Emotional Responses to the Beginning and End of the Rule of Louis I
in Dalmatia

Valentina Šoštarić and Krešimir Baljkas

University of Zadar

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Hungarian Historical Review Volume 14 Issue 1 (2025): 3-29 DOI 10.38145/2025.1.3 

This paper presents a brief historical background of the rule of Louis I of Hungary in Dalmatia, followed by an analysis of the emotional reactions of the ruling circles in Zadar, Split, and Dubrovnik to two crucial events in 1358 and 1382, which marked the establishment and subsequent weakening of Angevin rule. Although the sociopolitical context of Louis’ rule is well established, the role of emotions during these critical moments has not received sufficient scholarly attention. This innovative problem-centered approach requires methodological clarification of the applications of the concept of emotions in historiography, as well as the possibilities and limitations arising from the nature of archival sources. The emotions expressed in these sources will be considered as a powerful tool with which to provoke tangible changes in the real world, specifically to motivate historical actors to take concrete actions. These rhetorical devices and narrative structures, understood here as expressions of emotion, will be scrutinized within the wider framework of sociopolitical, cultural, and religious interconnections. Through an analysis of primary sources, this study aims to offer insights concerning a possible range of emotions experienced by historical actors during the tumultuous political events surrounding the establishment of Angevin rule and the dissolution of the same after Louis’ death. Specifically, the paper interprets elements of the texts as expressions of emotions such as fear, insecurity, anxiety, envy, disappointment, dissatisfaction, happiness, love, and hatred in order to provide a deeper understanding of how these decisive moments were understood and presented by the authors at the time. This study aims to enrich our current understanding by emphasizing the significance of appeals to and expressions of emotional responses as a lens through which to examine political and social change.

Keywords: Dalmatia, Croatian history, Angevin dynasty, King Louis I, history of emotions

Research Topic: Issues and Possibilities

The establishment of Angevin rule in Dalmatian cities marked a significant turning point in the course of historical events along the eastern Adriatic coast. Having successfully concluded the conflict with Venice and adeptly pacified the influential nobility in the immediate hinterland, Louis the Great paved the way for the reintegration of coastal communities with their natural hinterlands. This harmonization unfolded within the new, strengthened political framework of the Hungarian and Croatian Kingdom. The triumphant culmination of decades-­long efforts by the new dynasty, formally crowned with the signing of the Zadar Peace Treaty in 1358, created the conditions for the social and economic development of the eastern Adriatic coastal region.1 Furthermore, the reaffirmation of royal authority in the immediate hinterland established the patterns of the structures upon which the social and political life of the Croatian nobility would now rest, and which would last until finally disintegrating under the Ottoman conquests.2 While extensive scholarly attention has been devoted to almost every facet of Louis’s ascension to power, including its repercussions for preexisting sociopolitical3 and economic dynamics,4 artistic evolution,5 and legal codification,6 scant scholarly interest has been given to the emotional responses of the ruling circles of Dalmatian cities, as expressed in the textual sources, following Louis’ triumph over the Venetians and during the years characterized by uncertainty in the aftermath of his demise.

Historians have typically confined the study of emotions to the field of psychology, and in the contemporary scholarship, neuroscience has come to the forefront.7 Emotions, long overlooked in historiography, started to gain attention in the mid-twentieth century8 and were made a central research topic within the social sciences and humanities by the end of the century.9 Within historiographical research, the “field of emotions”10 is frequently marked by conflicting theories, methodologies, and diverse perspectives on complex issues, and this has fostered its rapid development as a subject of study.11 The diversity of concepts, methodological approaches, and research questions posed has led to such an abundance of studies that contemporary researchers now refer to as a paradigm shift, often termed the “emotional/affective turn.”12

Considering the multitude of potential definitions of the term “emotions,”13 it is important to emphasize that, in this paper, they will be approached as sociocultural, situational, and relational constructs.14 Emotions play a significant role in shaping social interactions15 and decision-making processes, particularly within the sphere of high politics.16 Against this backdrop, this article aims to discern textual expressions of emotions in relation to the medieval system of dependency and power relations, the prevailing culture, and the influence of specific emotional responses on the course of historical events.

In part as an attempt to address the existing lacuna in the secondary literature, the interpretation focuses on the expression of specific emotions in the narrative and administrative records of the councils of Zadar, Split, and Dubrovnik in the context of the two aforementioned historical changes. This will be attempted primarily by referring to elements in the surviving sources on the basis of which hypotheses can be ventured concerning the collective emotions of the ruling elite of the eastern Adriatic urban centers. Since the councilors were not a homogeneous “emotional community”17 and they did not share the same political worldviews during the transitional moments analyzed in this paper, it is important to consider which individuals within these communities might have experienced certain emotions, and whether these emotions were genuinely felt or were they a part of a specific manipulative rhetorical strategy. While administrative sources are the product of meticulous consideration and extensive discussions, the complete suppression of any expression of emotions within these text seems to have been challenging. The places where these expressions of emotion appear are symptomatic and warrant scientific attention and interpretation. Some of these expressions of emotion can be recognized as recurring themes, while others seem to have been the result of sudden changes in the realm of high politics. On the other hand, chronicles were used to a lesser extent, and when evaluating them, it is important to consider authorship and the historical-temporal context of their creation.

To a certain extent, these examples reveal the existence of stereotypical emotions. There are several different models that explain how emotions arise and the possibilities for their use. For the purposes of the inquiry here, the most applicable model is a combination of cognitive and social constructivism. While the first theoretical approach argues that the choice of which emotions to express depends on whether these emotions would be perceived as useful or harmful,18 the second approach holds that expressions of emotions depend on language, expectations, values, cultural practices, moral beliefs, and rules according to which these expressions of emotion can be correctly decoded.19 In this sense, expressions of emotion can be consciously employed and manipulated in a specific context to provoke a desired effect.20 Although it is impossible for us today to answer the question of whether a specific emotional expression was truly felt or was simply a matter of textual, rhetorical performance and strategy, this is ultimately not important. What matters is that a given expression of emotion would have been recognized and accurately interpreted (interpreted as the author presumably wanted it to be) by its intended readership. Finally, it is crucial to detect how expressions of emotions are managed, considering the personal power and reputation of individuals or groups, as well as their status, origins, and the relationships among the interlocutors. In other words, it is of paramount interest to observe who gives expression to particular emotions, when and where they do so, and who they are addressing, much as it is also of interest to consider their possible reasons for giving expression to these emotions and how these emotions may have influenced the relationships among political actors and shaped their specific actions.

Establishment of Angevin Rule

The authorities in Dubrovnik21 were well aware of the establishment of Louis’ rule in Dalmatian cities. While some councilors expressed enthusiasm and excitement about Louis’ successes and the prospect of rejecting Venetian rule, others viewed these changes with concern and expressed fear and anxiety.22 The division within the ruling elite concerning loyalty to Venetian rule or the integration of their homeland into the community of the lands annexed to the Crown of St. Stephen led to the formation of two factions, one pro-Venice and the other pro-Hungarian.23 Even among the noblemen who favored claiming Louis as their new sovereign there was no consensus regarding the position of Dubrovnik in the new community. Nenad Vekarić, in his research, has demonstrated that in 1358 the Gundulić clan was dominant, with its two factions, the Gundulić faction and the Gučetić faction.24 Both factions were characterized by a pro-Hungarian orientation, but the Gundulić clan sought greater Ragusan autonomy, while the Gučetić faction supported less autonomy for the small maritime republic. A conflict arose between Marin Klementov de Gozze, the king’s confidant and a supporter of the Gučetić clan, and Marin Lukarov de Bona and Marin Junijev de Mençe, members of the Gundulić clan. This conflict led to Marin filing charges against the two aforementioned noblemen before the court of the Ban of Dalmatia and Croatia in 1361. Marin’s actions were prompted by previous accusations made by his opponents, who had cast doubt on Marin’s loyal service to the city in front of the Ragusan government.25

Nevertheless, the councilors promptly prevented the factional split of the nobility, as well as uprisings by the commoners, which were common in other Dalmatian cities during these turbulent years.26 The rigidity of the Ragusan ruling structures aimed at preserving, even nominally, internal harmony and consistency in foreign affairs. This is particularly evident if one compares the same mechanisms of internal control with other Dalmatian cities where they failed. Split, Trogir, and Šibenik were, one after another, shaken by the escalation of factional struggles among the city nobility at the time and immediately after the significant political changes. In contrast with Ragusa, in these cities, the final resolution of the internal divisions had to come “from outside,” or in other words, it had to be imposed by the intervention of royal representatives.27

The Ragusan councilors ultimately agreed to send their representatives promptly to Louis I in Visegrád to negotiate the most favorable terms for the city’s integration into the Archiregnum Hungaricum. Emotions tied to the aura surrounding the ambassadors sent to Hungary awoke suspicions among the authorities and prompted them to show caution, as they feared potential betrayal.28 These ambassadors, as privileged individuals enjoyed significant personal power, and some of them possessed inherited emotional capital from previous encounters with the king.29 In this context, it is noteworthy to mention the case of the king’s close confidant, Marin Klementov de Gozze, who faced an investigation in his hometown for surpassing entrusted authority and having made arbitrary decisions. Marin was ultimately released due to the king’s direct intervention in his favor.30 However, the authorities in Dubrovnik did not hesitate to protest, and they beseeched Louis to refrain from intervening in such a manner on Marin’s behalf or on the behalf of any other Ragusan noblemen.31 Dubrovnik was in something of a unique position after having become part of the Crown of St. Stephen. Apart from Zadar, it was the only city in Dalmatia with a notable number of noblemen among its denizens who had successfully established individual relationships with the ruler. Still, predominant position in the new regime belonged to the members of the Zadar’s nobility. Royal knights from the ranks of Zadar’s nobility, thanks to this accumulated symbolic and direct political capital, played a significant role in the political and social infrastructure of Angevin rule in Dalmatia, holding important positions in other Dalmatian cities.32

The Ragusans used sophisticated emotional strategies concerning the establishment of Louis’ rule in Dalmatia. Chronicler Junije Resti cautioned the Ragusan councilors to be wise in navigating between two equally dangerous forces. He warned them not to arouse Venetian jealousy toward Louis due to the loss of Dalmatia. Resti concluded his reflections by praising the emotional intelligence of the city’s authorities, contrasting it with the ruling elites of Zadar, who, lacking it, continually faced the consequences of Venetian military interventions.33

During the years it spent under the protection of a powerful yet distant sovereign, Dubrovnik enjoyed a security that allowed it to develop autonomously, ushering in its golden era.34 In the period following the recognition of Angevin rule, many Dalmatian cities expressed great disappointment with the royal house and its blatant violations of agreements it had reached with them. These frustrations led to conspiracies and rebellions. Dubrovnik, in contrast, was satisfied, in general, with the conditions according to which it had recognized Louis as its sovereign. It is thus not surprising that the authorities frequently emphasized their loyalty to the crown and king, often motivated by the privileges and various benefits he had granted them, such as the right freely to elect the city rector35 and also trade privileges with Serbia and Venice, even in the case of war between the Croatian-Hungarian king and one of these countries.36 Hence, it is unsurprising that the Ragusan authorities often expressed their “love” and “affection” for the crown and king.

