the world of private banking

INtRODUctION
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Throughout the nineteenth century, the City of London was the world’s leading
financial centre, and Baring Brothers were only second to the Rothschilds in the
field of international banking and finance. In chapter 8, John Orbell provides
a useful overview of the London merchant banks’ main activities, focusing on
the case of Baring Brothers. They ranged from merchanting and agency work to
corporate finance advice, private banking, and security management. Two of them,
however, were at the core of their business: finance of international trade and
security issuance, and are rightly paid closer attention. One of the chapter’s main
interests is the way John Orbell not only presents the very rich material available
in the ING Baring archives (accounts, correspondence with clients and agents,
information books and so on), with occasional reference to that of other merchant
banks, but also underlines its relevance to the study of all aspects of merchant banks’
activities, and identifies the areas which have remained unexplored and could
benefit from systematic use of the records – the whole amounting to a research
programme on private banks and the international economy.
Industrialization
Dieter Ziegler and Luciano Segreto reassess, in chapters 9 and 10, the role and
importance of private bankers during industrialization and the alleged reasons
for their decline. Both take issue with the widely accepted Gerschenkronian
argument that only joint-stock banks could supply the necessary capital to
leading-sector industries.
For Germany, Ziegler points out that even earlier, by the 1850s, demand for
capital was outrunning private bankers’ resources and that the famous banking
dynasties were not amongst the pioneers in industry finance. Still, by the mid-
1850s, when the first joint-stock banks were founded, the basic railway network
linking the Zollverein regions was already built, its length being second only to
the British system. It was not that universal banks squeezed out private banks
from the second half of the nineteenth century and into the twentieth, but rather
that a division of labour evolved, in which a limited number of private banks
had gained an important position. For example, industry and commerce were
not confined to big concerns, and in particular medium-sized industry in the
provinces relied on local private bankers well into the twentieth century, writes
Ziegler. Private banks supplied services which universal banks were unwilling or
unable to provide. Examples include small- to medium-scale finance, rendered
cumbersome and unprofitable by the universal banks’ increased bureaucratization,
centralization and hierarchical management style. During the stabilization crisis
German universal banks were simply unable to obtain foreign credit, a ‘niche’ that
old-established private bankers filled with ease.
Lastly, in a Gerschenkronian framework of interpretation the de facto
disappearance of private banks in Germany after 1945 looks like a ‘natural’ result
of market forces. Ziegler shows convincingly that in the case of Germany, the