Abstract
This article analyzes the early years of the history of the Bundesbank from a history of economic thought perspective. The study uses the example of Bernhard Benning, who headed the Economics Department of the Reichs-Kredit-Gesellschaft, one of the major banks owned by the German Reich during the National Socialist era. After the war Benning was appointed a member of the board of directors of the Deutsche Bundesbank for twenty-two years. As a student of Adolf Weber and his Munich school of economics, Benning's views were shaped by classical liberal rather than ordoliberal ideas. His legitimacy in postwar Germany stemmed from his public opposition to war financing and warnings about inflation during the Donner-Benning Debate of 1942–43. In this tradition, the early Bundesbank was Weberian rather than ordoliberal, so, for instance, fixed exchange rates were favored, and a strong business and investment perspective was adopted.
1. Introduction
In recent years, the history of the Bundesbank has increasingly become the focus of research. Especially after the euro crisis of 2011, scholars have been interested in the German attitude toward monetary policy and its historical background (e.g., Mee 2019; Feld, Köhler, and Nientiedt 2015). The narratives on the subject often focus on political events.
The Bundesbank itself commissioned a project to research its history and that of its predecessors. The recently published results focus on economic history and do not address the role of monetary theories or economic schools. The exception is the treatment of Karl Blessing, Bundesbank president from 1958 to 1969, who is described as a “theoretically informed pragmatist” (Grüner 2024: 99). For other executives, scholars have largely accepted their self-portrayal as apolitical experts and thus as a functional elite detached from (party) politics and theoretical convictions (e.g., in the autobiographies of Wilhelm Vocke or Otto Pfleiderer) (Marx 2024: 84). In this article, the view of the Bundesbank as apolitical will be complemented by a perspective from the history of economic thought. Although a quarter century ago Keith Tribe (2001: 46) complained about the lack of research on theoretical thinking at the Bundesbank, not much has changed. Only a few studies have been conducted on the theory that was developed and practiced at the Bundesbank (e.g., Rieter 2009).
With the end of the Bretton Woods system, the public became increasingly aware of differences in the theoretical positions within the Zentralbankrat (Central Bank Council). The general conclusion that has been drawn is that only beginning in the 1970s did the monetary policy of the bank become based on theoretical reasoning. The impression that the early Bundesbank developed little to no theory can partly be attributed to the retrospective victory narrative of ordoliberalism. Ordoliberalism, which is a specifically German form of neoliberalism, shaped and dominated—or so many contend—the economic policy of the early Federal Republic of Germany. The same is also said of the Bundesbank. Ludwig Erhard, who is generally regarded as the “Father of the Deutsche Mark” and the “Economic Miracle” after the war, is often connected to this (Herrmann 2019).
The perception that ordoliberalism shaped Germany does not reflect the actual situation. The economic policy debates were significantly more diverse. Ordoliberalism faced criticism not only from leftists and socialists but also from other influential liberal groups that were more oriented toward classical liberalism (Kolev 2018; Rahtz 2022). These differences and conflicts within liberal groups are rarely recognized (Giersch, Paqué, and Schmieding 1992: 26–36; Fèvre 2018: 681; but see Kolev 2015). Nevertheless, the discussions between the liberal groups significantly influenced the economic policy debate in the 1950s. Consider that two essential laws, the Competition Law (Gesetz gegen Wettbewerbsbeschränkungen) and the Bundesbank Law, were both approved only in July 1957 because of these disputes, despite having been discussed for years. The classical liberals lost their fight against the establishment of an antimonopoly office but won the battle for an independent central bank against the ordoliberals (Bibow 2009; Köhler and Nientiedt 2017). Even according to contemporary accounts, this “fraternal quarrel” between classical liberal groups and ordoliberals reached alarming dimensions over the course of the 1950s (Greitens 2023).
The topic of this article is not the dispute between these liberal groups but the specific influence of the Munich school of economics. Its central figure was Adolf Weber. A long-standing professor in Munich and a successful textbook author, Weber has, despite his importance and the influential network of his students, remained largely unknown. His Munich school of economics influenced several executives at the Bundesbank.
This article aims to highlight Adolf Weber and his economic theories as a significant influence on the early Bundesbank, particularly in the 1950s. For example, by examining the composition of the Zentralbankrat, several groups can be identified: Weber's students, notably Bernhard Benning and Otmar Emminger, played a key role. Ernst Wagemann, head of the Statistischen Reichsamtes (Statistical Office of the German Reich) and Institut für Konjunkturforschung (Institute for Economic Research) during the Weimar Republic, was influential not only for Benning and Emminger but also for Eduard Wolf, the chief economist. Additionally, there were actors shaped by the experiences they had at the predecessor of the Bundesbank, the Reichsbank, such as Wilhelm Vocke and Karl Blessing.
To highlight the significance of Weber, Bernhard Benning serves as an ideal example. Benning, even as a second-tier figure, is a perfect case to study, as he was an intimate student of Weber who held important positions in the banking industry during the Nazi era. Furthermore, he also served on the board of directors of the Bank deutscher Länder (the later Bundesbank) from 1950 to 1972. For this purpose, this essay has the following structure, addressing three areas: Weber's influential monetary thinking, Benning's experiences during the Nazi era, and the continuities of both into Benning's years as a member of the Zentralbankrat at the Bundesbank.
The article starts with Adolf Weber. Unfortunately, there is no intellectual biography of him. However, some key economic principles and monetary theoretical considerations can be presented in section 2. In section 3, the biographical and intellectual development of Bernhard Benning and Weber's influence on him will be described. In the following sections, Benning's experiences and writings between 1933 and 1945 will be analyzed. He worked for the state-owned Reichs-Kredit-Gesellschaft, collaborating with the “Führer” of the Reichsgruppe Banken, Otto Christian Fischer. With the Donner-Benning debate, he was one of the main critics of the Reich's monetary policy during the war. How these banking experiences shaped Benning is described in section 4, and the Donner-Benning debate is explored in section 5.
