Financial Crisis and Political Upheaval in Nazi Germany

A recent paper by Sebastian Doerr, Stefan Gissler, José-Luis Peydró and Hans-Joachim Voth investigates the role that a financial crisis in Germany played in the Nazis coming to power. They show how financial distress can lead to radical voting when accompanied by a convergence of cultural and economic factors. In less than four years, the Nazis went from capturing 2.6% to 37.3% of the popular vote. The authors identified the failure of one bank as being significant in growing the support of the nazis – Danatbank.

Danatbank and Dresdner Bank
Danatbank (the second largest bank in Germany) was widely seen as responsible for causing the financial crisis, and it was headed by the well-known Jewish manager Jakob Goldschmidt, a favourite target of Nazi propaganda. Its collapse in 1931 saw a surge of support for Hitler. Dresdner Bank, Germany’s third-largest lender, failed as well. Exposure to Dresdner Bank had a similar negative effect on city incomes as exposure to Danat, but had almost no effect on support for the Nazis. By contrast, Dresdner Bank was not the key target for Nazi propaganda – even if it had numerous Jews occupying leading positions like most German banks. While the economic impact of the two bank failures was almost identical, only exposure to Danat had a significant effect on Nazi voting. By 1932 Danatbank and Dresdner Bank merged.

Note: The shaded area indicates the period of the 1931 banking crisis, from the beginning of troubles at Austrian Creditanstalt to the merger between Danatbank and Dresdner Bank. Blue vertical lines show: (A) beginning troubles at Austrian Creditanstalt (May 1931), (B) Nordwolle accounting irregularities discovered and Hoover Moratorium established (June 1931), (C) failure of Danatbank and ensuing bank holidays (July 1931), and (D) forced merger of Danatbank and Dresdner Bank. 

The Depression enabled the Nazis’ rise to power, but the financial collapse of 1931 thus lent seeming plausibility to a key Nazi hate narrative, helping to bring a large part of the German middle class round to the party’s world view.

Leave a Reply

Your email address will not be published. Required fields are marked *