Bismarck's domestic policies played a great role in forging the authoritarian political culture of the Kaiserreich. Less preoccupied by continental power politics following unification in 1871, Germany's semi-parliamentary government carried out a relatively smooth economic and political revolution from above that pushed them along the way towards becoming the world's leading industrial power of the time.

Not only did German manufacturers capture German markets from British imports, by the 1870s, British manufacturers in the staple industries of the Industrial Revolution were beginning to experience real competition abroad. Industrialization progressed dynamically in Germany and the United States, allowing them to clearly prevail over the old French and British capitalisms. The German textiles and metal industries, for example, had by the beginning of the Franco-Prussian War surpassed those of Britain in organization and technical efficiency and usurped British manufacturers in the domestic market. By the turn of the century, the German metals and engineering industries would be producing heavily for the free trade market of Britain.

After achieving formal unification in 1871, Bismarck devoted much of his attention to the cause of national unity and achieving this under the ideology of Prussianism. Catholic conservatism, conceptualized by the reactionary turn of the Vatican under Pope Pius IX and its dogma of Papal Infallibility, and working class radicalism, represented by the emerging Social Democratic Party, in many ways both reacted to concerns of dislocation by very different segments of German society, brought by a rapid shift from an agrarian-based economy to modern industrial capitalism under reactionary tutelage. While out-and-out suppression failed to contain either socialists or Catholics, Bismarck's "carrot and stick" approach significantly mollified opposition from both groups.

One can summarize Bismarck's objectives under three keywords: Kulturkampf, Social reform and national unification.

    * Kulturkampf. Following the incorporation of the Catholic states in the south and the former Polish lands in the east, Catholicism, represented by the Catholic Centre Party, was seemingly the principal threat to Bismarck's military-aristocratic Prussian nationalism, because Catholics were perceived as having loyalty to Pope over the state. Southern Catholics, hailing from a much more agrarian base and falling under the ranks of the peasantry, artisans, guildsmen, clergy, and princely aristocracies of the small states more often than their Protestant counterparts in the North, initially had trouble competing with industrial efficiency and the opening of outside trade by the Zollverein.
      After 1878, the struggle against socialism would unite Bismarck with the Catholic Centre Party, bringing an end to the Kulturkampf, which had led to far greater Catholic unrest than existed beforehand and had strengthened rather than weakened Catholicism in Germany.

    * Social reform. To contain the working class and to weaken the influence socialist groups, Bismarck's reluctant creation of a remarkably advanced welfare state would give the working class a stake in German nationalism as well. The social security systems installed by Bismarck (health care in 1883, accidents insurance in 1884, invalidity and old-age insurance in 1889) at the time were the most advanced in the world and, to a degree, still exist in Germany today.

    * National unification. Bismarck's efforts also initiated the levelling of the enormous differences between the German states, which had been independent in their evolution for centuries, especially with legislation.

The completely different legal histories and judicial systems posed enormous complications, especially for national trade. While a common trade code had already been introduced by the Confederation in 1861 (which was adapted for the Empire and, with great modifications, is still in effect today), there was little similarity in laws otherwise.

In 1871, a common Criminal Code (Reichsstrafgesetzbuch) was introduced; in 1877, common court procedures were established through the Gerichtsverfassungsgesetz, the Zivilprozessordnung and the Strafprozessordnung (court system, civil procedures, and criminal procedures, respectively). In 1873 the constitution was amended to allow the Empire to replace the various and greatly differing Civil Codes of the states (if they existed at all; for example, parts of Germany formerly occupied by Napoleon's France had adopted the French Civil Code, while in Prussia the Allgemeines Preu?isches Landrecht of 1794 was still in effect). In 1881, a first commission was established to produce a common Civil Code for all of the Empire, an enormous effort that would produce the Burgerliches Gesetzbuch (BGB), possibly one of the most impressive legal works of the world; it was eventually put into effect on 1 January 1900. It speaks volumes for the conceptual quality of these codifications that they all, albeit with many amendments, have been in effect until today.

Carrying out many of the same tasks that would have been brought to fruition with the help of a revolution from below, the ultimate effects of conservative modernization are distinct. With real political power still in the hands of the aristocracy, the government sought to preserve as much of the original social framework as they could, even as the economic base of the landowners rapidly diminished in comparison to industry. Unification was followed by a prolonged period of conservative and even authoritarian government. The leadership had to have at hand or be able to construct a sufficiently powerful bureaucratic apparatus, including the agencies of repression, the military and the police. But in place a strong central government would have to establish strong authority and uniform administrative system, and a more or less uniform law code managed to create a sufficiently powerful military machine to be able to make the wishes of its rulers felt in the arena of international politics.