The last part examines the influence that these theoretical influences and experiences had on Benning in the early Bundesbank. With his long-term membership on the board of directors of the Bank deutscher Länder/Bundesbank, he influenced monetary policy. This is described in section 6.
The results are summed up in section 7.
2. Adolf Weber and the Munich School of Economics
After graduating from school in Bonn in 1897, Weber studied law and political science. He first drew the attention of bankers and economists in 1902 with his highly regarded dissertation (“Depositenbanken und Spekulationsbanken”). He laid the foundation for a long-lasting debate on the characteristics and advantages of different financial systems. He completed his habilitation in 1903 with a thesis on land speculation titled “Über Bodenrente und Bodenspekulation in der modernen Stadt” (1904) and became lecturer (Privatdozent). In 1908, he was appointed professor of political science at the Cologne School of Commerce, in 1914 he moved to Breslau, and in 1919 he moved to Frankfurt. Finally, in 1921, he succeeded Max Weber as the chair of economics and finance at the University of Munich, where he continued to work well beyond his retirement in 1947. During the Nazi era, Adolf Weber was largely able to teach and research unimpeded. Although he made some concessions to Nazi ideology in his writings, he did not join the National Socialist German Workers’ Party (NSDAP). He remained a practicing Catholic and held on to his liberal views. After the war, Weber increasingly sought to influence public opinion. In 1948–49, he was among the pioneers of the Informations- und Forschungsstelle für Wirtschaftsbeobachtung (today, the ifo Institute) in Munich (Rieter 2020).
Weber became a proponent of the ideas of the Swedish economist Gustav Cassel, who enjoyed remarkable popularity in Germany in the 1920s and whose work had a broad impact. A whole “Cassel literature” formed around him, with people like Weber promoting his approach to economics. Similar to Cassel, Weber rejected mathematical modeling and had no interest in value theories (Köster 2011: 101–3; Schumpeter 1927: 242; Kruse 1963: 16, 24; Janssen 2012: 63–67).
Weber and Cassel advocated an overinvestment theory of business cycles. According to the theory, crises are caused by overinvestment in relation to aggregate savings. While the production of consumer goods is relatively constant, the fluctuations in the production of capital goods lead to business cycles. Therefore, economic policy must ensure long-term and stable capital accumulation by enterprises. Depressions are caused by a lack of capital accumulation. The preconditions for investments are real savings and not monetary credit expansion (Cassel 1923: 484–98; Weber 1929: 424–25; Weber 1959: 46; also Janssen 2012: 358−61, 391−99, 462−64). Capital scarcity or “frightening capital poverty” (Weber 1928: 8) was a central element in many of Weber's writings.
Owing to his broad orientation and urge to go public, and his great renown as a university teacher, speaker, and author of widely published textbooks on economic theory and policy, Weber was among the most prominent German economists during the first half of the twentieth century. His theoretical analyses and his practice-oriented treatment of current economic problems had a significant impact.
Adolf Weber was influenced by the conservative economic (classical) liberalism of the German Empire during his upbringing (Rieter 2020). His academic career began in the German Empire and continued largely uninterrupted through the Weimar Republic and the National Socialist era into the Federal Republic (Hagemann 2008: 94). He was an example for many liberal economists who embraced the National Socialist zeitgeist (Janssen 2012: 506, 522).
Together with Otto von Zwiedineck-Südenhorst, Weber dominated the education of economists at the University of Munich for many decades (Weber 1961). With his extensive network of students, Weber became particularly influential. The rarely used term Munich school of economics describes a wide circle of students of Adolf Weber who were taught in Munich for decades and stood in a classical liberal tradition shaped by Gustav Cassel (“Adolf Weber” 2024). Among these students were Erich Carell, Georg(e) N. Halm, Alfred Kruse, Adolf Lampe, Fritz Terhalle—and Bernhard Benning.
3. Biography of Bernhard Benning
Bernhard Benning was born in Munich on September 17, 1902.1 After graduating from high school in 1921, he completed an apprenticeship at the Bayrische Hypotheken-und Wechselbank in Munich, graduating in 1923. He continued to work at the bank while studying economics at the University of Munich and graduated in April 1927. Benning attended lectures by Zwiedineck-Südenhorst, but he wrote his doctoral thesis, which he defended on June 27, 1928, under Adolf Weber on the “Black Friday” of May 13, 1927, when prices plummeted on the Berlin Stock Exchange. In this work, Benning rejects intervention in the market and considers securities exchanges as an indispensable instrument for capital allocation in a modern economy (Benning 1929: 81). In addition to the overinvestment theory of the business cycles according to Gustav Cassel and Adolf Weber (79), he frequently cites Alfred Lansburgh, a famous financial journalist known for his fight against inflation. Thus, his lifelong theoretical convictions are already outlined as follows: the usefulness of capital markets, the importance of private investment for an economy, and a classical liberal stance.
Benning applied for a position at the Reichsbank after completing his doctorate but was turned down. Instead, at the suggestion of Zwiedenick-Sündenhorst, he went to the Statistische Reichsamt in Berlin in September 1928 to work in the Monetary Affairs Department on bank balance sheets and loans as well as capital formation and investment. The modern empirical methods by Ernst Wagemann in cooperation with the Institut für Konjunkturforschung had a tremendous influence on Benning's later work. He also met there many other economists who were to accompany him throughout his life, including Otto Donner, Kurt Hunscha, Günter Keiser, and Otmar Emminger (Janssen 2012: 85, 448; Hunscha 1962: 14). Wagemann was not a theorist and had not developed his own theory of the business cycle (Janssen 2012: 339; Kulla 1996: 44); thus, Adolf Weber was Benning's main influence in theoretical matters.
The most significant work by Benning during this period was the first systematic investment statistics for the German Reich, which he published together with Keiser in 1931. The initiative for the work came from Eugen Schmalenbach, who wanted not only statistics on monetary capital formation but an estimate of actual physical capital accumulation, including estimations on self-financed investments by companies. This work went hand in hand with estimates of savings and investment activity in an economy, which were essential for the Cassel-Weber overinvestment theory of business cycles (Benning and Keiser 1931).
