German Economic and Business History in the 19th and 20th Centuries by Werner Plumpe

Author:Werner Plumpe
Language: eng
Format: epub
Publisher: Palgrave Macmillan UK, London

Corporate Strategies Between ‘Founder Crash’ and Wilhelminian Economic Miracle

First, let me deal briefly with those myths. The dual process of sectoral and industrial structural change and severe economic fluctuations was at the same time marked by further important changes. In the literature of the 1970s and 1980s, these were chiefly referred to as ‘organized capitalism’ and ‘financial capitalism’—terms that were simultaneously used to distinguish a supposedly corporate German capitalism from the more liberal sort of capitalism practiced in the Anglophone world. In this view, German firms mainly reacted to the challenges of the ‘Great Depression’ of the 1870s through an ‘empowerment of markets’, through price arrangements, cooperation, concentration, and extensive efforts to use national government to promote an industry-friendly economic policy. Accordingly, at the center of this development were not only certain industrial firms but above all the emerging and expanding big banks that had steadily (so it was alleged) become something like the spider in the web of German capitalism.37

Before we examine these theories, the findings need some explanation. Particularly the period after the 1880s was certainly characterized by the establishment of large firms and the emergence of what were called industrial ‘dukedoms’—that is to say, the horizontal and vertical integration of certain chains of value-creation into individual combines, notably in heavy industry but later also in electrical engineering and chemicals. Contemporaries were fascinated by these groups and the people who ran them.38 Such captains of industry as Friedrich Alfred Krupp,39 August Thyssen,40 Hugo Stinnes,41 or Albert Ballin42 were the men of the hour. The names of such innovative entrepreneurs as Carl Duisberg,43 Heinrich Brunck, and later Carl Bosch or members of the great Siemens and Rathenau electrical dynasties were on everyone’s lips. However, we must be cautious about rushing into any reinterpretation of the creation of large firms and groups as a period of concentrated (not to say: monopoly) capitalism. Corporate structure remained largely unchanged; more than three-quarters of German firms were small or medium-sized businesses, and it was in them that almost as many workers found employment. The dominant form of enterprise was the family firm. The formation of large firms and groups was still closely bound up with specific technological and economic circumstances, and to that extent its scope was limited—although it is the big companies that stick in our minds as having been all-powerful. With that in mind, any talk of ‘organized capitalism’ seems premature to say the least.44

On the other hand, there is apparently clear evidence of cartel formation. Pre-1914 Germany had several thousand cartels and marketing agreements that (where they were fixed by contract) also had legal recognition. In a notorious judgment handed down in the 1890s, the High Court or Reichsgericht had pronounced cartel agreements binding under civil law and declared the contractual fines laid down in them to be admissible. Most of these cartels came into being at times of falling prices such as Germany experienced in the 1870s and 1880s (cartels as ‘children in need’). Their purpose was to prevent further price falls.

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