Co-ops and Big Banks in the Weimar Republic

Written by guest blogger, Thomas J. Saunders.

Thomas J. Saunders’ article, “Self-Help and State Rescue: The Raiffeisen Bank and Rationalization of the Cooperative Movement in Weimar Germany” is FREE-TO-READ for a limited time. Read it inside the Canadian Journal of History/Annales canadiennes d’histoire at CJH/ACH Online or on Project MUSE.

Thomas J. Saunders, University of Victoria.

Public bailouts of the private sector are familiar in recent memory from the massive rescue packages for the financial sector and the automobile industry in the aftermath of the economic meltdown of 2008. Viewed over the longer term, these bailouts represent one facet of the state’s role in the modern era as a broker between public and private interests. Since the interdependence of the state and the industrial sector was cemented a century ago in the Great War, state management of economic fundamentals has been largely uncontested. However, determination of whether public funds should be used to salvage otherwise unviable private companies remains controversial on a case by case basis. My interest in public intervention to rescue a major cooperative bank in Weimar Germany lies primarily in the strategies by which such imperilled institutions position themselves to “deserve” handouts. Central to these strategies are appeals to public interests rather than profit, interests such as preserving employment, protecting home owners or sustaining an industry or sector seen as indispensable to the national economy and thus “too big to fail.”

In the case of the Raiffeisen Bank, the existence since the 1890s of a Prussian state bank dedicated to the provision of cooperative agricultural credit indicates the importance of cooperatives within the agrarian economy — itself crucial to national welfare and in receipt of a broader program of state aid. This loaded the dice in favour of public rescue. However, the pitch still needed to be made. A bailout prescribing merger of a divided cooperative sector disguised what otherwise could have appeared preferential treatment — Raiffeisen was simply the neediest cooperative organization. Appeal to then incantatory power of “rationalization” leant merger a broader economic rationale that was equally difficult to gainsay. These were the overarching strategies by which to appeal to public authorities. Within them lay the task of framing and finessing that had its own intrigue. Significantly, that task sidelined questions of origins or responsibility for private mismanagement to focus on rescue and the ostensible public good.