These studies made Benning interesting for the Reichs-Kredit-Gesellschaft (RKG), which was a major state-owned bank in Berlin. In October 1933, he moved to the RKG as director of the Economics Department based on the recommendation of Adolf Weber. Ernst Stern had established the Economics Department in the 1920s, but he was forced out to London by the National Socialists in 1933. Stern had also established semiannual reports of the RKG on economic development in Germany, which received international recognition (Hunscha 1962: 15; Jannsen 1962: 17).
Benning's tasks included continuing the semiannual reports with the empirical methods learned by Wagemann, advising the board of directors on economic matters, and preparing reports. Since Otto Christian Fischer, director of the RKG, had become the leader of the Reichsgruppe Banken, the institution for the Gleichschaltung of the banks, in 1934, the Economics Department had become increasingly important (Muthesius 1962: 17, 20, 29, 37). Together with Walter Hofmann, Fischer's closest associate, Benning was instrumental in implementing Fischer's National Socialist banking policy (Muthesius 1973: 117–18).
Benning was also responsible for an extensive range of economic analyses. In this capacity, he was head of the Volkswirtschaftlicher Beirat des Deutschen Instituts für Bankwissenschaft und Bankwesen (Economic Advisory Board). Benning was given exclusive access to information from the National Socialist apparatus for his analyses (Gleske 1990: 553; Bundesarchiv R/8136/1889).
As head of the Economics Department, Benning was also the superior of Otto Pfleiderer, whom he kept at the bank against many attempts to poach him and with whom he later sat together from 1950 to 1972 at the Zentralbankrat of the Bank deutscher Länder/Bundesbank.
Although Benning was not a member of the NSDAP, he was nevertheless involved in many National Socialist organizations.2 The most important for his work was his membership in the Akademie für Deutsches Recht (Group IV for Economics), where he participated in two working groups, Foreign Trade and Money and Credit (Schubert 2011: XXI).
From January 1944, Benning was also head of the Reporting Department in the planning office of the Reichsministerium für Rüstung und Kriegsproduktion (Reich Ministry of Armaments and War Production), which had considerable problems in receiving adequate information on the state of the economy and therefore sought contact with Wagemann and his institute, who involved many former associates (Herbst 1982: 442–49; Tooze 1993: 17–22). In this capacity, Benning was the main author of the “Report on the German Economic Situation, 1943/44,” which echoed the structure of the RKG's semiannual reports and became the key document on the economy in the final months of the war (Scherner 2007: esp. 499).
On May 17, 1945, Benning was appointed as a provisional board member of the RKG by the newly established office of the Allies responsible for banks but was then taken into custody on May 22. He was held in Soviet camps until February 1950 (Hofmann 1980: 97–98). This period confirmed Benning's attitude against Bolshevism.
On March 6, 1950, Benning was invited by Erich Zachau, a former banker in Berlin, to apply at the Bank deutscher Länder;3 as early as March 14, Benning was able to accept the position as director. This appointment had been supported by Otto Pfleiderer, who had become the head of the Landeszentralbank (regional central bank) in Baden-Württemberg. Pfleiderer, a former staff member of Benning's Economics Department, had also supported the Benning family during Benning's imprisonment (Bundesbank archive N1/176).
Benning was reappointed beyond the age limit until 1972 by the federal government, whose members repeatedly attended the Zentralbankrat meetings and therefore knew him well. He died in Frankfurt on December 19, 1974.
Many contacts from the Berlin period were continued in Frankfurt. In the 1950s, Benning became familiar with Volkmar Muthesius, who, together with Walter Hofmann, had founded the Zeitschrift für das gesamte Kreditwesen in 1946 and was heavily involved in the disputes with the ordoliberals. Muthesius had been cooperating with the Bank deutscher Länder since 1948 to promote the bank's stance to the public with his Zeitschrift für das gesamte Kreditwesen (Mee 2019: 110–11, 128, 180, 204–5, 304).
Benning always worked for state-oriented institutions—he applied for a position at the Reichsbank and was an employee of Statistisches Reichsamt, the state-owned RKG, and later the Bank deutscher Länder/Bundesbank. During 1933 and 1945, he was a bank manager and leading bank official of the Nazi regime. Across all positions, he published economics texts with scientific standards on banks and financial markets.
Benning consistently represented monetary theoretical positions that were influenced by Weber. For example, similar to Weber, Benning distinguished between the money market, relevant for the circulation of goods and services, and the capital market, relevant for investments and its link to business cycle theory (Benning 1933: 185; Weber 1961: 104). “If the artificially [by credit expansion] increased demand is directed towards consumption goods . . . , such credit must have a capital-reducing effect in the long run” (Weber 1938: 171–72).4 Keynesian ideas led to “dangerous collectivist recommendations” (Bundesarchiv B330/9676). Ernst Wagemann was also of great importance to Benning. However, this influence did not pertain to theoretical ideas; unlike Weber, Benning was always engaged in empirical work. Benning combined both by using empirical methods supporting Weber's theories.
The communication between Weber and Benning continued until the latter's death. Benning wrote an obituary for Weber in the Weltwirtschaftliches Archiv. In the obituary, Benning highlighted Weber's advocacy of stock markets. Weber, as a “paternal teacher” and “master” (Bundesarchiv B330/9676), had had a “profound intellectual influence” (Benning 1963: 4–5) on his students, and this was well known in Benning's case (Mellinger 1962: 25).
4. Reichs-Kredit-Gesellschaft and Reichsgruppe Banken
The RKG dates back to the war economy in World War I and was established in 1917 as a statistical bureau for state-owned companies in war production to balance liquidity surpluses and needs between the companies. After 1918, the statistical bureau was transferred to the Reichs-Kredit-und Kontrollstelle GmbH; with the founding of the Vereinigte Industrieunternehmungen Aktien-Gesellschaft (VIAG) in March 1923 as an umbrella company for industrial holdings previously held directly by the German Reich, the office was reorganized as the RKG, transferred to the VIAG, and then converted into a stock corporation in 1924 (Wixforth 2009: 3–4).
