EH.net is owned and operated by the Economic History Association
with the support of other sponsoring organizations.

American Big Business in Britain and Germany: A Comparative History of Two “Special Relationships” in the Twentieth Century.

Author(s):Berghahn, Volker R.
Reviewer(s):Hannah, Leslie

Published by EH.Net (June 2014)

Volker R. Berghahn, American Big Business in Britain and Germany: A Comparative History of Two “Special Relationships” in the Twentieth Century. Princeton NJ: Princeton University Press, 2014. ix +375 pp. $49.50 (cloth), ISBN: 978-0-691-16109-9.

Reviewed for EH.Net by Leslie Hannah, Economic History Department, London School of Economics.

Volker Berghahn, now Emeritus Professor of History at Columbia University, also has extensive earlier personal and academic experience in the other two countries in the title and is exceptionally well-qualified to analyze this subject. His thesis is that, notwithstanding the century-long self-deluding puffery of Stead, Churchill and Blair of a supposed “special relationship” with the U.S., America’s business elite actually felt a greater, truly modernizing, affinity with their German counterparts for most of the century. This led to their successful collaboration as “grave-diggers” of British industry and finance (p. 361), so Germany has naturally supplanted Britain as the U.S.’s “special” partner in Europe.

For my taste such rhetoric smacks too much of a zero-sum, politicized dramatization of complex (and often mutually beneficial) business and diplomatic interactions among the three nations, a distressingly populist category error that too often soured their past relations. However, the eventual outcome – whether the whole truth or partially true – is hardly surprising. In 1900, America was already the world’s leading economy, with a GDP equal to Britain’s and Germany’s combined. There still remained a clear German lag, on Maddison’s data, in that Britain’s GDP still exceeded Germany’s even though the latter had 32 percent more people. Britons (like Americans) then enjoyed a level of economic development significantly higher than Germans, as proxied by real GDP per capita. Yet there is no doubt that they were all in the same convergence club. By 2000, again on Maddison’s data, re-united Germany had (almost) caught up with Britain’s real GDP per head and its population was by then 38 percent higher, though both countries lagged the U.S. outlier, whether in terms of real GDP per capita or (a fortiori) of absolute GDP (many Europeans having sensibly gone forth to the U.S. and multiplied). If the business of America really remained business, then – other things equal – market and technological considerations would progressively incline the U.S. more toward Germany’s more populous and larger economy than toward the UK’s, as this process advanced. Any Yankee soft spot for its British ally would be confined to fading sentimental memories of shared wartime victories, cultural/linguistic affinities and U.S. affection for its “poodle” (a term approvingly cited on p. 8). For some, Britain was “special” only as a faithful dog, more willing than (now impressively more pacific) Germany to use its more experienced military and intelligence assets in support of U.S. global ambitions. The latter include, apparently, eavesdropping on Angela Merkel’s cellphone, more easily – though less secretly and probably less usefully – than past espionage on German ENIGMA machines. Of course, national technological superiority, though occasionally useful, is not everything.

There are some large elephants – as well as such implausibly dysfunctional dogs – in this small room. Berghahn thus has to devote much of the book to explaining why Germany struggled for so long to arrive at an outcome that should, arguably, have resulted earlier from the natural long-term convergence of its – numerous, civilized, educated and hard-working – people on the standards of the initial Anglo-Saxon leaders. This process was already proceeding encouragingly (and peacefully) before 1914, but was then sabotaged by Germany’s dysfunctional politics and militarism, resulting in its impoverishment (and that of its enemies and allies in Europe generally) relative to the U.S. The author pillories two prime saboteurs of his dream scenario: Kaiser Wilhelm II (who misused his decisively authoritarian foreign policy powers in 1914) and Herr Hitler, who (more ambitiously and with the deposed Wilhelm’s qualified admiration) rubbed out Weimar democracy, militarily occupied and economically exploited much of Europe, and systematically murdered millions. Neither were exactly minor aberrations, yet multiple American businessmen are shown to have admired both these (distinctly un-admirable) German rulers, while others provided support for reasons of business expediency. Their pacific optimism, isolationism, legal punctiliousness as alien corporate guests, Germanic origins, or anti-Semitism twice eventually yielded to patriotic support for the U.S. joining France and Britain in shared elemental struggles against Germans thus misled. There is debate about how willingly misled, but the impressive bottom line is that there are few Germans in today’s admirable federal republic who would rather Hitler had won. They certainly owe Americans considerable thanks for that happy outcome, duly acknowledged here.

Alfred D. Chandler’s Scale and Scope (1990) famously pre-figured Berghahn in bracketing Germans and Americans together as business soul-mates, while seeing the British as obtusely lagging on business “modernity.” Surprisingly, Berghahn essentially ignores his work, perhaps because many of Chandler’s comparative findings have, in a quarter-century of subsequent research, been seriously questioned by experts on both Britain and Germany. Berghahn also rarely cites the “varieties of capitalism” school, which presents a more direct challenge to his thesis. In this alternative view it is the U.S. and UK that are bracketed together as typifying an “Anglo-Saxon” culture of market-orientated business organization, while German business epitomizes the “Rhenish,” corporatist, bank-orientated alternative. This challenge is evasively dismissed rather than seriously addressed on pages 7-8, though Berghahn does later acknowledge much un-American corporatist and cartelist historical baggage in German business before 1945. He then emphasizes (with less chronological differentiation for the – only sketchily covered – second half of the century) that bourgeois Germany was eventually competitively “recast” (the language – though not the interpretation – echoes Charles Maier) more effectively than were Britain’s dysfunctional mutations. For the latter, he rounds up the usual culprits: restrictive trade practices, class exclusion and nationalization.

