In 17th century, the Hohenzollern state did not have the fertile lands that its neighbors, such as Austria, Saxony or Bohemia, had. The eastern parts of the state were geographically not fit for efficient agriculture and the western parts had suffered disastrous effects from the Thirty Years War (1618 – 1648). In the second half of the century, with the Great Elector Frederick William’s efforts, many reconstruction and infrastructure missions were carried out. Most prominent of these missions were mostly about roads and canals. Towards the end of the century, all these construction works started paying off as the lands of Brandenburg were more developed than they had ever been. Another thing Frederick William did to develop his country’s economic situation was to encourage immigration to his country from all over Europe. He issued a declaration called the Edict of Potsdam, which called all oppressed Protestants to move to his country. Thousands of Protestants from France, Netherlands and Bohemia moved to Brandenburg’s capital city, Potsdam. He also invited the Jews who were expelled from Vienna to his lands. All these new immigrants brought fresh labor, economic production and new agricultural methods and skills with them which significantly contributed to the country’s rapid economic growth.
At that time, the essence of Prussian economy was based upon incentives and investments made by state. Other European states like England, France and the Netherlands were developing their own bourgeoisie class that would help that would carry the economic burden instead of the state itself. Prussia had not developed any sort of modern merchant class yet, but the nobility and common people were unusually hard working with disciplined work ethics. The efficiency of farmers and artisans provided Prussia with enough economic resources to become one of the great powers of Europe. In 19th century, under Frederick the Great, the economy of Prussia was going through a contradictory period. Conquest of Silesia brought new and much needed mining areas under Prussia’s rule but the almost incessant war period between 1740-1763 negatively impacted the land’s development. In order to compensate for the lack of the bourgeoisie, Frederick encouraged the growth of local industries that were loyal to his authority. His main objective was to reduce the country’s need for import goods and prevent the Prussian gold and silver from going outside of the borders. Frederick managed to double the size of the treasury of his state during his reign.
After Frederick’s death, his initial successors did not make almost any changes to the economic system he had established. Prussia’s growth slowly degraded and came to the brink of collapse with the Napoleon’s occupation in 1806. After that, the well-known sets of reforms came to place in Prussia’s internal policies. Main focus of these reforms were to grant complete rights for freedom of trade, thus paving the way for the needs for the age of industrialization and urbanization. A turning point in Prussia’s industrialization came into place in 1815 as Prussia gained the Ruhr region in the Congress of Vienna as a result of its participation in the Napoleonic Wars (1803 – 1815). Ruhr region was one of the most industrialized areas in early 19th century Europe. The acquisition of the region brought an unprecedented flow of money to Prussian treasury in such a short time. Another upside was the transfer of industrial technology from Ruhr to core Prussian lands which later sparked a rapid industrialization in all Prussian lands. To add on all these, Tariff Law of 1818 removed all internal tariffs between states of Prussia. The enactment of this law is seen as one of the key events in paving the way to Germany’s drastic economic growth in 19th century. It provided a free trade environment that led the way to the foundation of a new bourgeoisie class and it also allowed richer regions’ resources to be transferred and distributed to poorer regions and help their growth.
In 1834, Prussia took the first steps to expand its new tariff system to its neighbors and formed the customs union Zollverein to develop trade and commerce with other German states. These decisive steps taken by Prussia eventually changed the course of history and helped Prussia assert its dominance over Austria financially, for the first time. Coming into the middle of the 19th century, although Austria had more population and more territories, Prussia’s economy was way ahead of Austria’s by all means. Starting in early 19th century, Prussia had built numerous kilometers long railroads in its lands in just 30 years. Prussia won the economic race against Austria yet now it was competing against stronger rivals such as industry giants France and Great Britain. Later on, after the unification of Germany, Prussia left France way behind and rivaled Great Britain until the end of the Hohenzollern monarchy.
To sum up, especially in early 19th century with the acquisition of Ruhr region and various economic reforms and law enactments, Prussia transformed from an agricultural state planned economy to an industrial free trade center. This transformation brought its own problems, of course, as the aristocratic nobility of Prussia that resided to the east of Elbe river, the Junkers constantly clashed with the bourgeoisie of the western Germany in political and financial ways. But again, with all its positive and negative impacts, the economy and financial history of Prussia influenced Germany so much, that even today one can see its effects.