With its transformation into a stock corporation, the RKG developed into a major bank, which was no longer only for the internal financing of the VIAG but was also increasingly in direct competition with other major banks in investment banking (Pohl 1998: 51, 54). In the banking crisis of 1931, the RKG was a key instrument of the Reich Ministry of Finance for intervention (Wixforth 2016: 80, 93). As a state-owned bank, the RKG was a leader among the major banks after 1933 in forcing out Jewish employees and in the “Aryanization” of companies (Pohl 1998: 141, 217–18).
Otto Christian Fischer had been a member of the board of directors of the RKG since 1925 and remained there until 1938. Together with Friedrich Reinhart and August von Finck, Fischer was one of the first representatives of the banking industry to publicly support the NSDAP even before 1933 and agreed with its anti-Semitic rhetoric. He was rewarded by becoming the most important banking official in the Third Reich. In 1933, he became chairman of the Centralverband des Deutschen Bank-und Bankiergewerbes (the association of German banks), which was transformed into the Reichsgruppe Banken in 1934 (James 1995: 391; 2001, 57, 277; Wixforth 2014: 290).
Fischer saw himself as a link between traditional banking and National Socialism (James 2001: 277). He wanted to subordinate the banks to the “totality of the National Socialist state” (Fischer 1934: 10). The introduction of the Führer Principle was intended to prevent “excessive competition.” Nevertheless, he was later attested as having shown ideological restraint toward the National Socialists by his colleagues in the RKG (James 2001: 5).
The concrete competencies of the Reichsgruppe Banken were limited and lay in the bureaucratic-administrative supervision of banking. Local competition disputes could be resolved by the Reichsgruppe Banken (Salden 2019: 351–52; Bundesarchiv R/8136/3717). Otherwise, this institution was primarily an “information agency” for its members (Wixforth 2014: 285). In October 1935, Fischer founded the Deutsches Institut für Bankwissenschaft und Bankwesen (German Institute for the Banking Science and Banking Industry), which was largely supported by the Economics Department of the RKG, to provide considerable guidance to banks. Thus, Benning became the “good spirit of the Institute” (Muthesius 1962: 29).
Along with the institute, the Volkswirtschaftlicher Beirat des Deutschen Instituts für Bankwissenschaft und Bankwesen was also founded (Fischer 1935: 7). Benning hosted the weekly luncheons. This advisory board brought together the heads of the Economics Departments of the major Berlin banks, as well as the editors of the two leading banking journals, Bank-Archiv (Günther Keiser) and Die Bank (Ludwig Mellinger) (Benning 1960: 16; Muthesius 1962: 15). This group around Fischer and the institute, and the economic advisory council, of which Benning was a central member, did not distance themselves from these activities after the war. On the contrary, they remained loyal to Fischer (Hofmann 1949: 463–64) and attested to each other their internal emigration, silent resistance, and resigned fatalism (Muthesius 1973: 69–70). This group of classical liberals in banking tended to be more connected to the Nazi regime and to be more opportunistic than most ordoliberals. In the case of Benning, he legitimized his prominent role after the war, despite his entanglements, through his public opposition to war financing beginning in 1942 with the Donner-Benning debate.
5. Donner-Benning Debate: Criticism of War Financing
A public debate regarding war financing began after the dismissal of Hjalmar Schacht as Reichsbank president in January 1939 because of his criticism of the massive increase in government spending. In December 1939, the Professoren-Kriegsfinanzierungsgutachten (professors’ war finance report) was published, calling for the abandonment of monetary credit financing (Tribe 2001: 36–37; Donner 1942: 5). In 1940, five essays were published in the Weltwirtschaftliches Archiv on the topic; however, all essays downplayed the problem (short-term credit with excess liquidity). The downplaying was advocated in subsequent debates by Hero Moeller and Robert Philipp Nöll von der Nahmer, among others (Take 2019: 239; Janssen 2012: 510–11, 517).
The actual discussion began in 1942 with two essays by Otto Donner and Benning, which were also published in the Weltwirtschaftliches Archiv. Both essays were later published together as an offprint (see Benning 1942a; Donner 1942). Benning focused on the monetary consequences, while Donner concentrated on the question of government debt limitations.
The two essays induced a wide-ranging discussion; in addition to the Weltwirtschaftliches Archiv, the Bank-Archiv and Die Bank were particularly involved in the debate. That those two journals were well known in the banking community was not coincidental: the authors and editors knew each other well. In addition to Keiser, the discussion also included, for instance, Kurt Hunscha, who, as a bank economist, was also a member of the advisory board of the Deutsches Institut für Bankwissenschaft und Bankwesen (Hunscha 1962: 14).5
The contributions of Donner and Benning were also discussed at the Akademie für Deutsches Recht in April 1943 and were thus the “most official” contributions to the debate. The dispute will therefore be called the Donner-Benning debate owing to the frequent citations of these contributions. The reputation of Benning as a critic of the National Socialists after 1945 was largely based on the debate.6
The preoccupation of Benning with the finance policy of the National Socialists went back longer. In April 1936, he wrote an internal and confidential report for the RKG, in which he warned against the high and especially short-term indebtedness (Bundesarchiv R/8136/3804). Further internal reports and an essay in the Bank-Archiv followed in 1939 (Bank-Archiv of January 15, 1939, 31−35; Bundesarchiv R/8136/3806, R/8136/1751, R/8136/3809).
The main result of the Money and Credit working group of the Akademie für Deutsches Recht was the 1941 anthology Deutsche Geldpolitik (German Monetary Policy), which Heinrich Ritterhausen described not as a scholarly work but as a patriotic one (Schubert 2011: XXIV, 291–94; Janssen 2012: 19). In this anthology, Benning wrote the essay “Kreditbanken und Geldmarkt” (“Credit Banks and the Money Market”); at the end of the essay, rather in the spirit of the downplaying that still prevailed, Benning cautiously hinted at a criticism of war financing (Benning 1941: 356–59). Simultaneously, the problems of skimming off excessive liquidity had already been intensively discussed in private meetings of the working group (Bundesarchiv: R/8136/1833, minutes of the meeting of October 21, 1941).