There are surprisingly few references to Mira Wilkins, whose multiple studies of international investment provide comprehensive statistics that have (largely) stood the test of time. Despite his stated aim of building bridges between political/diplomatic history and quantitative economic history (p. 10), it is not clear how the author would reconcile his impressionistic assertions based on contemporary opinion with her quantitative data. These show that U.S. multinationals favored Britain over Germany as a destination for their overseas investments (e.g. Maturing of Multinational Enterprise, 1974, pp. 56, 185) and that stocks of British investments in the U.S. consistently exceeded Germany’s (e.g. History of Foreign Investment in the United States, 2004, pp. 9, 72, 391, 441-5); and both are in absolute dollar terms rather than scaled to Britain’s smaller population.  Nor can war-time forced sales explain the discrepancy, because American friendship in wartime was as expensive (though fortunately certified by a victory quality brand) as its enmity. Britain had to sell significantly more of its U.S. investments to finance American logistic support in World War One than the U.S. compulsorily or otherwise exacted from Germany (Wilkins, History of Foreign Investment, p. 63), though, in World War Two, the British and German contributions to the U.S.’s costs of European liberation were more equal (albeit then a tiny fraction of the overall cost). Then what does explain the UK’s consistently higher involvement than the German businessmen (whom, Berghahn alleges, were more favored) in two-way multinational capital flows across the Atlantic? Perhaps the subset of Americans buying or selling businesses internationally were for some reason unable to understand the insights about the relative promise of the two countries that he reports? Perhaps Hitler’s determined drive for re-armament was more effective than Britain’s effete 1930s leaders in blackmailing Americans into forms of business complicity not reflected in investment data? Perhaps British managers were as backward and incompetent as he suggests and so needed to invite more American management fizz into their domestic economy than their German counterparts (though that does not explain why British managers were also larger investors in the U.S.)? Or perhaps Berghahn’s business opinion samples are systematically biased?

More recent publications on Europe’s “Americanization” (many focusing on the micro-level and accessible only in German) are more extensively and usefully mined and summarized, while America’s convergence on some European standards is generally downplayed. For those of us who admire (most) modern American values, it is useful to remember that they came from a more eclectic and ambiguous range of sources than the all-seeing Founding Fathers of “Tea Party” mythology. The American military-industrial complex that underpins its present (for all its mistakes, more benign than satanic) global hegemony places the U.S. nearer to Britain (the pre-1914 naval hegemon) and Germany (with the strongest pre-1914 land army) than to the nineteenth century U.S. (then a second-rank, sporadically anti-Hispanic, military power).

Both the role of immigrant German engineers and managers in U.S. business (currently a major focus of an impressive project at the German Historical Institute, Washington) and Germany’s interwar anti-American Ueberfremdung scare might have been given more prominent billing, perhaps without detracting from his argument on net. Some historians might also reasonably question the author’s swallowing of the American (extreme protectionist) “pot” calling the British (still more open, free-trading) “kettle” black, even before Ottawa in 1932 entrenched imperial preferences almost as thoroughly as America’s own longstanding equivalents. We sometimes forget that what earlier united the young American Economic Association with German economic policymakers (incidentally supporting Berghahn’s hypothesis) was their shared opposition to the UK’s reviled “Manchesterismus” (an economic ideology not easily distinguished from what we now call the “Washington consensus”). America’s more successful modern leadership of liberalizing international trade and investment flows might possibly be characterized by less Whiggish historians as “Britishization.”

The most original and interesting parts of the book are its accounts of business opinion, based, inter alia, on the published writings and private papers of Frank A Vanderlip (the globetrotting chairman of National City Bank) and Parker Gilbert (Wall Street banker and official Reparations Agent in Germany under the Dawes Plan), as well as of the regretful ex-Nazi Otto Friedrich’s heartening post-war experiences with American industrialists. The (sometimes spectacularly erroneous) views of the Wall Street Journal, now conveniently searchable online, are also extensively cited.

Even for readers who struggle to find support for some of its claims (among whom you may have gathered this reviewer is one), this formidably eclectic report on some neglected themes offers an interesting survey of the changing perspectives of American and European business elites on multiple important issues. Alas, this potential utility is compromised by the printed book’s exceptionally poor index, so serious researchers should consider the alternative E-book (ISBN13: 978-0-691-85029-7) which, presumably, can be more readily searched.

Leslie Hannah (lesliehannah@hotmail.com) is Visiting Professor, Economic History Department, London School of Economics and author (with James Foreman-Peck)  of “Extreme Divorce: The Managerial Revolution in UK Companies before 1914,” Economic History Review, 2011.

Copyright (c) 2014 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (June 2014). All EH.Net reviews are archived at http://www.eh.net/BookReview

Subject(s):Business History
Geographic Area(s):Europe
North America
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII