Industrialisation, Banking and Insurance (1833–1945) — a part of the book Basel as an International Financial Centre by Dr Alexander Ressos.
Part D covers the century in which Basel became an industrial city. Beginning in 1833, when the canton split into two half-cantons after a civil conflict between the city and its countryside, it ends in 1945, when the Second World War closed with Switzerland intact but morally exposed. Between these dates, the railways connected Basel with the networks of Europe and turned the city into the northern gate of Switzerland. Dye works grew into chemical companies whose names, Geigy, Ciba, Sandoz and Roche, became known throughout the world. The private bankers founded joint-stock banks, among them the Basler Bankverein, which became the Swiss Bank Corporation. Insurers established Basel as an insurance centre. In 1930, the central banks of the leading powers chose Basel as the seat of their own bank, the Bank for International Settlements.
Chapter I describes the partition of the canton and the railway age. Chapter II follows the path from dyes to chemistry and pharmaceuticals. Chapter III examines the banks. Chapter IV is devoted to insurance. Chapter V traces the crises of the interwar period, the Second World War and the first fifteen years of the Bank for International Settlements.
This part belongs to Basel as an International Financial Centre by Dr Alexander Ressos, published here in full, section by section.
Partition of the Canton, Railways and the New Basel Economy — conclusion
The nineteenth century transformed Basel from a commercial city of ribbon merchants into an industrial and financial centre. Read more Basel · Industrialisation, Banking and InsuranceA city against its countryside
In the summer of 1833, armed men from the city of Basel marched into the countryside to suppress a rebellion of the rural population. Read more Basel · Industrialisation, Banking and InsuranceDividing a state
The separation of the canton required the division of its assets and liabilities, a task that raised legal and financial questions of considerable complexity. Read more Basel · Industrialisation, Banking and InsuranceTwo half-cantons and their institutions
The separation produced two very different polities. Basel-Stadt was a small, urban, wealthy canton, governed until the 1870s by the old families and dominated by commerce, banking and the emerging… Read more Basel · Industrialisation, Banking and InsuranceThe first railway on Swiss soil
The railway age reached Switzerland through Basel. In the early 1840s, a French company built a railway from Strasbourg along the left bank of the Rhine to Saint-Louis, on the border near Basel. Read more Basel · Industrialisation, Banking and InsuranceThe Swiss Central Railway
The Swiss railway network was built in the 1850s by private companies under concessions granted by the cantons, under the Federal Railway Act of 1852, which left the construction and operation of… Read more Basel · Industrialisation, Banking and InsuranceFinancing the railways
The construction of railways required capital on a scale that Switzerland had never seen. Read more Basel · Industrialisation, Banking and InsuranceAlfred Escher, Zurich and the Gotthard
The railway age also changed the balance between the Swiss financial centres. In Zurich, the politician and entrepreneur Alfred Escher founded the Swiss Northeastern Railway in 1853 and, to finance… Read more Basel · Industrialisation, Banking and InsuranceThe nationalisation of the railways
The private railway companies did not fulfil the expectations of the Swiss public. Read more Basel · Industrialisation, Banking and InsuranceThe Basel economy in transformation
The railway age transformed the economy of Basel in several ways. It reduced the cost of transport and opened new markets for the city's industries. Read more Basel · Industrialisation, Banking and InsuranceElectricity, water and the municipal enterprises
The industrial city needed new infrastructure: gas for lighting and heating, clean water, sewerage, electricity and public transport. Read more Basel · Industrialisation, Banking and InsuranceThe Rhine port and the return of navigation
As Part A described, the revival of Rhine navigation to Basel at the beginning of the twentieth century was the work of the engineer Rudolf Gelpke and his supporters. Read more Basel · Industrialisation, Banking and InsuranceThe federal customs and the border economy
The Federal Constitution of 1848 transferred customs to the Confederation. The cantons lost the tolls and duties that they had levied for centuries on goods crossing their borders. Read more Basel · Industrialisation, Banking and InsuranceUrban expansion and the finance of building
