Austria and Prussia where were the two dominant states within the German confederation. The 1848 revolutions had caused an emergence of a middle class who was interested in the political affairs of Germany. It also brought to the forefront Prussia's growing hostility towards Austria. This was heightened even further by Prussia's humiliation at the Erfurt Union. In which the Prussian king had proposed a "Kleindeutschland" approach to uniting Germany, which would be predominantly German and not include Austria, with Prussia as the leading force. But due to Russia's support of Austria this idea was thrown out. The treaty of Olmutz was signed in 1850 in which Germany reverted back to the German confederation of 1815 with Austria as it's most dominant.
In order to consider the "coal and iron" debate among historians and the reasons for Prussia emerging as the leading power in relation to Austria the Prussian economy will be outlined. Prussia had a rich source of coal and iron and other minerals with gain of Westphalia areas at the treaty of Vienna. These areas were extremely beneficial to the development of industry and the military in Prussia. There was also significant government interest in the development of the economy, Von Motz the finance minister(1825-30) reformed taxation laws and put into a programme specifically for the building of roads, the banking system was also reformed by Von Ruther in 1846,hence strengthing Prussia's economic even further. One the most significant economic factors was the zollverein in which Prussia was the dominant force. This was a German customs union which allowed free trade between the member states which in 1836 covered 25 German states and over 26 million people. Through Prussian negotiations it allowed the member states to trade with Piedmont, Holland, Belgium and France. In 1834 the zollverein showed a vast rise in customs revenue from 14.4 million to 27.4 million thalers in 1845.Austria was opposed to free trade and therefore did not take part, it wasn't until the success of the zollverien was evident and realisation of the growing economic and political power of Prussia did Austria try to join. The Austrian minister president Schwarzenburg proposed a zollunion between Austria and the zollverein in which Austria would be the leading force. This was quickly dismissed as the German states believed that Austria was not a dominant economic force within Europe, instead they looked to Prussia for economic and political direction, thus excluding Austria.
Equally important was the Prussian industrial revolution which saw the shift from agricultural work to industrial work such as mining the coal and iron and also the technological innovations." output of iron rose from 0.5 million to 1.29 million tons between 1852 and 1857 due to rapid conversion from charcoal smelting to coke smelting"(Morris,p82). Political reforms also played its part with mining laws of 1851 and 1860 which enabled taxes to be cut on coal output. The steel industries greatest success was the Alfred Krupp foundries in the Ruhr whose technology in artillery developments played a vital part in the strength of the Prussian military. Due to the vast military orders this foundry which employed seven went on to employ nearly 2000 of which it trebled over the next three years.
The development of the railways was also important as it enabled a link to further a field German territories and boosted the Prussian economy, 55% of...