While discussions among the Ragusan elite were primarily concentrated on the rights and obligations arising from having become part of the Angevin Archiregnum, events and circumstances in other Dalmatian communities were characterized by various expressions of a much greater range of emotions due to the distinctive political and geographical backdrops in each of these communities.37 With the systematic suppression of all forms of local autonomy by Venice and the introduction of a new administrative structure that excluded the local nobility, the perspectives and emotions of the Zadar elite became more challenging to discern.38 In other words, following the Venetian suppression of the rebellion in 1346, many members of the Zadar elite were physically removed from the city through forced internment in Venice, and many of them then escaped and fled to areas beyond the reach of the Venetian authorities. Nevertheless, despite the removal and the flight of the most prominent members of the Zadar elite, Venice, by all indications, was unable to pacify the rebellious city completely. During the war, specifically in 1357, lingering dissatisfaction with Venetian rule persisted. A conspiracy was hatched in the city, but it was discovered and thwarted.39 The continued presence of dissidents and “internal enemies” in Zadar, at least from the perspective of Venice, was confirmed by the turmoil, namely the looting and destruction of property, at the moment of the entry of the royal army.40

The political arena of the city of Split during the turbulent period of the establishment of Angevin rule and the immediate aftermath provides a dynamic and significantly more fruitful field for the study of the emotional states of factions within the city elite. After the upheaval had ended,41 the rebellion against Venetian rule had emerged triumphant, and the Angevin banner had been raised over the city.42 Nonetheless, the continued war and the advance of royal forces in Dalmatia were closely monitored by the leading circles of the Split commune. The news of the entry of the royal army into Zadar, announced to the Split Grand Council by the ambassador from Šibenik, was met with joy by the city nobility. Prompted by this news and “as a sign of joy and in honor of the royal highness and the commune of Split,” the Grand Council decided to present the envoy with new clothes.43 The broader context suggests that this act was not merely a matter of a pro forma gift but was in fact a sincere expression of the emotional state of the decision-making members of the Grand Council. Apart from the continuously empty city treasury,44 the Šibenik commune had, in the immediate aftermath of the upheaval in Split, participated in the Venetian punitive expedition against the Split held island of Šolta.45 The messenger from Šibenik was now, just a few short months later, generously rewarded at the municipal expense by the decree of the Split Grand Council. The generosity towards former enemies, especially emphasized by the unfavorable financial circumstances of the Split commune, can further be interpreted through those emotional states whose existence we can only glimpse indirectly. Besides, almost certainly, giving impetus to thoughts of the imminent end of the war,46 the news of the entry of royal forces into Zadar likely instilled a sense of relief among the members of the Split elite. Their choice during the recent coup, siding with the Angevin sovereign, had seemingly been vindicated.47 However, when shortly afterward the official news about the success of the royal arms at Zadar arrived in Split, this time conveyed by the envoy of the Ban John Csúz, knight Kónya, it is hard to escape the impression that the initial euphoria within the ranks of the Split elite has somewhat dampened. The invitation of the city podestà Gentilis for the Great Council of Split to act in accordance with the ban’s wishes and to appropriately reward his messenger is met with nominal approval, but this time without the overt expressions of joy. Furthermore, the decision was accompanied with a somewhat measured clause stating that the final value of the gift should not exceed, still not insignificant, sum of 40 ducats.48

A less easily traceable but undoubtedly more significant case of the cor­relation between the emotions and the concrete steps taken by political actors occurred in the middle of 1359. At the session of the Grand Council in July of that year, the main point of discussion was the question of how to proceed with the unnamed conspirators against the honor of “our lord the King.”49 While neither the names nor the social statuses of the conspirators (not to mention the ultimate goal of the conspiracy) are clear to us today, we can say much more about the disagreements and tensions between the Split commune and the royal authorities that preceded the conspiracy and therefore probably had a significant impact on its formation.

The period following the conclusion of the Peace Treaty of Zadar bore witness to the rapid shaping of a new administrative infrastructure through which the Angevin king intended to rule.50 While the position of Zadar was seemingly vindicated,51 it became increasingly apparent that the new power configuration was diametrically opposed to the desired, idealized vision of the postwar order inherited by the leading strata of the Split elite. Angevin control over the leading administrative functions in the city, demonstrated by the abolition of the position of the city podestà and the reaffirmation of the role of the city count,52 along with interference in the judicial autonomy of the com­mune,53 likely resulted in a growing sense of dissatisfaction among some of the city nobility.54 The existence of a certain level of dissatisfaction in the new periphery was apparently acknowledged even in the center of the kingdom. The charter granted by the royal commission to the neighboring city of Trogir in August 1359 explicitly states that economic benefits were provided with the aim of resolving issues or complaints.55 Taking into account the aforementioned actions of the political center, as illustrated by the example of Split, it is not unreasonable to assume that the charter issued by the royal commission was intended to achieve several different goals. Apart from alleviating the economic difficulties peculiar to Trogir,56 the charter likely represented a step towards mitigating the (presumably significantly broader) wave of complaints. Said complaints, which were apparently also being made in other Dalmatian cities, were evidently caused by both the administrative and the new economic policies implemented by the Angevin dynasty in Dalmatia.57

Did the dissidents in the region, who we can presume were there and were active on the basis of the Trogir charter, hide the unnamed participants in the failed conspiracy that was discussed in the Split Great Council in July 1359? Unfortunately, we cannot give a reliable answer to this question.58 Similarly unclear is whether, due to royal pressure on municipal autonomy, there had been a resurgence of the pro-Venice party.59 Alternatively, was the failed conspiracy an internally generated attempt to revise the existing political stratification of the Split commune at the moment of or, more precisely, immediately after a radical political change, similar to earlier examples in Trogir and Šibenik?60 Could we identify, as a factor in the final galvanization of accumulated dissatisfaction, the growing apprehension of the urban elite concerning its gradual loss of control over the local levers of power? Apprehension that was seemingly made manifest in the royal imposition of the Ban of Dalmatia and Croatia on the office of the city count? The sources do not permit us to offer clear answers to these questions.61 We can reasonably assume, however, that during the period that began with the establishment of royal authority over Split through the years following the end of the war, members of Split’s political and social elite gave expression to a relatively wide range of emotions. The victories of the royal forces in Dalmatia may very well have been met with shows of joy, enthusiasm, and relief. The consolidation of Angevin authority and especially the implementation of a new political and social order in the province, however, have led to a radical shift in the emotional state of the urban nobility. In stark contrast to the initial positive emotional responses to the establishment of Angevin rule, the consolidation of Louis’ reign nurtured feelings of dissatisfaction and disappointment among the Split nobility with the actions of the new ruler. These accumulated resentments would eventually find form in the ultimate sin on the medieval political stage: a conspiracy against the sovereign in July 1359.

Turmoil after Louis’ Death

The death of Louis in the autumn of 1382 in Nagyszombat (today Trnava, Slovakia) marked the end of an era.62 At that moment, love for the king was confirmed through the expression of posthumous honors and the organization of a memorial service. However, in Dubrovnik and, indeed, in the whole of Dalmatia unrest and uncertainty had taken hold. The first measure was to organize defense under these extraordinary circumstances.63 This was confirmed by the decision, voted on by Dubrovnik’s Great Council on September 25, 1382, pro dando salvamentum nobis et nostre civitati et rebus nostris occasione obitus domini nostri naturalis domini regis Ungarie.64 The commune of Dubrovnik was particularly afraid of the Bosnian ban Tvrtko, who planned to establish a competing salt market in Novi.65 The prevailing uncertainty in years that followed Loius’ death nurtured fears among the people of Dubrovnik, who sought to mitigate the turmoil caused by dynastic conflicts by forming an alliance with the people of Zadar against Venice. It is interesting to point out that the people of Zadar took the initiative to establish communication and cooperation among the Dalmatian cities against the expansionist ambitions of the Serenissima.66 On numerous occasions during that period, initiatives for the creation of an alliance of Dalmatian cities were put forward.67 Thus, fear seems to have functioned as a driving emotion in those uncertain times and resulted in collaboration and joint action among the Dalmatian cities.

Although the carefully maintained Angevin infrastructure on the periphery of the kingdom did not begin immediately begin to splinter after Louis’ death, it was not long before the first cracks started to appear in the rest of Dalmatia as well. Concern about the uncertain future on the threshold of a new era can be indirectly discerned from the previously mentioned hectic diplomatic activity of the commune of Zadar. One month after Louis’ death, in October 1382, the people of Zadar established “a bond of unity, brotherhood, and eternal friendship” with Count Butko Kurjaković, all the while pledging their “loyalty to our queens and to the Holy Crown of Hungary.”68 Although at first glance this information may seem insubstantial, the diplomatic move by the Zadar commune suggests a prevailing sense of insecurity that took hold in the immediate aftermath of the king’s death. This line of reasoning, or more precisely, the interpretation according to which one can see, in this diplomatic act, Zadar’s desire to acquire at least some semblance of security, even if it be only in the immediate hinterland, can be further underlined by the fact that previous attempts to connect political factors inside the territory of Angevin Dalmatia during Louis’ lifetime were stopped by the royal authorities.69 Judging by this diplomatic activity and from the presumed perspective of the city’s nobility, the task of preserving the city’s security, which before had been firmly placed in the hands of the Angevin ruler for a period of decades, had once again become the duty of the local elite. This would suggest that the recent developments had given rise to a sense of unease. The nobility of Zadar, previously firmly integrated into the Angevin administrative structure, felt the need to act independently under these new circumstances and to take care of the city’s security with their own resources.

Uncertainty about the development of events in Dalmatia and possibly also a certain degree of mistrust in the loyalty of the local political factors likely existed in the center of the kingdom as well. Queen Elizabeth therefore attempted to strengthen the loyalty of the urban centers on the east Adriatic coast, first indirectly by means of letters and envoys and then through a personal visit.70 The course of events that took place in Zadar provides us with a revealing, albeit borderline, indicator of broader sentiment in Dalmatia.71 Namely, the previously mentioned mistrust of the royal government with regards to the local authorities seemed to prove justified. In the middle of 1384, the city authorities in Zadar were forced to deal brutally with several conspirators against Angevin rule. In the immediate aftermath of the executions, local authorities were compelled to carry out once again the social ritual of swearing fealty in front of representatives of the crown.

