Iron Kingdom : The Rise and Downfall of Prussia, 1600-1947 (18 page)

The disaster in East Prussia highlighted the inefficiency and corruption of the ministers and senior officials, many of whom were personal favourites of the king. A party – including crown prince Frederick William – formed at court to bring down the leading minister, Kolbe von Wartenberg, and his cronies. After an official enquiry revealed misappropriations and embezzlement on an epic scale, Wartenberg was forced into retirement; his close associate Wittgenstein was incarcerated in Spandau fortress, fined 70,000 thalers and subsequently banished. The episode was a formative one for Frederick William. This was the first time he had become actively involved in politics. It was also a turning point in the reign of his father, who now began to let power pass gradually into the hands of his son. Most importantly, the East Prussian débâcle left the crown prince with a burning zeal for institutional reform and a visceral hatred of corruption, wastage and inefficiency.
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Within a few years of his accession to the throne, Frederick William had transformed the administrative landscape of Brandenburg-Prussia. The organizational concentration that had begun under the Great Elector was now resumed and intensified. The management of all non-tax revenues across the territories of Brandenburg-Prussia was centralized; on 27 March 1713 the Chief Domains Directory (
Ober-Domaänen-Direktorium
), which managed the crown lands, and the Central Revenues Office (
Hofkammer
) were merged to form a new General Finance Directory (
Generalfinanzdirektorium
). Control over the finances of the territory now rested in the hands of only two institutions, the General Finance Directory, which dealt above all with lease income from the royal domains, and the General Commissariat (
Generalkommissariat
), whose task was to collect the excise tax levied in the towns and the contribution tax paid by people in the countryside. But this state of
affairs in turn generated new tensions, for the two authorities, whose responsibilities overlapped at various points, soon became bitter rivals. The General Finance Directory and its subordinate provincial offices regularly complained that the exactions of the Commissariat were preventing their leaseholders from keeping up with their rents. When the General Finance Directory, for its part, tried to raise its rental income by encouraging its leaseholders to establish small rural businesses such as breweries and manufacturies, the Commissariat protested that these enterprises placed urban taxpayers at a competitive disadvantage, since they were outside the towns and therefore not liable to excise. In 1723, after much deliberation, Frederick William decided that the solution was to merge the two rivals into an omnicompetent super-ministry that bore the unwieldy title ‘General Chief Directory for Finance, War and Domains’, but was known simply as the General Directory (
Generaldirektorium
). Within two weeks, the merger had been extended to cover all the subordinate provincial and local offices of both bodies.
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At the apex of the General Directory, Frederick William installed what was known as a ‘collegial’ decision-making structure. Whenever an issue had to be resolved, all the ministers were required to come together at the main table in the relevant department. Along one side sat the ministers, facing them on the other were the privy councillors of the relevant department. At one end of the table there was a chair left empty for the king – a pro forma observance, since the king scarcely ever attended meetings. The collegial system delivered several advantages: it brought the decision-making process out into the open and thereby prevented (in theory) the empire-building by individual ministers that had been such a prominent feature of the previous reign; it ensured that provincial and personal interests and prejudices were balanced out against each other; it maximized the relevant information available to the decision-makers; most importantly, it encouraged officials to take a holistic view. Frederick William sought to reinforce this tendency by urging the former employees of the General Finance Directory not to be shy in learning from their colleagues of the General Commissariat, and vice versa. He even threatened to use internal examinations in order to test whether knowledge was being transferred efficiently between the officials of what had previously been rival administrations. The ultimate objective was to forge an organic, pan-territorial body of expertise out of a plurality of separate specialist knowledges.
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The General Directory was still in many respects quite different from a modern ministerial bureaucracy: business was not primarily organized according to spheres of activity, but, as in most executive governmental organs in Europe at this time, by a mixed system in which provincial portfolios were supplemented with responsibility for specific policy areas. Department II of the General Directory, for example, dealt with the Kurmark, Magdeburg and the provisioning and quartering of troops; Department III combined responsibility for Kleve, Mark and various other exclaves with management of the salt monopoly and the postal services. Moreover, the lines of demarcation separating distinct spheres of competence within the new organization remained unclear, so that serious internal conflicts over jurisdiction continued well into the 1730s – the institutional rivalries that had given rise to the General Directory in the first place were thus internalized rather than resolved, and they were cross-cut with new structural tensions between locality, province and central government.
