by Marcus Dietrich

June 5, 1975, was meticulously planned. After his arrival at Berlin-Schönefeld airport at 16:30, the honored guest was to be gifted flowers by a stewardess of the East German airline Interflug. Comrade Horst Kaminsky, president of the Staatsbank – socialist Germany’s version of a central bank – and a small delegation of representatives was to welcome the American arrivals. Seating arrangements in the cars taking the invited party to the guest-residence in Niederschönhausen were planned in detail and a reserve car was put on hold to insure against all eventualities. The next 36 hours were packed with business events, official meetings, an honorary dinner (and honorary lunch) and, if time allowed, a short trip to the television tower – a “hostess” to accommodate the visitors was ready, of course. If the guest insisted on a visit to the US-embassy, it should be scheduled for the morning of June 6 and the Ministry of the Interior was to be informed so that cross-roads could be blocked at short notice (Deutsche Staatsbank DN10/1677).

Reading the East German documents produced in anticipation of David Rockefeller’s visit to East Berlin, one cannot help but sense a certain nervousness. Kaminsky, who was named Ehrenbetreuer (honorary supervisor) for the duration of Rockefeller’s stay, was informed that it was his task to introduce the banker to various government officials such as the Chairman of the State Council, Willi Stoph, but that in practice this would not be necessary “because the host will ‘automatically’ approach Rockefeller” (Deutsche Staatsbank DN10/1677). This sort of attention to detail testifies to the special nature of the visit. Nothing was to go wrong when the chairman of the Chase Manhattan Bank, the third largest bank in the world, and brother of US-American Vice President Nelson Rockefeller came to the GDR.

The pile of documents buried in the East German banking archives evoke, however, much more fundamental questions than puzzlement over socialist Germany’s relentless planning. What was one of the most important bankers in the world with ties to the White House doing in East Berlin in the middle of the Cold War? International finance and the US government are usually not associated with socialist countries and their socio-economic systems. How, then, can we understand Rockefeller’s visit and the effort of the GDR’s leadership to accommodate him?

Détente and the growth of international finance

Certainly, this short episode in history must be viewed against the background of détente, or rapprochement, between East and West in the first half of the 1970s. The US-American President Richard Nixon and Leonid Brezhnev, General Secretary of the Communist Party of the Soviet Union, managed, for the first time since the end of World War II, to promote and foster a diplomatic dialogue that promised a peaceful end to the Superpower confrontation. On a regional level, the American president found a capable ally in West German chancellor Willy Brandt, who worked towards normalizing relations with East Germany – a policy mix known as Ostpolitik (Westad 2017: 381–91). Gone were the days of the aggressive rhetoric of the McCarthy-era and more hostile political maneuvers such as the Cuban Missile crisis. State-visits by important government representatives, including presidents, across the rather perforated iron-wall were becoming more and more common.

Rockefeller’s visit to the GDR was one expression of this broader phenomenon. After all, he officially visited East Berlin not as a businessman, but, according to his own definition, as an “Eisbrecher” (icebreaker) interested in open discussions about political, economic and cultural issues (Deutsche Staatsbank DN10/1677). His trip, however, was also characteristic of a different process taking place in the 1970s: The exceptional growth of global finance and thus rising importance of banks and bankers. Several aspects contributed to this development. On the one hand, the restrictive Bretton Woods system, which, since the end of the Second World War, had defined the broad parameters that governed the Western economy by implementing constraints on cross-border capital flows and forging a rigid currency exchange-rate regime around a dollar-gold standard, dissolved in the early 1970s. On the other hand, lightly regulated financial offshore markets outside any states’ jurisdiction, so-called Eurodollar markets, had already started to appear in the 1950s in London, Paris and Rome and were growing ever since (Schenk 1998; Balaban 2023). In fact, capital controls were never rigidly enforced in the Western world. The end of Bretton Woods did nevertheless represent the final push towards free financial markets – the dollar was no longer tied to gold; the rest of the western currencies were no longer tied to the dollar. Discussions on capital controls lost traction with the advent of the post-Bretton Woods world governed by neoliberal ideas and free-market oriented values (Helleiner 1994).

Contributing to these processes were developments in the Middle East. Members of the Organization of the Petroleum Exporting Countries (OPEC), after coordinating a price hike of the most important and dollar-denominated commodity in the world, oil, experienced a massive inflow of money. What came as a shock to the West – suddenly, cheap energy could no longer be taken for granted as the basis for post-war growth – represented windfall profits for the oil-rich states. Some of these so-called Petrodollars were employed in the countries of OPEC members themselves but a substantial portion was channeled back into the aforementioned Eurodollar markets. This process, known as Petrodollar-recycling, contributed to the extraordinary expansion of financial markets in the 1970s. Financial institutions from all over the world, including from socialist countries and the Global South, borrowed and lent money in markets located in London, Paris and Singapore and became entangled in an intricate web of dollar-denominated debt (Battilossi 2009; Trecker 2020).