Although the scant number of conspirators who were executed does not suggest that the plot had broader backing within the ranks of the city elite, the number of councilors listed at the ceremony in 1384 is revealing. The fact that only 23 councilors took the new oath of fealty, in contrast with the 75 councilors who had been present for the same ceremony in 1383, indirectly leads to the conclusion that there had been a discernible and clearly notable stratification among the ranks of the city nobility in terms of loyalty to the crown.72 In contrast to previous and somewhat united efforts to resist Venetian rule, the noble class of Zadar was by then presumably fractured with significantly more pronounced divisions than had been the case in previous times. Although we can determine neither the causes of the dissatisfaction that prompted the aforementioned conspiracy nor the actions that immediately preceded its open culmination, it is particularly significant to note that the betrayal occured in Zadar, a city that represented a stronghold of Angevin authority in Dalmatia.73 Given the particularities of the city and its elite within the Angevin administration, the events in Zadar still offer a valuable indicator of the possible sentiment present in other Dalmatian communes. In any case, the events in Zadar gradually began to match the pace of the unrest in the broader Croatian territory, thus offering an ominous prelude to future events.

Conclusion

A comparison of emotional reactions regarding the establishment of Louis’ rule in Dalmatia reveals noticeable sentiments of excitement and uncertainty, accompanied by divisions within the noble class. Recognition of Louis as their sovereign allowed the people of Dubrovnik to experience autonomous development under his protection. Provided with security and prosperity, Dubrovnik expressed a strong sense of loyalty towards the Crown. With the notable exception of Zadar, which would now come to enjoy a privileged position, with its nobility playing a significant role in the new regime, other cities in Dalmatia were added to the Crown of St. Stephen under less favorable conditions. These conditions were sometimes grossly violated, leading to expressions of dissatisfaction with and bitterness towards the authority of the individuals who worked in the king’s service. During Louis’ rule, the people of Split initially experienced joy and expressed enthusiasm for the new sovereign. However, as time went on, they began to express increasing disappointment and eventually open dissatisfaction, as their expectations regarding the strengthening of municipal self-governance remained unfulfilled. The imposition of a royal confidante who served in the role of the city count was a particularly great blow, as this figure was a foreign magnate who violated the old rights and customs of the city. Dissatisfaction with the actions of the new authorities eventually found expression in the unsuccessful rebellion against royal rule.

After Louis’ death, a sense of fear and uncertainty was felt in all Dalmatian cities, further amplified by Tvrtko’s and Venetian expansionist aspirations. The crisis, uncertainty, and vulnerability, along with the feelings of anxiety, insecurity, and fear that they fueled, could have either strengthened the internal cohesion of the ruling elites or ignited divisions among them. The tumult following Louis’ death caused internal dissension and disagreements among the nobility in Zadar. Meanwhile, the real and perceived threats united the ruling elite of Dubrovnik and made them act in unison. Divisions among the nobility of Zadar regarding the succession and the question of loyalty to the new queens resulted in an attempted rebellion, foretelling the significant turmoil that would affect the city in the coming years.

Another important consequence of the crisis was the creation of an alliance of Dalmatian cities, driven by the people of Zadar, which was a novelty compared to previous periods, when integration and cooperation among the cities on the eastern Adriatic coast were mostly absent. Similar efforts in the past, when attempted under the unifying banner of the royal crown, were halted in their infancy. The fact that then, after almost half a century of Angevin rule, there was a renewed need for and independent initiative aimed at collective protection reflects the atmosphere of uncertainty that prevailed on the kingdom’s periphery following Louis’ death.

Ultimately, it is evident that the various emotions expressed, whether enthusiasm, fear, satisfaction, disappointment, excitement, anxiety, love, or resent­ment, both originated in and actively influenced the relationship that a particular city had with its sovereign and communication between this city and the ruler. Only if we consider these emotions, as well as the causes behind them and the potential outcomes associated with them, from analyzing the significant historical changes which came with the establishment and end of Louis’ rule, are we in a position to provide a more comprehensive understanding and draw more complete conclusions about these, in many respects pivotal, events.

Archival Sources

Državni Arhiv u Dubrovniku [State Archive in Dubrovnik] (SAD)

Reformationes, ser. 2, vol. 18.

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A Unique Path to Monopoly:
The Case of the Hungarian Insurance Sector, 1945–1952

Gyula Horváth

Eötvös Loránd University, Corvinus University of Budapest

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Hungarian Historical Review Volume 13 Issue 4 (2024): 575-595 DOI 10.38145/2024.4.575

This paper presents the nationalization and monopolization of the private insurance industry in Hungary after World War II. In all the socialist countries save one private insurance was prohibited. In the insurance sector, only one (or technically sometimes two) state-owned insurance companies handled the insurance business with an essentially monopolistic position after the process of nationalization had ended. This uniformity, however, masks the fact that these countries took differing paths towards this end. This was particularly true of the events in Hungary. This article suggests possible explanations for these differences.

Keywords: private insurance industry, nationalization, Central and Eastern Europe, post-World War II, monopoly

One of the greatest turning points in the history of the insurance industry in Hungary and Central and Eastern Europe occurred between 1945 and 1952. The nationalization and monopolization efforts that were characteristic of the region as a whole at the time unsurprisingly also affected this sector of the economy. Although there is a relatively extensive historiography of the period, including the process of nationalization, the insurance industry has been almost totally neglected by historians. The lack of primary sources has also been an encumbrance, since the archives of the relevant companies are incomplete due to damages sustained during the war.

By fortuitous accident, I happened to get access to documents collected by a former insurance executive of the State Insurer company (Állami Biztosító).1 The man in question, Endre Boross, had served as a lawyer for the insurance industry from the 1930s until 1970s. At the peak of his carrier, he was Head of Legal Department for the company. These documents helped me better understand the process of nationalization, and I found that it was somewhat different from the process of nationalization in other industries in Hungary and also from the process of nationalization in this branch of industry in the other countries of the region, even if the final result, a monopolistic state insurance system, was the same. Regarding the nationalization of the insurance industry, there were at least four different methods in Central and Eastern Europe:

• The nationalization of the private companies, typically relatively soon after the end of the war, followed by the step-by-step merger of the companies into one (this was the path taken in almost all the countries of the region).
• Not formally nationalizing the private companies but rather “suffocating” them and, after they had been made insolvent, transferring their portfolios to companies that were close to the state and then establishing a state insurer from scratch and transferring the portfolios of the remaining companies to it (this was the path taken in Hungary).
• Banning all private insurance companies and establishing companies owned by local governments, which were later merged into one (this was the path taken in the German Democratic Republic).
• Banning the whole insurance industry (this was the path taken in Albania).

The section below on Central and Eastern Europe presents the processes by which the insurance industry was nationalized in the countries of the region other than Hungary. The Hungarian case is discussed in the section “The Insurance Industry: A New, Short Beginning.” In this discussion, I offer answers to the following question: was the path taken in Hungary with regards to the nationalization of the insurance industry unique in the region compared to other countries and to the path taken to nationalization in other sectors of the Hungarian economy?

Nationalization in Hungary after World War II

Given the deeply politicized nature of the issue, interpretations of postwar nationalization in Hungary differed meaningfully depending on the political climate of the given historical moment. From the perspective of the discussion below, the era can be divided into five periods.

The first period covers the years from the end of World War II to the “turnaround year” (1948). From the viewpoint of the history of privatization, it would make sense to put the end of this period at 1949 rather than 1948, but by 1949, there were no longer any opportunities or even possibilities for substantive debate or dissent in Hungary.

Due to the lack of historical perspective, naturally, only the economic press covered the subject in these years. Most of the articles were about what was happening abroad. As Czechoslovakia had already undergone major nationalization in 1945 under the so-called Košice Program (which included the nationalization of heavy industry, banks, insurance companies, and all companies employing more than 300 people), several articles dealt with the processes underway there.2 Articles in the economic press regularly reported on nationalization campaigns abroad, mostly without giving the names of the authors of the articles and without providing any commentary. In an article published in January 1948, József Büky examined the nationalization of central banks and, in particular, the post-nationalization management systems.3 According to Büky, the nationalization of the central banks was a necessary consequence and part of the general postwar nationalization process.

The first comprehensive analysis of the postwar situation appeared in the first issue of Közgazdasági Szemle (Economic Review) in 1948, in the form of a book review.4 Vilmos Nemény analyzed the expected transformation of society and the economy from capitalism to socialism on the basis of Joseph Schumpeter’s5 classic 1947 work Capitalism, Socialism and Democracy, perhaps the most interesting idea being that socialism would be established by “the state taking over the large corporate units.” If this were to happen in a “mature” society, then the leadership of the emerging large bureaucratic machine would be taken over by managers and the transformation could be democratic and democracy could be maintained. Otherwise, Schumpeter claims, socialism will be dominated by struggle and society will not be democratic. Whatever the case, the last two sentences of Nemény’s article are not optimistic, or rather, in retrospect, they were realistic: “After reading Schumpeter’s book, it seems likely that the world he describes as coming is not the world he himself would like to live in. But sympathies or antipathies cannot change the inexorable logic of social events.”6

The second period lasted until 1956. This period was characterized by an endorsement of the decisions of the party leadership and a portrayal of the Communist Party as the only positive political actor. The first time nationalization was discussed, albeit briefly, was in 1952. The author was Mátyás Rákosi himself,7 whose sixtieth birthday was the occasion for the lecture “The road of our people’s democracy,” given at the Party School of the Hungarian Working People’s Party (Magyar Dolgozók Pártja), which was the ruling party in 1949–1956. According to Rákosi, gradual nationalization in four or five stages would be a prudent strategy with which to avoid prompting a concerted counterattack by the enemy.8 The articles published in the period basically presented two (not contradictory) rationalizations of nationalization, sometimes in the same article. According to the first, nationalization was part of the class struggle, albeit a relatively peaceful way of engaging in this struggle. As such, the steps in the process were linked to political developments.9 This concept was supported by some articles translated from Russian, which of course quoted extensively from the “brilliant” works by Comrade Stalin, notably The Economic Problems of Socialism in the Soviet Union, which was published in 1952. They described the people’s democracies as transitional societies where the remnants of capitalism were still present, but where nationalization had brought the “command posts of the economy” under the control of the proletarian state. The other view is mainly based on economic and planning arguments. According to this view, capitalist enterprises were wasteful and inefficient (there were occasional accusations of sabotage), and without nationalization, it would have been impossible to introduce planned management.

The third period, which was something of a prelude to the more dramatic decade of an increasingly intense push for regime change, ended sometime in the late 1970s. Iván T. Berend and György Ránki, the leading authors of these years, emphasized the use of so-called “dry” methods of capital expropriation by the state in the brief period between 1945 and 1947. These “dry” methods were based on the experience of the Soviet NEP (New Economic Policy – Novaya ekonomicheskaya politika). The government exerted strict control over private enterprises, which included for instance the loans that were given, wages, prices, and even quantities of raw materials available for use.10 The government was thus able to “suffocate” the target company and force the owners to offer the ownership to the state without formally nationalizing the company. Politicians and historians referred to this method as “dry” nationalization.11 In some cases, it was combined with brutal pressure from the police and state security forces.

In articles published in the 1960s in the journals Századok12 and Acta Historica,13 György Ránki argued that state capitalism had existed before nationalization, since the state already determined the control of companies through the credit, pricing, and the tax system, even if capitalist private property formally still existed. The inclusion of companies in the National Bank’s single account system also contributed to state control. The appointment of workers’ directors was no longer seen by Ránki as a clear success, as many of these directors lacked the necessary skills and knowledge. Interestingly, this latter idea appeared only in his article published in English.

