In recent years, the image of an isolationist and autarkic socialist bloc has been overcome by scholars highlighting the multitude of exchanges, interdependencies and entanglements the “East” developed with the “West” as well as the “South” on the dimensions of trade, culture, information, technology or politics. However, one important aspect – finance, payment and banking – has so far only received scarce attention. Drawing on novel archival material from East German financial institutions, primarily the East German Foreign Trade Bank and the East German Central Bank, I focus on their integration into international financial markets from the late 1950s until the 1960s. By highlighting an early connection to Italian commercial banks, I ask how socialist banks participated in an international financial infrastructure – here including financial institutions, legal frameworks, currencies and payment systems – that crossed borders, ideological differences or bloc-affiliations.
Rather than being passive recipients of the forces of financial globalization, East German bankers actively participated in emerging international financial markets on the private level. The case-study of Italy shows how cooperation with various commercial banks facilitated dollar flows across the iron curtain from the late 1950s onwards. The East Germans used these infrastructures not only to finance trade with Italy and Western countries, but also to practice financial market operations including arbitrage and currency speculations, turning typical images of socialist autarkic economies on their head. Furthermore, the sources shed light on Soviet controlled “friendly” banks in Western Europe – such as the Banque Commercial pour l’Europe du Nord in Paris – which acted as trusted correspondent banks, enabling and securing East German access to financial markets. The East Germans therefore found themselves in a paradoxical position: While rhetorically attacking Western imperialism and emphasizing the inviolability of the socialist economic system, the real integration of socialist banks into the international financial markets by the 1960s made them very dependent on a well-functioning dollar-based monetary system. These insights contribute to a non-Western view on the development of finance during the Cold War. They allow us to draw insights into how payments were conducted across the iron curtain, despite political differences, legislative barriers and ideological opposition. Further, they reveal how through financial practices – such as interest rate management, short-term investments or reciprocal depositing – East German banks had to increasingly accept and adjust to the rhythm and interdependencies of global finance.
Marcus Dietrich holds an M.A. in history and a diploma (equivalent of M.A.) in International Business and Economics from the university of Innsbruck. He is currently a PhD-candidate with the research training-group "Authority and Trust" at the Heidelberg Center for American studies. His dissertation focuses on the integration of socialist banks into international financial markets during the Cold War period with a particular focus on the East German case. Further research interests include the history of banking, finance and money, alternative globalization efforts and global monetary systems.
