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Review of Political Economy

ISSN: 0953-8259 (Print) 1465-3982 (Online) Journal homepage: http://www.tandfonline.com/loi/crpe20

Sraffa's lectures on Continental banking: A


preliminary appraisal

Marcello De Cecco

To cite this article: Marcello De Cecco (2005) Sraffa's lectures on Continental


banking: A preliminary appraisal, Review of Political Economy, 17:3, 349-358, DOI:
10.1080/09538250500147072

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Download by: [Jawaharlal Nehru University] Date: 27 August 2016, At: 14:06
Review of Political Economy,
Volume 17, Number 3, 349– 358, July 2005

Sraffa’s Lectures on Continental


Banking: A Preliminary Appraisal
MARCELLO DE CECCO
Scuola Normale Superiore, Pisa, Italy

ABSTRACT Piero Sraffa delivered a course of lectures on Continental banking to


Cambridge undergraduates in the spring term of 1929 and 1930. He wrote extensive
lecture notes, from which this paper reconstructs the structure and contents of the
course. Sraffa emphasised the differences between the British and Continental,
particularly German, banking systems, stressing the importance of the relations
between banks and industry on the Continent. He also underlined the different roles
played by central banks in the two systems. The lectures are particularly interesting for
the light they throw on large German banks in the 1920s and on the eve of their great
crisis. The role of the allies in trying to reconstruct the German banking system after
the defeat of Germany on lines which would weaken the banks’ links with industry is
brought into relief, as are the Allies’ reduction of the Reichsbank’s role as lender of
last resort. Due attention is paid to the role of foreign capital in German banking in the
1920s and to the crucial impact of the drying up of this resource at the end of the 1920s.

1. Introduction
In his otherwise informative and well written entry on Charles Henri de Saint
Simon for the New Palgrave Dictionary, Kenneth Tribe omitted any mention of
the influence Saint Simon had on the development of banking in the continental
European countries in the 19th century.
Piero Sraffa chose, on the contrary, to underline exactly that influence when
he had to introduce third year Cambridge undergraduates to the mysteries of con-
tinental banking in the course of lectures he agreed to deliver and, indeed, seems to
have actually delivered in the springs of 1929 and 1930.
His focus in the lectures was on the relations of banks with industry. He had
arrived in Cambridge in the wake of the political storm caused in Italy by his
articles on Italian banking published in the English press. He was thus considered
an expert on continental banking. High in Keynes’s mind, when he asked Sraffa to
deliver the course must have been the wish to introduce Cambridge undergradu-
ates to a banking experience that was rather different from that of their own

Correspondence Address: Marcello de Cecco, Scuola Normale Superiore, Piazza dei Cavalieri, Pisa,
Italy. Email: M.dececco@sns.it

ISSN 0953-8259 print=ISSN 1465-3982 online=05=030349–10 # 2005 Taylor & Francis Group Ltd
DOI: 10.1080=09538250500147072
350 M. de Cecco

country, where all Englishmen firmly believed modern banking had been invented
and brought to perfection.
The second half of the 1920s was a time when banking on the Continent, and
especially in Germany, looked like examples British banks could imitate. The
British banks were widely accused in the press, in Parliament and even among
the governing elites of the country, of failing to enable the revival of British indus-
try. On the Continent, especially in Germany, industrial production and investment
were growing apace. As we know, it all came unstuck in 1931. The German
economy collapsed in a heap of ruins in the midst of a huge international financial
crisis; unemployment soared and this probably facilitated Hitler’s ascent to power.
However, when Sraffa set out to give his first course of lectures on banks and
industry on the Continent, all this was still to come. British banks looked obsolete
and incapable of rising to the tasks the new phase of capitalist development
required of them. In November 1929, a few months after Sraffa first delivered
his course, the Committee on Finance and Industry was appointed under the chair-
manship of Lord Macmillan. Its Report came out in June, 1931, when German
banks had already collapsed and the world of glittering German industrial
growth had been replaced by what looked like total disaster. But in the two
years when the Macmillan committee sat, it fell under the spell of John
Maynard Keynes, who was its most influential member. He steered the committee
towards recommending a reform of the banking system which would allow banks
to become more closely involved with industry, and towards a repeal of the Gold
Standard. The Gold Standard was in fact abandoned a few months after the
publication of the Report.
Keynes had brought Sraffa to Cambridge, not only to shield him form Mus-
solini’s wrath, but also to shake the local economic milieu from its Marshallian
complacency. Keynes thought that the young Italian scholar could not only dyna-
mite traditional value and competition theory, but might also awaken the under-
graduates’ young minds to the possibility that banking, that quintessentially
British activity, could be organised, a few miles away from British shores, and
in economies as highly developed as Britain’s, in a completely different way,
and which seemed, at least superficially, to be conducive to a higher rate of
growth.

