# The economy around 1914 : overview

"Bankers' crisis" of 1907, on Wall Street  - Author's private collection ©

"Bankers' crisis" of 1907, on Wall Street - Author's private collection ©

The British economic historian John Clapham once said that "economic history was the most fundamental of all varieties of history, not the most important". This phrase speaks volumes. This so-called "fundamental" variety must nevertheless recognise that economics, a very young science in 1914, is still to a very large extent influenced and conditioned by some of the great dogma such as the theory known as the "Kondratieff cycle". According to this theory, the economy has "high and low" periods – vague notions, at best – with cycles of 40 to 60 years. Of course, there were crisis periods during the 19th century. Today's public, still reeling from the subprime crisis of 2008-2009, seldom recalls that a major crisis burst upon the international stage in 1907 (though it was neither an overproduction crisis as in 1929, nor the result of a speculative bubble as in 2008). This crisis originates in the United States, which economic philosophers describe, even still quite recently, as a new virgin land ready to open its doors to money (personified) in the 19th century. At the time, the USA are at the summit of their posterity. However, declining orders from General Electrics cause the price of copper to plummet. The stock markets collapse. Only the full participation and skills of industrialist Pierpont Morgan managed to avoid a catastrophe. Let us recall, on the other hand, that Belgium experiences years of noteworthy prosperity in 1910-1912.

Competition, already…

In Belgium, one of the main economic problems of the 19th century was the need to "hold your ground" when faced with competition from the United States and Russia, massive exporters of cereals, and from Argentina, known for its beef that quickly floods the European market. But the Low Countries are having trouble going the distance, while still living according to proverbs that seem ever more artificial: Gods water over Gods akker laten lopen (in other words: everything in its time; nature will follow its course). Farming techniques are not evolving. Country people, confronted with what some will call a "challenge", are living in a condition close to misery (3 francs/day, while a qualified labourer can earn four times as much). However, the political class seems to take stock of the situation and, in 1884, the Ministry of Agriculture, Industry and Public Works is created.

A major crisis bursts on the international stage in 1907

"Back in the day"

Belgium also takes part in what some people refer to as the "Second Industrial Revolution" of the 1880s (Chemistry / electricity / rapid expansion of railways), and was home to many big names, such as Adolphe Eymael, in the region of Liège, whose chemical product plants were internationally renowned. Starting from nothing, a true self-made man, his success even enabled him to convince the Russian Imperial family to support the signing of contracts between Belgium and Russia. Other names will also contribute to increasing Belgium's renown abroad. After the economic crisis of the 1880s, a marked era of prosperity begins in Belgium, in several domains. Several major industrialists do very well for themselves. This is the case of Ernest Solvay (manufacturing of soda), whose La Floridienne rapidly transforms the company into a multinational, while the Ateliers de Constructions électriques de Charleroi (ACEC) experience remarkable rapid expansion. In addition, Belgium begins to expand abroad, with investments in Italy, Russia and Egypt ; the jewel of the Kingdom is the country's exports of tramways, that will be a huge success in the streets of Cairo, Tokyo or Naples. But this expansion is not entirely without a hint of scandal, however. Around 1910, a major diplomatic crisis arises between Belgium and Italy, around the so-called question of the "Naples Tramways". Indeed, the Chairman of the company in charge of these tramways, Eugène Vilers, also the Consul of Belgium in this Italian city, had somewhat murky relations with the local mafia, the Camorra

Eugène Vilers had somewhat murky relations with the Camorra

Grinding to a halt in 1914 : a Customs union?

But what about after 1914, after the conflict breaks out? The territory of Belgium is neatly divided up by the German occupier, that splits the country into three zones : the Operationgebiet, the Etappengebiet and the General Government. Quite quickly, the occupier does away with three Ministries (Foreign affairs, Colonies and War), while maintaining the Finance, Sciences and Arts as well as the Interior Ministries. Starting in February 1915, Governor General von Bissing creates a Political department, which soon carves off a branch devoted to the economy. In the mind of the occupier, and continuing with the grand designs of the Zollverein (German Customs Union, set up in 1833), it would not be out of the question to include Belgium within a Customs union, that would cover France, the Grand Duchy of Luxembourg (Mitteleuropa) etc. While never more than a grand plan on paper, this great project also calls for the pure and simple annexation of Liège and Antwerp into the German Empire. It should be noted that the management of Germany's affairs, then in the hands of Chancellor Bethmann-Hollweg, was very often tinged with ambitious economic considerations, which is no surprise considering that the said Chancellor was himself from a banking family, close to the circles of the chemical industry. However, the Chancellor wants nothing to do with these annexations. As to Belgian industry, it will to large degree be dismantled. Sometime later, this very question will be raised with intensity during the Versailles Peace Conferences in 1919, when dealing with the reparations that Germany owes to Belgium.

In the mind of the occupier, it would not be out of the question to include Belgium within a Customs union