Militarism

One of the by-products of conservative modernization was militarism. To unite the upper classes—both the military-aristocracy and industrialists—militarism proved necessary to continue modernization without changing socio-political structures. Each of the elites in the ruling coalition of the Empire found some advantages in formal, overseas expansion: mammoth monopolies wanted imperial support to secure overseas investments against competition and domestic political tensions abroad; bureaucrats wanted more occupations; military officers desired promotion; and the traditional but waning landed gentry wanted formal titles. Observing the rise of trade unionism, socialism, and other protest movements during an era of mass society in both Europe and later North America, the elite in particular was able to utilize nationalistic imperialism to co-opt the support of the industrial working class. Riding the sentiments of the late nineteenth century Romantic Age, imperialism inculcated the masses with neo-aristocratic virtues and helped instill broad, nationalist sentiments. Thus, Prussia—heir to the garrison state built up by figures such as Friedrich Wilhelm I and Frederick the Great in the 18th century—managed to create a sufficiently powerful military machine not only capable of challenging rivals on the continent such as Austria and France, but able to make its presence known in the arena of international politics.

German imperialists (of the Alldeutsche Verband), for instance, argued that Britain's world power position gave the British unfair advantages on international markets, thus limiting Germany's economic growth and threatening its security. Many European statesmen and industrialists wanted to accelerate the Scramble for Africa, securing colonies before they strictly needed them. Their reasoning was that markets might soon become glutted, and a nation's economic survival depend on its being able to offload its surplus products elsewhere. In response, British imperialists such as Joseph Chamberlain thus concluded that formal imperialism was necessary for Britain because of the relative decline of its share of the world's export trade and the rise of German, American, and French economic competition.

Economic trends certainly played a major role, explaining why statesmen from Jules Ferry to Francesco Crispi sought new roles for the emerging powers that they led, especially during the Great Depression of 1873, but shifts in the European balance of power are what ultimately facilitated formal overseas expansionism. With the reactionary continental order established by the Congress of Vienna shattered, the allure of imperialism was an option beyond the traditional great powers of France and Britain. The new nation states of Germany and Italy were no longer embroiled in continental concerns and domestic disputes as they were before the Franco-Prussian War.

Thus, Bismarck, once openly uninterested in overseas adventurism, was eventually brought to realize the political value of colonies. The absolutist Central Powers, led by a newly unified, dynamically industrializing Germany, with its expanding navy, doubling in size between the Franco-Prussian War and the Great War, were strategic threats to the markets and security of the more established Allied powers and Russia. German colonial efforts from 1884 brought only a small overseas empire compared to those of Britain and France, although in the Herero Wars it shared with those empires the phenomenon of armed conflict between natives and colonials.

Subsequent German foreign policy initiatives (notably the initiation of a large battle fleet under the naval laws of 1898 and 1900) drove Britain into diplomatic alignment (the Entente) with a Franco-Russian alliance already in the offing at the time of Bismarck's fall.

After Bismarck

The Empire flourished under Bismarck's guidance until the Kaiser's death (March 1888). In this so-called Dreikaiserjahr (Year of Three Emperors), Friedrich III, his son and successor, only lived 99 days, leaving the crown to a young and impetuous Wilhelm II, who forced Bismarck out of office in March 1890.

Within Germany, the opposition Social Democratic Party (SPD) rose to become for a time the strongest socialist party in the world, winning a third of the votes in the January 1912 elections to the Reichstag (imperial parliament). Government nevertheless remained in the hands of a succession of conservative coalitions supported by right-wing liberals or Catholic clericals and heavily dependent on the Kaiser's favour.

The shaky European balance of power broke down when Austria-Hungary, Germany's ally since 1879, declared war on Serbia (July 1914) after the assassination in Sarajevo of the heir to the Austrian throne. Germany supported their one loyal ally's objectives in Serbia and gave them a "blank cheque" to pursue whatever means they found necessary there. Serbia was supported by Russia, which in turn was allied with France. Following Russia's decision for general mobilisation (i.e. against both Austria-Hungary and Germany) Germany declared war on both Russia and France in what it called a preventive strike.

This was the beginning of World War I. Despite early successes, Germany and its allies suffered military defeat in the face of an enemy strengthened after 1917 by the intervention of the United States. The Kaiser Wilhelm II was driven into exile (November 1918) by a revolution led by elements of the opposition SPD and communist groups, who later organised their own abortive bid for power (January 1919).

In June 1919, the Treaty of Versailles formally ended the war. It was signed in the Hall of Mirrors at Versailles, the same place where the Second Reich had been proclaimed nearly half a century before. Germany lost territories to France, Belgium, and the reinstated nation of Poland, and elsewhere, and was required to pay reparations for its alleged sole responsibility for the war.