2. The Lectures: An Overview


Let us turn now to the architecture of Sraffa’s course of lectures. In the Sraffa
Papers at Trinity College, Cambridge, the Lectures on Continental Banking are
kept in Folder D2/5, which contains manuscripts, newspaper cuttings and biblio-
graphies. It is a rather large folder divided into 59 files, each of which contains a
different number of sheets, full of information on historical, bibliographical, stat-
istical and banking matters. The notes marked D2/5/1 – D2/5/46 constitute the
corpus of the lectures. In the subsequent files (D2/5/47– D2/5/59) we find
notes on different subjects and some data concerning great German banks and
their deposits.
The handwritten notes which Sraffa left amount to considerably more than
the mere outline of a course to be delivered orally. We must remember that in
Sraffa’s Lectures on Continental Banking 351

those days a lecture was just that, a reading by a teacher from a manuscript. It was
delivered with some formality, the lecturer standing at a lectern, dressed in a gown
and with a mortarboard on his head or at least besides his notes on the lectern. This
explains why the lectures were written as if they should sound like a written text,
with a rather high degree of structure.1
In the text of the lectures, the subjects Sraffa deals with are rigorously and
consistently presented. In D2/5/1 he introduces the general subject of the
course, stating that he only wants to deal with one aspect of Continental
banking, the financing of industry and its effects on the structure of the banking
system, with German banks as a main reference. Sraffa deals with the birth of Con-
tinental banking, from Saint Simon to the Pereire Brothers (D2/5/1 – D2/5/13).
After that, a long lecture is dedicated to the concept of the liquidity of a bank’s
assets (D2/5/14). The core of the lectures, however, concerns the German
banking system. After going over the genesis and growth of the large German
banks, Sraffa analyses the concentration process taking place in German banking
and the diversification of the banks’ investments in agriculture and industry,
leading to the banks competing with one another to secure industrial clients
(D2/5/15). Relations between banks and industry and between the banks and
the Reichsbank are analysed in D2/5/16. There follows an interesting analysis
of German banking since the First World War (D2/5/25); here, Sraffa devotes
considerable attention to the monetary policy of the Reichsbank and to the
latter’s autonomy in the 1920s (D2/5/28). In the last lecture, Sraffa relates the
conclusions reached by the Dawes commission in 1924 about the Reichsbank’s
autonomy (D2/5/38– D2/5/46).

3. The Content of the Lectures


I started by mentioning Saint Simon. In the first lectures, Sraffa wants to impress
upon his students that banking on the Continent is a social phenomenon very
different from what they know by the same name in Britain. It includes an import-
ant strand, industrial banking, which is absent in Britain, and is performed primar-
ily, though not exclusively, by huge multifunctional universal banks.
He thus begins by mentioning that British banking arose in an evolutionary
fashion, and developed in the 19th century as a clear example of the law of unintended
consequences, as banks of issue were repressed by Peel’s Act and deposit banking
was invented in their stead, giving rise to the circulation of cheques. Because of
the very large needs of international trade finance, especially the financing of