Benning was more explicit in his contribution to the Festschrift for Otto Christian Fischer of 1942. In the spirit of Weber, he suggests that investment activity may have gone too far through credit expansion instead of real savings:
In accordance with the primacy of the dispositions of the goods economy, the justifiable extent of a general credit expansion is determined by the real goods world. The economic limit must be considered to have been reached when the national economy has entered the state of full employment: when, that is, no additional capacity, no idle labor force, and no usable inventories are any longer available. (Benning and Neubaur 1942: 74)
The high-profile essay “Aufbringung der Kriegskosten, Kapitalfreisetzung und Geldüberfluß” in the Weltwirtschaftliches Archiv of 1942 begins by emphasizing the remarkable importance of exploiting the conquered European countries for war production. “The German war economy was able to draw to a considerable extent on the other European economies to help cover war expenses. . . . Considerable portions of the productive capacities of the continental European area are, at present, working in this way for the war requirements of the allied Axis powers” (Benning 1942a: 229).
In this context, Benning also addresses the reorganization of the Continental European area. “There is no doubt that, after a successful end of the war, an abundance of additional productive forces can be activated by this expansion of the continental living space, which will favor an accelerated overcoming of the consequences of the war and of productive forces” (Benning 1942a: 231).
These remarks refer to the “Funk Plan,” with which Walther Funk, the Reich minister of economics and president of the German Reichsbank, wanted to align Continental Europe with German economic interests after the war was won. These plans were based on lectures that were published in 1942 in an anthology (Gross 2017).
The involvement of Benning in these plans, which were outlined in his essay “Europäische Währungsfragen” (“European Monetary Issues”) in the anthology, demonstrates his entanglement with the National Socialists and their plans during this period. Contrary to his liberal convictions, Benning here argues against gold automatism (“This automatism will not rise again!” [Benning 1942b: 163]) and for price regulations (“With the help of a constantly refined price and wage control apparatus, it has been possible to make this monetary policy successful” [164]), defends credit expansion since 1933, and advocates manipulated exchange rates and a clearing system centralized in Berlin to supply Germany advantageously with goods from Continental European countries.
Benning defends an “elastically adjusted exchange rate policy geared to the goal of the best possible exchange of goods and services in continental Europe” (Benning 1942b: 174). However, he rejects exchange rate policy as a means of controlling the balance of payments: “Admittedly, it will be important to ensure that changes in exchange rate relations should, as far as possible, be exceptional. Temporary disturbances of the balance of payments, such as might be caused by unfavorable harvests in individual countries, should be bridged by compensatory intergovernmental credit relations” (177). The merits of Georg Friedrich Knapp, who is elsewhere accused of having abetted the hyperinflation of 1923 with his famous State Theory of Money, are also astonishingly highlighted (179). Grotkopp (1954: 232, 242) misinterpreted this highly opportunistic phase in Benning as “German Keynesianism.”
The Funk Plan of 1940 envisioned a currency area in Europe independent of gold, with a multilateral clearing union and a future currency union. The public impact of the plan was enormous; the Keynes Plan for a postwar monetary order and the architecture of the Bretton Woods system of 1944 are often associated with the Funk Plan. Some of the contributions read like an early anticipation of the controversy over the eurozone (Ritschl 2024: 28).
The later parts of the essay “Aufbringung der Kriegskosten, Kapitalfreisetzung und Geldüberfluß” from 1942 focused on the monetary consequences of silent war financing. Tax financing of the war is impossible for practical reasons; thus, the war is financed by debt (Benning 1942a: 231–32). The resulting money incomes among households and firms meet a limited supply of goods as production is focused on the war effort.
Accordingly, income earners can only buy the remaining limited volume of goods with their too high money incomes. The consequence is an open discrepancy between the high money incomes and the limited supply of marketable goods. This leads to the following possibilities for the important task of solving this discrepancy: Either the high money incomes compete for the too scarce supply of goods; the consequences of such a liberalistic7 solution method are well-known: progressive price increases and initiation of the inflationary circulus vitiosus with wage increases, etc.; or the state intervenes to steer the supply of goods or the state intervenes in a guiding and contractive way with the aim of neutralizing monetary tensions by rationing consumer goods and limiting private sector investment, combined with wage and price freezes. (232–33)
Excess liquidity must be balanced by appropriate measures. In the short term, this means that liquidity must be frozen during the war by “measures of rationing, investment control, distribution of raw materials on the basis of a well-developed index system, etc. The direct claim to goods is largely withdrawn. Money may thereafter exercise purchasing power only in connection with the token, points, and coupon system” (Benning 1942a: 243).
Even after the war, the high surpluses of money in broad sections of the population may only gradually be transformed into demand because this cannot be fulfilled immediately, and production must first be converted to a peacetime economy (Benning 1942a: 250). Benning argues for a state-directed prioritization of expenditures: “The most urgent demand that arises from this is the need for responsible higher-level planning based on a carefully weighed hierarchy. As is well-known, the famous ‘cake’ of the social product can only ever be divided once” (253). Investments in the consumer goods industry, transport, and replacement investments should be made first.
This attempt at ranking can only be seen as the result of purely theoretical economic considerations. The authoritarian state reserves for itself the decision as to what is urgent according to its overriding objectives in peacetime no differently than in wartime. Naturally, the authorities responsible for the decision will have to make clear to themselves that no magic can be performed in the national economy and that there are no “miracles” in this respect. Everything must be worked out, and what is worked out can only be put to a final use. If, for example, one increases investments in the public sector, this must be at the expense of the consumption sector. (254)
To deal with high liquidity, Benning suggests the following possible solutions: “1. consolidation; 2. continued voluntary saving in the postwar economy; 3. taxation, public expenditure restraint, and liquidation; 4. reprivatization of public assets and drawing on outside economies” (Benning 1942a: 255–56). He rejects debt cuts or inflation (264–65).
