After the 1815 “Congress of Vienna”, Prussia was officially one of the great powers in Europe. However in the German confederation Prussia had to compete with Austria for dominance, which finally resulted in a war in 1866. Building up to this Prussia became increasingly strong compared to Austria, the reasons for which have to be explored.
In 1815 Prussia's population consisted of 73.5% rural people, while Austria had 80% rural people. However, after 1815 Prussia experienced a fast population growth, which meant that many people decided to move to the cities for work and so for example Berlin grew from 172,000 in 1800 to 419,00 in 1850. This enabled a big potential for industry in the cities because workforces were now available. One of the reasons why Prussias's industry was dominant over that of Austria was that it, after the 1815 “Vienna conference”, annexed the Rhineland and therefore gained access to one of the greatest reserves of natural resources in central Europe with not only the Rhineland but also Silesia and the Saarland. Prussia could expand their industry without having to be concerned about resource scarceness, which lead to industry expansion. This is a major factor of the dominance over Austria, as Austria couldn't rely on such great resources and therefore their economy wasn't boosted.
Another reason as to why Prussia became dominant is that Prussian economic policies strongly supported economic development, such as the tax reforms and the road building programme by Friedrich von Motz, who was Minister of Finance between 1825 and 1830. This and the abolishment of Surfdom in 1821 enhanced Prussias industry and economy because new jobs were created and government funds lead to more market orders.
Austria on the other hand maintained strict control over all trade prohibited greater expansion of the economy. The development of the economy in Austria was only seen in Bohemia, and a railway construction in 1828 as well as a port in Triste, which lead to Austria lagging in comparison to Prussia, economically.
The biggest factor however, which significantly influenced Prussia emerging as the dominant power in 1866 was the establishment of the “Zollverein” on the 1st January 1834. The Zollverein covered 18 states in 1834 which increased to 25 by 1836. It united most of the German states under itself and showed great economic success. However many historians such as Helmut Böhme argue that Prussia not only wanted economic advance but also wanted to extract Austrias influence from Germany. Prussia enjoyed the leadership of the “Zollverein” and by 1844, excluding only Hannover, Bremen and Hamburg, all German states were members. This enabled Prussia to lead an economically virtually unified Germany. Putting Prussia in a strong position, a position which Austria failed to occupy by not joining the “Zollverein”. Austria, due to national markets, which she didn't want to disturb didn't join the Zollverein and this not only led to a weaker position but also to economic stagnation, while Prussias economy was flourishing.
This is shown through the output in Prussia during the industrial revolution which reaches Prussia 1850. Prussias economy experiences a great advance, the railway network increases from 3869 km to 7169 km between 1850 and 1860, not only does Prussia's transport system improve but also the industrial output such as coal, which increases from 700,000 tons in 1850 to 2.2 million in 1860 in the Ruhr area. Austria on the other hand, couldn't keep up with Prussia, their export even decreased between 1853 and 1856 from 184.3 million thaler to 150.3 million.
In 1866 Austria was economically inferior to Prussia, as they didn't join the Zollverein, they didn't have the resources Prussia did and their policies were too strict and didn't allow room for industrial expansion. Furthermore Austria didn't industrialise the way Prussia did and had a greater portion of the population still living in...
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