the world of private banking

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