If the essay was still vague and cautious in its criticism of war financing, then Benning subsequently became increasingly offensive. In August 1942, in a strictly confidential note and in his role as liaison officer to the Wehrwirtschaftsstab of Oberkommando der Wehrmacht, he expressed his concern regarding war financing (Bundesarchiv R/8136/3732). On October 9, 1942, Benning was able to publish an abridged version of his essay from the Weltwirtschaftliches Archiv in the Deutsche Allgemeine Zeitung, of which Muthesius was the editor. His essay ends with the plea for “price stability” as an essential goal of monetary policy.
This essay was followed in March 1943 by a speech to the Money and Credit working group titled “Expansion und Kontraktion der Geldmenge” (“Expansion and Contraction of the Money Supply”), which was later also published in the Weltwirtschaftliches Archiv (Bundesarchiv R/8136/3810). The manuscript of the speech contains many passages, such as direct critical references to colleagues and criticisms of data availability, that were not published later on.
A clear criticism of silent war financing can be found in the published version, which is organized in a similar way as the article of the previous year. With the achievement of full employment in 1937, monetary expansion should have been scaled back again. Without this correction, the “phase of full employment passed into that of overemployment” (Benning 1943c: 210). Isolated measures to absorb the monetary surplus (for example, wage/income tax surcharges, wartime surcharges on tobacco and alcohol, surcharges on the corporate income tax, and replacement of the house interest tax) were taken but were insufficient (212–13).
Benning rejects inflation as a solution: “The topic of changes in the value of money is one of the most sensitive subjects of discussion, especially in Germany, which has not forgotten the catastrophe of total inflation at the end of a lost war in the years leading up to 1923” (Benning 1943c: 229). For inflation to then remain manageable, “the power of a strong state authority” is needed to “guarantee the transition from wartime expansion to orderly management and liquidation in the long run” (240–41). Benning recommends debt restructuring into long-term government bonds and moderate cuts (225−27).
In the discussion at the working group that followed the lecture, the problems raised by Benning were argued by Nöll von der Nahmer for example, while the vice president of the Reichsbank, Emil Puhl, repeatedly called for concrete proposals for a contraction of the money supply (Schubert 2011: 484, 475–77).
The distributional consequences of the measures were intensively discussed. The director of the Reichsbank, Karl Nordhoff, clarified that all methods of dealing with inflation, debt cuts, the wealth tax, debt restructuring, and price/wage controls were problematic from this viewpoint. Ministerialdirigent Riehle from the Reich Ministry of Finance said, “We will have to get used to the fact that we are poor, as a war is fought by consuming resources, and I only hope that after the war we will have the courage to fully draw the consequences that arise from all of this” (Schubert 2011: 475).8
The problems of the hidden inflation were so pestering that the repressive government had to allow the Donner-Benning debate on the matter. The argument in the banking community was accepted and had no personal consequences for the participants. The regime seemed unconcerned that the actors would withdraw their support for the war. In this respect, the question arises as to what extent this widespread and legal opposition legitimized Benning's prominent role after 1945, as he had seen it.
In the debate, some of Benning's central theoretical and monetary views became clear, which he also maintained during his time at the Bundesbank. His fight for fixed exchange rates was deeply rooted in an ideal of the gold standard and through the debates on the Funk Plan. Price stability was mentioned by him as an essential objective for monetary policy. For this, Benning supported a steering role of a strong state in money and capital markets.
6. Director at the Bundesbank
This section describes Benning's role in the Bundesbank and links his actions there, as far as they can be specified, with the previous results.
The members of the board of directors of the Bank deutscher Länder were elected by the Zentralbankrat, particularly by the presidents of the Landeszentralbanken (Wandel 1980: 69). In this respect, presidents had a dominant influence on the composition of the board. At that time, the prevailing belief was that the personality of a central banker was more crucial than a precise mandate for the central bank, making the appointments particularly significant (Rieter 2009: 165–66).
The restructuring of human resources was primarily in the hands of Erich Zachau, who was not originally from the Reichsbank. Zachau represented a fresh start in personnel policy and was seen as a symbol against old Nazi networks (Marx 2024: 80). At the beginning of March 1950, Zachau invited Benning to the Bank deutscher Länder in the name of several members of the Zentralbankrat, among others Pfleiderer (Bundesbank archive B330/9669). They believed that the Reichsbank had failed to stop inflation after World War I and the depression from 1929 and wanted to bring people into the Zentralbankrat who had no imprint from the Reichsbank. These included not only Zachau and Benning but also Eduard Wolf and Otmar Emminger later on (Gleske 1990: 556–57).9
Fritz Paersch, a former employee of the Reichsbank, was to be appointed. However, Paersch was not denazified; thus, Benning was appointed instead. Benning had made a name for himself as a critic of war financing with the Donner-Benning debate and was regarded by the Allies as a convinced “Anti-Nazi” (Office of Military Government for Germany OMGUS, Integrity of Prominent People in German Economic Circles, November 6, 1944); thus, he was quickly denazified.
Pfleiderer wanted to create a counterfaction to the former employees of the Reichsbank at the Zentralbankrat with Zachau, Benning, Emminger, and Wolf. It was about a group of young economists without a Reichsbank background who were responsible for the substantive, institutional, and personnel modernization of the German central banking system (Gehlen and Janneck 2024: 88). Nevertheless, Wilhelm Vocke's efforts to maintain cohesion within the central bank should not be underestimated. The anti-inflationary narrative served as a unifying bond. This illustrates how the past, particularly the experiences of the 1920s and 1930s, influenced all senior central bankers (92).
