level. By 1938
it is still only 59.0%. The position attained in 1911 is not recovered in the interwar
period. 2
This leads to a series of questions: what were the causes of the good performance
of German agriculture up to 1913 and why was this not maintained in the 1913-38
period? Was this the result of changes within the agricultural sector or did it reflect
outside factors, such as policy changes or changes in the international trading system?
The implication is that the performance of German agriculture was a drag on the German
economy as a whole in the crucial period leading up to the outbreak of the Second World
War, which is an intriguing finding and calls for further study.
Broadberry also argues that the rate of structural change in the German economy
was not high in 1870-1914 and that this held back the overall growth of the economy. As
the transfer of labour from agriculture to industry and services is the main component of
structural change, this implies that agriculture was, despite a relatively good internal
performance, a drag on overall growth as a result of political decisions to support the
agricultural sector through the imposition of tariffs and other measures. The agricultural
sector was larger than the level which would have been most efficient given the pattern of
comparative advantage of the German economy.
The slow rate of structural change of German employment in the period up to
1913 may be, in part, a statistical effect due to deficiencies of the German occupational
censuses, in particular the occupational census of 1882. The share of agriculture in total
employment was 43.7% in 1882 and 34.7% in 1907, a relatively modest drop of 9
percentage points over 25 years. But, the drop in the total agricultural population (the
proportion of the population in households headed by someone with an agricultural
occupation) is larger, from 40.4% in 1882 to 27.4% in 1907. The drop of 13% on this
measure indicates a more rapid rate of structural change. 3
The main reason for the discrepancy is that the 1882 census showed a relatively
low level of participation for wives and other family members, but this then rises in
subsequent censuses. This gave rise to a concern, which was expressed by the statistical
authorities at the time, that the 1882 census had under-recorded the labour contribution of
wives and other family members. It is, however, also possible that what was picked up
was a degree of under-employment in German agriculture at the time, and that this was

2
Broadberry (1997).
3
The German occupational censuses were published in Statistik des Deutschen Reichs n.f.2-7 (1882),
n.f.102-111 (1895) and n.f.202-211 (1907). Summary statistics were published in the annual Statistisches
Jahrbuch für das Deutsche Reich.
then reduced as employment opportunities improved, inside and outside the agricultural
sector.
This point is of importance as it leads to a revised view of the pattern of structural
change in the German economy over the whole period to 1939. Figure 1 illustrates this,
using results from the employment censuses corrected for boundary changes.

Figure 1. Structural change in the German Economy, 1882-1939.

The share of agriculture in total employment, and the agricultural population as a
percentage of the total population, German Reich 1919 boundaries.
(Projections carry forward the rate of change 1882-1907)

Using the agricultural employment figures the rate of structural change is broadly
continuous over the whole period: there is a decline in the rate of change between 1907
and 1933 and a pick-up in 1933-39. The rate of change for 1907-1939 (as an annual
decline in the agricultural proportion of the workforce) is 79% of the 1882-1907 figure.
The shaded area in the figure shows how far off trend agricultural employment was in the
interwar period.
But with the agricultural population figures (the lower line in figure 1) the break
after 1913 is much starker. Even though the rate of change increased in 1933-39, the
overall rate of relative decline in 1907-39 was still only 55% of the 1882-1907 figure. A
continuation of the pre-1907 trend would have brought the total agricultural population
down to 10.7% of the German population, against the figure of 18.2% actually recorded
by the census of that year. Total agricultural employment would have been just 15.4% of
the occupied population, compared to the actual figure of 26.1%. The shaded area is, in
consequence, much larger.
So, if the deficiencies of the 1882 census are borne in mind, it is clear that the
German economy as a whole was well off-trend in 1939, given the rate of structural
change achieved in 1882-1907. The disruptions of the 1913-33 period had resulted in a
larger agricultural sector than would have been anticipated if the previous trend had
continued.

B Import trends.
One important factor in the rate of structural change was the decision of the
German Empire to protect its agricultural sector against US grain imports in the 1870’s.
In this Germany differed from Britain, which chose not to protect. But it also differed
from a number of other European countries, including France and Italy, in that the level
of protection was not high enough to prevent a large increase in imports, and a decline in
self-sufficiency.
A significant point was that Germany had already made progress as an industrial
nation. Germany had a comparative advantage in industrial goods, and was therefore able
to pay for increased agricultural imports by expanding exports of manufactures. This was
not an option which was available to other European countries which lacked a substantial
capacity to export industrial goods.
Another factor was that Germany in the 1870’s was a more recent industrial
power than Britain in the 1870’s when cheap grain imports started to appear on the
European markets. There was still a large rural population, and German cities were small
by comparison with Britain. They were already suffering from the effects of rapid
expansion, leading to high sickness and mortality rates. By contrast, most British
industrial cities had been growing steadily since the 1780’s or before. While urban
problems were still acute, progress was being made towards their amelioration.
This was an important background factor behind the decision to protect. Only
12.5% of the German population in 1871 lived in towns of over 20,000 inhabitants. A 1%
fall in the German agricultural population (which was then 49.5% of the labour force)
would produce a 4% increase in the urban population if all those who left agriculture
went to the cities. 4 But in Britain, with a much smaller agricultural sector (22% of the
labour force) and 42% of the population already living in towns of over 20,000, each 1%
decline in the rural labour force would produce a migration stream equal to just 0.5% of
the existing urban population.
For these reasons, the decision to protect was not so irrational. But, despite
protection the balance of German trade in agricultural produce swung heavily into deficit.
In the early 1870’s Germany had a small deficit on agricultural trade, amounting to 0.7%
of Net Domestic Product in 1870-2. By 1911-13 this had risen to 4.5% of total Net
Domestic Product. As figure 2 shows, import dependency in cereals reached 15% of total
domestic consumption in the early 1900’s and stayed at this level until the First World
War. In this area, the future German Reich had been a net exporter in 1850’s and 1860’s.

