Coping with Crisis: International Financial Institutions in the Interwar Period (review)

Composed of nine papers presented at the 26th International Conference on Business History (the Fuji Conference) in 2000, this slender volume packs quite a wallop. Inspired by the problems that Japan's economy faced during the 1990s, those putting together the conference decided, in Makoto Kasuya's words, that "it would be good to investigate how financial institutions reacted during financial crises in the interwar years" (p. v). The scholars at the conference examined how banks, securities companies, and insurance companies in Western Europe, the United States, and Japan handled their affairs during the turbulent 1920s and 1930s. Kasuya opens the volume with a valuable overview of the changing global financial architecture and the specific alterations taking place in individual countries during the interwar years, focusing especially on government-business relations and on interactions among different types of financial institutions.

The authors of the next four papers examine the history of commercial banking. Youssef Cassis compares bankers and banking practices in Great Britain, France, and Germany. After surveying financial developments, he paints a detailed portrait of the twenty-seven menin charge of their countries' leading banks in 1929. Cassis finds that "the leaders of Europe's top banks in the interwar years largely conformed to the model of the pre-1914 businessman" and that the "business of banking underwent little change during the first-half of the twentieth century" (p. 38). Nor do Michael Collins and Mae Baker find much evidence of change in their examination of the relationship between commercial banks and industrial businesses in Britain, a topic of longstanding scholarly interest. Collins and Baker explain why, despite considerable pressure for change, especially during the 1930s, few alterations occurred, as bankers maintained their traditional distance from industrialists. Eugene White, however, discovered considerable change in the United States. New Deal regulations, he shows, succeeded in encouraging commercial bankers to boost long-term lending to manufacturers and other business people. White's broad-ranging essay is a "must" for anyone interested in the evolution of America's financial history. In a finding similar to those of Collins and Baker for British banks, Shinji Ogura writes that Japanese commercial banks were interested mainly in making short-term loans to businesses and were not eager to become involved in the management of those firms. Only under government pressure in the late 1930s did Japan's commercial bankers make long-term loans. Looking at the operations of Mitsui Bank, Ogura examines how zaibatsu-affiliated banks tried to become fully independent financial institutions and why these efforts proved stillborn during the interwar years.

Two authors closely examine universal banking, and a final three look at the securities business. Eric Bussière examines the operations of the Banque de Paris et des Pays-Bas (Paribas). He finds that, although Paribas became more and more a universal bank, conditions in the 1920s, especially inflation, made steps in that direction difficult. Nor, Harald Wixforth shows, were German universal banks able to regain in the interwar years their earlier leading positions of importance in industrial financing and management—positions surrendered in the late 1910s. Mariko Tatsuki surveys the development of modern life insurance in Japan, stressing the interactions of different types of companies, the government, and trade associations in the growth of the industry. Like the commercial banks studied by Ogura, Japan's insurance companies lost their autonomy in the late 1930s, forced increasingly to invest in government bonds and wartime projects. Edwin Perkins examines the history of Merrill Lynch & Company, showing how the firm's "emphasis on growth stocks and the solicitation of middle-class households had its origins in the interwar period" (p. 179). The work of this firm and its imitators transformed America's securities markets after World War II, ensuring a much higher degree of participation by Americans in equities markets than by Europeans...