A Berlin bank panic

development led to improving harvest yields. Grain harvest yields had improved as a result, by 80 per cent at the time of the Great War, compared with the period before 1887 when fertilizers were fi rst introduced on a signifi cant scale. By contrast, Russia, at the outbreak of the war, with 3 million acres more under grain cultivation, produced 19 million fewer tons of grain than Germany. By 1913, Germany was 95 per cent self-suffi cient in meat production, despite per capita meat consumption having doubled since 1870, while Britain in 1913 imported 45 per cent of her meat requirements. Paralleling the expansion of its industry and agriculture, Germany went from a net emigration country in the early 1800s, to a country with strong population growth by the end of the century. Between 1870 and 1914 Germany’s population increased almost 75 per cent, from 40,000,000 to more than 67,000,000. Large industry grew after the 1880s in a symbiosis with large banks such as Deutsche Bank, under what became known as the Grossbanken model, or simply the ‘German model’ of interlocking ownership between major banks and key industrial companies.2

Germany’s Wirtschaftswunder arose in this period after 1870. The much-proclaimed industrial recovery from the devastation of war and world depression in the late 1950s represented, to a very signifi cant degree, the recovery of the foundations laid during the 1880s up to 1914.

A BERLIN BANK PANIC

The development of an independent national economic policy in Germany took its second impetus from the consequences, ironically, of a banking panic. In 1890, as a result of the near failure of the prestigious London merchant bank, Baring Brothers, arising from their huge losses in Argentine bond speculation and investment, and the ties of German banking to this Argentine speculation, a Berlin bank panic ensued, as the dominoes of an international fi nancial pyramid began to topple.

Berlin, and German investors generally, had been caught up in international railroad speculation mania in the 1880s. With the crash of the elite Baring Bros., with some $75,000,000 invested in various Argentine bonds, down came the illusions of many Germans about the marvels of fi nancial speculation.

In the wake of the fi nancial collapse of Argentina, a large wheat exporter to Europe, Berlin grain traders Ritter & Blumenthal had