This week the Commerzbank was partly nationalized in Germany, the first bail-out in the aftermath of the financial crisis. This reminds me of Germany’s darkest years, beginning in 1933 with the Machtergreifung of the Nazis. They were able to transform the economy quickly due to the fragile state of German enterprise finances. Adam Tooze reports in his excellent The Wages of Destruction (p. 106):
The first year’s of Hitler’s regime saw the imposition of a series of controls on German businesses that were unprecedented in peacetime history. In large part these stemmed from the difficulty of managing the German balance of payments and in that sense they clearly had their origin in the great financial crisis of the summer and autumn of 1931. However, with the complete disintegration of the gold standard following the dollar devaluation, Germany’s creeping default on its long-term debt, including hundreds of millions of Reichsmarks owed by German corporates, and the implosion of the New Plan, these regulations took on a new and more systematic character.
The financial crisis combined with a serious disruption of global trade might again create a toxic mixture of strong politicians and weak business, threatening to turn the tables completely. Instead of the death of the nation state the (re)birth of autocratic government looms. Surely, many countries will be immune, mostly those with long established democratic institutions. Others might do not so well. In 2006 a book called The J-Curve by Ian Bremmer appeared on the shelves, discussing the issue of openess and stability. Chapter 5 and 6 deal with India and China. This would be worth re-reading now, especially for those that have recently read the popular book The White Tiger by Aravind Adiga, which I can also recommend.
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