4
The relationship between agricultural conditions and migration is a theme explored in Grant (2005).
Figure 2. Net imports of cereals as a percentage of total domestic consumption
(including use as animal feed), Germany (post-1871 boundaries) 1850 -1913.
30

20

10

-10
1850 1860 1870 1880 1890 1900 1910

The shift from being a net exporter to being a net importer was, in the initial
stages, only partly due to increased competition from the United States. It is certainly true
that Germany was ousted from some important third markets. In 1856-60 German cereal
exports accounted for 23 % of total British imports, but this had fallen to 8% in 1871-5.
Meanwhile the US share rose from 19% to 41%. But, German producer prices were
actually rising over this period, by 13% for wheat and 15% for rye. The negative effects
of US competition were masked by the effect of rising domestic demand in these years.
Figure 3 shows that German producer prices were quite buoyant in the mid
1870’s, and only started to slide from 1877 onwards. Between

Figure 3. German producer prices for cereals, compared with the duties on
imported grain levied by the German Reich from 1879 onwards. 5

5
Producer prices from Hoffmann (1965).
 240

220

200 Producer prices

180

160

140

120

100

80

60 Import duties

40

20

0
1860 1866 1872 1878 1884 1890 1896 1902 1908

Notes: dotted line shows annual producer prices (weighted averages of the
major cereals
dashed line shows five-year moving average
duties in 1902-6 were on a sliding scale, on a range of 55-75 Marks (maximum
and minimums are shown)

c. Productivity growth.
The good performance of German agriculture in the late nineteenth century is
based largely on a strong growth in physical measures: German yields caught up with
those in the more advanced agricultural economies; livestock numbers rose at a faster rate
than in other countries. Figure 4 gives wheat yields in selected European countries from
1848 to 1913. In the mid nineteenth century German yields were roughly the same as
those in France, and well below those in Britain and Denmark. German yields were also
behind those in Belgium and the Netherlands. But in the course of the late nineteenth and
early twentieth centuries, Germany caught up with the leading group, and left France
some way behind.
From 1879 onwards regional figures are available, which make it possible to
compare yields in Germany east of the Elbe with the rest of Germany. The figure shows
that the improved performance of East-Elbian agriculture was an important factor in the
overall increase in German yields. Yields rose at a faster rate in this region compared to
the other German regions. In 1879-1883 eastern yields were 14.8% below those in the
rest of Germany, but by 1909-1913 they were 2.7% higher on average. 6

Figure4. Wheat yields 1848-1913, 1000kg per hectare, rolling 5 year averages.
log scale. 7
4

2
Germany

France

Denmark

Britain

Germany, east
1
.9 Germany, rest
1848 1858 1868 1878 1888 1898 1908

Figure 5 repeats the analysis for rye, which was the most important cereal crop in
Germany. Britain is omitted as little rye was grown and yield figures are not available. In
this case, German yields show a slow upward trend to the late 1880’s, which then
accelerates, catching up and surpassing Denmark, the European leader. Again France is
left behind.
The regional breakdown also shows a pronounced convergence between yields
east of the Elbe and in the rest of Germany. In this case, the East does not fully catch up,
but the gap closes at a rate which is slightly faster than for wheat. In 1879-1883 eastern
yields were 26.8% below the rest of Germany; by 1909-1913 the gap was down to 8.3%.

6
Agriculture east of the Elbe has long had a bad press. Grant (2003) presents a contrary view.
7
Calculated from data in Mitchell (1981), from national sources, but then adjusted using the 1905-9
Institute International d’Agricole comparison of cereal yields, Institut International d’Agriculture (1915)
p.28. The British figures were converted to metric tons using estimates of bushel weights from the 1879
Encyclopaedia Britannica.
 Compared to France, where rye yields showed little tendency to increase in the
late nineteenth century, yields in eastern Germany went from being 12% below in 1879-
1883, on average, to being 68% above in 1909-1913.

Figure 5. Rye yields 1848-1913, 1000kg per hectare, rolling 5 year averages. 8
log scale
2

Germany

France
1
Denmark
.9 Germany, east

.8 Germany, rest
1848 1858 1868 1878 1888 1898 1908

The main force driving up yields was improved nutrient supply. Livestock
numbers rose substantially during the late nineteenth and early twentieth centuries. Cattle
numbers rose from 15.8 million in 1873 to 21.0 million in 1913, while pig numbers
increased from 7.1 million to 25.6 million. Sheep numbers fell with the switch to more
intensive systems.
Rough calculations can be made of the implications of these increases for plant
nutrient supply, when estimates of the value of animal manures are added to figures for
applications of artificial fertilisers, which are rather better recorded since many materials
were imported. Table 1 provides a calculation of the total increase in the main categories
of plant nutrient supply from these sources, comparing 1878-80 with 1911-4.

8
As figure 5.4.
Table 1. Plant nutrient supply in German agriculture, average annual applications
divided by the total agricultural area. 9

1878-80 1911-4
A. Estimates of nutrients available Nitrogen (kg/ha) 14 33
from animal manure: Phosphate (kg/ha) 12 28
Potash (kg/ha) 11 26

B. Estimates of nutrients available Nitrogen (kg/ha) 0.7 6.4

from artificial fertilisers Phosphate (kg/ha) 1.6 18.9
Potash (kg/ha) 0.8 16.7

1878/80 to 1911/14
C. Overall increase in nutrient Nitrogen (kg/ha) +168%
supply Phosphate (kg/ha) +245%
Potash (kg/ha) +262%

D. Proportion of increase supplied Nitrogen (kg/ha) 23.1%

by artificial fertilizers Phosphate (kg/ha) 52.0%
Potash (kg/ha) 51.5%

The table shows a very substantial increase in total nutrient supply, with
applications of potash and phosphate rising by a factor of 3.5. The increase in nitrogen is
rather less, but in this period a substantial amount of nitrogen was made available by the
use of nitrogen-fixing crops (such as clover) as part of the normal arable rotation. The
effect of this cannot easily be calculated.
In general, therefore, the rapid increase in yields shown in figures 3 and 4 can be
explained by improvements in plant nutrition. However, this was not the whole story.
Plant breeding improvements were also relevant, as it was necessary to improve straw
strength if the more heavily fertilized crops were to bear full fruit, without “lodging”
(falling over) before harvest. This was done partly by the importation of English
“Squarehead” wheat varieties which were crossed with German strains to improve straw
strength and resistance to lodging. German breeders, such as the pioneer breeder Wilhelm
Rimpau, also produced improved rye varieties which showed similar traits. 10
Table 1 also shows the proportion of the increase in nutrient supply which can be
attributed to the use of artificial fertilizers. Even in 1911-14 artificial fertilizers accounted
for only about a third of total plant nutrient supply, but the contribution at the margin –
the proportion of the increase which was supplied by artificial fertilizers – was rather
greater. Over 50% of the increase in the supply of potash and phosphate came from
artificial fertilizers.
In general, therefore Germany in 1870-1913 can be seen as a classic case of an
agricultural sector whose role in the development process was not a passive one, merely

9
Figures for artificial fertilisers from Schremmer (1988) who also provided estimates of total applied
tonnage of animal manures. These have been converted to nutrient value using figures from Voelcker
(1883).
10
Frauendorfer (1956).
providing surplus labour to the industry, but which was an active participant in the
development process. New crops were introduced, such as sugar beet, new techniques
were employed.

III. Regional factors in German agricultural performance 1870-1913.

Perhaps the most telling evidence of the transformation of German agriculture
comes from the regional breakdown. The contribution of the areas east of the Elbe was a
major factor in the overall success of the agricultural sector. These regions, initially
backward, experienced rapid productivity growth and caught up with the more advanced
central regions.
Productivity estimates can be produced, using regional accounts, for 1880/4,
1893/7 and 1905/9. 11 These five year periods were chosen because they centred on the
census years of 1882, 1895 and 1907 – the occupational censuses of these years were an
important source of information. Figure 6 shows the estimated increase in net value
added per full time labour unit (labour input adjusted for part-time employment). The
figures from which these growth rates are calculated are given in Appendix B.

Figure 6. Percentage increase in agricultural productivity 1880/4 to 1905/9.

(For regional definitions and key to numbers see Appendix A)

11
The original calculations are given in Grant (2002).
 As can be seen from this figure, most of the regions experiencing rapid
productivity increase were in the East. The fastest increase was in East Prussia (region 1),
where productivity nearly doubled in 25 years. Seven other regions had increases of 2%
per annum or more. All these were eastern regions (regions 2,3,4,5,7 and 10). By
contrast, productivity gains in western Germany were more modest, and in the south and
south-west there was much slower growth: 1% per annum in Bavaria (region 17) and
0.5% per annum in Württemberg-Höhenzollern (region 20) and Alsace-Lorraine (region
21). Productivity in these regions also lagged behind the centre, but, unlike the east, they
did not converge.
In central Germany there were also below average gains in Mecklenburg (region
6) and in Prussian Saxony-Anhalt (region 8). This represented a rather different process.
These two regions, along with Schleswig-Holstein, were the leading regions in 1880-4,
with productivity levels well above the national average (88% above for Mecklenburg
and 62% above for Saxony-Anhalt). But their rate of increase in 1880/4 to 1905/9 was
below average, although it was not a case of stagnation: the estimated increases of 0.98%
for Saxony-Anhalt and 1.23% for Mecklenburg were quite respectable. What made them
less impressive was the extremely rapid rate of increase further east. But this represented
the realization of a possibility for rapid catch-up which would naturally diminish as the
gap between the east and the central regions was diminished.
It follows from this that a reduction in the rate of productivity increase after 1913
might well have been anticipated on these grounds alone, and that the rate of increase
recorded for the leading three regions between 1880/4 and 1905/9 (roughly 1.25% per
annum) might have been a better indication of the long run potential of the German
agricultural sector than the more rapid increase achieved by the sector as a whole over
these years. If the overall growth rate were to fall back to this level, then this would take
0.3% per annum off the growth of agricultural productivity.
However, while the eastern German regions were converging, those in the south
and south-west were diverging. In 1880/4 productivity in regions 17, 19 and 20 (Bavaria,
Baden and Württemberg-Höhenzollern) had been 24%, 23% and 12% below the national
average, respectively. By 1905/9 these gaps had increased to 32%, 35% and 33%. This
created new opportunities for convergence if the performance of these lagging regions
could be improved.
But the challenge was a different one compared to that presented by the provinces
east of the Elbe. These had had structural advantages compared to the rest of Germany.
Their farms were larger and generally in single units. The land/labour ratio was more
favourable than in the other German states. Consequently, when arable yields were
brought up to national standards, this produced a rise in the total share of crop production
(major roots and cereals) from 33% in 1880/4 to 43% in 1905/9. The share of livestock
production remained constant at about a third, as did the share in the total agricultural
labour force. Yield convergence, brought about by the spread of advanced arable
technology from the central regions and by improved transport links, was the mechanism
by which the east caught up.
The south and south-west, by contrast, had smaller farms than the national
average and they were more likely to be split up, due to the consequences of the partible
inheritance system practiced in southern Germany. 12 There was relatively little land
which was uncultivated or under-utilized. The transformation of these regions by modern
technology would be a much harder task. 13
Figure7 shows the prevalence of small-scale agriculture in the south and south-
west. There were three regions where over 80% of the agricultural area was in holdings
of under 20 hectares: regions 14, 17 and 18 (Pfalz, Hesse and Baden). In Bavaria (region
13), 64.7% of the land was in farms of less than 20 hectares. In the east farms of this size
were relatively rare. In regions 1,2 and 4 (East and West Prussia and Pomerania) the
percentage was below 20, as it was in Schleswig-Holstein (region 8). In Mecklenburg,
only 12.9% of the land was in farms of less than 20 hectares.
The productivity estimates show a strong negative correlation between the levels
of net value added per full time labour unit and the importance of small-scale farming.
The correlation coefficient for 1905/9 is -0.77, which is a stronger relationship than for
1880/4 (-0.58). This shows that the eastern regions were overcoming their initial
disadvantages of remoteness and poor communications, and as a result, they were better
able to take advantage of their better farm structure.

12
Conrad (1891) and Miaskowski (1882).
13
The ability of smaller holdings to keep up with larger farms was a concern of contemporary writers:
Kutzleb (18850, Auhagen (1896) and Sumpfe (1896).
Figure 7. Small scale farming in German agriculture.
The percentage of the total agricultural area in holdings of less than 20 hectares,
From 1895 Agricultural Census.

IV. Capital intensity and efficiency.

The issue of resource utilization and efficiency is central to German agricultural
history between 1870 and 1939. Broadly speaking, the evidence of the interwar period
shows a sharp rise in advanced inputs - machinery and fertilizers in particular. Yet, the
rate of productivity growth slows down, indicating that these resources were not being
used to maximum efficiency. Why, then, was there a drop-off in the efficiency of the
agricultural sector after the impressive performance between 1870 and 1913 period? To
answer this question, it is again of interest to look at the regional breakdown in the pre-
1914 period.
The German statistical office organized surveys of agriculture which formed part
of the occupational censuses of 1882, 1895 and 1907. These recorded machinery use in
German agriculture. This is a valuable source but it has 2 defects. Firstly, there are
problems of comparability – the surveys did not ask the same questions and record the
same items of farm machinery. This means that the only way to achieve comparability
between censuses is to use those items for which comparable data are available and
construct a weighted index using values from contemporary farm costings. 14 The indices
are then chained together, working backwards from the most comprehensive survey, that
of 1907. The second problem is that the surveys recorded machinery use, not machine
numbers. So, as an index of capital input there is a possibility of bias if sharing of
machinery or joint-ownership is more common in one region than another.
Table 2 provides estimates of machinery use in the different German regions,
using the regional units previously shown in figure 6. The surveys were used to allocate
the total machinery stock, using values from Hoffmann, and express this in relation to the
total agricultural area.
The results are instructive, even with the caveats expressed in the previous
paragraph. The east is shown to be an area with a relatively low level of mechanization,
and this did not change that much even as it was catching up in terms of labour
productivity. Some eastern regions did show quite large rises in machinery use, but they
remained well below regions in the rest of Germany.
There were a number of possible reasons for this. Firstly, the east had larger farms
and therefore may well have used items of machinery more intensively and more
efficiently. Secondly, wages were lower in the east, and so the incentive to substitute
machinery for labour was less. The east also had access to cheap seasonal workers from
Russian Poland, and this would have been helpful in dealing with peak seasonal labour
demands, reducing the need to invest in expensive steam-driven threshing machines, for
example. Finally, it is noticeable that machinery use is related to the level of regional
industrialization. The highest machinery use in the east was recorded by the industrial
region of Silesia. By contrast, Schleswig-Holstein, one of the most advanced agricultural
regions but one which had relatively little industry, had a relatively low level of
machinery use when compared to other regions in the west and north-west. In this period,
much machinery was locally made, and required skilled local workers for repair and
maintenance. In the more remote regions, with few industrial centres, such skills were
hard to find.

14
From 1882 to 1895 the index includes 4 items: steam ploughs, mowing machines, steam-powered
threshing machines, other threshing machines. From 1895 to 1907 it includes these items plus broadcast
sowing machines, milk centrifuges and hoeing machines.
Table 2. Estimates of machinery intensity in German agriculture.
Total machinery stock in Marks (1913 prices), per hectare of agricultural land. 15

1882 1895 1907

A. East
1 East Prussia 46 71 91
2 West Prussia 55 55 70
3 Berlin/Brandenburg 57 67 95
4 Pomerania 33 44 65
5 Posen 33 59 99
6 Silesia 151 153 189
19 Mecklenburg 65 65 68

B. Centre
7 Prussian Saxony/Anhalt 118 152 199
15 Saxony 204 196 217
20 Thuringia 139 173 270

C. West and North-West

8 Schleswig-Holstein. 69 94 121
9 Hannover/Oldenburg/Brunswick 112 228 220
10 Westphalia 272 351 413
11 Hesse-Nassau 105 190 285
12 Rhineland 259 210 256
14 Pfalz 262 344 393
18 Hesse 335 469 408

D. South and South-West

13 Bavaria excl. Pfalz 238 227 257
16 Württemberg/Höhenzollern 109 145 244
17 Baden 127 185 374
21 Alsace-Lorraine 290 221 262

