Introduction

A major puzzle of German economic history in the twentieth century is the fact that the records of the two postwar decades have been so vastly different – a fast and sustained growth leading to full employment in the 1950s, a slow and rather volatile expansion with persistent unemployment in the 1920s. To explain this puzzle, Mancur Olson and some other prominent scholars – notably the economic historians Knut Borchardt and Harold James – have advanced a theory of institutional discontinuity: in essence, they claim that the Weimar Republic of the 1920s suffered from some major institutional weaknesses which gave interest groups a much strong influence to pursue their distributional objectives than was to be the case in the different institutional environment of the later Bonn Republic. In fact, Mancur Olson himself has regarded German economic history as a most important piece of empirical evidence in favour of his celebrated theory of the rise and decline of nations. In this sense, the German case delivers more than just another string of idiosyncratic national history; it is rather a paradigmatic playground for testing one of the most elegant and parsimonious growth theories advanced in the last few decades.

This chapter is no more than a critical note on this ‘Olsonian interpretation’ and an attempt to offer an alternative view that takes the role of interest groups seriously without running into conflict with the basic facts of history. In section 2,1 argue that the major premise of the Olsonian interpretation – the existence of a relatively sharp institutional break between the Bonn and the Weimar Republics concerning the role of distributional coalitions – is untenable.