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Against the Mainstream: Nazi Privatization in 1930s Germany


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The Great Depression spurred State ownership in Western capitalist countries. Germany was no exception; the last governments of the Weimar Republic took over firms in diverse sectors. Later, the Nazi regime transferred public ownership and public services to the private sector. In doing so, they went against the mainstream trends in the Western capitalist countries, none of which systematically reprivatized firms during the 1930s. Privatization in Nazi Germany was also unique in transferring to private hands the delivery f public services previously provided by government. The firms and the services transferred to private ownership belonged to diverse sectors. Privatization was part of an intentional policy with multiple objectives and was not ideologically driven. As in many recent privatizations, particularly within the European Union, strong financial restrictions were a central motivation. In addition, privatization was used as a political tool to enhance support for the government and for the Nazi Party.
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Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
By Germà Bel
Research Unit of Public Policy and Economic Regulation (ppre-IREA),
University of Barcelona, Department of Economic Policy and World Economics.
Diagonal 690, 08034 Barcelona, Spain; Tel: 34.93.4021946;
Abstract: The Great Depression spurred State ownership in Western
capitalist countries. Germany was no exception; the last governments of
the Weimar Republic took over firms in diverse sectors. Later, the Nazi
regime transferred public ownership and public services to the private
sector. In doing so, they went against the mainstream trends in the
Western capitalist countries, none of which systematically reprivatized
firms during the 1930s. Privatization in Nazi Germany was also unique in
transferring to private hands the delivery of public services previously
provided by government. The firms and the services transferred to private
ownership belonged to diverse sectors. Privatization was part of an
intentional policy with multiple objectives and was not ideologically
driven. As in many recent privatizations, particularly within the European
Union, strong financial restrictions were a central motivation. In addition,
privatization was used as a political tool to enhance support for the
government and for the Nazi Party.
Key Words: Privatization, Public Enterprise, Nazi Economy, Germany.
JEL Codes: G38, L32, L33, N44
* This research project has received financial help from the Fundación Rafael del Pino, and
from the Spanish Ministry of Science and Technology under the Project BEC2003-01679.
Much of the work on this paper was done while I was visiting scholar at Harvard
University. A preliminary version of the paper was presented at Georgetown University.
Comments and suggestions from Xavier Coller, Jost Dülffer and Luis Quiroga and an
anonymous referee have been useful. I am thankful to Benedikt Kronberger for his help in
translating from German. I am fully responsible for any remaining errors.
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
I. Introduction
Privatization of large parts of the public sector was one of the defining policies of the last quarter
of the twentieth century. The privatizations in Chile and the United Kingdom, implemented in the
1970s and 1980s, are usually considered the first privatization policies in modern history (e.g. Yergin
and Stanislaw, 1998, p.115). A few researchers find earlier instances: Some economic analyses of
privatization (e.g. Megginson, 2005, p. 15) identify partial sales of state-owned firms in Adenauer’s
Germany in the late 1950s and early 1960s as the first large-scale privatization program, and others
argue that, though confined to just one sector, the denationalization of steel and coal in the United
Kingdom during the early 1950s should be considered the first privatization (e.g. Burk, 1988;
Megginson and Netter, 2003, p. 31).
None of the contemporary economic analyses of privatization takes into account an important,
earlier case: the privatization policy implemented by the National Socialist (Nazi) Party in Germany.
The modern literature on privatization, the recent literature on the twentieth-century German
economy (e.g. Braun, 2003) and the history of Germany’s publicly owned enterprises (e.g.
Wengenroth, 2000) all ignore this early privatization experience. Some authors occasionally mention
the re-privatization of banks but make no further comment or analysis (e.g. Barkai, 1990, p. 216;
James, 1995, p. 291). Other works, like Hardach (1980, p. 66) and Buchheim and Scherner (2005, p.
