From Finance to Fascism
50 Pages Posted: 28 Mar 2018 Last revised: 24 Apr 2020
Date Written: March 6, 2018
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 5,610 firms. Incomes plummeted in cities affected by the bank failures; connected firms curtailed payrolls. Nazi votes surged in locations exposed to Danatbank, led by a Jewish manager - but not in those suffering from the other bank's failure. Unobservables or pre-trends do not explain the results. Danatbank's collapse boosted Nazi support, especially in cities with deep-seated anti-Semitism, suggesting a synergy between cultural and economic channels.
Keywords: financial crises, political extremism, populism, anti-Semitism, Great Depression
JEL Classification: E44, G01, G21, N20, P16
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