There were heated disputes between the group of young economists. Pfleiderer and Wolf are described by Holtfrerich as intellectual opposites. Emminger disregarded his decades-long colleagues Benning, Zachau, and Pfleiderer in his memoirs. Meanwhile, Wilhelm Vocke, president of the Bank deutscher Länder and former director of the Reichsbank, honored Wolf and Benning in his memoirs. A central dispute herein was the question of the revaluation of the deutsche mark, which Emminger called for with increasing vehemence and which was rejected by Vocke, Pfleiderer, and Benning (Holtfrerich 1998: 398; Emminger 1986; Vocke 1973: 205).
Although Otmar Emminger, like Benning, was influenced by both Weber and Wagemann, Emminger developed differently in terms of monetary theory compared to Benning. He had, as did Wagemann, a more positive stance toward Keynesianism relative to other central bank members (e.g., Emminger 1986: 35) and advocated for more flexible exchange rates early on (93–94, 279). From Emminger's perspective, the old members still carried much ideological baggage from the Reichsbank (38, 132). For Benning, the influence of Wagemann was limited to empirical methodology.
The question of the exchange rate of the deutsche mark was one of the central monetary policy discussions during the Bretton Wood era. In 1942, Benning (1942b: 177) had argued against combating temporary disturbances of the balance-of-payments equilibrium by adjusting the exchange rate. He maintained this stance. In 1955, he wrote, “The central bank should, of course, try to absorb fluctuations in the balance of payments situation, which are short term, by using its foreign exchange reserves. . . . It should, as far as possible, pursue a policy as if it were tied to a parity, so that the fluctuations do not become excessive” (Benning 1955: 22). Thus, adjustments should always be made only in international coordination.
From the second half of the 1950s, the dilemma between external obligations to maintain the exchange rate and the threats of imported inflation was more and more admitted. The need to maintain the exchange rate also meant that the credit creation of the banking system could not be controlled (Krauss 2021: 35, 57–58, 68).
The appreciation in 1961 calmed the situation only briefly, and the issue was discussed again in the Zentralbankrat at the end of the Bretton Wood system. A vote was taken on exchange rate liberalization at the decisive meeting on May 5, 1971. By a vote of eleven to seven, council members favored the introduction of capital controls, thus remaining in a fixed exchange rate regime (Krauss 2021: 73–74; Emminger 1986: 230). The following year, three long-standing members who had been on the Zentralbankrat for decades and supported fixed exchange rates, namely, Pfleiderer (January 31, 1972), Zachau (June 30, 1972), and Benning (September 30, 1972), left the Zentralbankrat (Deutsche Bundesbank 1972). When the question of floating the exchange rate was discussed again in February 1973, a majority of fourteen to three were in favor. The majority ratio had thus shifted considerably from May 1971 to February 1973 (Krauss 2021: 117).
In banking circles, Benning was regarded as one of the last guarantors against floating exchange rates, which were seen as necessary for a functioning international monetary order and for the international competitiveness of the German economy (Mössner 1962). The minutes of the Zentralbankrat meeting of May 5, 1971, indicated that Benning feared the international consequences, “because such a measure would call into question the present monetary system of the Western world, especially if exchange rate fluctuations and thus uncertainty about parities were to extend over a longer period.” His rejection of liberalization was presumably also motivated by the fact that floating rates could lead to devaluations, which at some point can raise doubts regarding the stability of the deutsche mark. Similar concerns had been formulated by Adolf Weber (Muthesius 1950: 16).
In a letter to Pfleiderer dated July 22, 1973, Benning wrote that he feared for the competitiveness of the German industry by an appreciation: “The continuous appreciation of the DM within the framework of block floating against the dollar, pound, lira, etc. . . . would have been considered an extremely harsh measure just a year ago. Nowadays, people continue to believe that German industry will already be able to cope with any conceivable appreciation” (Bundesbank archive N1/176).
Benning was entrusted with the Capital Market Department at the Bank deutscher Länder/Bundesbank. According to the Colm-Dodge-Goldsmith Plan,10 the Bank deutscher Länder was to coordinate financing needs with the German economy (Wandel 1980: 53). The Bundesbank also depended on capital-market-ready securities, which were still lacking in the 1950s, to conduct open-market operations (Deutsche Bundesbank 1988: 90, 200). Thus, the main task of Benning was to set up these structures.
At the beginning of his tenure, Benning said at an event organized by Muthesius that “the main goal must be to make the capital market work. Here we are still facing a fateful vacuum. At present, we have nothing at all in Germany that resembles a capital market” (Muthesius 1950: 89). Benning saw high interest rates as a necessary prerequisite for increasing the willingness to save and buy securities. With an explicit reference to Weber, he complained that investment was too low because the supply of capital was insufficient (90, 96).
For many years, Benning represented the Bundesbank on two committees for the coordination of financing on the capital market: first, on the Ausschuss für den öffentlichen Kredit (legally designated as the Konjunkturrat since the Wachstums-und Stabilitätsgesetz of 1967), which coordinated federal, state, and local government issuances; second, on the Zentraler Kapitalmarktausschuss, which was an association of the major issuing banks to coordinate private issuance. Benning saw the Bundesbank as the “monetary shepherd” for the capital market (Benning 1973: 23–24).
Benning's stance on monetary policy was in line with what Krauss (2021: 33) called the “Conservative Consensus” in the Zentralbankrat and that largely fits Weber's views. For example, in 1955, Benning (1955: 13, 19) advocated an active stimulus policy, but he was rather cautious regarding the extent of intervention.
In his analysis of the hyperinflation of 1923, Benning also saw the “all-too-willing yielding of the state leadership and, in its wake, the Reichsbank to ‘social’ demands” as a cause of the crisis. Unlike the Reichsbank at the time, he wanted a central bank that could vigorously counter threats in the interest of stabilization (Bundesarchiv R/8136/3803). In retrospect, Benning affirmed that “it was easy to pay lip service to stability, but exceedingly hard and unpopular to pursue stability policy with all available means” (Bundesbank archive, letter from Benning to Pfleiderer, July 22, 1973, N1/176).