In 1962, Iván T. Berend analyzed the aforementioned “dry” state capitalist mode of capital appropriation in his article. According to Berend, stabilization required the strictest measures of a controlled economy, with appropriate credit, monetary, and price policies, but all this in turn gave the opportunity to limit the power of capital through state capitalist means.14 In 1965, in a speech at the Karl Marx University of Economic Sciences (Budapest) given on the twentieth anniversary of the liberation of the country,15 and in 1967, in an article on economic policy between 1945 and 1965,16 he presented the state intervention after 1945 as having had historical antecedents (World War I, the Great Depression, preparations for war, and World War II). On the other hand, he claimed, this policy was a response not simply to economic collapse but also to Soviet and other war reparations claims. According to Berend, it was not only about the introduction and maintenance of a command economy, but also about the question of who benefited from these measures. In his view, they served both the long-term goals of socialism and attempted also to respond to the economic conditions of the time. All this, he wrote, “marks the transition from capitalism to socialism on the broad road of state capitalism.”

In essence, these interpretative frameworks remained valid in the 1970s. Some more critical approach also appeared. In his 1973 academic inaugural address,17 Berend himself analyzed the reorganizations that immediately followed the nationalizations, pointing out that the large state enterprises such as the Heavy Industry Centre were almost beyond central control. Even later, large companies and trusts were still created, at least until the introduction of the New Economic Mechanism in 1968.

In the fourth period, which began in 1980 and lasted until the fall of the socialist regime, the growing intellectual freedom of historians allowed for the emergence of more critical, sometimes non-Marxist views. Tibor Kovácsy’s 1981 article18 deviated strikingly from the earlier interpretative frameworks. In his view, the changes that took place between 1946 and 1950 were not the results of organic social developments but were rather consequences of an anticipated mode of social functioning. Accordingly, he characterized the nationalizations as “drastic,” and disagreed with the earlier consensus that these nationalizations had led to the emergence of social or public property, since “nationalization places the right of disposal in the hands of a specific organisation, i.e. a closed group of people, whereas the concept of social property excludes such a monopoly on disposal.”19 Charles Gáti described the discussion between Imre Nagy and others in the Hungarian Communist Party leadership about the acceleration of nationalization following the Cominform’s20 decisions in Szklarska Poręba.21 In 1985, Sándor Balogh analyzed the events of 1944–1948 and offered an objective description of the process of nationalization.22 Perhaps his only evaluative remark was that the nationalization of March 25, 1948 had constituted a break with earlier practice, since it had been carried out not by law but by degree, i.e. by taking advantage of the power situation.

The fifth period covers the years from the regime change in 1989 to the present. During this period, there was a noticeable decline in interest in the subject, which is partly understandable, as the era was more about privatization than nationalization.

A new approach has also emerged. Historians have begun to analyze the impact of nationalization on Hungarian foreign relations. In several works, including an article written in 1993, László Borhi examined the American response to the post-1945 Soviet takeover of a big part of the Hungarian economy.23 Borhi described the debates between the American and Hungarian governments about the nationalization of American companies in Hungary. Zoltán Vas24 had declared in 1948 that American companies would not be nationalized, but this proved not to be true. In 2009, János Honvári analyzed Hungarian-American negotiations on financial and property issues, where one of the most important questions was the compensation to be paid for nationalized US assets.25 These issues were only settled in 1973 within the framework of a comprehensive agreement. The dispute over the nationalization of the Swedish-owned match monopoly had been settled much earlier, in 1951.26 In 2017, historian Antal András Kováts studied the seizure of Swiss assets.27 Éva Voszka’s 2018 summary work on the history of nationalization and privatization also analyzed nationalization after 1945, but she focused on Western European and US experiences.28 Unfortunately, the nationalization and monopolisation of the insurance industry was not even mentioned in these works. In Dezső Csabay’s summary of general insurance theory, a single paragraph dealt with the subject without offering any evaluation.29

The State and the Insurance Industry

The role of the state in the insurance industry has been a matter of debate for the past two centuries. From time to time, authors, politicians, and professionals have argued that the state should own insurance companies for a number of ethical, political, and practical reasons. Some of them have also suggested that the state insurance companies should have a monopolistic role in different segments of the market.

We know of some historic examples when these suggestions were adopted (e.g. Brand-Assecuranz and Feuer-Sociätat mutuals in some entities within the Holy Roman Empire).30 In the Holy Roman Empire, the first ideas arose as early as the beginning of the seventeenth century (Oldenburg, 1609). As the population of the German states considered the introduction of compulsory fire insurance merely another tax, the first attempts failed, including those of Elector Friedrich Wilhelm of Brandenburg (1640–1688). According to many citizens, the insurance even went against God’s will, as it sought to offer a safeguard against an act of God.31 Despite this resistance, state insurance companies were established in Hamburg (1676) and later in other states as well, in some cases with mandatory membership.

In Hungary, local authorities pioneered the establishment of local mono­polistic fire insurance companies in the eighteenth and nineteenth centuries.32

In 1912, the Italian Government established the so-called Istituto Nazionale delle Assicurazioni, INA. The INA had a monopoly on the acquisition of life insurance policies, while the other companies continued to manage their existing portfolios. This system remained in place until 1923, when the Government abolished the monopoly. An interesting political fact is that the INA was created by the left-liberal Gilotti government and was abolished by the Fascists as an early action of the Mussolini cabinet.33

After World War II, nationalization efforts intensified in many European countries. In 1946, 34 insurance companies were nationalized and a state-owned reinsurance company was created in France. However, no attempt was made to establish a state monopoly on (re)insurance.34 These measures were proposed to the parliament by the three-party Gouin government of Socialists, Communists, and Christian Democrats.

As is perhaps not surprising given the size of the country, the largest nationalization program outside of Europe took place in India. The Life Insurance Corporation Act of 1956 nationalized all life insurance companies operating in the country and established a single monopolistic company.35 This was in line with the mixed-economy policy of the Nehru cabinet. In 1972, all non-life companies became state-owned. More than 100 insurers ceased to exist, and the General Insurance Corporation of India was founded.36

Central and Eastern Europe

In the Central and Eastern European region, in the so-called people’s de­mocracies, Soviet practice set the model for the insurance industry, like in many other sectors of economic and political life.

After the October Revolution, the local Soviets took control of the mutual associations in the zemstvos37 and cities in Soviet Russia.38 At the time, private insurance companies were still allowed to continue operating. On March 23, 1918, the Council of Insurance Affairs was set up with the task of overseeing “the overall management, coordination, and proper control”39 of all insurance organizations. The council, which consisted of 40 members, included representatives of the state and trade unions as well as representatives of the joint-stock insurance companies. On September 17, 1918, the Council decided that dividends of joint stock companies were to be paid into the Treasury. On November 28, 1918, the state monopoly on insurance was declared and private insurance companies were liquidated. (Only insurance cooperatives which insured movables and goods on a mutual basis were allowed to survive.) Interestingly, insurance and fire services were placed under joint management, although these activities were separated in 1920. During the civil war and “war communism,” insurance became irrelevant. State-owned companies had to give up insurance, and private capitalist ownership either ceased or became illegal. This left only private individuals as a market, who in turn were hit by inflation and impoverishment. On November 18, 1919, life insurance was abolished, and the reserves were transferred to the State Treasury. In October 1921, the General Directorate of State Insurance was set up under the People’s Commissariat of Finance. The 1936 Constitution of the the Union of Soviet Socialist Republics, USSR (the so-called Stalin Constitution) in Article 14 (o) placed insurance under federal jurisdiction. The further history of the Directorate and its successor, the insurance monopoly company Gosudarstvennoe Strakhovanie (Государственное Cтрахование, State Insurer), is beyond the scope of this article.

Since the establishment of the Ingosstrakh (Главное управление иностранного страхования СССР, Chief Directorate of International Insurance of the USSR) in 1947 there was a duopoly in the USSR, but each company had a monopoly in its respective market (Gosstrakh in the internal market and Ingosstrakh in the international direct and reinsurance business).

The process of the nationalization of the insurance sector differed in:

• the victorious countries (Czechoslovakia, Poland), which were brought under Soviet influence,
• Yugoslavia and Albania, which were also on the victorious side but which did not have the Soviet army on their territories,
• Hungary, Romania, and Bulgaria, which had lost the war but formally remained independent,
• East Germany, later the GDR, which was under Soviet occupation.

In Czechoslovakia, all private insurers were nationalized by Presidential Decree 103/1945 of October 24, 1945 (one of the so-called Beneš Decrees).40 Expropriation was in principle carried out by means of compensation, but owners who were German or Hungarian by nationality as well as alleged collaborators and their companies were excluded from compensation (§ 19). The only company not nationalized was the First Czech Reinsurance Bank (První českou zajišťovací banka) (§ 17). In January 1947, the nationalized joint stock companies, mutuals, and branches were merged into five state-owned insurance companies. In 1948, the nationalized companies were merged into the Československa pojišťovná (Czechoslovak Insurer).41 In 1969, with the transformation of Czechoslovakia into a federal state, two entities were established, the Česká státní pojišťovna (Czech State Insurer) and the Slovenská štátna poisťovňa (Slovak State Insurer), each with a monopoly in its respective market.42

Poland also nationalized its insurance industry in 1946. At the beginning of 1947, the government established the General Mutual Insurance Company (Powszechny Zakład Ubezpieczeń Wzajemnyh, PZU) by decree.43 This was a state-owned insurance company, and it became the basis of the monopolization of the market. The process of monopolization was completed only in 1952, when the PZU became the only insurer in the country.

In Yugoslavia, all insurance companies were nationalized in March 1945, and their portfolios were merged into the National Insurance and Reinsurance Institute. It enjoyed a monopoly until 1961.44

During the communist era, there was no insurance company in Albania. The first state-owned one was established in 1991 as a monopoly, and the state opened the market only in 1999.45

Romania nationalized its insurers and the banks in June 1948. However, within a year, the portfolios of the insurance companies were transferred to the Sovrom Asigurare (Sovrom Insurer), a Soviet-Romanian joint venture.46 The company ceased to exist in 1953, when the ADAC, a Romanian state insurer, was established.

In June 1948 all Bulgarian insurance enterprises were nationalized by an Act of the National Assembly.47 The portfolios of the companies were merged into the National Insurance Institute (DZI), which had a monopoly in the insurance business.

In the GDR, the Soviet Military Authority banned all private insurance companies48 and the state established separate insurance firms in five different Ländern (territorial units) and one for East Berlin. These firms were later merged into a single company in two steps. The process was completed in 1969 with the establishment of the Staatliche Versicherungen der DDR (State Insurer of the GDR).49

As this brief summary shows, in all the so-called people’s democracies except the GDR, the process of the creation of state-owned insurance monopolies was similar: the government nationalized the insurance industry and eventually merged the companies. The Hungarian case was somewhat different and, therefore, merits study.