1
The text we possess is mostly written in Sraffa’s hand. Some of it, however, is in a different hand. A
simple comparison with the letters of Sraffa’s mother, Irma Tivoli, reveals that she wrote what is not
in her son’s hand. They are pages reproducing parts of books and articles by other people, which
Sraffa obviously intended to quote in the course of his lectures. Some of the copied texts—passages
from a famous book by Maffeo Pantaleoni—are in Italian; others—on Saint Simon’s doctrine—are
in French; and still others—the American translation of Jacob Riesser’s book on German universal
banks—are in English. We know that Sraffa’s mother visited him at the time he was working on his
notes. It is thus probable that she copied the passages her son intended to use in his lectures while she
was in Cambridge.
352 M. de Cecco

primary commodity trade via short term bills, Sraffa notes, British deposit banks did
not go in for industrial finance; and in any case, British industry, not being very capital
intensive, was able to finance its investment by retained profits.
On the Continent, on the contrary, modern banking arose as the practical realis-
ation of a social dream by some of the dreamer’s disciples. Saint Simon was the
dreamer, and the Pereire brothers the men who tried to make it come true. The
dream was to create an organic link between banks and industry. This was
in nuce the concept of ‘active banking’, a closed circuit between banks and industry
by which banks became able to create deposits. Saint Simon, as Sraffa notes, went so
far as to justify banks’ domination of industry by the superior information banks
could gather on industry, being at the crucial node of the economic system.
To make the impact of this statement greater, Sraffa then quotes abundant
excerpts from the Exposè of Saint Simon’s doctrine by his disciples. He also
quotes from an official German legal document, which defines banks as insti-
tutions whose role is to finance industry, and he contrasts this definition with
the traditional English definition of what deposit banks are and what they do, as
described in a passage from Foxwell’s Essays in Current Finance.

3.1 The Rise of Industrial Banking: The Credit Mobilier


A rather substantial part of the lectures is then dedicated to a precise account of the
long experience of the Credit Mobilier, the industrial bank the Pereire brothers
founded and ran, of the large role it had in the financing of European railways
and other infrastructures, of the building up of Haussmann’s Imperial Paris, on
how the bank flourished and why it collapsed. Sraffa points out the main errors
the Pereire brothers made in the management of the bank they had created. He
emphasises that they began wisely, matching maturities of assets and liabilities,
but then started to finance long-term investment with short-term deposits. Sraffa
also underlines the jealousy they aroused in the haute banque and the hostility
which the Banque de France came to harbour against the Credit Mobilier,
which led the Banque to jettison the Pereires’ requests for necessary Government
permits to issue long-term bonds. The refusal to allow the Pereires properly
to finance their assets led them to the improper use of deposits they resorted to
collecting faute de mieux.

3.2 Liquidity
The lessons of the Credit Mobilier led Sraffa to dedicate a lecture to the concept of
liquidity in banking (D2/5/14). The lecture merits quotation in its entirety:
The question of liquidity of a bank’s assets, and the closely connected one if its
relation with the Central Bank which issues notes, is the fundamental one for
every bank, but of course it is more delicate for an industrial bank which
sinks its resources in long period investments.
In most cases in which this sort of banks have got into trouble, including the
C. M., it has been, not owing to their having lost their own capital and the money
of their creditors, but owing to their inability to transform their assets into cash,
as fast as their depositors were withdrawing their deposits.
Sraffa’s Lectures on Continental Banking 353