All Germany 131 154 190

But the most surprising result which emerges from this is that German agriculture
shows a negative correlation between productivity, as measured by net value added per
labour unit, and machinery use per hectare. The coefficient is -0.64 for 1905/9. This
paradoxical result is due to the regional split – the eastern regions were achieving good
levels of productivity despite relatively low usage of machinery. By contrast, in other
German regions, productivity was lower and machinery use was higher.
These figures for machinery inputs can be used to derive figures for total factor
productivity. These are, however, provisional and illustrative rather than definitive, given

15
Total machinery stock is from Hoffmann (1965); the German occupational censuses provided the
regional breakdown; prices of the machinery items came from Krafft (1899) and Lohaus (1911).
the gaps in the data. The main problem is the lack of regional figures for investment in
agricultural buildings. This can be estimated using livestock figures, as buildings were
mainly used to in-house livestock in the winter months, but this is a poor substitute for a
direct survey. A second problem is the lack of information on factor returns, necessary
for calculating the weights in a standard TFP calculation.

Table 3. Estimates of total factor productivity growth in German agriculture, 21

regions, 1880/4 to 1905/9.

Residual Malmquist DEA

calculation TFP index 16
A. East
1 East Prussia 1.82 2.00
2 West Prussia 1.41 1.48
3 Berlin/Brandenburg 1.41 1.31
4 Pomerania 1.44 1.40
5 Posen 1.76 1.48
6 Silesia 1.64 1.60
19 Mecklenburg 0.40 0.67

B. Centre
7 Prussian Saxony/Anhalt 0.52 0.65
15 Saxony 1.42 1.40
20 Thuringia 0.71 0.90

C. West and North-West

8 Schleswig-Holstein 0.85 1.35
9 Hannover/Oldenburg/Brunswick 0.91 1.53
10 Westphalia 0.97 1.66
11 Hesse-Nassau 1.06 1.75
12 Rhineland 0.97 1.39
14 Pfalz 0.74 0.72
18 Hesse 0.92 1.02

D. South and South-West

13 Bavaria excl. Pfalz 0.50 0.56
16 Württemberg/Höhenzollern -0.11 0.16
17 Baden 0.28 0.88
21 Alsace-Lorraine 0.06 0.34

All Germany 0.94 1.15

The first column of table 3 gives the results of a residual TFP calculation for net
value added in the German regions, weighting input estimates as follows: 0.55 for labour,
16
The computer program is downloadable at www.uq.edu.au/economics/cepa/deap.htm. Further details are
in Coelli (1996).
0.35 for capital (buildings, machinery and livestock) and 0.1 for the arable area. The
regional pattern reveals that TFP growth was fastest in the east, with a strong catch-up
process in this area (relatively slow growth is shown for the leading regions – 7, 8 and
19), But the south and south-west lagged behind the others, with no evident tendency for
catch-up in this area.
An alternative method of TFP calculation has been employed by the Food and
Agriculture Organisation of the United Nations (FAO) in its 2005 report - The State of
Food and Agriculture 2005. 17 This uses a computerized “data envelopment analysis” (or
linear programming) approach to estimate a production frontier, and then estimates TFP
growth as a movement towards this production frontier. The resulting Malmquist TFP
index has the advantage of not needing input prices – the factor weights are calculated as
part of the estimation process. The results of the application of this method to the German
regions are given as a second column in table 3. While these differ in some respects to the
figures in the first column, they broadly support the regional pattern shown earlier – TFP
growth is fast in the east, and the south and south-west lag. The main difference is that
the regions of the west and north-west are shown to have rather better TFP growth than in
the first column.
Overall the regional pattern of capital use and efficiency raises questions about
the ability of German agriculture to sustain the rapid rate of productivity growth achieved
before 1914, Structural problems were causing some regions to have difficulty in making
effective use of new technology. While growth between 1870 and 1913 had been driven
by the convergence of yields in the east, this factor was likely to be less important as
yields east of the Elbe were now close to the national average. The weaknesses however
remained.

V. German agriculture 1914-1939.

The First World War represented a dramatic break in the progress which had
characterized the German agricultural sector up to that point. The livestock sector in
particular had been highly dependent on imported feedstuffs and was heavily run down
during the war, with much slaughtering of breeding stock. Even after the war had ended
the Allied blockade continued until the peace treaty was signed, and the period of
disruption was extended by the hyper-inflation of the early 1920’s and the international
tensions which culminated in the Franco-Belgian occupation of the Ruhr in 1923-4.
Despite this it might have been expected that German agriculture would return to
the highly successful growth path of the pre-1914 period, once the disruptions of the
immediate post-1918 period had been overcome. The impact of the war was not entirely a
negative one. In particular, the shortage of nitrate for explosive production which had
resulted from the British interruption of Chilean exports to Germany, had stimulated the
construction of the Oppau plant for the production of ammonium nitrate using the Haber-
Bosch process. This removed the last obstacle to the development of an agricultural
sector entirely freed from dependence on organic manures.
However, the performance of the agricultural sector in the interwar period fell
well below that of the pre-1914 period. As figure 8 shows, net value added per head fell
sharply in 1914-25 and struggled to recover the 1913 level. The level of productivity
17
FAO (2005).
reached in the 1930’s was still well below the potential implied by the pre-1913 trend.
The shortfall is about 26% of estimated potential output for 1934-8.