The Nationalization Process of Other Economic Sectors in Hungary

Nationalization in Hungary was the result of a relatively long process that lasted from 1946 to 1952. It started with the nationalization of the coal mines and ended with the nationalization of the tenement houses. The Communist Party, in many cases together with the left-wing social-democrats and the National Peasant Party, used a step-by-step process. In the first period, they forced the nationalization of the natural monopolies, such as the coal mines, and they asserted exclusive state control over the biggest heavy-industry companies. Until the end of 1947, they used the aforementioned “dry” methods, based (as explained earlier) on the experience of the Soviet NEP.

At the end of 1947 and the beginning of 1948, the government adopted a new strategy, the direct nationalization of almost all the companies in the banking sector and in the sectors of industry. This more direct process might not have been independent of overall political developments in Central and Eastern Europe. The communist parties started to accelerate the takeover process of power in every Central and Eastern European country. They established the Komintern, a common platform to coordinate their efforts. The Czechoslovak party made a coup-d’état in February 1948. In every country, the communist parties eliminated the social democratic parties in the name of the “unity of the working classes.” This process began in East-Germany in 1946 and continued in every country of the region in 1948.

The long transition period originally envisaged was replaced by almost immediate action, and as I show in the next chapter, this change had an effect on the insurance sector as well, although at a slower pace.

The Insurance Industry:
A New Beginning for a Short Period after World War II

In 1938, there were 43 insurance companies and local branches in the Hungarian insurance market. A further company from Sudetenland was established in 1942. During the war, three smaller insurers merged with larger companies so that by the end of the war there were 41 companies.

The war had an enormous impact on the insurance companies. In addition to the loss of employees, many companies had substantial investments in properties in the city of Budapest, which had suffered a 51-day-long siege (much longer than Vienna or Berlin, where the sieges lasted nine and sixteen days respectively). Because of the intense street fights, 15 percent of the buildings were destroyed and 59 percent were damaged,50 including the tenement houses of the companies. Some companies lost their archives as well.51

After the war, the eight local branches of UK companies (which as enemy properties had had to transfer their portfolios to Hungarian firms during the war) decided to discontinue operations in Hungary.

The remaining 33 insurers tried to restart operation after the war, but hyperinflation made it almost impossible. The real developments started after the introduction of a relatively stable currency, the forint, in the middle of 1946.

Based on the Potsdam declaration and the Hungarian Peace Treaty of Paris, all German assets in Hungary became the property of the Soviet Union as part of the war reparation claims against Germany. As a consequence, the Soviet Union became the owner of two insurance companies and nine branches of German, Austrian, and Sudeten-German origins operating in Hungary. The Soviets merged most of them into one company, the so-called Central-European Insurance Company (KEBIR). One specialized baggage insurer remained independent.

The state had dominant ownership in three groups of companies. In total, nine different legal entities belonged to these conglomerates. One of them was an agriculture-based mutual insurer (Gazdák Biztosító Egyesülete, the Farmers Insurance Association). The state owned the majority of its shares even before the war. The two others, including the biggest Hungarian insurer, were partly owned by banks. Due to the nationalization of the banks and the firms belonging to their spheres of interest in 1947, these companies were not nationalized directly, but the state gained a considerable stake in them. These companies were called “state-interested” insurers (állami érdekeltségű biztosítók). They started to cooperate vigorously in the market, including product harmonization and the establishment of a common commission system. The Ministry of Finance established the Central Insurance board (CIB), which worked as a common board for these companies. Despite their close ties to the state, they were not nationalized, which is one distinct feature of the Hungarian process of monopolization.

In 1948, the government decided to establish only one (or two, the second for reinsurance purposes) state insurers. It set up a so-called “committee of six members” to organize the process. The committee members represented the General Council for Economic Affairs (the apex body for economic governance), the Ministry of Finance, and the General Council of the Trade Unions.52 The committee also dealt with issues of other insurance companies. Based on the notes of the committee meetings (which are part of the document collection I mentioned at the beginning of this article), it is clear that their goal was to force all the companies not related to the state (apart from those owned by the Soviets and Italians) to cease operations and transfer their portfolios to one of the state-interested insurers. In the process, the government used the method of “dry” nationalization effectively.

It is worth presenting some typical cases. The Astra Insurer was Italian owned. Its main shareholder was the INA (Istituto Nazionale delle Assecurazioni), a state-owned insurer. In October 1946, INA sold its shares to the Helvetia Feuerversicherung AG, a Swiss firm.53 This could be interpreted as the Swiss trusting that private insurance could be a good business in Hungary in the long term. The company had also used this Swiss connection in its marketing. According to an article written by the CEO Lajos Bokor:

The private insurance companies… ask only for ideological, moral, and legislative support from the government, because the private insurance institutions are not expected to play a capital-demanding role in the reconstruction but a capital-producing role, and they intend to play this role to the full.54

The demands of Bokor and the private insurers were not heard, so after a year, the owners gave up, and in October 1948, a liquidation proposal was submitted to the General Assembly.55 The parent company moved Bokor to the Belgian Congo, and the company’s portfolio was transferred to one of the state-interested insurers, the Farmers Insurance Association. The last information I have about Bokor is from an advertisement in the Dél Keresztje (The Southern Cross), a Hungarian-language newspaper published in Sydney, Australia in 1952. He offered his brokerage services as “former CEO of Astra.”56 Another Swiss entity, the branch of the Baseler Versicherung gegen Feuerschaden (Basler), also merits discussion. As was the case with many other insurers, the government appointed a caretaker to run the branch in 1945.57 The caretaker was the previous representative in Hungary, so this was not a hostile move. Rather, it was justified by the communication difficulties at the time.58 Later, the caretaker became a representative again.59 The branch restarted operations, and in 1947, it was also authorized to enter the burglary insurance market.60 While the available sources reveal little about the details, the branch asked for permission to transfer its portfolio to the Farmers Insurance Association two years later.61

By 1948–1949, all seven independent companies had ceased to exist and had transferred their portfolios to one of the state-interested companies. Finally, the state established the state-owned company (legally from scratch) called Állami Biztosító (State Insurer) on May 5, 1949 and transferred the portfolios of the state-interested insurers to it. At the time, there were still eight companies in the Hungarian market, five Italian and two Soviet, in addition to the State Insurance Company.

Before the war, an important part of the market had been dominated by Italian companies (Generali, Foncière and Riunione Adriatica). As a possible part of Italian war reparations for the Soviet Union,62 they came under Soviet supervision and could continue their operations until 1950–1951. The history of their liquidation will be the subject of further research.

The heritage of the Soviet companies, especially the portfolios and agent networks of the Anker Group (Vienna), the Victoria Insurers (Berlin), and the Duna-Concordia, was significant. Out of the two companies, the KEBIR was far more important, so I focus on its history. The company was owned by three Soviet entities: Soviet State Insurer (Gosstrakh), which owned 70 percent, the Foreign Trade Bank of the USSR, which owned 15 percent, and the Institute of Transport of the USSR, which also owned 15 percent. The sources do not explain the rationale for this structure.

The Soviets held the first assembly under their control on November 28, 1946. A new board of directors and a supervisory board were elected. There was only one Hungarian member on the board of directors: Imre Váradi, the CEO, and the supervisory board consisted exclusively of Soviet citizens.

It is interesting to note that some vestiges of the rule of law continued to function under Soviet occupation even under increasing communist political influence. The Commercial Court required the election of at least one Hungarian citizen to the board of directors of the KEBIR. The registration of the company’s new name did not go smoothly either. The Ministerial Commissioner in charge of the registration of commercial companies objected to the fact that the company was using the name “Keleteurópa” (Eastern Europe), though its activities were limited to Hungary. He made registration conditional on the company proving its commercial links with Eastern Europe. In its reply, the company argued that one of its owners and its sole reinsurer was the “Russian (sic!) State Insurance Institute” and that it planned in cooperation with the parent company to enter the Eastern European markets after the conclusion of the peace treaty. In a later letter, it also referred to the fact that some members of the Soviet Union were themselves considered independent states. To some extent, this argument may have been supported by the fact that not only the Soviet Union but also Belarus and Ukraine became members of the United Nations when it was founded.

The lifecycle of the company can be divided into two phases. Between 1947 and 1950, the company experienced dynamic development, with a compound annual growth rate of 32 percent, and became an important player in the Hungarian market. In 1951, however, there was a significant decline, mainly due to the loss of active reinsurance.

The Soviet authorities used their power to avoid Hungarian regulations. As the company’s activities generated solid profits throughout 1947–1949, profit repatriation became an important issue. There was a regulation for the Hungarian companies according to which they were permitted to pay dividends on their profits only up to four percent of the share capital. However, the two Soviet companies were allowed to pay a much higher dividend based on their 1947 results. In the case of KEBIR, this was 1,550,000 forint, or 52 percent of the share capital.

Their presence in the market after 1949 constitutes another distinct feature of the Hungarian situation. They and the Hungarian State Insurer were competitors. The agent networks in particular fought against each other. The six-member committee and later the Ministry of Finance had to discuss the conflicts and the Soviet claims in many cases. This happened in a period of strict central planning. I am not aware of this type of competition taking place in other industries in the same period. This question offers an interesting path for further research.

The Hungarian Government wanted to establish a monopoly, but it was not easy to drive out the Soviet companies, as Soviet influence remained very significant in Hungary even after the Paris Peace Treaty.

The Soviets probably found the Hungarian idea of creating an insurance monopoly promising. They could get rid of a declining business where the Hungarian state stood behind the competitor firm, the Hungarian State Insurer. As the state became the owner of almost all Hungarian industries, it could easily deprive KEBIR of most of its businesses. During the negotiations, the Soviets tried to take advantage of the situation, always using data from an earlier period when estimating the value of portfolio and ignoring the fact that the portfolios were in decline.

Finally, the Hungarian government bought the Soviet-owned insurers at the end of 1952, together with many other Soviet companies. Only then did it manage to establish a monopoly. The agreement was reached after long and sometimes heated discussions. These debates and the activities of Soviet insurers in Hungary in general will be the subject of a separate article.

One main question remains open: why were the processes of nationalization so different in the Hungarian insurance sector compared to the nationalization of this sector in other socialist countries and also to the processes of nationalization in other branches of industry in Hungary? In the current phase of research, there is no clear answer to this question, and there is probably no single answer either. One explanation could be that an important part of the Hungarian insurance industry was owned by foreign investors, which made the government cautious. Second, the strong Soviet presence also complicated the situation. A third factor may simply have been the fact that in Hungary the insurance industry was never as important as the banking sector, and therefore, it was not important for the political leadership to resolve such a relatively complicated issue.

Archival Sources

Endre Boross bequest. (Privately owned.)

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Kováts, Antal András. “Svájciak a magyar történelem sodrában 1867–1990” [The Swiss in the maelstrom of Hungarian history 1867–1990]. Történelmi Szemle 59, no. 4 (2017): 563–67.

Kovácsy, Tibor. “Az utasításos gazdaságról” [On the command economy]. Történelmi Szemle 24, no. 2 (1981): 191–202.

