Banks and Industry in Anglo-German Perspective

Abstract

Patterns of corporate external finance, even among developed countries that broadly share the same basic technologies and possess similar industrial structures, can differ strikingly. From an Anglo-Saxon perspective, the differences appear particularly stark in Germany, where banks have been unusually prominent in company affairs since at least the 1830s. As Prof. Tilly notes, the nature of this distinctive relationship between banks and industry has been an enduring, and often controversial, theme of modern German economic history, from the industrial “takeoff” of the nineteenth century to the Monopolkommission reports and innovation debates of the present. By 1913, due to their size and the ubiquity of their influence, large “universal” banks occupied a position in Germany which was unique among industrial nations. Despite some evidence of convergence in lending practices in recent years (BANK OF ENGLAND, 1984), the differences which had become well established by the late nineteenth century remain conspicuous today: at the end of 1993 the total stock market capitalization of British companies was nearly three times the stock market capitalization of German ones while the German economy was over 75% larger than Britain’s. Put another way, the total market capitalization of British companies was 125% of British GNP whereas the comparable ratio in Germany was only 25% (BISHOP, 1994, Chart 3). Clearly, banks and public financial markets continue to play, as they have for many decades past, very different roles in the provision of external company finance in the two countries.