Q&A: Catherine Davies on Transatlantic Speculations

“This creative global history of the financial panics of 1873 is now surely the leading study of its subject. In tracing not only transnational capital flows, but also the meanings and interpretive frameworks employed to make sense of them, Davies has added a newfound sophistication and depth to the historical study of financial panics. This is global history and cultural history of economy practiced at its finest.”

~ Jonathan Levy, University of Chicago

This week we’re featuring Transatlantic Speculations: Globalization and the Panics of 1873, by Hannah Catherine Davies, assistant professor of modern history at the University of Zurich. In this interview, Davies explains what motivated her to research the economic panics of 1873, her work’s place in the New History of Capitalism, and how the events of 1873 are disturbingly similar to aspects of today’s world.

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Q: Why did you decide to write about the panics of 1873?

Catherine Davies: I completed my MA degree in modern history at Freie Universität Berlin in 2009. Back then, I was interested in the history of migration and especially in attempts at curbing emigration from rural Eastern Prussia in the late nineteenth century. This was a concern especially for Conservatives who feared that the exodus of small farmers to the United States was weakening the Conservative element in their state. Many Conservatives were anti-Semites and believed that a stock exchange dominated by Jews was conspiring to undermine the rural economy and social order by offering loans to small farmers, then driving them into bankruptcy, seizing their land, and thus leaving them with little choice but to leave their country. Conservatives’ demonization of Jewish financiers clearly had a longer history which I decided I wanted to explore further. As part of the MA thesis, I had also begun reading about American history as my German sources talked a lot about contemporary developments in the United States, from which they believed they could learn. So writing about the panics of 1873 – which were most acute in America, Germany, and Austria – seemed like a logical next step which would allow me to develop those interests further. Of course, the financial crises of 2008 also made earlier crises seem like a promising topic of investigation. I still remember writing a chapter of my MA thesis in September while following the bankruptcy of Lehman Brothers.

Q: Would you say that your book contributes to what has been termed the New History of Capitalism? If so, what?

CD: I would say that it is certainly inspired by it, and I do hope it can make a contribution. When I first began working on the panics of 1873, I was unaware of this emerging field, and it only came to my attention with Jennifer Schuessler’s now famous New York Times article. I was excited to learn of these developments, as they suddenly provided a new context for my research – there was, at the time, nothing really comparable in German history departments. Books by, for example, Julia Ott, Jonathan Levy and Jessica Lepler then helped me think more clearly about how I might combine different approaches – intellectual, cultural, and legal history – in writing about financial markets and crises and their embeddedness in wider societal contexts. I also think, though, that the New History of Capitalism has often been quite US-centric, so I hope that the transnational and comparative approach I adopt in the book will add a hitherto somewhat neglected perspective to the field.

Q: What were the main differences between the American, Austrian, and German varieties of capitalism when seen through the lens of the panics of 1873?

CD: This is a question that contemporaries on both sides of the Atlantic wrote about in the 1860s and 1870s. Some of their observations and arguments still sound familiar today, for example the idea that American ways of doing business (“capitalism” not being a term that was used by contemporaries) were faster and more ruthless, while the German way, by contrast, was less extreme and antagonistic. Some Austrian writers, on the other hand, believed that their speculative bubble had been caused by a specifically Catholic mindset which precluded people from engaging in business in a thoroughly “modern” way. At the same time, however, commentators in the 1870s began questioning such (self-)images and stereotypes, precisely because the transatlantic panics appeared to suggest that financial practices and ways of doing business were increasingly converging. One of the differences I found intriguing is the fact that American stock market reports were highly personalized and depicted stock market operations as the work of a few well-known speculators. German and Austrian market reports, by contrast, were couched in much more anonymous terms. This is relevant because of the anti-Semitic conspiracy theories that sprouted in Germany post-1873 but not in America.

Q: How do the crises of the 1870s compare to more recent financial crises? What are the main similarities and differences??

CD: Generally, I am more interested in describing and analyzing the 1873 crises in their historical specificity rather than in terms of sameness and repetition. But of course one cannot help but notice certain similarities. When studying newspapers and private communications from the 1870s, it does seem as though the investor psychology was not much different from what we observe today – with many people knowing that price rises are unsustainable in the long run but believing that they will be able to anticipate the turning point and cash in in the nick of time. And then there was a common complaint that small investors were too ill-informed to be dabbling in the stock market; in Germany, this resulted in regulations that effectively barred people of small means from investing in stocks.

At the same time, however, there were considerable differences, most notably perhaps the widespread belief that the introduction of a gold-backed currency would preclude speculative bubbles. In the 1870s, this was the common-sense position, while today, it is one held by a small number of cranks. Back then, a world-wide gold standard was the kind of international regulation contemporary policymakers were happy to embrace, the point being, of course, that it did not require political cooperation because it followed supposedly natural economic laws. German policymakers also designed quite a complex and detailed corporation law in response to the crisis which shows that they very much believed in the regulatory power of the national state, and the question of international economic competition did not come up in this context (it did in other contexts, most notably tariff policy). So here, too, I think we have a marked contrast to today’s debates about economic globalization.