“A magánbiztosítás és a hároméves terv” [Private insurance and the three-years plan]. Képes Figyelő, September 6, 1947. 41.

Nemény, Vilmos Béla. “Gondolatok korunk társadalmi átalakulásának kérdéséhez” [Reflections on the social transformation of our time]. Közgazdasági Szemle 71, no. 1–4 (1948): 115–28.

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The Politics of Business: (Failed) Economic Initiatives of
Slovene Liberals in the First Decades of the Twentieth Century

Ivan Smiljanić

Institute of Contemporary History, Ljubljana

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Hungarian Historical Review Volume 13 Issue 4 (2024): 559-574 DOI 10.38145/2024.4.559

Slovenian politics in the late nineteenth and early twentieth century was strongly divided along ideological lines, with the conservative and liberal camps in particular engaging in never-ending cultural struggles through their various outlets. This was also evident in the economic sphere, where the conservative camp held a strong position with a network of cooperatives across the predominantly agricultural areas of Slovenia. The liberal camp tried to gain greater influence and also founded a number of cooperatives in order to exert greater economic and thus also political influence. For reasons such as rashness, inexperience, negligence, and outright corruption, these projects were mostly unsuccessful and ended in a series of bankruptcies or financial scandals.

Keywords: economic nationalism, Slovenia, liberals, Kulturkampf, bankruptcy.

The economy is often understood as an area that moves, changes, fluctuates, and morphs according to its own internal laws, which can only be understood rationally to a certain extent and over which other areas have only a marginal influence. However, there are unquestionably some external forces that can be of great importance to the state of the economy, politics being one of the most important. Political decisions can have a short-term or long-term impact on the state of the economy. One of the most important factors that can arise from this direction is the concept of economic nationalism, which aims to protect the interests of a particular national group as opposed to other groups, which are usually seen as competitors if not outright enemies.1 This approach may run counter to some basic axioms of economics, but it was and still is a strong doctrine in many regions. A similar situation, which can perhaps be considered a subset of economic nationalism (although its name and status are not yet clearly defined in the relevant literature), is the case of economic competition within the same nationality when political and ideological differences exist.

While the Slovenian territory, which belonged to Austria-Hungary until 1918 and was then largely part of the Kingdom of Serbs, Croats and Slovenes, was characterised by strong nationalist Slovenian-German struggles until the collapse of Austria-Hungary, divisions also emerged within the Slovenian group, and these divisions became increasingly pronounced over time. In the second half of the nineteenth century, there was a political and ideological stratification among Slovenian politicians. Although attempts had been made in previous years to stand shoulder to shoulder and face the common enemy (German liberalism) together, the differences proved too great. In 1892, a Catholic party was officially founded with the name Catholic National Party, which has been known as the Slovenian People’s Party since 1905. The Liberals also founded their own party in 1894, the National Progressive Party, followed by a socialist party (the Yugoslav Social Democratic Party) in 1896. The newly founded parties proved divided. They sharply criticised the views and actions of each other. As in other parts of Austria-Hungary and in many other European countries, a veritable Kulturkampf ensued, in which not only the political representatives but also the general public were divided into political camps. The most important Slovenian newspapers, each closely associated with one of the parties, published foul-mouthed articles about their political opponents, harsh condemnations of the opinions and actions of others, and sharply satirical, if not insulting, texts. It was not uncommon for public debates, whether in the newspapers, in the general public or in the Carniolan regional assembly, to become extremely offensive on a personal level. This political reckoning in extremis was an important feature of the (not only) Slovenian political landscape of the fin de siècle.

The party leaders realised that political influence could be strengthened by a strong position in the economy, and every party did its best to establish its dominance in the economic field. They had to take into account the strongly agrarian character of the Slovenian economy. The vast majority of Slovenians, up to 90 percent, belonged to the peasantry. The small percentage of the local economy that did not fall under the agricultural umbrella was mainly based on small family businesses and craft enterprises. Therefore, any group that wanted to increase its political power had to appeal primarily to the peasantry. An important part of the Slovenian peasant economy was the cooperative system, in which peasants, craftsmen, and workers contributed their savings to local cooperatives, which helped them with cheap loans, the purchase of tools and crops, and so on. At the beginning of the twentieth century, the cooperative network spread throughout Slovenia, but it was mainly under the influence of the Catholic conservative party, despite its earliest beginnings being overseen by liberal politicians.2 The liberal party, unable to come to terms with the strong influence of the Catholic Church in the rural parts of Slovenia, tried to establish its own parallel economic institutions in order to increase its own influence, even though its ideology was certainly closer to a (comparatively small) group of the Slovenian bourgeoisie.3 Therefore, in many towns it was not uncommon for there to be two Slovenian cooperatives with different political orientations. The Liberals founded the Association of Slovenian Cooperatives (Zveza slovenskih zadrug), which in a short time included around 130 new member cooperatives. Most of these cooperatives were newly founded, but about a third were taken over from the existing conservative cooperatives. The projects with which the Liberals wanted to achieve increased influence were ambitious, but in their quest for quick success and due to management errors, they often collapsed on themselves.

The Old Liberals’ First Attempt: The Glavna Loan Company

There were two factions within the Liberal Party, the more conservative Old Liberals and the more radical Young Liberals. The two groups differed both in their political-ideological and economic views. At the beginning of the twentieth century, both tried to prove their competence in the economic field by founding two large cooperatives, both of which came to an unfortunate end.

The Old Liberals were the first to try their luck. They founded the Glavna loan company (Glavna posojilnica) in Ljubljana in 1899, although they were generally opposed to the establishment of cooperatives,4 which Glavna officially was. Glavna was intended to be a serious competitor to the Catholic cooperatives, as its name indicates (“Glavna” means “the main one”), but throughout its existence it exerted only a limited influence.5 The institution was plagued by financial problems early on, as several of its main debtors failed and were unable to repay their debts. The director of Glavna, the lawyer Matija Hudnik, got involved in speculative transactions to earn the money he needed and then, in desperation, made an agreement with the auditor of the Cooperative Association in Celje. The auditor touted the strength of the Glavna loan company to the members of the association so that the cooperatives would invest more money in the company, and the auditor then received a commission from this money.6 The scam could not and did not last long.

As soon as the financial problems became known to the public, German agitators allegedly appeared and called on investors to withdraw their money from the collapsing Slovenian savings banks and deposit it in the Carniolan savings bank,7 an old, respected institution that was publicly associated with the German camp. The Catholic camp also allegedly spread disturbing rumors about the state of the Glavna. The liberal press was initially calm and said that there was no need to panic, but the tides soon changed and even the liberal press began to warn that everyone, whether liberal, Catholic, or German, had savings accounts and thus shares in the loan fund and should therefore contribute to its reorganization.8 But it was too late. Glavna had losses of several million crowns (later sources speak of 3.6 million crowns),9 and in February 1911, it went bankrupt.

The news landed on the front pages of Slovenian newspapers10 and caused public outcry. The bankruptcy was a catastrophe for around 500 investors who, mostly without realizing the true significance and extent of their commitment, had pledged the credit company all their assets in case disaster struck. There were hundreds of other investors who had wisely avoided this type of guarantee. “The common good demands that an institution that relies on an unlimited commitment fulfils every penny of its obligations,” the Catholic press insisted.11 The liberal press, on the other hand, was more cautious:

According to the strict wording of the law on cooperatives with unlimited commitments, they would have to cover the entire loss of the institution, which was borne by the members of the cooperative, the vast majority of whom did nothing other than borrow small amounts from this cooperative at a clearly usurious interest rate at the time and, if necessary, return them soon.12

The collapse of the credit society frightened savers in Carniola and Styria and led to a decline in lending in both regions. The Catholic newspaper Slovenec gave the following warning:

The collapse of the Glavna loan company in Ljubljana has affected many loan offices in southern Styria; the Cooperative Association in Celje is writhing in agony; private individuals who are investors in Glavna are cursing this institution and its leaders.13

Many cooperatives and credit companies had to publish reassuring announce­ments in the newspapers that they were not doing business with Glavna and that they would not lose a penny as a result of its collapse. The possible reorganization of the credit institution was discussed at the regional summit chaired by regional governor Fran Šuklje,14 and the delegation of the loan company was also to meet with the Austrian prime minister and finance minister in Vienna.15

In a heated exchange that lasted for weeks, the liberal and conservative political camps accused each other of being responsible for the bankruptcy of the loan company. The Catholic press reported extensively on the disaster and blamed the incompetent and deceitful leadership of the Liberals. It emphasized that the event, which was caused specifically by the Liberal leadership of the loan company, was extremely unpleasant for the Liberals, as it clearly proved their corruption and incompetence, which they are trying to hide as much as possible in anticipation of the upcoming elections. According to Slovenec, this did not mean that the Conservatives were happy about the disaster, as hundreds of innocent investors had lost their money.16 However, they vehemently rejected any claim that Glavna was in any way connected to the conservative camp. The liberal press, on the other hand, was convinced that the declaration of bankruptcy had been a quick procedure due to the involvement of the Catholic camp,17 which had sought to blame it on the Liberals. The Liberals repeatedly warned that the merchant Tomaž Pavšlar, whose large unpaid debts were fatal to the collapse of the loan company, was also a conservative, and information began to spread that Matija Hudnik was also secretly a conservative sympathizer who had been expelled from the liberal party.18 The Old Liberals defended themselves by claiming that Glavna had been sunk by conservative debtors who had not repaid their debts on time. The discussions were interrupted, albeit rather late, by the liquidation committee, which claimed that it was not “one political party or another” that had been responsible for the disaster, but the board of directors and the supervisors, who had been “reckless and unscrupulous” in their handling of the cooperative’s assets.19

The entire press agreed, however, that the bankruptcy was “one of the saddest facts in the history of our country’s economic independence.”20 There was also clear consensus that it would have serious consequences:

On the Slovenian money market, this bankruptcy is one of the worst blows that has directly affected our trade, our crafts, our private companies and even reaches deep into the conditions of private life. […] It is true that the catastrophe of the Glavna loan company has also caused much hardship and misery in private life and many economic disasters on Slovenian soil.21

The former director Hudnik and the auditor with whom he had committed fraud were arrested and sentenced to several years’ imprisonment at the court hearing in June 1911.22 The bankruptcy proceedings dragged on for several years until a reorganization cooperative was founded in 1914 to help the investors settle their debts.23 The proceedings were halted by World War I, as the bankruptcy trustee was drafted into the army. The proceedings were not officially concluded until 1926,24 so they lasted 15 years and are one of the longest documented Slovenian bankruptcy proceedings. The debtors received 52 percent of the amounts they had claimed.25

The Attempt by the Young Liberals: Agro-Merkur Cooperative in Ljubljana

Thus, the attempt by the Old Liberals to found their own cooperative ended ingloriously. The Young Liberals, who also wished to take over the influence in the Slovenian cooperative system from the Catholics, tried their luck at practically the same time. In autumn 1908, the Agro-Merkur cooperative was opened in Ljubljana, which traded in agricultural products26 and was to become the central trading office of the Association of Slovenian Cooperatives.27 Just over a year after it was founded, Agro-Merkur ran into difficulties. Dr. Gregor Žerjav, its unofficial manager and also a prominent figure of the Liberal group, had no experience running a business,28 and many machinations took place in the cooperative under his management. Agro-Merkur’s debts were far in excess of the officially authorized 50,000 crowns, and Žerjav tried to hide this fact. He did not convene any board meetings and merely noted in Agro-Merkur’s accounts that the debt had been repaid by other loan companies.29 The final sum of Agro-Merkur’s debts, most of which had been accumulated at the Association of Slovenian Cooperatives, exceeded half a million crowns.30 By October 1910, Žerjav’s inexperience and dishonesty had driven Agro-Merkur into bankruptcy.

