the world of private banking
the world of private banking
the world of private banking
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CHAPTER 9<br />
German Private Banks and German Industry,<br />
1830–1938<br />
Dieter Ziegler<br />
If <strong>the</strong> old Gerschenkronian hypo<strong>the</strong>sis that <strong>the</strong> German banks were <strong>of</strong> indispensable<br />
importance for mobilizing <strong>the</strong> capital needed for an industrialization process that<br />
was based on a much more capital-intensive leading-sector complex than that <strong>of</strong><br />
<strong>the</strong> industrial pioneers is right, <strong>the</strong>n it is not <strong>the</strong> universal bank that deserves <strong>the</strong><br />
praise but <strong>the</strong> <strong>private</strong> banker.<br />
This fact was overlooked by Gerschenkron and o<strong>the</strong>rs for two main reasons.<br />
First, by <strong>the</strong> 1850s <strong>the</strong> demand for capital and credit from <strong>the</strong> railway companies<br />
and emerging heavy industry was already outrunning <strong>the</strong> <strong>private</strong> bankers’ resources,<br />
and initiatives for joint-stock credit banks were emerging, while only a quarter <strong>of</strong><br />
a century later <strong>the</strong>se joint-stock banks began to dwarf even <strong>the</strong> largest <strong>private</strong><br />
banks in <strong>the</strong> credit market. Second, <strong>the</strong> famous cosmopolitan <strong>banking</strong> dynasties <strong>of</strong><br />
German origin, such as <strong>the</strong> Rothschilds, <strong>the</strong> Bethmanns, <strong>the</strong> Mendelssohns and <strong>the</strong><br />
Erlangers, were not among <strong>the</strong> <strong>banking</strong> pioneers <strong>of</strong> German industrialization.<br />
In addition, until recently historical research unanimously agreed that after <strong>the</strong> turn<br />
<strong>of</strong> <strong>the</strong> century German <strong>private</strong> banks underwent a period <strong>of</strong> steady decline, interrupted<br />
only by an illusory flowering during <strong>the</strong> inflation. In <strong>the</strong> logic <strong>of</strong> this interpretation <strong>the</strong><br />
de facto disappearance <strong>of</strong> <strong>private</strong> banks in Germany after 1945 is seen as a ‘natural’<br />
result <strong>of</strong> market forces. This article attempts to get both <strong>the</strong> role and importance <strong>of</strong><br />
<strong>private</strong> bankers during industrialization and <strong>the</strong> reasons for <strong>the</strong>ir disappearance as a<br />
major component <strong>of</strong> <strong>the</strong> German financial markets into perspective.<br />
Private Bankers and German Industrialization<br />
In <strong>the</strong> early nineteenth century <strong>the</strong> role and function <strong>of</strong> <strong>the</strong> <strong>private</strong> <strong>banking</strong><br />
houses depended on <strong>the</strong> peculiarities <strong>of</strong> <strong>the</strong> place where <strong>the</strong>y operated. Despite<br />
Germany’s economic backwardness, <strong>banking</strong> in Germany was not underdeveloped<br />
as such, but as yet not geared towards <strong>the</strong> financing <strong>of</strong> industry and trade. The<br />
only exception was Hamburg, <strong>the</strong> outstanding North Sea port for Central Europe.<br />
Hamburg’s intermediate position between <strong>the</strong> Atlantic and its vast economic<br />
<br />
A. Gerschenkron, Economic Backwardness in Historical Perspective (Cambridge,<br />
Mass., 1962), pp. 5–30; see also R. Sylla, ‘The Role <strong>of</strong> Banks’, in R. Sylla and G. Toniolo (eds),<br />
Patterns <strong>of</strong> European Industrialization: <strong>the</strong> Nineteenth Century (London, 1991), pp. 45–63.