1800, Germany’s social structure was poorly suited to entrepreneurship or economic development. Domination by France during the French Revolution (1790s to 1815), however, produced important institutional reforms, that included the abolition of feudal restrictions on the sale of large landed estates, the reduction of the power of the guilds in the cities, and the introduction of a new, more efficient commercial law. The idea, that these reforms were beneficial for Industrialization has been contested. Nevertheless, traditionalism remained strong in the many small principalities. Until 1850, the guilds, the landed aristocracy, the churches and the government bureaucracies maintained many rules and restrictions that held entrepreneurship in low esteem and given little opportunity to develop. From the 1830s and 1840s, Prussia, Saxony and other states introduced agriculture based on sugar beets, turnips and potatoes, that yielded higher crops, which enabled a surplus rural population to move to industrial areas.
In the early 19th century the Industrial Revolution was in full swing in Britain, France, and Belgium. The various small federal states in Germany developed only slowly and independently as competition was strong. Early investments for the railway network during the 1830s came almost exclusively from private hands. Without a central regulatory agency the construction projects were quickly realized. Actual industrialization only took off after 1850 in the wake of the railroad construction. The textile industry grew rapidly, profiting from the elimination of tariff barriers by the Zollverein. During the second half of the 19th century the German industry grew exponentially and by 1900, Germany was an industrial world leader along with Britain and the United States.
Historian Thomas Nipperdey remarks:
On the whole, industrialisation in Germany must be considered to have been positive in its effects. Not only did it change society and the countryside, and finally the world…it created the modern world we live in. It solved the problems of population growth, under-employment and pauperism in a stagnating economy, and abolished dependency on the natural conditions of agriculture, and finally hunger. It created huge improvements in production and both short- and long-term improvements in living standards. However, in terms of social inequality, it can be assumed that it did not change the relative levels of income. Between 1815 and 1873 the statistical distribution of wealth was on the order of 77% to 23% for entrepreneurs and workers respectively. On the other hand, new problems arose, in the form of interrupted growth and new crises, such as urbanisation, ‘alienation’, new underclasses, proletariat and proletarian misery, new injustices and new masters and, eventually, class warfare.