Research

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 practice-theoretical approach the project will base its findings on changes in perceptions and routinized behavior 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 behavior 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

Im Jahr 1986 überstiegen die Exporte der Bundesrepublik Deutschland zum ersten Mal die der Vereinigten Staaten von Amerika, bis dahin das exportstärkste Land der Welt. Der Nationalstolz des Landes, der nach dem verlorenen Finale bei der Fußballweltmeisterschaft in Mexiko City einen Dämpfer erhalten hatte, konnte nun wenigstens unter Journalisten wieder hergestellt werden, die damals den Titel des „Exportweltmeisters“ verliehen. Tatsächlich war es bemerkenswert, dass eine Bevölkerung von nur 61 Mio. Menschen in der Mitte Europas mehr Güter exportierte, als 240 Mio. Amerikaner und 121 Mio. Japaner. Wie wurde aus der deutschen Wirtschaft, die traditionell wesentlich mehr Güter importierte als sie exportierte, nach dem Zweiten Weltkrieg eine der erfolgreichsten Exportökonomien der Welt?

Im opus magnum wird die These vertreten, dass im Denken und Handeln von Politikern und Managern in Deutschland die Orientierung am Export tief verankert war und hieraus im Verlauf des 20. Jahrhunderts eine besondere Handlungslogik entstand, die andere gesellschaftspolitische Ziele dem Export mehr und mehr unterordnete. Die Exportstärke der bundesdeutschen Wirtschaft folgte mithin nicht zwangsläufig aus der spezifischen Güterstruktur und Produktionsweise der deutschen Unternehmen, der Kostenstruktur oder gar durch besondere Fähigkeiten der inländischen Beschäftigten, sondern wurde erst durch die spezifische Handlungsweise der Entscheidungsträger in Politik und Wirtschaft herbeigeführt. Die punktuelle Exportorientierung einiger Branchen und Unternehmen wurde zu einer wirtschaftspolitischen Obsession übersteigert.

Im vorgeschlagenen Buchprojekt soll diese Exportobsession historisch hergeleitet werden. Hierzu werden die Felder, auf denen die Exportorientierung ausgespielt wurde, zusammengeführt: Neben der klassischen Handelspolitik waren vor allem die Währungspolitik und ein weitläufiges Dickicht an diversen z.B. steuerlichen Fördermaßnahmen entscheidende Faktoren der bundesdeutschen Exportweltmeisterschaft. Hinzu kam die „Globalisierung“ der von deutschen Unternehmen gesteuerten Produktionsprozesse in Form von Auslandsinvestitionen und Auftragsverlagerung. Das opus magnum soll diese außenwirtschaftlichen Zusammenhänge erstmals systematisch beschreiben, während in der wirtschaftshistorischen Literatur bislang eine nationalstaatliche Perspektive dominierte. Das Buch leistet einen Beitrag zur Entstehungsgeschichte „globalisierter Volkswirtschaften“ im letzten Drittel des 20. Jahrhunderts und macht bis heute wirksame Dynamiken sichtbar.