Hugh Neuburger

German Banks and German Growth, 1883–1913: an Empirical View

Almost without exception interpretations of the remarkable growth of the German economy before the First World War stress the role of the German banking system, in general, and that of the universal or Kreditbank, in particular. The most subtle and penetrating view of this question is that developed in Alexander Gerschenkrons essays, “Economic Backwardness in Historical Perspective†and “Prerequisites of Modern Industrialization.†According to this view, “backward†countries which experience successful industrializations do so by making institutional “substitutions†which enable them to compensate for or even to turn to their advantage their initial deficiencies of productive factors. The institution which is “substituted†in Germany to perform this function is the Kreditbank. This interpretation places special emphasis on the growth-inducing character of these banks, but is also open to the possibility that an industrialization led by such institutions might have entailed certain costs. In fact, Professor Gerschenkron explicitly invites help in assessing these costs in commenting: “it would be a fruitful undertaking in research to explore and perhaps to measure and compare the difficulties, the strains, and the cost which were involved in the various processes of substitution ….†Thanks to the work of Ekkehard Eistert, who has constructed a reliable set of statistics on the German banking system in this era, it is now possible to attempt such a “fruitful undertaking.†Making use of these data, an econometric model has been constructed to test the hypothesis that the manner in which the Kreditbanken allocated credit contributed to the growth of German non-agricultural output. Our findings strongly suggest that the credit allocation policy of these banks was inhibiting rather than stimulating the German economy in the period for which data are available and that previous interpretations are in need of serious revision. It appears that, in Gerschenkrons terms, the “cost†of bank-led industrialization was far greater than anyone has previously suggested.

A Note on the Stochastic Structure of the Velocity of Money: Some Reservations

position which relies on the assumption that velocity is stable or at least predictable.1 We offer counter-evidence indicating that the Gould-Nelson findings are highly period sensitive, having been obtained for the period 1869-1960. The problem with using this period is that it actually represents a conglomeration of three separate periods, each with distinct historical characteristics.2 By the use of a more homogeneous period (1879-1940), originally suggested by Fried man, we have found that there is a substantial drift in the velocity series and that the movement of the velocity series can be distinguished from a

German Banking and Japanese Banking: A Comparative Analysis

Wherever there are banks there are arguments about the macro-economic effects of banking policy. One of the best theoretical formulations of the effect of German banking on German development appears in Alexander Gerschenkrons “Economic Backwardness in Historical Perspective†and “Reflections on the Concept of Prerequisites of Modern Industrialization.†This problem is given an empirical treatment in “German Banks and German Growth, 1883–1913: An Empirical View,†by Hugh Neuburger and Houston H. Stokes. Our intention in this paper is to test further our previous findings and to contrast our findings for Germany with those for post-World War II Japan. While the two situations are not entirely comparable they are similar enough to make such a comparison worthwhile.

The Industrial Politics of the Kreditbanken , 1880–1914 *

One of the most durable theories explaining the remarkable rise of German industry in the generation before World War I was that of the critical role of the Kreditbanken, the great commercial and investment banks of which the Deutsche Bank was the most prominent. Recently, however, historians have begun to question the power of the banks, and even to suggest that they were a drag on German economic development. In this brief study of how Georg Siemens, of the Deutsche Bank, kept the peace between the two leading German electrical equipment manufacturers, Professor Neuburger shows that the crucial factors were not merely the financial strength or weakness of the Bank, but also the diplomatic skill with which its leaders navigated the rapidly shifting currents of the era.

The Anglo-German Trade Rivalry, 1887-1913: A Counterfactual Outcome and its Implications

We are probably fools not to find a reason for declaring war on Germany before she builds too many ships and takes away our trade. Arthur Balfour 1907. Projecting economic variables is a difficult art but one which statesmen practice with relish. In parliamentary democracies it is a rare candidate who does not forecast that under his tenure the pots of the electors will be graced with chickens. A more sober, careful kind of forecasting is required in conducing foreign affairs. Sound judgments about tariffs, subsidies, military and naval force levels, and even alliances depend upon prior analysis of the effects of each such policy over some specified length of run. Although one suspects that some kind of forecasting was always a part of statecraft, industrialization in Western Europe necessitated a change in the time frame of the predictions of statesmen. As the pace of economic change quickened, the rate at which the economic and military potential of states might change also accelerated. For many Englishmen observing the growth of the German economy during the 1890s, learning this lesson produced more than a little anxiety. So great was the attention which the British gave to German economic growth that predictions of Germany’s overtaking of Britain came to be a staple item of British politics in the two decades before World War One. Should these predictions have been taken seriously by contemporaries? The best answer is that given by the outcome of the pre-1914 Anglo-German rivalry: Germany did not overtake Britain in that era. Because war intervened, we cannot know the outcome of continued peaceful economic rivalry, but by using a relatively new statistical method we can chart the course this rivalry may well have followed had the peace been kept in 1914. Our projections suggest a sequence of events that never occurred but may nonetheless be used as a guide in evaluating the views and expectations of contemporaries.