It is, therefore, usually agreed that an industrial bank is necessarily lacking


liquidity in its assets, in respect of a run of depositors, whereas a bank that
only discounts bills and makes short loans has always perfectly liquid assets.
Now I think this is only partly true, and requires some qualifications. It would
be entirely true if banks could meet their sight liabilities only by calling in
their credits: but in this case no bank would be safe, unless it kept a cash
reserve equivalent to its deposits; even a three months bill would be an
immobilisation for all the period it had to run.
But, of course whenever banks are called upon to pay back their deposits to
any large extent, they don’t wait the maturity of their credits, but simply sell
to others their assets. . . .
Therefore, to this extent, the relevant quality of assets, in order to be liquid, is
not that they should be payable at an early date, but that they should be readily
marketable [emphasis added]. By selling its assets a bank can change them into
cash immediately; whereas if it has to wait till maturity, this involves a more or
less prolonged delay.
Thus, a book credit to a customer for a definite period, however well secured
and however short the period, is not marketable, and therefore is less liquid than
a gilt edged bond which is payable in 100 years.
The essential thing therefore for liquidity is the existence of a large market for
the commodity or the security in question. The same of course, may be said for
commodities: the more extensive their market, the more readily are they conver-
tible into cash. Gold is the most readily convertible into cash. We might arrange
all commodities in order of liquidity. [Sraffa added this last sentence afterward
on the side of the page].
Consequently, the less ‘specialised’ a commodity is (the greater the number of
different uses to which it can be put) the safer it is for a bank to make advances
upon it. Raw materials (e.g. raw cotton) are more liquid than manufactured
products (e.g. cotton cloth of a given quality) since they have a wider market,
since the number of people who buy products made out of raw cotton is
greater than those who buy products made out of that particular quality of
cloth. (Thus barley is more liquid than beer from the point of view of bankers).
Commodity markets fascinated Sraffa as well as Keynes. They were both
observers and practitioners of the speculative activities that occurred on them.
In his lecture, Sraffa goes on to describe the essential figure of the market
maker. He then introduces the market for gold bullion, and discusses how
central banks make it liquid by being market makers on it, at a fixed price,
under the arrangements of the gold bullion standard.
In the same way, Sraffa argues, the central bank gives security to banks
engaged in extending industrial credit by being prepared to help them when
they are in temporary difficulty and are unable to sell their securities in the open
market. In all countries on the Continent, he notes, joint stock banks have recourse
to the central bank, directly, whenever they need it. ‘In this respect,’ he writes, ‘the
relations of joint stock banks to the bank of issue are very different from those in
England (describe: squeezing the market: direct only in emergencies).’
A central bank can rediscount freely the bills presented by a commercial
bank, if they are illiquid. Things become more difficult, Sraffa notes, if their sig-
natories are not solvent. But this more generous attitude on the part of Continental
central banks is due to the elasticity of their note issue, while the Bank of England
354 M. de Cecco

is tied to the Bank Act’s rigid note issue. On the Continent, he noted elsewhere in
the lectures, a rigid note issue could not endure, because there are no money
markets anywhere nearly as developed as the English one.
Liquidity, he also notes, is different for different quantities of the same
security or commodity. It is the same reasoning that applies in the case of a
small producer facing a large market. A small quantity can be sold without
trouble; a large one may clog the market, making it illiquid. A big bank is therefore
in a worse position as regards liquidity than a small bank: the small institution may
have all its holdings of bills discounted or its securities sold without upsetting the
market; the big one may be unable to do so.
Sraffa’s long note on liquidity will ring some obvious bells in the minds of
those who have read Sraffa’s published work on monetary topics. In particular,
we are reminded of his debate with Hayek, in which he introduced the concept
of own interest rates, and we also recall Chapter 17 of Keynes’s General
Theory, in which Keynes arranges goods according to their liquidity, and adopts
the concept of own interest rates from Sraffa’s contribution to the Hayek
debate. In the lectures we find perhaps the first treatment of this subject. The
idea evidently came to Sraffa when he studied forward exchange rates, around
1919, and provided Keynes with data on the lira’s forward rates; Keynes used
this data in his exposition of the theory of forward rates in his famous Manchester
Guardian Supplement article.

