Political unity was achieved in 1871, but under the leadership of the traditional, authoritarian Prussian state. Although the political leaders of the new German state were mostly the descendants the old, landed aristocracy, they cooperated with the growing bourgeoisie to form what has been called "organized capitalism." It was basically a market-based economy under which individual entrepreneurs were guided and supported by the precursor of the modern "interventionist state." A handful of private banks enjoyed monopoly status guaranteed by the imperial government. They in turn provided capital for industrial development that increasingly took the form of huge horizontal and vertical cartels, which facilitated the process of technological innovation. Part of their profits flowed back to the banks, which used it for further investment both within the country and in underdeveloped areas such as the Ottoman Empire and China where German imperialistic interests were growing. The government also supported the creation of scientific institutes to support basic research that then worked in close relationship with private industry to apply what was learned to business. Thus the bourgeoisie came to see their economic interests as well served by this bureaucratically efficient and militarily strong authoritarian state and most willingly jettisoned the liberal principles commonly associated with their class. A Reichstag elected by universal manhood suffrage gave the illusion of parliamentary liberalism, but in reality political authority rested in the hands of the emperor, who might, as in the case of Wilhelm I and Bismarck, delegate responsibility to his Chancellor.

The traditional military-agrarian complex opened to include the new industrial sector and the state implemented protectionist tariffs for the protection of both agriculture and industry. Foreign competition was shut out and domestic competition was reduced by the strong trend towards huge industrial cartels. An excellent system of scientific and technical education provided personnel for the new enterprises and a state-owned railway network made shipment of raw materials and finished goods reliable and inexpensive.

To a large degree the traditional political-social structure survived the initial process of modernization. Tariff policy effectively subsidized the traditional land-owning Junker elites, but at the same time protected much of the peasant class and the new industrial bourgeoisie. But not all Germans benefited. Protectionism also brought higher prices in all sectors and many small peasant landholders failed. Craftsmen, artisans, and small businessmen of the pre-industrial era grew increasingly unable to compete and became susceptible to reactionary rhetoric, which spoke of the evils of modernism, particularly grasping industrial capitalism, and interest banking behind which a Jewish conspiracy for world domination was believed to lurk. In imperial Germany however, these elements were relatively few.