Capital, people and ideas in the nineteenth century

Trade and the German market

The economic relationship between Zurich and the German states is older than either the Swiss federal state or the German Empire. The textile merchants of Zurich sold silk and cotton goods at the fairs of Frankfurt and Leipzig from the early modern period onwards, using the Rhine and Lake Constance to reach the markets of southern Germany. The foundation of the German Customs Union in 1834 created a large protected market on Switzerland’s northern border, which the Swiss had to reckon with when they drew up their own tariff policy after 1848. The treaty relationship with the new German state began even before its formal foundation. On 13 March 1869 Switzerland concluded a commercial treaty with the North German Confederation, whose renewals of 1881 and 1891 confirmed Germany’s position as Switzerland’s most important trading partner. Swiss exports to Germany grew from 162 million francs in 1892 to 306 million francs in 1913 and consisted mainly of watches, machinery, embroidery and textiles.¹

Zurich stood at the centre of this trade. Its machine builders, above all the firm of Escher Wyss, its silk manufacturers and the engineering firms of Winterthur sold a large part of their output across the Rhine, relying on the Zurich banks for the commercial credit that financed those exports. The German market also mattered as a source of inputs, since coal, iron and many semi-finished goods came from the Ruhr and the Saar. A merchant bank in Zurich in 1880 thus had German clients on both sides of its books: German buyers of Swiss goods and German suppliers of Swiss industry, whose bills of exchange circulated through the discount business of the city’s banks.

German capital in railways and banks

The first Swiss railways could not have been built with Swiss capital alone. Chapter D.I describes how the private railway companies of the 1850s turned to investors in Paris, Stuttgart and Leipzig, and how each episode of foreign influence provoked a defensive reaction in Zurich. The most important of these reactions was the foundation of the Schweizerische Kreditanstalt on 5 July 1856. Alfred Escher conceived the bank as an instrument that would allow the Swiss railways to raise capital without depending on foreign financiers, yet one of its founding shareholders was the Allgemeine Deutsche Credit-Anstalt of Leipzig, a newly founded institution modelled on the French Crédit Mobilier.² The paradox is instructive for the whole history of the relationship. German capital was welcome in Zurich as long as control remained in Zurich. The seat, the statutes and the management of the Kreditanstalt stayed in Swiss hands. The enormous public subscription of its shares soon reduced the weight of the Leipzig founders.

A generation later the same pattern appeared on a larger scale in the Gotthard railway. The line through the Alps, which Chapter D.VI treats in detail, was financed by a private company with its seat in Lucerne and with Escher as its first president. Its capital came from shareholders and bondholders in Switzerland, Germany and Italy, supplemented by subsidies from the three states. Under the Gotthard treaties concluded with Italy in 1869 and with the German Empire in 1871, Germany undertook to contribute to the cost of the line, whose strategic value for the connection between Germany and Italy was obvious to Bismarck’s government.³ When the line opened in 1882, Zurich had become the financial address through which German capital flowed into Swiss infrastructure and, increasingly, through which Swiss capital flowed back into German enterprises.

The flow in the second direction grew rapidly after 1890. Swiss investors bought German industrial shares and bonds, the Zurich banks took part in German issuing syndicates, and the electricity finance companies founded around 1895, among them the Bank für elektrische Unternehmungen (Elektrobank) in Zurich, were created in close cooperation with German electrical groups such as the Allgemeine Elektricitäts-Gesellschaft (AEG).⁴ These companies bought and financed power stations and tramways across Europe, using Swiss capital, German technology and the legal and fiscal advantages of a Swiss seat. They were an early form of what later generations would call a holding structure: a Zurich company whose real business lay abroad, whose shareholders came from several countries and whose value depended on the ability to move money and securities freely across borders.

Professors, refugees and the German colony

Capital was accompanied by people. The German population of Switzerland rose from 57,000 in 1870 to about 220,000 in 1910, concentrated in the cities of Zurich, Basel and St. Gallen. In 1880 Germans made up 45.1 per cent of all foreigners in Switzerland. The share fell to 39.7 per cent by 1910 because Italian immigration grew even faster. Among the German entrepreneurs who built Swiss companies were Walter Boveri, co-founder of Brown, Boveri & Cie in Baden, and Henri Nestlé in Vevey.⁵ In the city of Zurich the German presence was even more pronounced. In 1910, according to a study by the think tank Avenir Suisse, Germans made up 21 per cent of the city’s population, while their share of the Swiss population as a whole stood at 5.9 per cent.⁶ Every fifth inhabitant of Zurich was thus a German national, a proportion that has not been reached again.