Legacy

Bismarck's rule of reactionary co-optation and coercion and his perpetuation of Junker virtues of militarism, hierarchy, and autocracy can be understood best when one considers that the nation was only recently and in some ways tenuously united; that the large and powerful neighbor, France, had for centuries pursued an active policy of keeping "the Germanies" weak and divided; and that Germany had again and again been the field where the power struggles of other European states and kingdoms were played out, with devastating consequences in most German regions. The earliest memories of Bismarck's generation of leaders encompassed the Napoleonic Wars and Prussia's attendant national humiliations. A perceived need not to manifest outward weakness made the adoption of more liberal means of government by these men unlikely, at best.

Intensified by the reign of the far more militaristic Kaiser Wilhelm II, Bismarck's legacy would contribute to the political culture in which Nazism found significant support-bases. This should raise questions over their true roles in history, despite the era of progress and prosperity over which they presided. Under Bismarck, much of this entails his strategies to suppress Catholic and socialist opposition while promoting militaristic Prussianism. As a result, in Germany, as in Japan and Italy, later attempts to extend democracy would succeed in establishing unstable democracies (the Weimar Republic, Japan in the twenties, and Italy from the end of World War I to the 1922 appointment of Mussolini as premier by Victor Emmanuel III). Each of these constitutional democracies could not to cope with the severe problems of the day and the reluctance or inability to bring about fundamental structural changes.

Despite advances in industry and science under the Second Reich, Germany retained a despotic aspect to its character, due to its militaristic inclinations and having achieved its unification by "blood and iron". The armed forces, inculcated in the militarism of the Prussian Junkers – the glorification of war, and supreme and unquestioning loyalty to the state, leader, and hierarchy – remained passionately loyal to the Hohenzollern dynasty. The values of Prussia's repressive "garrison state," grounded in Prussia's repressive system of agriculture since the defeat of the Teutonic Knights, would be carried to a new extreme under the Third Reich.

Prussianism caught on because prosperity satisfied the old support base of the middle class liberals, and the state was solicitous of the material welfare for many eventually won over—including the working class. German education emerged strong in vocational fields as well as propaganda. From the side of the landed aristocracy came the conceptions of inherent superiority in the ruling class and a sensitivity to matters of status, prominent traits well into the twentieth century. Fed by new sources, these conceptions could later be vulgarized and made appealing to the German population as a whole in doctrines of racial superiority. The royal bureaucracy introduced, against considerable aristocratic resistance, the ideal of complete and unreflecting obedience to an institution over and above class and individual.

At the foundation of these currents was centuries of economic, political, and cultural evolution starting with an agricultural system dominated for centuries by repressive means rather than through the market. German peasants were not only under the repressive watch of their landowners, but grounded in village and work structures that favor solidarity, diminishing their revolutionary potential. Thus, in the realm of propaganda, the Junkers established the generally successful Agrarian League in 1894, laying the groundwork for Nazi doctrine. The league sought the support of peasants in non-Junker areas of smaller farms, inculcating them in "fuhrer worship," the idea of a corporative state, militarism, anti-Semitism. They would also make the distinction between "predatory" and "productive" capital, a distinction later used by the Nazis to appeal to anti-capitalist sentiments among the peasantry.

On the other hand the Kaiserreich did guarantee freedom of press, security of property and it managed to establish a system of public welfare based on compulsory insurance, which survived two World Wars and in its core survives still today. There was a modern election system to the federal Parliament, the Reichstag, which represented every adult man by one vote. This enabled the German Socialists and the Catholic Centre Party to play remarkable roles in the empire's political life, although both parties were officially regarded more or less as "foes of the empire". And the time of the Kaiserreich is well remembered in Germany as a period, when academic research and university life flourished as well as arts and literature. Thomas Mann published his novel the Buddenbrocks in 1901. Theodor Mommsen was awarded the Nobel prize for literature a year later for his Roman history. Painters like the groups Der Blaue Reiter and Die Brucke made a significant contribution to modern art. The AEG turbine building in Berlin by Peter Behrens from 1909 can be regarded as a milestone in classic modern architecture and an outstanding example of emerging functionalism.

Bismarck's unified Germany also had a significant impact in East Asia. The unification of Germany was considered a model for both the successful modernization of Japan (which modelled much its imperial constitution on the Hohenzollern empire) and the less successful modernization of China at the beginning of the 20th century. The German civil code became the basis of the legal systems of Japan and the Republic of China after the retreat of the latter to Taiwan remains as the basis of the legal system there. In addition, the Prussian military model (mainly army, the British impressed more as a naval power) had also influenced the Chinese and Japanese armies greatly until the Second World War through their employment of German military advisors, instructors and the acquisition of Germany military equipment. The Ottoman army was reorganised prior to World War One under German influence.