The reaction of the press was once again stormy. Reporters agreed that Žerjav had wanted to turn the cooperative into an economic giant or that he had wanted “immediately to pin the cooperative to the sky.”31 There was also controversy in the exchange of blows between the young-liberal daily Jutro and the old-liberal Slovenski narod. The Old Liberals were annoyed by the serious consequences of the cooperative experiment and tried to distance themselves from Agro-Merkur by claiming that it had been Žerjav’s private company. Jutro defended Žerjav and blamed Žerjav’s Old Liberal colleagues, who allegedly had had a bad influence on him.32 Either way, in the following months the term “Agro-Merkur” was used in the Slovenian press as a synonym for the economic failure and greed of the (Young) Liberals. Žerjav had to retreat from Ljubljana to Gorizia for a while because of his tarnished public reputation. The press offered the more dramatic report that he had fled to Egypt.33 The conservative newspaper Slovenec commented, “Agro-Merkur is a huge cautionary tale, bitter but extremely instructive.”34

Similarly to the Glavna loan company, the cooperatives in Agro-Merkur were divided into members and other investors. Here too, the members who guaranteed the company with all their assets were threatened. It was alleged in the Catholic press that even when the cooperative was aware of its impending bankruptcy, it forced new members to join by selling them produce or wine so that they could cover their losses.35

There were many other lawsuits in which Agro-Merkur usually lost against the plaintiffs. Slovenski narod tried to relativize the defeats:

Busts are a natural consequence of bankruptcies. What is now being done in Ljubljana is now also being done in Klagenfurt. As is well known, the priests’ cooperative there went bankrupt, and the result was a legal dispute. But there is a big difference. ‘Glavna’ and ‘Agro Merkur’ went bankrupt due to unfortunate speculation. Mishaps in speculation can happen to anyone. Right now, there is talk of a large loss of the church ‘Volksanleihe’ in Styria, which was caused by unfortunate speculation. So ‘Glavna’ and ‘Agro-Merkur’ were destined for disaster because of unfortunate speculation, and the clerical cooperative in Klagenfurt suffered because the Catholic prelates stole millions.36

The criminal investigations following the Agro-Merkur bankruptcy proceedings attracted a great deal of public interest. Those responsible were sentenced to several months in prison, including Žerjav, who was not sent to prison due to his poor health and the outbreak of World War I. The court issued the following statement:

The reasons for the bankruptcy of Agro-Merkur lie primarily in the fact that the loans from the Slovenian Cooperative Association were used in an illegal and irregular manner. The management was not up to the tasks assigned to it, and it deployed staff who were not up to their tasks either. The events that were labelled an accident are of minor

importance, as this accident was related to the overstepping of the client’s scope of work. They were aware of the passivity even before they announced the bankruptcy.37

The bankruptcy proceedings were interrupted by World War I and only continued after 1918. In the new Yugoslav country, where he was also a minister, Žerjav had to deal with old accusations of embezzlement and prison sentences, which were brought up in anti-liberal newspapers. Jutro responded to the accusations with a reinterpretation of past events, namely that Žerjav had been sentenced to prison primarily because of his political and economic activities against the Germans.38 Slovenec saw through Jutro’s revisionist tactics and wrote that the liberal newspaper was using a well-known argument, according to which every act of a Slovene convicted in a court under Austria-Hungary should be understood as an act of “national merit,” and the person convicted should be seen as graced with the halo of martyrdom.39 The proceedings were summarily discontinued around 1928 (without being officially recognized by a public final declaration), with creditors receiving just over six percent of their claims.

Banking Experiments in the New State: Jadranska and Slavenska Banks

Despite these setbacks, the Slovenian Liberals remained influential in the economy even after the collapse of Austria-Hungary and the founding of the Kingdom of Serbs, Croats and Slovenes in 1918. While their cooperative experiments largely faded into the background following the dramatic and costly bankruptcies of two of their supposed flagships, they were still active in the economic sector, but they gradually turned more towards their original bourgeois roots, as reflected in their newfound interest in banking. The spread of influence, whether official or unofficial, was also characterized by exploitation. One of the first scandals to rock the young Yugoslav economy was related to the Jadranska bank (Jadranska banka), the director of which was the influential yet controversial banker, industrialist, and liberal Avgust Praprotnik.40 Praprotnik began his banking career at Jadranska bank, where he quickly rose to leading positions and was appointed general director in 1920. Two years later, when Praprotnik had already left the bank, it turned out that during his time as director, he had secretly transferred around three million crowns intended for political propaganda in Carinthia and the founding of the University of Ljubljana to his political friends, in particular Gregor Žerjav.41 Because he had left the bank in time, Praprotnik, who claimed that he was innocent,42 was not held responsible for the affair in front of the court, but he did gain notoriety. In a later public letter to his successor as the head of Jadranska bank, Praprotnik did almost outright admit to having committed fraud:

But what does my opponent accuse me of? Of having transferred large sums from the profits of Jadranska bank to the Yugoslav Democratic Party? Should I be ashamed of this offence? Have I really committed a crime against the country and the homeland by supporting the cultural, social, national economic, and political actions of the YDP? All banks support political and cultural endeavors with their profits.43

The affair was one of the first major economic disappointments in the newly founded kingdom, but it did not prevent Praprotnik from being appointed director of the Maribor escompte bank.

Soon Praprotnik was involved in the next sensational story. In 1918, Slavenska bank (Slavenska banka) was founded in Zagreb. It quickly developed into one of the largest Yugoslav banks.44 It took over the property of other banks, opened branches at home and abroad, and attracted many customers who were lured by the high interest rates.45 The influence of Slovenian businessmen and bankers, especially the Liberals, on Slavenska bank was great, if not decisive, as they owned the majority of shares and capital.46 Praprotnik was appointed vice-president of the bank in 1923. The largest shareholders wanted to control the bank’s work closely and therefore formed special interest groups from 1922, which influenced the bank’s activities from the background. Žerjav was one of the members.47

In 1924, the bank showed the first signs of difficulties. An inconsistent business policy, excessive lending, and extensive debt cancellation led to a deficit. Žerjav left the interest group and sold his stake in the bank for a large sum, while Praprotnik resigned from his position as vice-president.48 Investors became suspicious and withdrew their deposits en masse. In September 1926, the bank had to stop paying out deposits, and in May 1927 it went bankrupt.49 The bank’s collapse caused a great stir. It was one of the biggest financial upheavals in the country’s history, and the investors, 3,210 in total, ultimately only received 22 percent of their claims back after the bankruptcy proceedings,50 even though the liquidation process dragged on until 1947. Due to his another timely exit, Praprotnik did not have to answer for his actions in the bankruptcy proceedings, though he was identified by the majority of the Slovenian press as one of the main culprits in the bankruptcy. Newspapers that were not favorable to the Liberals wrote that the influence of Žerjav’s group on Praprotnik had merely shifted from Jadranska bank to Slavenska. Jutro tried to deny any connection between Žerjav and Slavenska, but this did not help much.51 Praprotnik was never brought to justice for his role in the affair, but in 1942, he was shot dead on a street in Ljubljana by members of the Partisan Security Service.

A Local Crash: The Kajfež Company in Kočevje

The shadow of the collapse of the liberal economic institutions haunted Žerjav until his death in 1929. The Catholic press always pointed out when a member of the liberal party experienced an economic collapse. The biggest scandal occurred in 1928, when a large timber and catering company owned by Anton Kajfež in Kočevje went bankrupt.52 Kajfež established himself as the richest and most influential Slovenian entrepreneur in Kočevje, which was predominantly inhabited by Gottscheers of German descent. From the Austro-Hungarian period onwards, Kajfež systematically promoted the economic development of the Slovenes and tried to limit German influence. He invested his money in the establishment of Slovenian economic and cultural institutions in the region, employed Slovenian workers, and tried to overcome the strong German influence in the region. As he personally, together with his family, had great influence on these institutions, he began to exploit this influence and accumulated considerable debts to the local bank he had helped to found. When the Kajfež company finally went bankrupt in 1928 due to unwise management53 (although the owner tried to hide the true extent of his debts through false accounting54), its considerable influence on the local economy had a noticeably negative impact on the Slovenian economy in the entire region. The Gottscheer community took the initiative again and remained there until the outbreak of World War II.

What About the Catholic Camp?

The focus of this paper has been on the Slovenian liberal camp, and it might seem that their fiercest ideological enemies in the Catholic camp were flawless by comparison. In fact, the Catholic group did not need to try to boost the economy because they already had the advantage when it came to exerting influence in the Slovenian economic sphere, especially in the agricultural sector. The Catholics’ pride and joy, the well-developed network of cooperatives, was based on the logic that the members controlled one another and focused on supporting the peasants rather than making profits. As a result, financial misdeeds and scandals or cooperative failures were a rare sight, but that doesn’t mean they never happened. When they did occur, the liberal camp, for a change, had a field day in the press.

