Book: Gold and Iron: Bismark, Bleichroder, & the Building of the German Empire

In 1862, shortly after taking office in the midst of a parliamentary crisis over defense spending, Prussian Minister-President Otto von Bismarck famously argued: “The position of Prussia in Germany will not be determined by its liberalism but by its power. … Prussia must concentrate its strength and hold it for the favorable moment, which has already come and gone several times. Since the treaties of Vienna, our frontiers have been ill-designed for a healthy body politic. Not through speeches and majority decisions will the great questions of the day be decided—that was the great mistake of 1848 and 1849—but by iron and blood.” (This expression was popularly transposed as “blood and iron.”) As Columbia University historian Fritz Stern brilliantly demonstrated in his classic Gold and Iron: Bismarck, Bleichröder, and the Building of the German Empire (Vintage, 1979),other elements were involved in Bismarck’s invocation of Prussian and later German power. War and diplomacy require money. A modern economy as well as a modern armed force depends on iron. Gold and iron, furthermore, are not exclusively national products; at least in part they must be obtained, cultivated, and expended on the international stage.

Gerson von BleichröderThe second but not subsidiary billing in Stern’s drama is given to Gerson von Bleichröder, a German-Jewish banker, the Prussian Rothschild, who served as Bismarck’s personal financial agent as well as an integral tool of Prussian/German statecraft. Bismarck fully understood the importance of economic tools as instruments of policy. He learned this lesson early. When the Prussian lower house refused to provide the funds to wage what became the first two wars of German unification, Bismarck defied that body and turned to Bleichröder to obtain the necessary loans. Their relationship reflected the connectedness between government and capital and diplomacy and finance, as well as public and private interest. Marx had a certain insight into this situation but misunderstood the relationship as it played out in Prussia and Germany. “One is struck by the penetration of economic power, its ubiquitous presence, but also by its limits and indeed by its inferiority to the power of the state,” Stern concludes. The Bismarck-Bleichröder relationship suggests the primacy of politics, not economics.

Stern provides a thoughtful assessment of Bismarck’s political and diplomatic strategy, especially in light of the financial situation (positive and negative) of Prussia/Germany. Funds were a constant worry due to the constitutional conflict between the King/Emperor, his ministers, and parliament. Bismarck knew that material prosperity enhanced the power of the state and dampened the revolutionary pressures from below that threatened the Junkers and the new industrial elite. “He forged the fatal and unprecedented union of constitutional absolutism with democratic trappings, of political nonage and economic growth that characterized the development of a powerful but illiberal Germany. … a mighty, militaristic country that would idolize power even when that power was unrestrained by intellect or moral realism.”

As Prussian Minister-President, Bismarck’s aim was constant: the aggrandizement of Prussia in Germany and the security of Prussia’s social and political system. He had no specific program when he came into office in 1862; he intended to preserve the authority of the Prussian monarchy at home and so increase its power abroad, for he saw its strength as the best protection against recurrent revolution and disorder. Under the shield of diplomacy he led Prussia into three insulated wars. But after 1872, as Chancellor of a united Germany, he realized that he could not expect to fight safely circumscribed wars again. Bismarck’s Germany had been created by diplomacy and war, and his nightmare ever-after was its destruction at the hands of a victorious coalition. “He wanted peace and ever increasing power—because international affairs was not a static system and because he knew that after centuries of defeat and disunity, his own people would forgive internal disappointments for external glory,” Stern writes. “To Bismarck, then, diplomacy was the essence of survival.”

Bismarck’s approach to diplomacy was forever flexible. “His greatness as a statesman depended on his ability to temporize, to seek and sometimes to prepare the right moment, the sudden opportunity, which he then exploited with daring speed and skill,” Stern concludes. “Long-range planning would perforce have narrowed choices. He elevated the perfectly human reluctance to make choices into a supreme political virtue. His genius was at its best in devising a ‘strategy of alternatives.'” Diplomacy was not only the rare moment of decision; it was the routine search for clues in ambiguous statements, in press campaigns and economic dispositions, in an imperial phrase or gesture, in armaments and troop movements. The world of diplomacy was at best one of partial knowledge and continuous search for temporary solutions to conflicting demands. “Diplomacy presupposed a vision of the interconnectedness of things: Europe was cramped and every move of every power had a hundred distant repercussions—and even small counties could create great upheavals. Above all, the scene changed continually, at least on the surface; there were always new issues and crises that threatened the precarious balance of forces. Interests and alliances shifted, and it was Bismarck’s plan to anticipate and guide these changes as much as possible.”