The demolition of the city walls, which began in 1859 after a decision of the cantonal parliament, opened the way for the expansion of Basel. Read more Basel · Industrialisation, Banking and InsuranceBasel and the Franco-Prussian War
The Franco-Prussian War of 1870 and 1871 brought war to the gates of Basel and changed the political map of its region. Read more Basel · Industrialisation, Banking and InsuranceBasel as a host of international congresses
The tradition of Basel as a place of international meetings, which Part A traced to the Council of 1431, continued in the industrial age. Read more Basel · Industrialisation, Banking and InsuranceThe First World War at the border
The First World War placed Basel on the edge of a front line. From the autumn of 1914, the Western Front ran through the Sundgau, a few kilometres from the Swiss border near Basel. Read more Basel · Industrialisation, Banking and InsuranceThe general strike of 1918 and its aftermath
The end of the First World War brought social unrest to Switzerland. Inflation, food shortages, the influenza pandemic and the hardships of the soldiers on border duty had strained the working… Read more Basel · Industrialisation, Banking and InsuranceConsumers' cooperatives and a cooperative bank
The working class of industrial Basel organised not only in trade unions and political parties but also in cooperatives. Read more Basel · Industrialisation, Banking and InsuranceHousing the industrial city
The rapid growth of the population in the second half of the nineteenth century created a housing crisis. Read more Basel · Industrialisation, Banking and InsuranceA city of migrants at the turn of the century
By 1900, Basel was a city of immigrants. A large share of its population had been born outside the canton, in other Swiss cantons or abroad. Read more Basel · Industrialisation, Banking and InsuranceTelegraph, telephone and the speed of markets
The railway was accompanied by the telegraph, which transformed the transmission of information. Read more Basel · Industrialisation, Banking and InsuranceThe finances of the half-canton
The separation of 1833 left Basel-Stadt with the wealth of the city but without the rural territory whose rents and taxes had contributed to the old canton's revenues. Read more Basel · Industrialisation, Banking and InsuranceFrom Dyes to Chemistry: Geigy, Ciba, Sandoz and Roche — conclusion
The chemical industry of Basel grew out of the silk dyeing tradition of the city. Its founders, many of them from Lyon and Alsace, began producing synthetic dyes in 1859, attracted by the absence of… Read more Basel · Industrialisation, Banking and InsuranceColours from coal
In 1856, an eighteen-year-old chemistry student in London, William Henry Perkin, tried to synthesise quinine, the antimalarial drug, from substances derived from coal tar. Read more Basel · Industrialisation, Banking and InsuranceWhy Basel?
Several factors explain why the chemical industry developed in Basel. The first was the silk industry. Read more Basel · Industrialisation, Banking and InsuranceAlexander Clavel and the origins of Ciba
The first producer of synthetic dyes in Basel was Alexander Clavel, a silk dyer from Lyon who had settled in Basel and operated a silk dyeing business. Read more Basel · Industrialisation, Banking and InsuranceGeigy: from the dye merchant to the dye maker
The Geigy family had traded in dyestuffs, drugs and chemicals since 1758, as Part C showed. Read more Basel · Industrialisation, Banking and InsuranceSandoz and the other dye makers
In 1886, the chemist Alfred Kern and the businessman Edouard Sandoz founded the firm Kern & Sandoz in Basel to produce synthetic dyes. Read more Basel · Industrialisation, Banking and InsuranceThe patent question
The absence of patent protection, which had favoured the birth of the Basel chemical industry, became a political issue in the last decades of the nineteenth century. Read more Basel · Industrialisation, Banking and InsuranceThe war windfall and the Basel cartel
The First World War transformed the position of the Basel chemical industry, as the previous chapter noted. Read more Basel · Industrialisation, Banking and InsuranceFrom dyes to medicines
The transition from dyes to pharmaceuticals followed a scientific logic. Dyes and drugs are both organic compounds, produced by the same chemical techniques. Read more Basel · Industrialisation, Banking and InsuranceRoche: a pharmaceutical company from the beginning
Unlike Ciba, Geigy and Sandoz, which began as dye makers, Roche was a pharmaceutical company from its foundation. Read more Basel · Industrialisation, Banking and InsuranceGeigy and DDT
Geigy remained primarily a dye company until the 1930s, when it diversified into textile auxiliaries, agricultural chemicals and pharmaceuticals. Read more Basel · Industrialisation, Banking and InsuranceGoing abroad: the multinationalisation of Basel chemistry
