Page 186 - Global Political Economy_Understanding The International Economic Order

SYS TEMS O F POLI TICAL ECONO MY
amounts of investment capital to expedite industrialization and catch
upwith the industrial leaders. This historic linkage between finance
and industry has continued in both Germany and Japan.
The most influential of the major German universal banks is, with-
out question, the Deutsche Bank (DB). The DB’s pivotal position in
the German economy may be gauged by its holdings in the nation’s
major corporations; it has a substantial stake in Daimler-Benz, Ger-
many’s largest corporation, and it also has substantial holdings in
Germany’s leading insurance company (Allianz), its largest reinsur-
ance company (Munich Re), and its major department store chain
(Karstadt). The list of blue-chipcompanies in which DB has a large
stake could easily be lengthened. In addition, members of the upper
management of DB are on the supervisory boards of over one hun-
dred fifty German corporations.
German government policies have supported and reinforced the po-
sition of Germany’s major private banks in corporate governance.
Corporate law has empowered banks by giving considerable rights to
minority shareholders. For example, corporate law has required that
75 percent of the shareholders in a public corporation must approve
any change in the corporation’s capitalization and hence in the gov-
erning structure of a firm. This means that a bank with only a 26
percent share can block change. Since, in certain circumstances, the
banks can also vote the shares of their account holders, this provides
banks with considerable influence over corporate affairs.
The governing structure of German industry is affected by the
German government’s tolerance of the concentration of economic
power, by horizontal cooperation, and by the linkages between fi-
nance and industry. Despite the fact that the American Occupation
after World War II attempted to wipe out the German cartel tradition
and to promote an antitrust mentality, this mentality remains rela-
tively weak in Germany. The decision of the German government to
permit Daimler-Benz to acquire Messerschmitt-Bo ¨lkow-Blohm, Ger-
many’s largest defense and aerospace firm, is an example of German
tolerance of the concentration of economic power. (Subsequent-
ly, Daimler-Benz eliminated its interests in Messerschmitt-Bo ¨lkow-
Blohm.)
German management is less restricted by shareholder concerns
about annual returns on their investments than is American manage-
ment. Freedom from outside scrutiny has unfortunately sometimes
protected the incompetent, but it has enabled German management
to pursue long-term plans. This situation began to change in the late
1990s, but previously, management independence had been greatly
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