3.3 The Great German Universal Banks


Sraffa remarks that the Pereire brothers were ahead of their time. But their scheme
was sound, and if soundly applied, it would succeed. This remark leads him to
introduce German universal banks. German universal banks imitated the Credit
Mobilier and made its model into a tremendous tool for the enhancement of
German industrialisation and for the increase of German exports, from the time
of German unification to the outbreak of the First World War.
Here Sraffa relies on what we still use today as main reference: Jacob
Riesser’s monumental study of German universal banks, translated into English
by the US National Monetary Commission (USNMC) just before the First
World War. Riesser’s book was translated by the USNMC together with the
equally monumental report of the German Bank Inquiry of 1907.
As in the case of the Credit Mobilier, so with the German universal banks,
Sraffa underlines the essential difference between the evolutionary, trial-and-
error nature of the British banking experience and the highly intellectual nature
of the German one. The German experience represented a clear case of planned
institution building, in which the enactment of laws and statutes was fundamental.
Sraffa notes that by 1914 the German universal banks could be said to have
performed the exact roles the statutes intended for them.2

2
Most of the ground covered in Sraffa’s lectures would also be covered in Barrat Whale’s book on
German banking. In a side note to his manuscript, Sraffa refers to that book as announced to come out
later in 1930. There appears not to have been any exchange between Sraffa and Whale before the
book came out, however.
Sraffa’s Lectures on Continental Banking 355

3.4 The Special Role of the Reichsbank in the German Banking System
In his account of prewar German banking, Sraffa lays considerable stress on the
crucial role played by the Reichsbank, the Imperial central bank. Banks like the
German Grossbanken, which were heavily involved in maturity transformation,
were likely to find themselves periodically stuck in illiquidity situations, and
required reliable access to last-resort lending by the Reichsbank. In fact, the
whole concept of last-resort lending, which had been developed in the English
context, had to be adapted, indeed drastically transformed, to be used in the
German one. Not merely a provider of last-resort lending, the German Reichsbank
was best thought of, à la Saint Simon, as the top institution of an organically
conceived centrally planned economy in which the banking system, headed by
the central bank, performed the role of planning office. Thus, the Reichsbank’s
readiness to assist the banks with funds was to be seen as an organic feature of
the German banking system, rather than as an emergency provision, as it was
always considered in Britain.
In his account of prewar German banking, Sraffa underlined the peculiarity
of the process by which banks would help industrial firms in their start-up
phase, sometimes even setting the firms up themselves and inducing them to go
public when they looked viable, in order to recover the capital invested in the
new companies’ stock. The role played by industrial promoters in Britain and
by investment banks in the US was thus performed by universal banks in
Germany.
Sraffa was at pains to stress how, in Germany, unlike what happened with
industrial promoters in Britain, banks took a long-term interest in industrial
firms, even providing, through specialised agencies they owned, the rating and
certification of industrial firms’ balance sheets.
Sraffa also drew attention to the role of German banks in organising
production in key sectors of the German economy, assisting the formation and
smooth operation of competition dampening cartels. He also gave a precise
account of the concentration process that went on in German banking and industry
before the First World War.

3.5 Postwar Changes in the German Banking System


Delivering his lectures on banking at such a very perturbed time for banks and
industry, both in Britain and Germany, Sraffa’s ultimate aim was to provide his
students with a reliable description and evaluation of German banks’ structural
transformation and performance since the war, in order to supply them with a
reliable view of these banks’ present state. Accordingly, he began by assessing
the war’s consequences both on the banks and on industrial companies. Industrial
firms, he noted, especially the largest among them, profited greatly from war
production. The Government rather than the banks became their main source of
finance. Their dependence on banks thus decreased proportionally. At the end
of the war they were their own masters and some of the most enterprising
industrialists, like Hugo Stinnes, embarked upon an ambitious campaign of
concentration and rationalisation of whole industrial sectors, thus performing
356 M. de Cecco