The Basel chemical companies became multinationals early. The small Swiss market absorbed only a fraction of their production, whereas their customers were textile industries, physicians and farmers… Read more Basel · Industrialisation, Banking and InsuranceFinancing the chemical industry
The Basel chemical companies financed their growth largely from their own profits. Read more Basel · Industrialisation, Banking and InsuranceThe chemical worker and the research laboratory
The chemical industry created two new figures in the Basel workforce: the chemical worker and the research chemist. Read more Basel · Industrialisation, Banking and InsuranceThe chemical industry and the Basel economy
By 1945, the chemical industry had become the dominant industry of Basel. It employed tens of thousands of workers in the city and the region, it was the largest taxpayer of the canton and its… Read more Basel · Industrialisation, Banking and InsuranceThe Rhine as a resource and a sewer
The chemical industry of Basel used the Rhine in two ways. It drew large quantities of water from the river for its production processes, for cooling and for washing, before discharging its waste… Read more Basel · Industrialisation, Banking and InsuranceFrom agrochemicals to Syngenta
Alongside dyes and pharmaceuticals, the Basel companies developed agricultural chemicals: insecticides, fungicides, herbicides and seed treatments. Read more Basel · Industrialisation, Banking and InsuranceThe industry association
The chemical companies of Basel organised their common interests in an industry association, founded in 1882 as the Swiss Society of Chemical Industries, today scienceindustries, the business… Read more Basel · Industrialisation, Banking and InsuranceManaging the franc
The Basel chemical companies earned most of their revenues abroad and incurred a large part of their costs in Switzerland, where their headquarters, research laboratories and many of their production… Read more Basel · Industrialisation, Banking and InsuranceScience, universities and the Basel model
Because the chemical industry of Basel depended on science, it built close relationships with the universities and research institutions of Switzerland. Read more Basel · Industrialisation, Banking and InsuranceBrands, advertising and the pharmaceutical market
Fritz Hoffmann-La Roche understood earlier than most of his competitors that a medicine was also a product that had to be marketed. Read more Basel · Industrialisation, Banking and InsuranceThe chemical industry and the canton's tax base
By the middle of the twentieth century, the chemical industry had become the largest source of tax revenue for the canton of Basel-Stadt. Read more Basel · Industrialisation, Banking and InsuranceThe Banks: Bankverein, Handelsbank, Kantonalbank — conclusion
In the industrial age, the banks of Basel took new forms. The consortium of private bankers of 1854 became the Basler Bankverein in 1872, a joint-stock bank that merged with the Zürcher Bankverein in… Read more Basel · Industrialisation, Banking and InsuranceThe age of the joint-stock bank
In the second half of the nineteenth century, the private bank, owned by a family and financed by its partners' capital, was joined by a new type of institution: the joint-stock bank, a company whose… Read more Basel · Industrialisation, Banking and InsuranceThe Basler Bankverein
The consortium of six Basel private banks formed in 1854 to finance railways, which Part C described, was a loose association for particular transactions. Read more Basel · Industrialisation, Banking and InsuranceThe Basler Handelsbank
The second major joint-stock bank of Basel was the Basler Handelsbank, founded in 1862. As its name indicates, it was a commercial bank that specialised in the financing of trade and industry. Read more Basel · Industrialisation, Banking and InsuranceThe Paris affair of 1932
On 26 October 1932, French police searched the Paris offices of the Basler Handelsbank and seized documents, among them lists of French clients who had deposited assets with the bank in Switzerland… Read more Basel · Industrialisation, Banking and InsuranceThe Basler Kantonalbank
The cantonal banks were founded in the second half of the nineteenth century to provide credit to the population and the economy of their cantons on conditions that the private and joint-stock banks… Read more Basel · Industrialisation, Banking and InsuranceThe Swiss National Bank and Basel
The foundation of the Swiss National Bank in 1907, which Part C described, took the issue of banknotes away from the cantonal and commercial banks, among them the Bank in Basel. Read more Basel · Industrialisation, Banking and InsuranceUniversal banking and the Swiss model
The Swiss big banks that emerged in the late nineteenth and early twentieth centuries followed the model of universal banking, in which a single institution performed all banking functions. Read more Basel · Industrialisation, Banking and InsuranceCapital exports and foreign lending