Figure 8. Net Value Added per head in German agriculture, 1870-1938 (1913
prices). 18
(Dotted line shows continuation of 1870-1913 trend)
1600

1400

1200

1000

800

600

400
1870 1880 1890 1900 1910 1920 1930
1875 1885 1895 1905 1915 1925 1935

What were the reasons for this break with trend? The main factors were on the
production side: a slowdown in the rate at which arable yields were rising, and the limited
recovery of the intensive livestock sector after wartime and post-war disruptions. The
problems of the pig sector were particularly evident when contrasted with the pre-1914
trends. Figure 9 shows total numbers of pigs in German agriculture from the various
livestock censuses (the pre-1914 figures are adjusted for the territorial losses at the end of
the First World War). The figure also gives cattle numbers as a point of comparison.
The figure shows that the rapid rate of increase of pig numbers before 1914 was
not maintained in the interwar period. There were substantial losses during the war and

18
These figures are from Hoffmann (1965). Questions have been raised about Hoffmann’s figures, see
Fremdling (1988) and (1995). Alternative figures for agriculture are available in Helling (1966) and Ritschl
and Spoerer (1997). While these differ in some respects from Hoffmann, the broad conclusion that
agricultural productivity did not recover to the pre-1914 trend is not affected.
these had only partially been made up by 1925: total numbers in this year were still 28%
below the adjusted 1913 figure. There was a partial recovery to 1933 and relative
stagnation thereafter.

Figure 9. Livestock numbers in Germany 1873-1937 (adjusted for territorial

changes)
Log scale
30000

Pigs

20000
Cattle

Cattle

10000
9000
8000
Pigs
7000

6000
1873 1883 1893 1903 1913 1923 1933
1878 1888 1898 1908 1918 1928

The pig sector suffered more than the cattle sector because it was more heavily
dependent on imported feed. Cattle were mainly fed on home-produced herbage (fresh
grass in the summer, hay in the winter) with some supplementation with cereals to boost
milk yield or to increase slaughter weights for beef cattle. Thus, in times of restricted
imports, the cattle population could be maintained without much use of cereals, although
this would result in a reduction of milk yields and slaughter weights. As pigs were not fed
on grass, pork production was much more dependent on the use of cereals for energy and
oil-cakes for protein, both of which were heavily imported before 1913. The use of
cereals for pig feeding also competed with the needs of the human population, even
though the actual crops used were not normally part of the diet of the German household
outside wartime conditions. Arable land could be switched from barley, oats and feed-
grade wheat to rye and bread-making wheat.
 This accounts for the more rapid fall of pig numbers over the 1913-25 period. But
the recovery was also a slow one. An important factor was that the recovery of cereal
imports was a slow one. As figure 10 shows, imports of these feedstuffs were well below
the 1913 figure throughout the interwar period, with the exception of the 1927-29 period.
Before 1927, this can be attributed to the lingering effects of wartime and post-war
disruption; after 1933 it was an act of deliberate government policy as the German
economy moved towards autarchy and reduced dependence on imports. 19

Figure 10. Imports of animal feedstuffs, relative to 1913 (1913 =100).

Oilseeds include processed oilcake and unprocessed seeds.
Cereals include maize, oats and barley. 20

140

120
Oilseeds
100

80

60

Cereals
40

20

0
1925 1927 1929 1931 1933 1935 1937

Oilseed imports were more robust, as they were partly a by-product of the need
for vegetable oils for the production of soap, margarine and other products (the import
figures include unprocessed seeds which then yielded oilcake for livestock production as

19
Contemporary German writers were convinced that the problems of the German foreign trade sector in
the 1920’s were the result of reparations payments as implemented under the Dawes plan. Sering (1929)
provides a strong statement of this view, with particular emphasis on the effect on German agriculture.
20
These are indices constructed using data from the German Statistical yearbooks. These provide constant
price import series at 1913 prices to 1925 and at 1928 prices from 1928. Between these years imports are
given at current prices and at the previous year’s prices. The series given in the table were produced by
chaining these series together. Note also that it would be desirable to include feed-grade wheat imports, but
these cannot be distinguished from bread-making wheat.
well as oil after crushing). But even here the recovery to 1913 levels was delayed until
1928, and by 1938 imports were 34% below the 1913 figure. Imports of cereal feedstuffs
were under 8% of the 1913 level by 1938.
Some falling away from the extremely rapid increase in pig numbers experienced
before 1913 might have been expected – there was a limit to the possible contribution of
pork to the German household diet – but the reduction went beyond this. It is an
illustration of the effects on German agriculture of the deliberate Nazi policy of turning
away from engagement with world markets.
Other problems which affected the livestock sector included intense competition
from imports in the 1920’s and price controls in the 1930’s. In the mid-1920’s meat
imports were extremely high: 360% of the 1913 figure in 1925, and 344% in 1926. This
fell off in the late 1920’s and there were further reductions in the depression years.
However, prices remained low. In real terms (deflated by the overall price index), beef
producer prices were 82% of the 1909/13 average in 1925-29 and 73% in 1934-8; pork
prices were 90% of the 1909/13 level in 1925-29 and 69% in 1934-8. The price controls
introduced by the Nazi government held agricultural prices down in the 1930’s even
when other prices began to rise.
The other major contribution to lowered productivity growth came from a fall in
the rate at which arable yields were rising. Table 4 provides estimates of the effect on
overall production of the major arable crops. The first section compares actual yields to
those obtained by projecting forward the 1870-1913 rates of increase. The estimated
shortfalls show how far the progress of German agriculture in the interwar period fell
below the momentum established between 1870 and 1913. As can be seen, this procedure
results in considerable deficits for all the major crops, both in the 1920’s and 1930’s.
However, as already noted, the rise in yields before 1913 was influenced by the
catch-up process in eastern agriculture, and may well, therefore, have represented the
realization of a “one-off” opportunity, as more advanced techniques were introduced into
previously lagging regions. A different approach is to interpolate between the five years
just before the First World War, 1909-13, and the late 1950’s, by which time West
German agriculture was fully restored to normality. This approach yields lower estimates
of the gap between potential and actual production, and probably gives a more realistic
view of the under-performance of German agriculture in the interwar period. The 1930’s
are shown to be a period of relative improvement, and by 1938 yields were back up to the
estimated potential line (though it would be a mistake to place too much emphasis on a
single harvest).

