Center Discussion Papers are preliminary materials circulated to stimulate discussions and critical comments. I appreciate the financial support of the National Science Foundation and the German Marshall Fund of the United States, as well as the kind assistance of several institutions associated with Germany's credit cooperatives today. Participants in the economic history at UCLA provided useful feedback, as did Bruce Carruthers, Carolyn Moehling, Cormac O Grada, and Jochen Streb. This paper was revised while I was a Visiting Scholar at the Russell Sage Foundation.
Comments are welcome.
These problems were especially difficult in the credit cooperative movement that grew up in Germany in the second half of the nineteenth century. These successful cooperatives thrived because they could harness the information and ties among local people to obviate many of the problems that faced other lenders. Doing so required managers who were themselves local people. Yet few if any locals had any banking experience, and most were not even familiar with basic accounting methods. These local managers created internal management problems and enhanced outside suspicion of the cooperatives as banking enterprises.