the role traditionally assigned to German universal banks. Moreover, Stinnes did
that by buying up several middle size provincial banks and using their resources
for his acquisitions.
At the same time, the banks found themselves unable to invest in industry and
allocated most of their uncommitted resources to the purchase of Government
paper.
Unlike what happened in Italy at the same time, the big German industrialists
did not manage to gain control of big banks. Here Sraffa uses some of his extensive
knowledge of Italian banking to sum up in a single page the main events of the
Ansaldo-Banca di Sconto saga.
The big German banks were able to foil any such schemes that the industri-
alists might have wanted to hatch. In this they were helped by the strong deflation
which followed hyperinflation. Industrial profits dried up and industry had to turn
to the banks for financial help. The banks used this chance to radically rationalise
entire industrial sectors. They denied credit to all but the most efficient producers,
compelled to do this by the Reichsbank’s tough policy of credit rationing. Here we
see Saint Simon’s organic relations between central bank and banks at work in the
rationalising phase of capitalism, its transformation into Rathenau’s organisierter
Kapitalismus. Hugo Stinnes, Sraffa notes, was repaid in his own currency by
banks, which led to bankruptcy and the splitting up of his empire, and to his
family’s loss of any control over it.
Financial and industrial developments in the 1920s caused the German big
banks to converge towards their English brethren. Sraffa shows, through a detailed
analysis of the German banks’ balance sheets, that they started relying much more
on depositors’ money than on their own capital. He also notes that having to use
depositors’ money has made the banks much more cautious about what they do
with it. A significant decline in the most risky and illiquid investments is notice-
able in the accounts. Securities held are but one third of what they were before the
war. On the contrary, a much greater reliance is shown on commodity-guaranteed
loans. At the same time, banks have drastically reduced their holdings of cash.
This is due to bad experiences during the great inflation, to the much increased
use of cheques, and to the high real interest rates, which make the holding of
idle cash very expensive.
Thus, the cash-to-deposits ratio, which is highly stable in England and is a
favourite tool of English monetary economists, is quite meaningless in the case
of Germany. The big banks’ liquidity has to be measured by adding up their hold-
ings of bills of exchange and their deposits with foreign banks, both of which can
very easily be converted into cash. This postwar development has left German big
banks more independent of the central bank, as the supply of trade bills and
especially foreign deposits do not depend on it.
Another meaningless ratio for Germany is that of current accounts to savings
accounts. All accounts pay interest and it is impossible to say what percentage of
them is kept by the public for transaction purposes. Moreover, cash holdings are
equally meaningless. Cash does not have the function of a reserve but only of till
money. It comes out with payments and comes in again with other payments. If the
public stopped paying cash to German banks, the latter’s cash holdings would fall
to zero, while they would remain unchanged in the case of English banks, where
Sraffa’s Lectures on Continental Banking 357

they serve as reserves. All this comes out of the system being accustomed for
decades to having no cash rationing on the part of the central bank.
Sraffa adds that a more meaningful ratio may be that of cash holdings to total
bank clearings, because these two magnitudes have a time dimension to them,
while deposits are measured at one instant in time. The whole argument is used
to cast doubt on the validity of the real balances theory of money when tested
by means of continental monetary statistics.
In order truly to know whether the liquidity of German banks increased or
decreased after the war, Sraffa notes, we must consider not only whether the
cash ratio has risen or fallen, but also how liquid are the rest of banks’ assets.
He argues that since securities held have decreased and loans against goods’
guarantees have risen, total asset liquidity has increased, thus allowing banks to
hold a smaller ratio of totally liquid assets, the first line of defence.