The proliferation of Eurodollar markets in combination with rising oil-prices, floating exchange rates, abolishment of capital controls, neoliberal thinking and ever more inter-dependent national economies made for a much more dynamic and open, but also volatile environment (Battilossi 2009: 31; Sargent 2013). Western bankers operating in these liberal and liquid markets enjoyed more freedom but also had to contend with strong competition and started to branch out. Socialist countries in Eastern Europe, whose creditworthiness was, curiously enough, often estimated to be very good since it was the state itself which was borrowing money (and that state, again, was presumed to be backed by the Soviet Union) were thus emerging as their own important segment to be targeted by Western financial institutions which were constantly looking to diversify their portfolios (Mourlon-Druol 2020: 78; Altamura 2017: 118). Rockefeller’s itinerary was telling in this respect. He visited not only the GDR but also included stopovers in the Soviet Union and Czechoslovakia – as well as Japan and the Netherlands (Deutsche Staatsbank DN10/1677).   

Global Finance from the East?

However, the rise of global finance was not just a unilateral expansion starting from the West subsuming passive recipients in the East. To understand Rockerfeller’s visit, the story must also be viewed from the other side. First, it is useful to point out that the decades after the end of World War II were not only the Golden Age of Capitalism, but, in comparison with the pre- and succeeding decades and considering just per capita growth for the moment, they were also very prosperous in the socialist East. Rates of growth in the USSR and Eastern Europe, 3.4 and 3.8 percent respectively, converged with those in Western Europe (4.1 percent GDP growth) while the United States hovered around 2.5 percent. These statistics, which dramatically worsened for socialist countries in the decades after 1973, should by no means imply that the standards of living were equal – the US was far ahead of all war-torn countries on the European continent. It shows, however, that socialist countries, such as East Germany, were slowly building their own economies (Bartel 2022: 9–11), including a number of banks responsible for managing domestic and foreign financial affairs.

Another aspect to consider is the structure of trade. Although economic relations within the socialist East became much more important than before the Second World War, economic relations with the West remained integral for the development of their economies. Particularly, in the 1970s, as the GDR and other socialist countries were ever more evidently falling behind the more technologically advanced Western world, imports from capitalist countries were seen as crucial to jumpstart their own economies and initiate a process of catching up (Richter 2021: 327–28). In their talks with David Rockefeller, for example, East German representatives made clear that “[t]he GDR is interested in developing stable, long-term foreign trade relations also with the capitalist states, particularly in obtaining technological processes, automation and rationalization resources to intensify production in the GDR.” (Deutsche Staatsbank DN10/1677) Thus, contrary to common associations of the communist bloc with isolation or autarky, the sources indicate that socialist countries were pushing for participation in and constructing towards a common world market (Sanchez-Sibony 2014). For socialist countries, trade with capitalist companies, particularly when importing, posed a problem insofar as their currencies were not convertible, that is, not accepted by the exporters in the West. Hence, they were constantly seeking to bolster their foreign exchange reserves. It is for this reason that the foreign banking sector was an integral part of every socialist economy. Only part of the convertible money could be earned by exports, the rest had to be taken on via loans with banks and companies in the West.

In the case of the GDR and Rockefeller’s visit, East Germany had opened accounts with the Chase Manhattan bank as early as 1952. It was not the only bank in the US that the East German central bank had enlisted as a correspondence bank, nor was it the most important one in the West – Soviet-owned banks in Western Europe, particularly in Paris and London, played a bigger role. For East German politicians, there was nevertheless a lot on the line when David Rockefeller came to Berlin. They were in the process of taking on ever larger loans, looking for ways to boost their stifling economy and worried about the creditworthiness of their banks which was tied to the state of the overall country. Furthermore, they were still discriminated against by US trade tariffs and clearly wanted to use Rockefeller’s visit to achieve an opening on this front (Deutsche Staatsbank DN10/1677). At the same time, the growth of global finance meant that bankers such as David Rockefeller gained political importance as well. For developing countries in the Global South and the socialist East, which had to rely on credit just to keep their economies afloat, maintaining good relations with international bankers, particularly those with ties to the US-government, was thus becoming a crucial aspect of their political-economy. East Germany’s debt structure underlined these dependencies. Already in 1973, costs of servicing the debts exceeded profits from exports by $50 million while debt was even projected to double until 1975 (Groot 2024: 39). These structural configurations implicated the power dynamics at play during Rockefeller’s visit.

