The Transformation of Money. A Transatlantic History of 'Money Illusion' during the Gold Standard Era, 1870s-1920s
The project investigates historical changes in monetary perceptions as a basis of contemporary experiences and expectations during transitions from deflation to inflation between the 1870s and 1920s. The central thesis is that expectations and social relations in economic contexts changed radically due to alterations in the general price level. However, alterations are not easily observed, and explanations for them depend on contemporary knowledge and past experiences. Therefore, the connection of monetary values to expectations is neither straightforward nor independent of time. The project aims to historicize the connection between the continuous transformation of money and contemporary experiences and expectations. Its objective is to provide a novel historical periodization of changes in monetary perceptions and their effects. It intends to overcome a current dichotomy of conceptual approaches in historical research on monetary phenomena. Cultural narratives focus on contemporary explanations for price changes. Positivist economic historians look at statistical aggregates and their effects on economic growth. Whereas the latter misses relevant changes in the actors' time horizons and sense-making processes, a discursive view remains silent about the economic effects of such changes.
By pursuing a practical-theoretical approach the project will base its findings on changes in perceptions and routinized behaviour over time. These changes in practices can be related to routines in bargaining as well as to political moves for institutional change, theoretical innovations in economic thinking, or narratives and expectations about the stability and time-dimensions of money. It is by bringing the different dimensions together that it becomes possible to overcome the dichotomy. The project attempts to utilize the concept of "money illusion" to do so. "Money illusion" means that actors are unable to relate the nominal value of money to the real value of goods which has grave economic effects. Instead of simply assuming this to be the case, the concept of "money illusion" will be used heuristically to investigate the contingencies of monetary perceptions, changes over time, and their link to expectations, economic behaviour, and social relations. The focus will be on industrial relations, creditor-debtor relations in farming, and struggles between households and retailers. Three central research questions guide the project that will focus on the United States, Germany, and Great Britain from the 1870s to the 1920s. First, when and why did understandings and expectations of monetary values change? Second, in what ways and why did experiences and expectations regarding the currencies' purchasing power influence social relations of economic actors? Third, did monetary fluctuations influence social relations in different ways in the three countries, leading to different institutional solutions that in turn influenced processes of expectation formation?
- Project Coordinator: Prof. Dr. Sebastian Teupe
- funded by the German Research Foundation as part of the Priority Programme "Experience and Expectation. Historical Foundations of Economic Behaviour" (https://www.experience-expectation.de/projects/funding-period-2/transformation-history-money-illusion)
DFG-Project: Regulating Competition during the Economic Miracle. The Practice of Cartel Law in the Federal Republic of Germany before the Law against Restraints of Competition, 1948/49-1958 (start: April 2018)
The DFG-funded research project seeks to investigate the practice of cartel law at the time of the German "economic miracle" to evaluate the interconnection of legal rules and business practices in light of the caesura in competition law after the end of the Second World War. The entrepreneurial scope of German firms has been analyzed historically almost exclusively with regards to the German Law against Restraints of Competition (GWB) which was passed only in 1957. The practice of cartel law in post-war Germany that was determined by occupation law and the rulings of German courts has escaped attention. The project intends to close this research gap by pursuing three targets.
First, the project will provide an empirical contribution regarding the historical interconnection of law and economy. The caesura in competition law enforced by the Allies met resistance not only in public protests of German firms but in their everyday practices as well. These legal conflicts forced the courts to interpret the allied statutory provisions thereby determining their legal content. The project will clarify to what extent German firms succeeded in inducing the courts to take into account their arguments, practices, and traditions.
Second, the project opens the possibility of identifying progressive and conservative forces inside the German judiciary during the turn towards a liberal market economy. The courts' acceptance of competition policy principles was a fundamental condition for this turn and had become well established by the 1960s. It is an open question, however, whether some courts played a pioneering role in establishing the new cartel law already during the early 1950s. The project will answer the question if and if so which courts employed elements of the GWB before it became the official law.
Third, the project will offer a new explanatory approach for the much-debated question which factors determined the concrete form of the GWB. Historical research has focused on U.S. American influence, the role of economic ideas, and the pressure of German firms. The project extends the scope of possible explanations by taking up the question whether the GWB of 1957 actually marked a decisive break or whether it simply sanctioned a cartel law practice that had become well established by that time.
To answer the three questions the project will collect and systematize court decisions and sources from business archives to analyze their mutual interrelations.
- Project Worker: Raphael Hennecke
- Project Coordinator: Prof. Dr. Sebastian Teupe
Ersparte Krisen? – Crisis through Savings
The research project “Ersparte Krisen? – Crisis through savings” combines historical and sociological approaches to analyze the development of saving behavior of German private households during the last five decades. The starting point for this investigation is the observation that the changing saving habits of private households in western societies have led to a fundamental structural change in the financial markets. The global accumulation of savings, which led Ben Bernanke, the former chairman of the Federal Reserve, to speak of a “global savings glut” had, according to many experts, a critical influence on the recent crisis in the financial markets.