Switzerland became a major exporter of capital in the late nineteenth and early twentieth centuries. Read more Basel · Industrialisation, Banking and InsuranceThe banking crisis of the 1930s
The Great Depression hit the Swiss banks hard. The standstill agreements froze their German assets, the collapse of world trade reduced the business of their industrial clients and the depreciation… Read more Basel · Industrialisation, Banking and InsuranceArticle 47: the criminal protection of banking secrecy
The Banking Act of 1934 contained a provision that would make Switzerland famous and controversial for the rest of the century. Read more Basel · Industrialisation, Banking and InsuranceThe devaluation of 1936
The Swiss franc remained tied to gold throughout the early 1930s, when Britain, the United States and other countries abandoned the gold standard and devalued their currencies. Read more Basel · Industrialisation, Banking and InsuranceFlight capital in the 1930s
The political and economic crises of the 1930s drove capital to Switzerland. Investors from France, Germany, Italy, Austria, Spain and Eastern Europe, fearing devaluation, confiscation, exchange… Read more Basel · Industrialisation, Banking and InsuranceThe private banks between the wars
The private banks of Basel, among them La Roche & Co, Dreyfus Söhne & Cie and A. Sarasin & Cie, continued their business alongside the big banks during the industrial age. Read more Basel · Industrialisation, Banking and InsuranceBanks and industry: the Basel system
By the middle of the twentieth century, a close network of relationships connected the banks and the chemical industry of Basel. Read more Basel · Industrialisation, Banking and InsuranceNumbered accounts and the practice of confidentiality
The protection of banking secrecy by the Banking Act of 1934 was accompanied by banking practices that reinforced confidentiality. Read more Basel · Industrialisation, Banking and InsuranceSavings banks, mortgages and the regional banks
Alongside the big banks, the cantonal banks and the private banks, a network of smaller banks served the population of the Basel region: savings banks, regional banks and local banks in the towns and… Read more Basel · Industrialisation, Banking and InsuranceThe Basel exchange in the industrial age
The Basel stock exchange, founded in 1876 as Part C described, grew with the industrial economy of the city. Read more Basel · Industrialisation, Banking and InsuranceA city of banks
By the middle of the twentieth century, Basel had a diverse banking landscape. The Swiss Bank Corporation, one of the three big banks, had its head office in the city. Read more Basel · Industrialisation, Banking and InsuranceThe Swiss Bankers Association: self-regulation from Basel
In 1912, the Swiss banks founded a national association to represent their interests: the Swiss Bankers Association. Its seat was established in Basel, where it has remained to this day. Read more Basel · Industrialisation, Banking and InsuranceForeign exchange and the international business of the Basel banks
The international orientation of Basel made foreign exchange one of the core businesses of its banks. Read more Basel · Industrialisation, Banking and InsuranceThe architecture of banking
The banks of the industrial age expressed their power and their reliability in buildings. Read more Basel · Industrialisation, Banking and InsuranceClerks, women and the banking workforce
The growth of the joint-stock banks created a new professional class: the bank clerk. Read more Basel · Industrialisation, Banking and InsuranceBasel as an Insurance Centre — conclusion
Basel became an insurance centre in the 1860s, when Basel merchants and bankers founded fire, life and transport insurance companies in the aftermath of the great fire of Glarus of 1861, which had… Read more Basel · Industrialisation, Banking and InsuranceThe business of risk
Insurance is the business of transforming uncertainty into calculable cost. An insurer collects premiums from many policyholders, each of whom faces a risk of loss, and pays the losses of those who… Read more Basel · Industrialisation, Banking and InsuranceBefore the companies: mutual aid and public fire insurance
Before the foundation of insurance companies in the nineteenth century, the people of Basel protected themselves against risk in other ways. Read more Basel · Industrialisation, Banking and InsuranceThe fire of Glarus and the birth of Swiss insurance companies
On the night of 10 to 11 May 1861, a fire driven by a strong föhn wind destroyed most of the town of Glarus, the capital of the canton of Glarus, leaving thousands of people homeless. Read more Basel · Industrialisation, Banking and InsuranceWhy Basel?