In the end, and certainly due to many hours of planning, his visit went smoothly and without any hiccups. East Germany’s official press organ, Neues Deutschland, published a short article with a picture of the capitalist banker engaged in a discussion with the socialist comrades. Other than that, the visit had little immediate impact, however. In 1976, the East German Foreign Trade Bank lamented that Chase Manhattan did not resolve to extend credits to the GDR and a large 5-year syndicated loan headed by the Bank of America had to be concluded without its participation (Deutsche Staatsbank DN10/1677). Rockefeller’s trip to socialist Germany was nevertheless exemplary for the new political economy underpinning international finance in the 1970s. The extraordinary growth of capital markets in combination with détente contributed to increasing monetary flows across the iron curtain, accompanied by personal exchanges. The importance and many layers of these developments have been discussed for western Europe and the US. My own research, as in this article, aims to shed light on some of these aspects, as it were, from the other side – socialist banks tapping offshore markets in the West, bankers travelling across the iron curtain to conclude million dollar deals, the emergence of a banking culture to foster trust and the exact way these financial institutions in the East operated at the intersection of capitalism and socialism.

---

About the Author

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 and finance, alternative globalization efforts and global monetary systems.

Contact: mdietrich@hca.uni-heidelberg.de

---

References

Altamura, Carlo Edoardo. 2017. European Banks and the Rise of International Finance: The Post-Bretton Woods Era. 1 Edition. Routledge explorations in economic history. London, New York: Routledge Taylor & Francis Group.

Balaban, Ioan Achim. 2023. “Banking and Eurodollars in Italy in the 1950s.” Enterprise & Society 24 (3): 759–83. https://ideas.repec.org/a/cup/entsoc/v24y2023i3p759-783_5.html.

Bartel, Fritz. 2022. The Triumph of Broken Promises: The End of the Cold War and the Rise of Neoliberalism. Cambridge Massachusetts, London England: Harvard University Press.

Battilossi, Stefano. 2009. “The Eurodollar Revolution in Financial Technology. Deregulation, Innovation and Structural Change in Western Banking in the 1960s-70s.” IFCS – Working Papers in Economic History.WH. https://ideas.repec.org/p/cte/whrepe/wp09-10.html.

Groot, Michael de. 2024. Disruption: The Global Economic Shocks of the 1970s and the End of the Cold War. Ithaca New York: Cornell University Press.

Helleiner, Eric. 1994. States and the Reemergence of Global Finance: From Bretton Woods to the 1990s. Ithaca New York: Cornell University Press. http://www.jstor.org/stable/10.7591/j.ctt1tm7jgx.

Mourlon-Druol, Emmanuel. 2020. “The Role of a Creditor in the Making of a Debt Crisis: The French Government’s Financial Support for Poland, Between Cold War Interests and Economic Constraints, 1958-1981.” Financial History Review 27 (1): 73–94. https://doi.org/10.1017/S0968565019000222.

Richter, Sandór. 2021. “Economic Integration Within COMECON and with the Western Economies.” In The Economic History of Central, East and South-East Europe: 1800 to the Present, edited by Matthias Morys, 324–51. London, New York: Routledge/Taylor & Francis Group.

Sanchez-Sibony, Oscar. 2014. Red Globalization: The Political Economy of the Soviet Cold War from Stalin to Khrushchev. New studies in European history. Cambridge: Cambridge University Press. https://www.cambridge.org/core/books/red-globalization/DAE3ADBABBEF84748E9E14D4BE9C82A2#fndtn-information.

Sargent, Daniel. 2013. “The Cold War and the International Political Economy in the 1970s.” Cold War History 13 (3): 393–425. https://doi.org/10.1080/14682745.2013.789693.

Schenk, Catherine R. 1998. “The Origins of the Eurodollar Market in London: 1955–1963.” Explorations in Economic History 35 (2): 221–38. https://doi.org/10.1006/exeh.1998.0693.

Trecker, Max. 2020. “European Summer School 2016 Best Paper Prize Winner Circle of Debt: How the Crisis of the Global South in the 1980s Affected the Socialist East.” Cold War History 20 (1): 1–19. https://doi.org/10.1080/14682745.2019.1621846.

Westad, Odd Arne. 2017. The Cold War : A World History. London, New York: Penguin Books.

 

Primary Sources

Bundesarchiv, Deutsche Staatsbank, DN10/1677.

Neues Deutschland, 07.06.1975. https://zefys.staatsbibliothek-berlin.de/kalender/auswahl/date/1975-6-7/2532889X/ (accessed, 06.11.2024)

 

Image Reference

Header Image: Antoon Kuper, Oude Oost Duits geld, click here 

Neues Deutschland, 07.06.1975: 8. Neues Deutschland Online-Archiv

 

---

---