Financial crises and political radicalization: How failing banks paved Hitler's path to power

72 Pages Posted: 28 Mar 2018 Last revised: 20 Sep 2021

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: September 19, 2021

Abstract

Do financial crises radicalize voters? We study Germany's 1931 banking crisis, collecting new data on bank branches and firm-bank connections. Exploiting cross-sectional variation in pre-crisis exposure to the bank at the center of the crisis, we show that Nazi votes surged in locations more affected by its failure. Radicalization in response to the shock was exacerbated in cities with a history of anti-Semitism. After the Nazis seized power, both pogroms and deportations were more frequent in places affected by the banking crisis. Our results suggest an important synergy between financial distress and cultural predispositions, with far-reaching consequences.

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, Financial crises and political radicalization: How failing banks paved Hitler's path to power (September 19, 2021). Journal of Finance, Forthcoming, 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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