Several factors explain why Basel became an insurance centre. The first was capital. Insurance companies needed capital to guarantee their obligations. Read more Basel · Industrialisation, Banking and InsuranceFederal supervision of insurance
The growth of the insurance industry raised questions of consumer protection. Insurance is a promise to pay in the future: the policyholder who pays premiums today depends on the insurer's ability to… Read more Basel · Industrialisation, Banking and InsuranceLife insurance and the mathematics of mortality
Life insurance was the branch of insurance in which the mathematical tradition of Basel was most directly relevant. Read more Basel · Industrialisation, Banking and InsuranceLife insurance and the duty of disclosure
The relationship between a life insurer and its policyholders raises legal questions that have occupied the courts and the legislators for more than a century. Read more Basel · Industrialisation, Banking and InsuranceInternational expansion
The Basel insurers looked beyond Switzerland from the beginning. The Swiss market was small. Read more Basel · Industrialisation, Banking and InsuranceThe German business in the Nazi period
The German business of the Swiss insurers became a moral and political problem after 1933. The Nazi regime imposed its policies on all companies operating in Germany, including foreign ones. Read more Basel · Industrialisation, Banking and InsuranceSocial insurance alongside private insurance
In the late nineteenth and twentieth centuries, the state took over a growing part of the protection against life's risks. Read more Basel · Industrialisation, Banking and InsuranceThe Basel insurers in the interwar period and the war
The Basel insurers survived the crises of the interwar period, although they suffered losses on their foreign business. Read more Basel · Industrialisation, Banking and InsuranceFrom many companies to one group
The Basel insurance companies founded in the 1860s operated for a long time as separate companies with interlocking ownership and management. Read more Basel · Industrialisation, Banking and InsuranceInsurance and the financial centre
Insurance contributes to a financial centre in several ways. Insurers are among the largest institutional investors, holding large portfolios of bonds, shares, real estate and mortgages to cover… Read more Basel · Industrialisation, Banking and InsuranceInsuring the chemical industry
The chemical industry posed particular challenges for insurers. Its factories handled flammable, explosive and toxic substances, operated high-pressure and high-temperature processes and stored large… Read more Basel · Industrialisation, Banking and InsuranceTransport insurance from a landlocked city
It may seem paradoxical that a landlocked city should become a centre of transport insurance. Read more Basel · Industrialisation, Banking and InsuranceHealth insurance and the sickness funds
Health insurance in Switzerland developed from the mutual aid societies of the guilds and the workers' movement. Read more Basel · Industrialisation, Banking and InsuranceInsurers as investors
Insurance companies are among the largest investors in any financial centre, because they hold large reserves to cover their future obligations to policyholders. Read more Basel · Industrialisation, Banking and InsuranceBasel, Zurich and the geography of Swiss insurance
The Swiss insurance industry is concentrated in a few cities. Zurich is the seat of Swiss Re, the Zurich Insurance Group and Swiss Life. Basel is the seat of the merged Helvetia Baloise group. Read more Basel · Industrialisation, Banking and InsuranceLiability, risk and the law of damages
The growth of industry created new risks for third parties: workers injured in factories, residents harmed by pollution, consumers harmed by defective products, passengers injured in railway… Read more Basel · Industrialisation, Banking and InsuranceLife insurance as popular saving
In the late nineteenth and early twentieth centuries, life insurance became a form of saving for the broader population. Read more Basel · Industrialisation, Banking and InsuranceThe insurer and the state
The relationship between the Basel insurers and the state evolved over the century covered by this part. Read more Basel · Industrialisation, Banking and InsuranceStatistics and the measurement of risk
Insurance depends on statistics. Over time, Basel developed a tradition of statistical measurement that served its insurers. Read more Basel · Industrialisation, Banking and InsuranceCrises, World Wars and the Bank for International Settlements (1930–1945) — conclusion
The Bank for International Settlements was founded in 1930 under the Hague Agreements to handle the reparations of the Young Plan. Read more Basel · Industrialisation, Banking and InsuranceA bank for the reparations
On 17 May 1930, a new institution opened its offices in a former hotel opposite the main railway station of Basel. Read more Basel · Industrialisation, Banking and InsuranceThe reparations problem
The Treaty of Versailles of 1919 obliged Germany to pay reparations for the damage caused by the war. Read more Basel · Industrialisation, Banking and InsuranceThe Hague Agreements and the Swiss charter
The Young Plan was adopted by the governments at two conferences in The Hague in August 1929 and January 1930. Read more Basel · Industrialisation, Banking and InsuranceWhy Basel?
