Industrial Espionage Made in Germany

Table of Contents

1. Introduction

2. The Industrial Revolution
2.1. Causes and Preconditions
2.2. Origin
2.3. The Industrial Revolution in England and Germany
2.4 Rivalry between England and Germany

3. Industrial Espionage
3.1. Definition
3.2. Historical Outline
3.3 Industrial Espionage by Germany in England
3.4. Impact

4. Made in Germany
4.1. Definition
4.2. England‘s Intention
4.3. Merchandise Marks Act of 1887
4.4. Importance for Germany
4.5. The Unexpected Effects

5. Made in Germany – A Successful Story to Date?

6. Industrial Espionage Today

7. Parallels between the Industrial Revolution and Today

8. Summary

9. Bibliography

1. Introduction

“Made in Germany”, the “Industrial Revolution”, and “Industrial Espionage”: what do these terms have in common?

“Industrial Revolution” describes a transition from an agrarian to an industrial society at the end of the 18th century, starting in Great Britain and spreading from there.^[1]) Whether railroad or steam engine, the technical innovations of the 18th century profoundly changed the working style and lifestyle of the people. Technical innovations went hand in hand with organizational innovations, such as the introduction of a factory system which ultimately put in motion a transformation process - now called the Industrial Revolution. The Industrial Revolution is one of the most significant turning points in history. There is no other known event in which, within such a short period, a centuries-old agrarian society was turned upside down and, within a few decades, something new was created.

The starting point is considered to be the development of the spinning machine by Richard Arkwright in the summer of 1769, creating industrial cotton processing in textile centers in England, as well as the invention of the steam engine by James Watt. Within a short time, new inventions hit the market almost continuously -- inventions that changed life significantly. At that time, England was the leading force with the majority of the inventions having their origins there. Across Europe, people admired England with its ideas and inventions.

First inventions were made in Germany as well, where they quickly began to copy, rebuild, and sell English products in England. In a targeted manner, England‘s advanced manufacturing processes were spied on by Germany, copied, and sold on the English market, initially mostly were of poor quality. This significantly impacted the English producers, and soon political and legal measures against the copiers were requested.

This resulted in the adoption of a law in England that required all imported goods to carry a label of origin. That was also the birth of the "Made in Germany" label, which still has its validity and legitimacy.

In this paper, we will firstly address the Industrial Revolution, examine the causes, and why the Industrial Revolution occurred in England, and why Germany initially only had the role of the imitator. We will then investigate and present why and how the label of origin "Made in Germany" came into existence. Then we will describe the ultimate effect of the label of origin in the context of the Industrial Revolution.

In the final part of the paper, we will examine what importance the "Made in Germany" label has now, and whether there are parallels to the Industrial Revolution with respect to current competitors, primarily from Asia. In the resumé, we will summarize the results and provide an outlook toward the future.

2. The Industrial Revolution

2.1. Causes and Preconditions

The causes and preconditions of the Industrial Revolution are a century-long perfecting of agriculture and livestock. Especially in 17th and 18th century England, new cultivation cycles were tested . At the end of the 17th century, crop rotation was introduced to replace the previous use of three fields. As a result, soil productivity considerably increased, and the further introduction of irrigation and drainage systems optimized and increased the efficiency of field management. Fields were planted in a rotation of wheat, grass, and turnips, with the result that it created increased food availability for humans and animals whose survival rate increased significantly.^[2]) Additionally, there were no more tariff barriers in mid-18th century England. There was a paved highway system and a canal system that made ​​it possible to transport goods quickly across the entire country. This allowed the export of surplus production to the continent. Because of the abundance of food in Britain, compared to that on the continent, there was a higher standard of living and a higher life expectancy. Thus, the population grew rapidly and as such, the number of buyers for all consumer goods also increased. In this century, businessmen were allowed to build and run roads, canals, and schools. Through the courts, the police, and the legislature, a more secure environment was created to increase and manage private property and assets. The continent, particularly Germany, with its small and mostly autonomous states, was far from these favorable circumstances.