Bleichröder became an integral part of this process (although as a Jew, he would forever be an outsider). Bleichröder too had a stake, actual or potential, in nearly every country in Europe and many beyond. Contrary to common perception of war-mongering bankers, his basic interest was peace. Peace brought prosperity; war spelled uncertainty, which the financial markets abhorred, as nature abhors a vacuum. He negotiated financial deals for himself and for Berlin with foreign governments (including, famously, the French war indemnity). He formed alliances with or against other bankers or syndicates in other countries. He provided information to Bismarck about their doings, and he served as an informal conduit for the famously close-mouthed Bismarck to promote his views. Bismarck’s style of diplomacy relied on deliberate ambiguity—which Bleichröder could help explicate when it was in Bismarck’s interest for him to do so. The Iron Chancellor parceled out partial truths. If his subordinates could not divine his aim or policy, it was often because he himself had not set on a definite course but was pursuing many lines simultaneously. He cultivated an intimidating inscrutability that kept Europe off balance. His favorite tactic was to bully an opponent into friendship.

Bismarck, over time, learned to see the world through the eyes of his banker. Bismarck “had a pragmatic sense of the interconnectedness of high policy and every aspect of domestic policy. Precisely because of his great practicality, perhaps because of his own involvement in the economic life of a nation, he appreciated the perspective on international affairs that his banker had to offer. For Bismarck, economic matters were at once a barometer of a nation’s health and disposition—a barometer over which he sometimes had limited power.” Bismarck was well aware that the world was not simply divided into foreign and domestic policy. “Diplomacy was the art of obtaining the best possible ends abroad within the clear constraints at home. The two were in constant interaction and Bismarck knew that war and revolution were deeply intertwined: the Commune had reminded him of that historical lesson. The two realms most clearly interacted in economic matters. He also assumed that the state should promote business interests at home and abroad, wherever it could do so without injuring competing, higher interests.”

Bismarck was particularly concerned with Bleichröder’s principal business, the placing for foreign loans. The stability of Europe depended in part on a variety of loans that advanced countries made to less developed countries. Even the great powers were dependent on foreign credit. Germany’s limited public and private capital, compared with that available to Paris and London, had to be invested wisely. Bismarck understood that the investment of German capital was a source of power, influence and prestige for Germany, and it enlarged German markets. On the other hand, he was concerned at times that Germany might over-invest abroad or that it might give a foreign power (specifically Russia) a strategic or political advantage. The movement of capital in and out of Germany always had a political dimension, which Bismarck monitored (and manipulated) carefully.

Bismarck became adept at economic warfare. “For Bismarck, war and peace, hostility and alliances, were not clear oppositions, but there was a vast gray area of presumed hostility where Bismarck knew that economic policies were like so many weapons in his hands. The scale of the weapons ranged from the imposition of crushing indemnities on beaten foes to the floating of loans to potential friends.” In between the extremes tariffs or import prohibitions were selectively applied. “He knew them to be the fiscal analogues of war and alliance, and he valued their expert application accordingly.” Money was the sinews of war but empty coffers offered no guarantee of peace. Counties could and did go to war for profits.

Sterns notes that in Bismarck’s final years, “cracks in his system at home began to show, while his often bullying policy of peace abroad became less and less compatible with the political aspirations of the other great powers.” This was a period of constant, almost desperate improvisations, made more difficulty by the gradual deterioration of Bismarck’s domestic situation, especially with the illness and death of his protector, William I. Bismarck’s Germany eventually fell to a lethal combination of instability at home and adventurism abroad. The country’s margins were simply too narrow even for a genius like Bismarck, much less his successors. Bleichröder and his heirs, meanwhile, would become hostages to and later victims of the new anti-Semitism in a Germany that he had helped create.