3.6 The Role of Foreign Deposits in Postwar German Banking


A large part of the second half of the lectures is dedicated to an evaluation of the
meaning of foreign deposits held at German big banks for the banks’ operational
stance and also for the conduct of monetary policy by the Reichsbank.
Sraffa notes that almost 40% of total deposits with German big banks are of
foreign origin. It is not known precisely what portion of them is denominated in
marks and how much in foreign currencies. But it is believed a high proportion
may be owed in foreign currencies. It is a potentially grave problem for
German banking and, generally speaking, for German monetary management.
Foreign deposits can be withdrawn suddenly and massively, and unlike an internal
drain they leave the German banking and monetary system, whereas local
currency deposits can only move around the domestic banking and monetary
system. The German banks therefore see an external drain as a very serious
danger. They try to protect themselves from it by redepositing the foreign deposits
with foreign banks, even if the sole reason money entered Germany was because
of the higher interest rates offered there. Sraffa is of the opinion that this is an
economically viable proposition for German banks because the interest rates
they charge on loans to their domestic clients are so high that it makes it possible
to afford even a low-yielding foreign reserve to be held against them.
For these reasons, Sraffa notes, it is said that the foreign currency reserves of
German big banks are as big as those held by the Reichsbank, which makes the
management of monetary policy much harder for the German central bank than
it would be if all reserves were centralised, as used to be the case before the war.
Private capital inflows to Germany were a clear advantage for German stabil-
isation in the second half of the 1920s, but a danger sign was given when money
flew out of Germany in 1928 towards the United States to take advantage of the
stock exchange boom. It was replaced by English and continental money, but
the phenomenon could occur again. With the benefit of hindsight we can say
that Sraffa’s worries were realised when money flew out of Germany after the
Austro-German customs union was announced and on the outbreak of the 1931
international financial crisis.
358 M. de Cecco

3.7 The Position of the Reichsbank after the Dawes Plan


In his final lecture, Sraffa examines the position of the Reichsbank after the
Dawes stabilisation plan. He understands extremely well the meaning of the
Bundesbank’s new charter, which the Allies imposed on the German Government.
The Reichsbank’s independence from the Government means that it can no longer
monetise the government deficit. It cannot conduct open market operations as it
used to do before. It is now prevented from being at the top of the organic
chain linking banks and industry. It cannot serve as lender of first resort to the
banking system, and this has led to the banks performing much more cautiously
than in the past, as Sraffa had already noticed in previous lectures.
There has thus been, in the late 1920s, a convergence of the German banking
system towards the English model. Banks’ balance sheets have become more
liquid and they look slightly more like those of English deposit banks.
The big banks have thus been somewhat reduced in their role as organisers of
German industry, in spite of what Sraffa said about their role in the rationalisation
of industry. They now also maintain relations with very small industrial clients,
have opened a large branch network and are much more interested than they
were before the war in collecting deposits from the public.
The heavy dependence on foreign deposits, however, now hangs over them
like Damocles’ sword, Sraffa notes. As he foresaw might happen, they were all
withdrawn at once with the onset of the final political crisis of the Weimar Repub-
lic. The reform of the Reichsbank’s charter had rendered it unable to rescue the
banks. Not surprisingly, the banks fell. Historians are still debating whether this
destroyed the Republic’s last chances of survival. It is more probable that the
chain of causation went the other way around.

4. Concluding Remarks
This essay provides a short account of what can be found in Sraffa’s lectures on
Continental banking. After more than 70 years since they were delivered, a
course on the same subject would necessarily say (if the lecturer were a very
good monetary historian) the same things that Sraffa said. New knowledge of
what went on at the time has not improved on Sraffa’s rendition of events and
his analysis of them. As usual, he hit the nail exactly on the head. That is what
makes the manuscript so useful to monetary historians. A modern lecturer on
Continental banking would be very wise to look at Sraffa’s lecture notes before
he assembled his own. Not least because several of the books Sraffa quotes are
no longer part of the bibliography people read to get acquainted with this subject.

Acknowledgment
I am very grateful to Francesco Auletta, who kindly made available to me the
typed transcript of Sraffa’s manuscript he had made in the Trinity College
Library. Moreover, he has written the remarks, near the start of Section 2, on
the formal character of the lectures; and the footnote on Irma Tivoli’s handwritten
transcriptions.