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On the other hand, the conditions of employment and the general ethos of the General Directory do sound a familiar note from a present-day perspective. The ministers were expected to convene at seven in the morning in summer and eight in winter. They were expected to remain at their desks until the day’s work was accounted for. They were required to come into the office on Saturdays in order to check the week’s accounts. If they spent more than a certain number of hours at work on any particular day, a warm meal was to be provided at the expense of the administration, but served in two sittings, so that half the ministers could keep working while their colleagues ate. These were the beginnings of that world of supervision, regulation and routine that is common to all modern bureaucracies. By comparison with ministerial posts in the era of the Great Elector and Frederick I, service in the General Directory offered fewer opportunities for illicit self-enrichment: a system of concealed supervision and reporting that ran through every tier of the organization ensured – in theory at least – that irregularities were immediately notified to the king. Serious offences met with punishments ranging from dismissal to fines and restitutions, to exemplary execution at the place of work. A notorious case was that of the East Prussian War and Domains Councillor von Schlubhut, who was hanged for embezzlement before the main meeting room of the Königsberg Chamber.

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After the disaster of 1709–10, Frederick William was especially concerned for the condition of East Prussia. His father’s administration had already succeeded in occupying some of the vacated farms with foreign settlers and migrants from the other Hohenzollern provinces. In 1715, Frederick William appointed a nobleman from one of the leading families of the province, Karl Heinrich Truchsess von Waldburg, to oversee reforms to the provincial administration. Waldburg focused above all on the iniquities of the existing tax system, which tended to operate to the disadvantage of the smallholding peasants. Under the traditional arrangements in the province, every landowner paid a flat rate of tax for every
Hufe
of land in his possession (the
Hufe
was one of the basic contemporary units of land; the English equivalent was ‘hide’). But since the tax-collecting agencies of the administration were still largely in the hands of the corporate nobility, the authorities tended to turn a blind eye when noble landowners understated their taxable landholdings. The returns of peasant households, by contrast, were subjected to the most pedantic scrutiny, so that not a single hide was missed. Further iniquities arose from the fact that no account was taken of the quality and yield of the land in question, so that smallholders, who tended in general to occupy the less fertile land, were subject to proportionally greater burdens than the major landowners. The problem, in Frederick William’s eyes, was not the fact of inequality as such, which was accepted as inherent in all social order, but the depression of revenues that resulted from the operation of this particular system. Underlying his concern was the presumption, which the king shared with some of the best-known German and Austrian economic theorists of the era, that excessive taxation reduced productivity and that the ‘conservation’ of his subjects was one of the foremost tasks of the sovereign.
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The king’s concern for peasant households in particular represented a shift from the previous generation of mercantilist theory and practice (embodied in the career of Louis XIV’s minister of finance Jean-Baptiste Colbert), which had tended to focus on the stimulation of commerce and manufacturing at the expense of agrarian producers.

The East Prussian reform programme began with the compilation of a survey of landholdings. The process revealed some 35,000 hides of previously undeclared taxable land, amounting to an area of nearly 6,000 square kilometres. In order to correct for variations in yield, the provincial domains administration then drew up a comprehensive
classification of all holdings according to soil quality. Once these measures were in place, a new General Hide Tax, calibrated for soil quality, was imposed on the entire province. In conjunction with new, more transparent and standardized leasing arrangements for farms on crown land, Waldburg’s East Prussian reforms produced a dramatic rise in agrarian productivity and crown revenues.