These positive fundamentals enabled England to develop the principle of supply and demand. For the first time, this provided people with the chance to have ideas to personally attain wealth if their products were in demand on the market. For this, too, the legislature had established a framework under which such “pioneer sentiments” could spread. Since 1624, inventions could be patented. As a result of patents, inventors of economically successful innovations had some protection for their invention in order to benefit from the profits. In such an atmosphere, of course, many innovations flourished.^[3])

2.2. Origin

As already mentioned, the Industrial Revolution had its origin in the 1770s, namely, via the inventions of the steam engine by James Watt and the spinning machine by Richard Arkwright. With these machines, human workforce, for the first time, could be taken over by machines.^[4]) Moreover, the invention of the steam-driven machinery allowed production independent of human, animal, or other natural forces, such as water and wind. Thus, through use of steam engines, production sites could be chosen freely.^[5]) As a result, due to technical progress, less and less manpower was needed. The largest steam engine designed by James Watt had an energy output equal to 1000 workers. A moderately working man has an output of 100 watts, and the coal steam engine around 1800 had an output of approximately 100,000 watts. ^[6]) This raises the question: how could replacing manual labor by machines ultimately lead to such a huge industrial boom? To answer this question, one must first clarify the living conditions at that time. In the 18th century human labor in England was expensive in comparison to energy supply, so that the savings of expensive employees by using mechanical power was profitable for the employer. This fact, and emerging capitalism, which led to mass production following supply and demand, as well as the already existing good infrastructure in England, led to the Industrial Revolution.^[7])

2.3. The Industrial Revolution in England and Germany

The Industrial Revolution in England started in the 18th century due to the positive circumstances, e.g., good infrastructure, no tariff barriers, and the regulatory framework, such as patent protection. Early on, this led to a shift from manual production in workshops or factories to machine production in industrial plants, replacing simple human labor tasks by machines. However, in Germany around 1800, 75% of the people worked in agriculture. In England, the invention of the steam engine by Watt and the spinning machine by Arkwright enabled the industrialization and economic growth already in the mid-18th century. With the mechanization of spinning began the era of mass production in the textile industry in England.

The actual transition from manufacturing to industrial mass production in factories, however, was caused by the combination of spinning machines and the advanced steam engine. The steam engine enabled independent location for production. Factories were located where they were needed, convenient to places or cities where enough people lived, who were available as workers. In comparison to manual production, mechanical production in factories was far cheaper. This fact, combined with the increasing product demand, led to the cotton industry developing into England's greatest single industry in a short time. The textile industry was the pacemaker for the industrialization in England. Not only cotton, but also iron strongly influenced the Industrial Revolution in England.

Through mass production, there was an increased need for machines, which greatly increased the demand for iron. It was only through this demand for iron that new, optimized production processes were developed in order to meet demand. Thus, the melting process was not fueled with charcoal anymore, which gradually became scarce, but with fossil coal, which was plentiful. The location of the iron works was now governed by where coal was mined. Also, by using steam engines, the ventilation processes could be stabilized and optimized, which is necessary for melting iron. Using these technological developments, the mass production of iron began. The modernization and introduction of new iron production methods led to a powerful machine engineering industry, which later advanced the railways in England.

Thus, with the introduction of mechanized production, England soon took global supremacy as the first industrial nation. England in the 18th century was thus the measure of things, and certainly the role model for industrialization and the nucleus of the Industrial Revolution.

Germany, in contrast to England, had no comparable legal framework or infrastructure such as paved roads or free movement of goods. Due to these disadvantages, Germany lagged behind a good 50 years. With England‘s industrialization in full swing, German entrepreneurs initially only looked to England with envy. In 1833, the sovereign German states formed a customs and trade union: the German Customs Union. This union initially included the states of Prussia, Hessia, Bavaria, Württemberg, Saxony and Thuringia and was gradually extended until the founding of the German Empire in 1871. The establishment of the German Customs Union in 1833 created a single market that gradually allowed an industrial revolution as well, along with other positive conditions, such as the construction of a canal and road network. In that time, the industrialization in England had a considerable influence on the early phase of industrialization in Germany. In this first phase, complete British machinery including personnel was imported to Germany. Later, German workers and industrialists traveled to England to study accordingly, but especially to copy techniques and production procedures. This was the only way to quickly promote industrialization in this early phase of the Industrial Revolution in Germany.^[8])

[...]

^[1] Holst/ Fischer; Die Industrielle Revolution Pg.22; 146

^[2] Liedtke; Die Industrielle Revolution; Pg.11- 20;

^[3] Holst/ Fischer; Die Industrielle Revolution; Pg.26

^[4] Holst/ Fischer; Die Industrielle Revolution; Pg.25; 126

^[5] Butschek; Industrialisierung Pg.115 ff.

^[6] Paeger, Ökosystem Erde, Die Industrielle Revolution; Pg. 1,2

^[7] Allen, The British Industrial Revolution in Global Perspective Pg.25 ff.

^[8] Liedtke; Die Industrielle Revolution, Pg.21- 27; 41- 48
Allen; The British Industrial Revolution In Global Perspective; Pg.135
Hahn; Die Industrielle Revolution in Deutschland; Pg.1-6; 17; 18; 22-24