From Finance to Fascism

56 Pages Posted: 28 Mar 2018 Last revised: 3 Nov 2020

See all articles by Sebastian Doerr

Sebastian Doerr

Bank for International Settlements

Stefan Gissler

Board of Governors of the Federal Reserve System

José-Luis Peydró

Imperial College London; Centre for Economic Policy Research (CEPR); Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Hans-Joachim Voth

University of Zurich - UBS International Center of Economics in Society; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 3, 2020

Abstract

Do financial crises radicalize voters? We study Germany’s banking crisis of 1931, when two major banks collapsed and voting for radical parties soared. We collect new data on bank branches and firm-bank connections of over 5,500 firms and show that incomes plummeted in cities affected by the bank failures; connected firms curtailed their payrolls. We further establish that Nazi votes surged in locations exposed to failing Danatbank, led by a prominent Jewish manager and targeted by anti-Semitic Nazi propaganda. Our results suggest a synergy between cultural and economic factors: Danatbank’s collapse boosted Nazi support especially in cities with deep-seated anti-Semitism; and the Nazis gained few additional votes in cities exposed to collapsing Dresdner Bank, which was not the target of Nazi hate speech. Danat-exposed and non-exposed cities were similar in their pre-crisis characteristics and exhibited no differential pre-trends; firms borrowing from Danat had lower leverage before the crisis than other firms. Unobservables are unlikely to account for the
results.

Keywords: financial crises, political extremism, populism, anti-Semitism, Great Depression

JEL Classification: E44, G01, G21, N20, P16

Suggested Citation

Doerr, Sebastian and Gissler, Stefan and Peydro, Jose-Luis and Voth, Hans-Joachim, From Finance to Fascism (November 3, 2020). Available at SSRN: https://ssrn.com/abstract=3146746 or http://dx.doi.org/10.2139/ssrn.3146746

Sebastian Doerr (Contact Author)

Bank for International Settlements ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

HOME PAGE: http://www.sdoerr.com

Stefan Gissler

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Jose-Luis Peydro

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, Barcelona 08005
Spain
(+34) 93 542 1756 (Phone)
(+34) 93 542 1746 (Fax)

HOME PAGE: http://https://sites.google.com/site/joseluispeydroswebpage/

Hans-Joachim Voth

University of Zurich - UBS International Center of Economics in Society ( email )

Raemistrasse 71
Zuerich, 8006
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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