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While arrangements for the General Hide Tax were still being put in place, Frederick William launched the long and difficult process known as the ‘allodification of the fiefs’ (
Allodifikation der Lehen
). The term referred to removing various bits of legal red tape left over from the feudal era, when noblemen had ‘held’ their lands as ‘vassals’ of the monarch and the sale and transfer of property were encumbered by the need to acknowledge residual claims vested in the heirs and descendants of previous owners. The sale of a noble estate was henceforth final, a state of affairs that provided new incentives for investment and agricultural improvement. In return for the reclassification of their land as ‘allodial’ (i.e. independently owned and unbound by any feudal obligations), the nobilities were to accept a permanent tax. The measure was legally complex, because the legacy of feudal law and custom was different in every province. It was also very unpopular, because the attachment of the nobilities to their traditional tax-exempt status was far greater than their resentment of their now largely obsolete and theoretical feudal obligations. They saw ‘allodification’ – not without justification – as a cunning pretext for undermining their ancient fiscal privileges. In many provinces, years of negotiation were required before the new tax could be introduced; in Kleve and Mark no agreement was reached and the tax had to be extracted through ‘forced execution’. Opposition was also strong in the recently acquired and still independently minded Duchy of Magdeburg; in 1718 and 1725, delegations of noblemen from this province were successful in securing judgements supporting their case from the imperial court in Vienna.
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These fiscal initiatives were flanked by numerous other revenue-raising measures. The marshes of the Havelland, where the Swedish army had floundered in 1675, were drained so energetically that 15,000 hectares of excellent arable and pasture were won back within ten years. Work began on the draining of the delta region around the rivers Oder, Warthe and Netze, an epic project that would be completed only during the next reign, when the Oder River Commission established by Frederick
William’s successor oversaw the reclamation of some 500 square kilometres of marshland from the Oder floodplains. Reflecting the fashionable contemporary concern with population size as the chief index of prosperity, Frederick William launched settlement programmes to raise productivity and stimulate manufacturing in particular regions. Protestant immigrants from Salzburg, for example, were settled on farms in the far east of East Prussia, and Huguenot textile manufacturers were installed in the city of Halle in the hope of mounting a challenge to the dominance of Saxon imports in the Hohenzollern Duchy of Magdeburg.
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A series of regulations issued in the 1720s and 1730s dismantled many of the localized guild powers and privileges to create a more unified labour market in the manufacturing sector.
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One area of particularly sustained government activity was the grain economy. Grain was the most fundamental of all products – it accounted for the lion’s share of economic transactions and for the greater part of what most people bought and consumed in their daily lives. The king’s policy on grain was based on two objectives. The first was to protect Brandenburg-Prussia’s grain growers and traders from foreign imports – the main concern here was the grain produced on Polish estates, which was of excellent quality and less expensive.
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The means adopted to achieve this were high tariffs and the prevention of smuggling. How successful the authorities were in stemming the flow of illegal grain is difficult to say. The records indicate numerous prosecutions, some of small dealers, such as groups of Polish peasants attempting to pass as subjects of the Mark and carrying a few bushels of contraband grain, as well as of more sophisticated operators, like the team of Mecklenburg smugglers who tried to sneak thirteen wagonloads of grain into the Uckermark in 1740.
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In order to prevent poor harvests from driving grain prices up to the point where they undermined the viability of the urban manufacturing and commercial economies, Frederick William also expanded the network of grain magazines that the Great Elector had used to provision his standing army. These magazines had been retained during the reign of Frederick I, but they were poorly managed and far too small to cope with the needs of the civilian economy, as the disaster of 1709–10 revealed. Starting in the early 1720s, Frederick William set about establishing a system of large dual-purpose magazines (twenty-one in all) that would serve the needs of his army but also perform an important role
in stabilizing the domestic grain market. The provincial commissariats and chambers were instructed to hold the price of grain as steady as possible, by purchasing stocks when prices were low and selling them off in times of dearth. The new system was to prove its worth in 1734–7 and again in 1739, when the social and economic impact of a succession of poor harvests was buffered by the sale of low-priced government grain. One of the last orders issued by the king was an instruction to the General Directory dated 31 May 1740, the day of his death, stipulating that the grain magazines of Berlin, Wesel, Stettin and Minden were to be filled again before the onset of the coming winter.
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