17), mention the sale of State-owned firms in Nazi Germany only to support the idea that the Nazi
government opposed widespread state ownership of firms and do not carry out any analysis of these
It is a fact that the government of the Nazi Party sold off public ownership in several State-
owned firms in the mid-1930s. These firms belonged to a wide range of sectors: steel, mining,
banking, local public utilities, shipyards, ship-lines, railways, etc. In addition, the delivery of some
public services that were produced by government prior to the 1930s, especially social and labor-
related services, was transferred to the private sector, mainly to organizations within the party. In the
1930s and 1940s, many academic analyses of Nazi economic policy discussed privatization in
Germany (e.g. Poole, 1939; Guillebaud, 1939; Stolper, 1940; Sweezy, 1941; Merlin, 1943; Neumann,
1942, 1944; Nathan, 1944a; Schweitzer, 1946; Lurie,1947).
Other less academic works from this period also comment on the privatization in Nazi Germany [e.g.
Reimann (1939) and Heiden (1944)].
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
Most of the enterprises transferred to the private sector at the Federal level had come into public
hands in response to the economic consequences of the Great Depression. Many scholars have
pointed out that the Great Depression spurred State ownership in Western capitalist countries (e.g.
Aharoni, 1986, pp. 72 and ff.; Clifton, Comín and Díaz Fuentes, 2003, p. 16; Megginson, 2005, pp. 9-
10), and Germany was no exception. But Germany was alone in developing a policy of privatization
in the 1930s. Therefore a central question remains: Why did the Nazi regime depart from the
mainstream policies regarding State ownership of firms?
Why did Germany’s government transfer
firms and public functions to the private sector while the other Western countries did not?
Answering these questions requires an analysis of the objectives of Nazi privatization. While
some of the analyses in the 1930s and 1940s are valuable, their authors lacked the theories, concepts
and tools available to us today. The recent economic literature has shown the multiplicity of
objectives usually targeted by privatization policies (Vickers and Yarrow, 1988, 1991) and the general
and widespread priority of financial objectives within the larger framework of multiple and coexisting
objectives (Yarrow, 1999). In addition, modern theoretical developments have provided valuable
insights into the motives of politicians choosing between public ownership and privatization (Shleifer
and Vishny, 1994) and the consequences of each option for political rent seeking, through either
excess employment or corruption and financial support (Hart, Shleifer and Vishny, 1997). Also, the
theoretical literature has provided interesting results concerning the use of privatization to obtain
political support (Perotti, 1995; Biais and Perotti, 2002).
With the analysis of privatization in Nazi Germany this paper seeks to fill a gap in the economic
literature. On the one hand, I document in detail the course of privatization in the period from the
Nazi take-over until 1937.
These limits are chosen because all the major reprivatization operations
A recurring question in the literature on Nazi economic policy is why the Nazis refrained from implementing
a policy of wide-scale nationalization of private firms [See Buchheim and Scherner (2005) for a recent
example]. Indeed, this question is interesting since the Nazis’ official economic program and their electoral
manifestos regularly included this proposal. However, it is not a central concern of this paper. It is worth
noting that by rejecting large-scale nationalization, the Nazi government joined the mainstream in Western
capitalist countries, which were, in the 1930s, more given to intervention through regulation and fiscal policy.
As explained in Megginson (2005, p. 10), nationalization of private firms was not a major policy in Western
capitalist countries once the worst of the Great Depression was over.
Choosing this period is also very useful because it permits us to avoid confusion between the processes of
privatization and Aryanization. As explained by James (2001, p. 38-51), after 1936-37 there was an
intensification of the Aryanization process, in what was a “state-driven aryanization.” Many of the largest
Jewish-owned businesses had survived until 1938. The anti-Jewish apogee was reached in November 1938,
with the pogrom of the Reichskristallnacht. In addition, analyzing Nazi privatization until 1937 avoids confusion
with the business processes implemented after the annexation of successive territories, beginning with Austria
in 1938.
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
had been concluded before the end of 1937. Some of the privatization operations explained in this
paper have not been previously noted in the literature. On the other hand, analyzing the Nazi
privatization with modern tools and concepts allows us to conclude that the objectives pursued by
the Nazi government were multiple. Of particular relevance were the increased political support and,
especially, a combination of increased revenue and expenditure relief for the German Treasury. In
short, these motives are quite similar to those that have driven privatization policies in most EU
The rest of the paper is organized as follows. First, I document the Nazi privatization policy, and
present a quantitative comparison with more recent privatizations. Then, I discuss the analyses of
Nazi privatization in the economic literature of the late 1930s and 1940s. After this, I analyze the
objectives of privatization policy in Nazi Germany. Finally, I conclude.