Table 4. Estimated shortfalls in arable crop production in the interwar period

(as percentages of the projected total output)

A. Using yield projections based on data for 1870-1913

wheat rye barley oats potatoes

1922-29 -21.6 -20.5 -16.3 -13.2 -14.6
1930-38 -16.1 -19.8 -12.2 -17.3 -8.1

B. Using interpolations between 1909/13 and 1956/60

 (West Germany only for 1956/60)
wheat rye barley oats potatoes
1922-29 -18.3 -18.6 -14.7 -6.2 -9.7
1930-38 -9.0 -14.1 -7.8 -4.9 -0.1

But the improvement in cereal performance in the 1930’s has to be set against a
sharp rise in inputs. The use of artificial fertilizers increased (table 5), and usage by the
late 1930’s was over 3 ½ times as high for nitrogen, and 2 ½ times as high for potash.
The table shows an interesting distortion. On agronomic grounds it would be expected
that all three fertilizer inputs would rise at roughly the same rate. This is because their
action is complementary: increased use of one fertilizer raises the effectiveness of
applications of the others. But the use of phosphate lagged in the interwar period.
Nitrogen application rose at 5% per annum before 1913 and 5% 1913-1938; potash
application rose 7 per annum before 1913 and 3% 1913-38; but phosphate application
increased 6% per annum before 1913 and less than 1% per annum 1913-38.
The reason for this is that Germany had little domestic production of mineral
phosphate and so this material had to be largely imported. By contrast, Germany was a
major producer of mined potash, and domestic supplies of nitrogen were sufficient after
the invention of the Haber-Bosch process. So, phosphate use was much more affected by
the foreign trade position. As the table shows, phosphate use fell by 39% between 1913
and 1921/22, and recovered only slowly thereafter.

Table 5. Use of artificial fertilisers in German agriculture relative to 1913

(1913 =100)
Adjusted for territorial changes. 21

Nitrogen Phosphate Potash

1921/22 169 61 164
1925/26 216 86 146
1930/32 184 78 125
1934/6 248 109 180
1937/39 366 130 246

Another area where inputs rose strongly in the interwar period is machinery.
Table 6 gives the main results of the 3 interwar surveys, including comparable figures for
1907 where these are available. The figures show impressive progress in most areas.
Electrification rose threefold between 1925 and 1939. Use of mowing machines rose
five-fold between 1907 and 1933.
However, closer examination of the figures reveals another distortion: most of the
power available to German farmers was stationary. There was high availability of
electricity; 189,000 farms had stationary petrol or diesel engines in 1939, but only 55,700
had use of a tractor. This in turn is reflected in the types of machinery that were in use:
most of the widely used types were operated in the farmyard which was where the power
supplies were situated: grinding mills, milk centrifuges, chaff-cutters, threshing

21
From figures in the Statistisches Jahrbuch für das Deutsche Reich, annual issues, and using the territorial
adjustment provided in Sering (1929).
machines. The equipment used in the fields was mostly light and suitable for use with
horses, which remained the predominant source of power outside the farmyard. It is
evident from the figures that 93% of the sowing machines and 96% of the mowers in use
in German agriculture in 1939 were still horse-drawn.
The contrast with Britain is a stark one. In Britain in 1940 there were 89 tractors
per thousand workers in agriculture; in Germany in 1939 there were just 6. 22 One
important factor was, once again, the relative isolation of the German economy in the
interwar period and even more so in the 1930’s. However, in this case the problem was
not so much import restrictions as the existence of conditions which were unfavourable to
foreign direct investment. In Britain the tractor industry was transformed by the entry of
major North American manufacturers such as Ford and Massey-Fergusson who set up
British factories to produce tractors designed for the local market. This did not happen in
Germany, in part because of the disruptions of the 1920’s but, most importantly, because
after the imposition of exchange controls in 1931, foreign firms were prevented from
repatriating profits earned in Germany.
But the comparison with Britain is also instructive in that British agriculture was
better placed to take advantage of the new technology of farm mechanization. British
farms were larger and more suited to cultivation with tractors. The smaller, split-up
holdings of southern Germany were particularly disadvantaged. A further factor which
may have had some influence in the 1930’s was that German firms who might have
produced tractors were heavily occupied in the rearmament programme.

Table 6. Machinery use in German agriculture, 1907-1939

Numbers of holdings using selected items of machinery, by census year (in
thousands)
1907 figures adjusted for territorial changes. 23

1907 1925 1933 1939

Electric Motors - 644.7 1225.7 1807.4
Steam engines - 14.6 15.3 11.8
Stationary petrol/diesel
1.8 92.6 189.3
engines
Tractors (including
- - 25.1 57.7
motorized ploughs)
Sowing machines
- 543.7 640.9 806.4
(including drills)
Mowing machines 307.4 1023.4 1338.2 1363.4
Threshing machines
457.5 - 1119.9 -
(powered)
Chaff-cutters - 2037.6 2017.4
Grinding/crushing mills 25.6 319.7 508.1 691.5

