216 The Domestic Politics of International Monetary Order: The Gold Standard
industry and finance, lifted by their stunning successes in international markets
after 1890, would have benefited from currency stability and ready gold
convertibility. Yet German monetary policy remained focused on internal targets.
The paradox is explained by the opposition and political power of Prussian
landowners, the Junkers.
Banking and industry developed in Germany quite differently from how they
developed in Britain. British banks had few connections with industry (which
tended to be self-financed) and thus developed a completely different orientation
to the international economy. Rising to prominence financing international trade,
foreign governments, and overseas infrastructure, British banks championed
monetary internationalism in opposition to the nationalism of the fading
manufacturing sector. In Germany, however, the interests of industry and finance
tended to move together because there were strong and durable links between
the two sectors. German joint-stock banks were originally established to provide
manufacturing with the large amounts of long-term capital it needed to initiate
and sustain “late” development. Indeed, the four “D-Banks” (Deutsche Bank,
Disconto-Gesellschaft, Dresdener Bank, and Darmsteder Bank) provided much
of the capital, entrepreneurship, and management of the German industrial
revolution. The relevant point is that these interrelations made the banks vitally
concerned with the well-being of their industrial progeny. As German industry
sought export markets, German banks aggressively established branches abroad
to provide foreign purchasers of German goods with short-term financing and
floated foreign bonds in Germany that stood to improve the market position of
German businesses. Yet despite the growing internationalism of German industry,
banking, and finance, monetary policy remained geared toward the needs of the
domestic economy.
Part of the explanation is that the Berlin money market, like the Paris market,
was still far less dependent on the confidence of foreigners than the London market.
The bread and butter of German banking was channeling funds to industry, not
issuing, accepting, and discounting international bills of exchange. The interests
of German bankers were, thus, not as tied up with the willingness of foreign
bankers, traders, and investors to deal in the home currency and in the national
money market as they were in London. Since maintaining international confidence
in the currency could require restrictive monetary policy inimical to industry, German
banks were at best tepid supporters of gold-standard orthodoxy. The political
consequence was that the financial sector’s support for a full gold standard was
weaker than in England.
Yet to understand fully the sources of Germany’s “conditional” gold standard
requires a look at the preferences and enduring political power of the German
landed elite. After unification, Germany was by and large a country of free
landholding peasants and power-cultivating squires—the Junkers. The Junkers,
like the British landed elite, were powerful beyond their numbers in the German
political system. Their monetary interests, however, tended to be more in line
with tenant and small holding farmers than with the British aristocracy. This was
because Junkers were not primarily rentiers. Instead, they managed great agricultural
estates organized along the lines of the Spanish system of latifundia. As agricultural