The history of the city records the phases of this migration. Germans came to Zurich from about 1830 onwards as academics and skilled craftsmen, some of them as political refugees. A German aid society was founded in 1856. By 1900 German labour migration to the city had become predominantly female, since many young German women found work in domestic service.⁷ The refugees of 1848 and 1849 formed a particularly visible group. Chapter D.III describes how the Polytechnikum recruited systematically in the German states, where the failed revolutions had driven able scholars into exile, and how the architect Gottfried Semper, himself a refugee of the Dresden uprising, designed the main building of the school. The composer Richard Wagner lived in Zurich as a political exile from 1849 to 1858. The German presence in the professoriate endured long after the revolutionary generation. In 1995, according to the Historical Dictionary, German nationals still held a quarter of all full professorships at the universities of Zurich, Basel and Bern and accounted for three quarters of all foreign professors.⁸

The size of the German colony occasionally produced friction. On 9 March 1871 Germans in Zurich celebrated the victory over France in the Tonhalle, the city’s concert hall. French officers of the Bourbaki army, who had been interned in Switzerland, forced their way into the hall, a brawl broke out, and crowds outside threw stones. The unrest lasted for several days. A German bystander was killed by a warning shot on the first evening, four people died on 11 March when troops fired on rioters, and four federal battalions were sent to the city to restore order. The cantonal government described the events as a revolutionary action, but the Historical Dictionary characterises them as a demonstration against the victorious Germans and against German workers, who were accused of earning higher wages and of depressing the pay of local labour in a time of economic crisis.⁹ The episode was short, but it foreshadowed a pattern. Economic interdependence with Germany was accepted in Zurich as a fact of life, while the political and social weight of German power and German numbers could at any moment provoke a sharp reaction.

For the financial centre, the German migration of the nineteenth century left three lasting results. It gave Zurich a class of German-speaking merchants, engineers, scholars and bankers with family and business ties on both sides of the Rhine, which made cross-border finance a matter of personal networks as much as of institutions. It anchored the German academic model in the Polytechnikum and the university, whose graduates went on to staff the banks, insurers and industrial companies of the city. It also established the habit, which has lasted to the present day, of treating Germany as the natural hinterland of Zurich’s markets, a habit that explains both the intensity of the later tax conflict and the speed with which business resumed after it.

Notes

1. Historisches Lexikon der Schweiz (HLS), Jean-Jacques Langendorf and Alfred Cattani, “Deutschland”, version of 29 October 2015, https://hls-dhs-dss.ch/de/articles/003352/. The article describes Germany as Switzerland’s most important trading partner from the late nineteenth century onwards and gives the export figures for 1892 and 1913. ↩
2. Wikipedia, “Credit Suisse” (German edition), https://de.wikipedia.org/wiki/Credit_Suisse, which states that Alfred Escher founded the Schweizerische Kreditanstalt on 5 July 1856 together with the Allgemeine Deutsche Credit-Anstalt, which held 50 per cent of the capital. Wikipedia, “Allgemeine Deutsche Credit-Anstalt”, https://de.wikipedia.org/wiki/Allgemeine_Deutsche_Credit-Anstalt, lists the Kreditanstalt among the institutions the Leipzig bank co-founded. Chapter D.II examines the foundation in detail. ↩
3. Wikipedia, “Gotthardbahn” (German edition), https://de.wikipedia.org/wiki/Gotthardbahn, which records the state treaties with Italy of 1869 and with the German Empire of 1871, contributions to the capital of the Gotthard Railway Company of 55 million francs by Italy and 30 million francs by Germany, and a further treaty of 1878 under which Italy and Germany each added 10 million francs and Switzerland 8 million francs after construction costs had far exceeded the estimates. Chapter D.VI discusses the financing. ↩
4. Wikipedia, “Elektrowatt” (German edition), https://de.wikipedia.org/wiki/Elektrowatt, which states that the Bank für elektrische Unternehmungen (Elektrobank) was founded in Zurich in 1895 by AEG together with a banking consortium led by the Schweizerische Kreditanstalt and was renamed Elektro-Watt in 1946. The role of these financing companies is described in Chapter D.II. ↩
5. HLS, “Deutschland” (cited above), section on the period 1848 to 1914, with the figures for 1870, 1880 and 1910 and the list of German entrepreneurs, which also includes Carl Franz Bally and Gustav Henckell. ↩
6. Daniel Müller-Jentsch, “Vor 100 Jahren war der Anteil deutscher Einwohner in der Schweiz noch grösser”, Avenir Suisse, 13 September 2011, https://www.avenir-suisse.ch/vor-100-jahren-war-der-anteil-deutscher-einwohner-in-der-schweiz-noch-grosser/. The author notes that the share of Germans in the Swiss population remained at or above the level of 2010 throughout the period from 1880 to 1930. ↩
7. HLS, Nicola Behrens, Andreas Motschi and Max Schultheiss, “Zürich (Gemeinde)”, version of 25 January 2015, section “Sozialstruktur und sozialer Wandel”, https://hls-dhs-dss.ch/de/articles/000171/. ↩
8. HLS, “Deutschland” (cited above), section on the period after 1945, which also records the growth of Swiss student enrolments at German universities between 1975 and 1995. ↩
9. HLS, Hervé de Weck, “Tonhallekrawall”, version of 8 August 2011, https://hls-dhs-dss.ch/de/articles/017245/. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.