22
British figures from Brassley (2000) p. 65 and p. 74. The comparison is in fact distorted in favour of
Germany: the British figure is for actual tractor numbers; the German figure is for holdings which used
tractors, which would be less if there was sharing or joint ownership.
23
Adjustment of 1907 figures from Sering (1929). Other figures are from the Statistisches Jahrbuch für das
Deutsche Reich, various annual issues.
Milk centrifuges 295.8 1415.1 1510.1 -

It is a puzzle why the very substantial increase in farm machinery which was
recorded by the interwar farm censuses did not produce a corresponding gain in
agricultural productivity. This puzzle is at least partly explained by the analysis of
regional machinery use and TFP trends before 1914, given in the previous section. Parts
of German agriculture were already having difficulty making effective use of machinery
before 1914.
An additional factor was the trend away from involvement in the world market.
This section has provided evidence of problems in three major areas: the intensive
livestock sector, the use of artificial fertilizers, and the use of machinery. What is
apparent from these three examples is that the foreign trade position of German
agriculture in the interwar period imposed a series of distortions which may have been
small in themselves, but which had a large cumulative effect. This was partly because
they impinged on each other, reinforcing the overall impact. Thus, the slow recovery of
the pig sector reduced the nutrients available for crop production, and made German
agriculture more dependent on artificial fertilizers, which in turn made the distortion
imposed by reduced access to phosphate imports more costly.
In contrast to the pre-1914 period, when a relatively moderate level of protection
still made it possible for German agriculture to develop using modern inputs and
importing heavy amounts of animal feed and other materials, between 1918 and 1939
German agriculture had restricted access to world markets, and was forced into a much
greater reliance on home-produced inputs. This had a serious effect on overall efficiency
and was a major factor in the reduced rate of productivity increase compared to the
record before 1914.

VI. Conclusions.
German agriculture between 1870 and 1939 provides a fascinating and instructive
example of an agricultural sector in an economy whose comparative advantage lay in
manufacturing not agriculture. For political, social and strategic reasons, Imperial
Germany was unwilling to let the agrarian sector decline in the same way that it did in
Britain. While this decision has been criticized, it was not a totally irrational choice,
given the effect that a further flood of rural migrants would have had on German cities in
the 1870’s and 1880’s. It can also be pointed out that if Germany had been even more
dependent on imported food, then this would have made it more vulnerable to the threat
of a British blockade. In any conflict Germany would have had to rely on the largesse of
the Royal Navy in allowing food imports to pass through the North Sea, leaving little
choice but to become the junior partner in an Anglo-German alliance.
Given this decision, what is remarkable about the pre-1914 German agricultural
performance is that the level of protection did not affect the growth of productivity.
German agriculture underwent a process of relative decline, but still contributed to the
overall growth of the German economy through a high rate of internal productivity
growth. However, this rate of progress was not maintained in the interwar period. The
analysis presented in this chapter suggests that there were two main factors at work. The
first was the trend away from an agricultural sector which was integrated with the world
economy and towards one which was largely autarchic and dependent on home-produced
resources. The second was the existence of structural weaknesses which meant that parts
of German agriculture were not well-suited to the use of modern farm machinery. In this
period, agriculture no longer made a significant positive contribution to the overall
growth of the German economy and became instead a drag on Germany’s economic
performance considered as a whole.
Appendix A. Pre 1914 German regions

Name used in Includes the following regional units used in

this study: German statistical publications:
1 East Prussia East Prussia
2 West Prussia West Prussia
3 Pomerania Pomerania
4 Posen Posen
5 Silesia Silesia
6 Mecklenburg Mecklenburg-Schwerin and -Strelitz
7 Berlin/Brandenburg Berlin and Brandenburg
8 Prussian Saxony/Anhalt Provinz Saxony and Anhalt
9 Thuringia Saxony-Weimar, -Altenburg, -Meiningen and
-Coburg-Gotha, both Reuβ and both Schwarzburgs
10 Saxony Saxony (Kingdom of)
11 Schleswig-Holstein Schleswig-Holstein ,Hamburg and Lübeck
12 Hannover/Oldenburg/ Hannover, Oldenburg, Brunswick and Bremen
Brunswick
13 Westphalia Westphalia, Waldeck and both Lippes
14 Hesse-Nassau Hesse-Nassau
15 Rhineland Rhineland
16 Hesse Hesse
17 Bavaria excl. Pfalz Bavaria excl. Pfalz
18 Pfalz Pfalz
19 Baden Baden
20 Württemberg/Höhenzollern Württemberg and Höhenzollern
21 Alsace-Lorraine Alsace-Lorraine
Appendix B. Productivity in German agriculture.
Estimates from regional agricultural accounts in 1913 prices, 95% confidence intervals
in brackets.

Net Value Added per FLU (Full-time Labour Unit)

1880-4 1893-7 1905-9
Marks Marks Marks
East Prussia 480 745 934
West Prussia 648 923 1078
Pomerania 731 1001 1222
Posen 852 1175 1433
Silesia 636 891 1179
Mecklenburg 550 765 960
Berlin/Brandenburg 1089 1356 1388
Prussian Saxony/Anhalt 1145 1323 1709
Thuringia 779 1075 1136
Saxony 579 865 834
Schleswig-Holstein 524 798 769
Hannover/Oldenburg/ 535 761 757
Brunswick
Westphalia 510 691 667
Hesse-Nassau 480 791 699
Rhineland 789 1052 1395
Hesse 594 641 661
Bavaria excl. Pfalz 517 631 635
Pfalz 685 949 1016
Baden 1267 1442 1716
Württemberg/Höhenzollern 750 1029 1088
Alsace-Lorraine 596 609 676
Germany 672 855 982

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