It is worth considering two such cases from the early twentieth century. In Poljane nad Škofjo Loko, the local Catholic elite founded a cooperative called the Associated Peasants’ Society, which at the same time established a local savings bank which gave generous loans. The people who guaranteed the debts of the savings bank were recruited from Poljane and the neighboring valley and mountain villages, and apparently many of them did not know what they were getting into. The unsustainable cooperative model finally collapsed in 1903 and the company went bankrupt, much to the chagrin of the local peasantry.55 The liberal camp, which had insisted for years that the widespread network of Catholic cooperatives was rotten from within and only served to ensure that the exploitative local clergy received money from the peasants, immediately began to write about the incident:

So another church cooperative has died, while the Catholics of Poljane claimed from the beginning that the association was flourishing and spreading the fame of the parish of Poljane for miles! But now this marvelous growth is showing! In the last nine months, these misguided poor people have lost 4,500 crowns!56

Slovenec was more reserved than usual this time and vaguely blamed an undefined, unhealthy state of the cooperative for the financial collapse.57 It seems that despite the liberal press emphasizing the guilt of the Catholic representatives, the official view was similar, because a court case was organized in which seven of the peasants who had (presumably unwittingly) guaranteed the bank’s liquidity were charged, but they were sentenced to very light prison terms because the court decided that they had not understood what they had signed or what they had been offering a pledge to guarantee.58

The second major Catholic affair took place at a similar time and not far from Poljane. This time it was connected with the peasant society in Dolenja Dobrava, a small village near Gorenja vas. This society was founded in 1899 by local landowners, but mainly by those who had no experience in trade or bookkeeping and many of whom were not entirely literate. They succeeded in recruiting a number of members, but there were disruptions in the society’s operations from the outset.59 The first president therefore resigned, and his successor began to support the liberals. It is hard to say what followed, but apparently his conversion was so unwelcome that he was framed for fraud for allegedly having stolen from the cooperative. He was arrested, but the court proceedings revealed that he was most likely not guilty, and he was released. Due to his tarnished reputation, he left Dolenja Dobrava and went to the United States.60 Despite his departure, the unrest in the cooperative did not stop, and it seemed to have fewer and fewer resources. The disheartened and disappointed peasant members of the cooperative demanded the closure of the cooperative and bankruptcy, but the leadership only supported liquidation and was unwilling to recognize the debt. Tensions were high, and although liquidation was initially declared, bankruptcy was finally declared in 1909.61 Slovenski narod printed the following victorious declaration: “So this is the famous clerical economy. One bankruptcy after another!”62 The bankruptcy proceedings lasted until 1913, and the liberal regional newspaper Gorenjec summarized the affair in the following words:

One thing remains clear: the clerics wanted to use the agricultural association in Dolenja Dobrava to build their fortress against the progressives, especially the progressive merchants, but they failed. With their reckless economics, they plunged many people into misfortune.63

Some of the high-profile affairs presented above show that the Slovenian liberal camp was prepared to go to great lengths to secure economic influence, which they saw as a means of gaining support for their political activities and strengthening their position vis-à-vis the Slovenian Conservatives. To achieve this, their leading members often acted boldly, unwisely, or even illegally. The Liberals therefore experienced a series of successes and failures, with the latter often becoming notorious public scandals due to their scale and the number of victims. The situation can be summarized as follows: the Catholic camp operated with smaller institutions and more modest sums of money, and it invested cautiously and in fairly safe investments which did not bring it great wealth but contributed to its firm anchoring among the Slovenes. The liberal camp, on the other hand, tried to catch up with the established Catholic influence in the economy with bold economic projects that promised immediate high profits. In this sense, the liberal project was not successful, as the conservative party always remained the most influential Slovenian party in the interwar period. Economic influence, at least in the rural parts of the country, remained firmly in the hands of the Conservatives up until the political changes during the war and postwar times.

Archival Sources

Arhiv Republike Slovenije [Archives of the Republic of Slovenia], Ljubljana

SI AS 307, Deželno sodišče v Ljubljani [Regional Court in Ljubljana]

S 11/10, Agro-Merkur.

Bibliography

Primary sources

Gorenjec, 1909, 1910.

Jutro, 1910, 1911, 1926.

Kramer, Albert. “Resnica o Agro-Merkurju” [The truth about ‘Agro-Merkur’]. Jutro, March 25, 1925.

Narodne novine, 1927.

Praprotnik, Avgust. “Poslano. Odgovor na poziv” [Sent. Response to invitation]. Jugoslavija, June 7, 1922.

Praprotnik, Avgust. “Zoper klevete” [Against defamation]. Tabor, June 1, 1922.

Slovenec, 1903, 1910, 1911, 1914, 1925, 1927, 1929, 1932.

Slovenski narod, 1902, 1904, 1910, 1911, 1912, 1923.

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• 1 Jančík and Kubů, Nacionalismus zvaný hospodářský, continuously in the text.

2 The so-called Nostrification Act No. 12/1920 of the Sbírka zákonů a nařízení republiky Československé [Collection of Laws and Regulations of the Czechoslovak Republic] authorized the Ministry of Industry and Trades to order companies with production plants in the Czechoslovak Republic but with their seats outside the Czechoslovak Republic to transfer their seats to the territory of the new republic. The main objective was to avoid tax losses (companies officially registered outside Czechoslovakia paid a share of their taxes to the countries in which they had their seats). However, other motives were also important. First and foremost, the act was intended to ensure the state’s influence on strategic enterprises. Nostrification was seen as one of the means of strengthening the economic independence of the new state. The nostrification process became a welcome opportunity to increase the economic influence of Czechoslovak banks, especially the national Czech banks, which took over the lending of nostrified companies. In total, over 200 large companies were nostrified with state assistance.

3 Kubů and Šouša, “Die Nostrifizierung von Industrie- und Handelsfirmen.”

4 Kubů, “Za sjednocenou nacionálně českou bankovní frontu.”

5 Všeobecný zákonník obchodní, 117–18.

6 Ottův obchodní slovník, vol. 2, 1045; Slovník obchodně-technický, účetní a daňový, vol. 9, 1402–4; Heyd, Repetitorium obchodních bank, 16–17, 127. See also Eichlerová, “Konsorcium.”

7 Pospíšil, “Emisní obchody bank,” 50–51; Růžička, Organisace bank, 100.

8 Ottův slovník naučný, vol. 24, 25.

9 Koloušek, Národní hospodářství, vol. 3, 40.

10 Kunert, “Průmysl a banky,” 137–44.

11 Rosík, Bankovní účetnictví, 248–69. For variations of accounting methods, see in detail Slovník obchodně-technický, účetní a daňový, vol. 9, 522–64. 

12 Rosík, Bankovní účetnictví, 183.

13 Novotný and Šouša, “Změny v bankovním systému,” 245–46.

14 On consortia in the context of banks’ emission operations, see Pospíšil, “Emisní obchody bank,” 50–54; Rosík, Bankovní účetnictví, 263–68; Gruber, Hospodářská organisace úvěru, 26; Fousek, Příručka ku čtení bursovních a obchodních zpráv v denním tisku, 27.

15 Šikýř, Bankovní účetnictví, 58–59.

16 Ibid.

17 Nečas, “Organizační síť a obchodní činnost českých bank”; Tóth, “K počátkům a vývoji cuk­ro­varnického průmyslu.” 

18 AČNB, fund ŽB, sign. ŽB/154/1, Sale consortium of Solo shares, contract dated October 25.

19 Rosík, Bankovní účetnictví, 263–68; Slovník obchodně-technický, účetní a daňový, vol. 9, 554–64.

20 Kunert, “Cesta ke koruně.”

21 When the consortium agreement was signed, Bedřich Fuchs was the owner of a private banking house and a speculator who had significant influence in the informal background of the Prague Stock Exchange (trading also in less frequently traded stocks), and from this point of view, he was a welcome partner who could help influence the exchange rate. The press of the time referred to him as “the master of the Prague Stock Exchange.” Bull, “O slávě bankéřské.”

22 These included shares in Škoda Works, Česká společnost pro průmysl cukerní (Bohemian Sugar Industry Company), Česká obchodní společnost (Bohemian Trading Company), Rakovnické a poštorenské keramické závody a.s. (ceramic factories in Rakovník and Unter-Themenau, Ltd.), Západočeské továrny kaolinové a šamotové a.s. (West-Bohemian Kaolin and Chamotte Factories, Co. Ltd.), Breitfeld-Daněk (engineering works Breitfeld-Daněk), Českomoravské elektrotechnické závody Fr. Křižík, a. s. (Bohemian-Moravian Electrotechnical Works), Spojené továrny hospodářských strojů Fr. Melichar-Umrath a spol., a.s. (United Factories of Agricultural Machinery Fr. Melichar-Umrath and Co., Ltd.), etc. For detailed documentation on the consortium, see AČNB, fund ŽB, sign. ŽB/183/2, folder Syndicate “B”.

23 Špička, Organisace bank, 377–79.

24 Karásek et al., Obchodník ve styku s bankou, 89–90; Špička, Organisace bank, 377–78; Preiss, Průmysl a banky, 9–10.

25 AČNB, fund ŽB, sign. ŽB/178/1, convolut of documents – Radlická mlékárna syndicate.

26 Ibid., syndicate agreement of June 28, 1935.

27 Ibid.

28 Balcar, Tanky pro Hitlera, 38–39; Teichová, Mezinárodní kapitál a Československo, 89.

29 AČNB, fund ŽB, sign. ŽB/ 49-10, convolut of documents (Philips syndicate).

30 Ibid., Gedenkprotokoll aufgenommen am 3. Februar 1937 in den Lokalitäten der Živnostenská Banka in Prag über den Abschluss eines Syndikatsvertrages. 

31 Ibid.

32 For a transcript of the agreement, see AČNB, fund ŽB, sign. ŽB/665/2, syndicate agreement “Czech Distillery Syndicate” of December 15, 1932 with amendments of October 23, 1936. 

33 Pátek, “Československo-rakouské kapitálové a kartelové vztahy,” 137–40; Novotný et al., “Úsilí českého finančního kapitálu.”

34 For a collection of documents on the activities of the distillery consortium, see AČNB, fund ŽB, sign. ŽB/32/1, Rules of Procedure for Companies Included in the Action Distillery Syndicate; Organizational Rules for Companies Controlled by the Action Distillery Syndicate.

35 In the case of the aforementioned Radlice consortium, previously concluded parameters regarding the business and credit connections were addressed in the agreement. AČNB, fund ŽB, sign. ŽB/178/1, syndicate agreement of June 28, 1935. 

36 AČNB, fund ŽB, sign. ŽB/150/1, draft agreement (1937).

37 Ibid., sign. ŽB/3959/1, list of consortium companies (undated).

38 Ibid., sign. ŽB/398/1, undated scheme of the structure of Živnostenská Banka.

39 For a detailed explanation, see ibid., sign. ŽB/3959/1, Technique of conducting consortium transactions (undated typescript). 

40 Ibid., list of consortium companies (undated). 

41 AČNB, fund ŽB, sign. ŽB/103/1, minutes of the meeting on November 7, 1919.

42 For a detailed overview of the participation key, see Novotný and Šouša, “Změny v bankovním systému,” 248. 

43 Rosík, Bankovní účetnictví, 206–9, 213, 218.

44 Klier, Veřejné peněžnictví, 218–19. 

45 Československé banky v roce 1922, 94.

46 Statistická příručka republiky Československé, vol. 4, 260. 

47 Pimper, České obchodní banky, 459–60.

48 Ibid., 460.

49 Novotný and Šouša, “Změny v bankovním systému,” 245–46.

* The study was carried out under the Cooperatio program, provided by Charles University, History, at the Faculty of Arts. The text is a revised version of the chapter “V napětí konkurence a spolupráce. Bankovní konsorcia/syndikáty v meziválečném Československu (angažmá Živnostenské banky)” [In the tension of competition and cooperation. Banking consortia/syndicates in interwar Czechoslovakia (Engagement of Živnostenská Banka)] published in the collective monograph Miloš Hořejš, Eduard Kubů, Barbora Štolleová, eds., Podnikatel versus kapitál – kapitál versus podnikatel. Dvě tváře jednoho vztahu ve střední Evropě 19. a 20. století [Entrepreneur versus capital – Capital versus entrepreneur. In the tensions of competition and cooperation], Prague: NTM, 2023, 100–14.