II. Selling public ownership.
In an article published in the Der Deutsche Volkswirt in February 1934, Heinz Marschner proposed
“The reprivatization of urban transportation, which after the period of inflation came under public
control, especially in the hands of local governments.” (Marschner 1934, p. 587, author’s translation).
This proposal was related to the Nazi government’s support for returning the ownership of urban
transportation back to the private sector. Several months later, in an article discussing banking policy
in Germany, Hans Baumgarten (1934, p. 1645) analyzed the conditions required for the
reprivatization in the German banking sector. Discussion of privatization was increasingly common
soon after the Nazi government took office early in 1933, and privatizations soon followed.
Railways: In the 1930s The Deutsche Reichsbahn (German Railways) was the largest single public
enterprise in the world (Macmahon and Dittmar 1939, p. 484), bringing together most of the railways
services operating within Germany. The German Budget for fiscal year 1934/35, the last one
published (Pollock, 1938, p. 121), established that Railway preference shares
worth Reichsmark
(Rm.) 224 million were to be sold.
After the I World War, the Reichsbahn had been reorganized as independent institution and its capital had
been formally detached from the Reich’s property (Wengenroth, 2000, p. 111). Within this context, common
shares and preference shares were issued. Common shares were direct ownership of the Reich, and most of
preferred shares were allocated initially to the Reich. The government could then sell these preferred shares
(Macmahon and Dittmar, 1940, pp. 35-38).
The Economist, April 7, 1934 [118 (4728), p. 763]. Besides the sale of German Railway shares, The Economist
also mentioned another sale of public property to be done: “The Reich property, which is to be “liquidated”
to yield Rm. 300 millions, is not defined.”
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
Steel and mining: In 1932, the German government bought more than 120 million marks of shares
in Gelsenkirchen Bergbau (Gelsenkirchen Mining Company), the strongest firm inside the Vereinigte
Stahlwerke A.G. (United Steelworks).
At that time, the United Steel Trust was the second largest
joint-stock company in Germany (the largest was Farben Industrie A.G.). The state took over the
shares at 364 percent of their market value (Wengenroth, 2000, p. 115). A range of reasons has been
given for the nationalization: a) to have effective control over the United Steel Trust (The Economist,
July 8, 1933, 117 (4689), p. 73), b) to socialize costs derived from the effects of the Great Depression
(Neumann, 1944, p. 297): and c) to prevent foreign capital taking over the firm (Wengenroth, 2000,
p. 115).
Soon after the Nazi party came to power, United Steel was reorganized so that the government
majority stake of 52 per cent was converted into a stake of less than 25 per cent, no longer sufficient
in German law to give the government any privileges in company control.
Fritz Thyssen, who held
the leading position in the Trust, had been one of only two big industrialists to give support to the
Nazi Party before it won political dominance (Barkai, 1990, p. 10). In 1936, the Government sold its
block of shares, amounting to about Rm. 100 million, to the United Steel Association.
The company Vereinigte Oberschlesische Hüttenwerke AG had control of all metal production in the
Upper Silesian coal and steel industry. The Seehandlung (Prussian state bank) owned 45 per cent of
this firm. The remaining shares were owned by Castellengo-Abwehr, one of the major Upper Silesian
coal mines. Castellengo’s capital was owned by Ballestrem. In mid 1937, the state’s Rm. 6.75 million of
shares were sold to Castellengo.