The historical part of the project is focused on the changes of investment products and the transforming marketing strategies of German commercial banks and Sparkassen (savings banks), from the 1960s onward. Moreover, using the example of the financial center in Luxemburg, it demonstrates how banking business has constantly become more international, addressing not only commercial customers´ business but also private savers’ assets.
The sociological part explores the social change of saving motives based on qualitative interviews. The central assumption is that saving decisions cannot be explained by individual preference or rational action alone but rather by the social context in which saving decisions take place. However, saving decisions are not only dependent on the current social background of individuals but are also subject to long-term and more general changes.
By reflecting on both the historical and the sociological perspectives of saving behavior, the project attempts to discover in more detail the multiple reasons for the changes in German saving behavior and the underlying activities of German banks and Sparkassen.
- Project Coordinator: Prof. Dr. Jan-Otmar Hesse
- supported by the The Federal Ministry of Education and Research
Break the Rules, Change the Law? Entrepreneurship and Legal Conventions in German and American Retailing. A Business History Perspective
The law is an integral part of the institutional setting in modern economies. There is considerable research about its relation to entrepreneurship. Usually, the focus lies on the effects that legal frameworks have on innovative business activities. My research takes the opposite perspective. Instead of trying to find out what the law does with the entrepreneur the objective is asking what the entrepreneur does with the law. My proposal looks at legal rule-breaking as an important part of entrepreneurship. While many legal transgressions of companies and entrepreneurs are clear-cut cases of economic crime there are also many examples that cannot be grasped with the concept of crime. As the economy is constantly changing, some of the needs of new industries and business models are in conflict with the legal framework. Companies spend billions in lobbying and court battles to change it or have it interpreted in their preferred way. Sometimes, however, entrepreneurs create facts instead of going "the long way" - even if it means bending or breaking the law. In Walter Kuemmerle´s view, the attitude behind this strategy is one of the main characteristics differentiating entrepreneurs form "normal" businessmen.
There is a fine line between business practices that can be considered "lawful departures from legal rules" (Kadish & Kadish) and those that entail penalties, bankruptcies or even jail. Entrepreneurship research still lacks a historical perspective on the question when breaking the rules also meant changing the rules. The project draws on theoretical groundwork by institutional theorists connecting entrepreneurial practices to institutional change. It unfolds the historical case study of German and American retailers in the second half of the 20th century when rapid structural change led to constant conflict between aspiring entrepreneurs and the legal system. In particular, the development of legislation on shop opening hours, pricing and distribution will be studied in comparative perspective. Today, both countries have modern retail structures and a liberal legal-institutional environment although some differences still remain. As will be shown, this was not the result of one-sided political and legal change but rather the outcome of open conflicts, public negotiations and conscious rule-breaking.
- Project Coordinator: Prof. Dr. Sebastian Teupe
Exportweltmeister. Geschichte einer deutschen Obsession. Opus-Magnum-Förderung der Volkswagen-Stiftung, 2021-2022
In 1986, Germany for the first time exported more goods than every other country. A deeply historical goal was achieved, and in public discourse the nation decorated itself with a new title: “World Export Champion” (German: “Exportweltmeister”). The expression connected the economic success of the overwhelming level of exports to the language of the World Football Championship, which took place in summer 1986. While Germany was defeated by Argentina in the final of this Championship, the nation could be proud of succeeding in export competition – as the concept implies. The book argues that this episode is highly emblematic for the role export success played in German economic history and for the nation’s self-characterization. For some historical actors, exportation had become an obsession.
The argument set out in “Exportweltmeister” is that the export strength cannot be explained by the comparative advantage of German industry alone. Industries and products that were especially successful in export markets changed frequently over the course of the 20th century, as did the structure of industrial relations, which was also often considered relevant for the competitive advantage of the German economy. A particular German work ethic, which is also often thought to be crucial is not only difficult to define in economic terms, but also hard to identify as a driving force over a long period of 150 years. Also, advantages in organization or quality of goods might be relevant factors over limited time periods, but not for the export strength in general over the whole period. While, therefore, a systematic impact of core economic factors for Germany’s export success is difficult to identify, the book points to an astonishing continuity in the aim among the political and economic elite in Germany to increase exports.
The book describes and analyses this long-time transformation process on the basis of an intensive study of archival material, mainly from the German Ministry of Economics and the Foreign office. It is possible to show how German economic policy was highly driven by a strong export-orientation that had been established at the end of the 19th century and established itself as a core reference point not only for politicians but also for the business elite. In some cases, as becomes evident, the orientation turned into an obsession that biased perception and decision-making. It is obvious that it distorted the allocation of income and wealth in Germany by increasing profits in the export industry and depressing domestic consumption and investment.