However, for his teacher Weber, the Bundesbank's policy was not restrictive enough. In 1958, he attempted to use his contacts in the Zentralbankrat to achieve a considerably restrictive monetary policy (Weber 1959: 5, 41). Weber saw pent-up inflation and increased money illusion during this period. He rejected the appreciation of the deutsche mark (following the liberalization of the exchange rates) as too theoretical an approach with explicit criticism of Emminger. He even accused Pfleiderer of having become a Keynesian (54, 59, 62).
7. Summary
Benning was a student of Adolf Weber and his Munich school of economics. However, he was also familiar with modern empirical methods influenced by Ernst Wagemann, making him attractive for the banking and administrative sectors. In the various publications during his tenures at the Statische Reichsamt, the RKG, and the Bundesbank, he worked primarily empirically. However, this was done from a theoretical stance shaped by Weber: he supported price stability and opposed monetary credit expansion, adopted a strong business and investment perspective, advocated for the strengthening of capital markets organized by coordination bodies, and favored fixed exchange rates (e.g., Weber 1948: 223–25; 1961: 371–89, 420–21).
Benning always saw himself as a civil servant, and even at the RKG he viewed himself as a “shepherd” of the financial system. With this stance, he also worked at the Bundesbank. This way, he could subordinate his liberal beliefs to loyalty to the state. This led to his opportunistic stance during the Nazi era, which is most evident in his contribution to the Funk Plan in 1942. David Marsh (1995: 207) wrote of Benning at the Bundesbank that he “championed the new economic structures with the same tenacity with which he had previously supported the old.”
Nevertheless, he saw himself as an opponent of the regime, despite his responsible roles during National Socialism. Benning drew his legitimation for his role in the early Federal Republic from his criticism of war financing. However, the Donner-Benning debate was regarded by the regime as an idle act of opposition without consequences. His wartime experience convinced him that price stability must be at the center of monetary policies and should include the control of monetary aggregates.
With a tenure of twenty-two years in the leadership of the Bank deutscher Länder and Bundesbank, Bernhard Benning played a major role in shaping the monetary policy of the early Federal Republic; however, he is still not well known. The multiple extensions of his employment until the age of seventy show the personal appreciation he had earned. He was part of the early generation of central bankers at the Bundesbank, who upheld a Weberian “Conservative Consensus” for twenty years and built the Bundesbank in contrast to the Reichsbank, despite all personal entanglements. It was only after their departure in the early 1970s that the policies of the Bundesbank began to change.
Notes
This section is based on personnel files at the Bundesbank archive in Frankfurt and in the Bundesarchiv R/8136/3740 in Berlin.
He was a member of the Reichsschrifttumskammer (Bundesarchiv R9361-V-13819), a liaison officer to the Wehrwirtschaftsstab des Oberkommandos der Wehrmacht (Bundesarchiv R/8136/3740), and on the advisory board of the Deutsche Weltwirtschaftliche Gesellschaft, NS-Rechtswahrerbund, Deutsche Arbeitsfront, and the Fachbuch-Zentrallektorat des Reichsministeriums für Volksaufklärung und Propaganda.
The Bundesbank was preceded by the Bank deutscher Länder, established by the Allies in 1948. It was highly decentralized with powerful regional central banks, called Landeszentralbanken, which together formed this national institution. The Bundesbank Law of 1957 established the German central bank in 1958. The management committee at the Bank deutscher Länder and Bundesbank was called Zentralbankrat. Members were the presidents of the Landeszentralbanken and the directors of the Bank deutscher Länder/Bundesbank.
All direct quotations are originally in German and are translated by the author.
E.g., Benning 1943a, 1943b; Keiser 1943; and also other articles by Fritz Terhalle, E. W. Schmidt, Otto Pfleiderer, and Kurt Hunscha. For other articles, see Herbst 1977: 311.
Ludwig Erhard’s famous 1943–44 memorandum “Kriegsfinanzierung und Schuldenkonsolidierung” was also based on the Donner-Benning debate on war financing (Herbst 1977: 309–10, 313–14). At that time, Erhard had worked closely with Keiser and was therefore intimately familiar with the debate, citing Donner explicitly (see Herbst 1982: 385). In large part, Erhard’s memorandum covers the topics of the Donner-Benning discussion, but without the empirical foundations. Instead, other, more far-reaching aspects of the future economic order are dealt with, especially at the end (Erhard [1943] 1977). The memorandum is often classified as dangerous for Erhard, because in it he would make plans for the postwar period, and making plans was forbidden by the Führer’s decree. But this is not true: the war financing debate could be conducted broadly. Only topics that went beyond that were potentially dangerous. As early as 1977, Herbst pointed out that the debate on war financing was not illegal, nor was participating in it dangerous; there was instead an astonishing amount of freedom at this point, especially given that Erhard’s memorandum was not published (see Herbst 1977: 306, 309).
Liberalistic, in the common usage of this time, generally means the economic system in Western countries.
Benning’s essay repeatedly served Götz Aly in 2005 as evidence for his thesis that the support of the Hitler government by the populace, even during the war, could be justified by the fact that the “ethnic Germans” were provided with social welfare benefits, a sufficient supply of consumer goods, and tax gifts—financed from the exploitation of the conquered territories (see Aly 2005). Aly quotes Benning’s complaint that the contraction of excess money was insufficient and that the middle classes had increasing financial assets (74, 76). Spoerer (2005) responded that Aly has succumbed to a “money illusion” by trusting in nominal values, such as savings deposits. Benning’s point was precisely to expose this money illusion and highlight the loss of the value of money by coupon systems, a hidden inflation (which was still concealed by administrative measures), and the de facto impoverishment of the population.
As chief economist, Eduard Wolf was responsible for the Bundesbank’s monthly reports on behalf of the entire board of directors until his death in 1964 (Emminger 1986: 27; Marsh 1995: 109). However, frequent reference is also made to the influence exerted by Benning and his RKG semiannual reports (Hofmann 1980: 37).
Plan of American government for a currency reform in West Germany.