The choice of Basel as the seat of the BIS was the result of a compromise. Several cities were considered: London, the financial capital of the world, was unacceptable to France; Read more Basel · Industrialisation, Banking and InsuranceThe first shareholders and the first president
The capital of the BIS was subscribed by the central banks of the countries that were parties to the Young Plan, Belgium, France, Germany, Italy and the United Kingdom, and by a Japanese banking… Read more Basel · Industrialisation, Banking and InsuranceThe crisis of 1931
The BIS had barely begun its work when the world financial crisis of 1931 broke out. Read more Basel · Industrialisation, Banking and InsuranceA bank for central banks
In the 1930s, the BIS developed the functions that would define it for the rest of the century. Read more Basel · Industrialisation, Banking and InsuranceThe Czech gold
The darkest episode in the history of the BIS before the war concerned the gold of the Czechoslovak National Bank. Read more Basel · Industrialisation, Banking and InsuranceThe BIS during the Second World War
When the Second World War broke out in September 1939, the BIS was in a delicate position. Its shareholders included the central banks of belligerent states on both sides. Read more Basel · Industrialisation, Banking and InsuranceSwitzerland, gold and the war economy
The conduct of the BIS during the war was part of a broader question about the role of Switzerland and its financial centre in the war. Read more Basel · Industrialisation, Banking and InsuranceRefugees at the border of Basel
Basel, at the border with Germany and occupied France, was one of the places where the Swiss refugee policy of the war years was enacted. Read more Basel · Industrialisation, Banking and InsuranceThe war at the border of Basel
The war came close to Basel. When the German army conquered France in 1940, Basel was surrounded by German-controlled territory on all sides except the Swiss. Read more Basel · Industrialisation, Banking and InsuranceThe reckoning of the 1990s
The questions about the conduct of the Swiss financial centre during the war, which had been settled in 1946 by the Washington Agreement, returned in the 1990s. Read more Basel · Industrialisation, Banking and InsuranceBasel in the Great Depression
The Great Depression reached Basel at the beginning of the 1930s. As the collapse of world trade reduced the exports of the chemical and textile industries, unemployment rose. Read more Basel · Industrialisation, Banking and InsuranceClearing, credits and the economic relationship with Germany
During the Second World War, the economic relationship between Switzerland and Germany was governed by clearing agreements. Read more Basel · Industrialisation, Banking and InsuranceThe BIS and its staff in wartime Basel
The BIS continued to operate in Basel throughout the war with a small staff drawn from many countries, among them Germans, Italians, Britons, Frenchmen, Americans and Swiss. Read more Basel · Industrialisation, Banking and InsuranceLessons for modern central banking
The early history of the BIS contains lessons that remain relevant for modern central banking and international financial institutions. The first lesson is the importance of cooperation in crises. Read more Basel · Industrialisation, Banking and InsuranceThe BIS after the war
The end of the war did not end the controversy about the BIS. The Bretton Woods resolution recommending its liquidation remained on the table, with the American government pressing for its… Read more Basel · Industrialisation, Banking and InsuranceMemory and responsibility in Basel
The history of the Second World War has left traces in the memory of Basel. The Jewish community of the city, which supported refugees during the war at its own expense, maintains the memory of those… Read more