Banking: Before the crash of 1929, publicly owned commercial banks accounted for at least 40
per cent of the total assets of all banks (Stolper 1940, p. 207), and one of the five big commercial
banks, the Reichs-Kredit-Gesellschaft, was publicly owned. The state was involved in the
reorganization of the sector after the bank crash in 1931 with an investment of about Rm. 500
million (Ellis, 1940, p. 22), and most of the big banks came under state control. Estimates made
before the Banking Inquiry Committee in 1934 by Hjalmar Schacht, president of the Reichsbank and
Minister of Economy, stated that around 70 per cent of all German corporate banks were controlled
by the Reich (Sweezy, 1941, p. 31). Through the Reich or the Golddiskontbank, the government
The Economist, March 28, 1936 [122 (4831), p. 701].
Külhmann (1934, pp. 391-392) explains the reorganization in detail.
Kruk (1936a, p. 319) and Reich-Kredit-Gesellschaft (1937, p. 55)
Der Deutsche Volkswirt, July 9, 1937 [11 (41), pp. 2020-21].
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
owned significant stakes in the largest banks:
38.5 per cent of Deutsche Bank und Disconto-Gesellschaft
(Deutsche Bank henceforth), 71 per cent of the Commerz– und Privatbank (Commerz-Bank
henceforth) and 97 per cent of the capital of Dresdner-Bank.
The Commerz-Bank was reprivatized through several share sales in 1936-37. These shares
amounted to Rm. 57 million, and the largest single transaction was a sale of Rm. 22 million in
October 1936.
Deutsche Bank was reprivatized in several operations effectively implemented in
1935-37. The largest was the repurchase in March 1937 of shares still held by the Golddiskontbank.
These shares amounted to Rm. 35 million and Deutsche Bank placed them among its clients. In
total, the reprivatization of Deutsche Bank shares amounted to Rm. 50 million.
Finally, the
Dresdner Bank was also reprivatized in several shares sale in 1936-37. These shares amounted to
Rm. 141 million, and the largest single sale was of Rm. 120 million in September 1937.
Ship building. In March 1936, a group of Bremen merchants purchased a block of shares in the
Deutsche Schiff-und Machinenbau AG Bremen “Deschimag” (German Shipbuilding and Engineering Co.).
The sale amounted to Rm. 3.6 million.
Shipping lines. In September 1936 publicly owned shares of the Hamburg-SüdAmerika shipping
company were sold to a Hamburg syndicate.
The sale of shares amounted to Rm. 8.2 million.
mid 1937, the publicly owned Norddeutscher Lloyd (North German Lloyd), part of the VIAG public
The degree of control exercised by the state in the large commercial banks by means of public ownership is
open to discussion. Most probably, state interference through ownership varied according to the relevance of
the publicly owned stake. Whereas interference in the Deutsche Bank was relatively slight [Feldman (1995, p.
272), James (2004, p. 45-49)], intervention in the Dresdner Bank was intense [James (2001, p. 16), Feldman
(2004, p. 23)]. In any case, the reform of banking regulation that began with the German Bank Act of 1934
allowed the government to exercise a tight control over private banks. Dessauer (1935) provides an extensive
explanation of the German Bank Act of 1934; Nathan (1944b) adds information on subsequent changes in
Baumgarten (1937, pp. 826-827). Other relevant stakes of the state in banks were 70 per cent of the
Allgemeine Deutsche Kreditantstalt, and 66.6 per cent of the Norddeutsche Kreditbank (Sweezy, 1941, p. 31). Russell
(1935, p. 204-208) offers a detailed analysis of the ownership relations between the Reich and the commercial
Kruk (1936a, p. 319), The Economist, April 3, 1937 [127 (4884), p. 16], Reichs-Kredit-Gesellschaft (1937, p.
55), League of Nations (1937, p. 77), League of Nations (1938, p. 92).
Baumgarten (1937, pp. 826-7)], The Economist, April 3, 1937 [127 (4884), p. 16], League of Nations (1938, p.
Baumgarten (1937, pp. 826-7), League of Nations (1938, p. 92), Reimann (1939, p. 181), Barkai (1990, p.
Kruk (1936a, p. 319) and Reichs-Kredit-Gesellschaft (1937, p. 55).
The ship-owners of Hamburg joined the Nazi party as a group. The head of the oldest shipping concern in
Hamburg explained to Lochner (1954, p. 220-221) that the decision by the ship-owners of Hamburg to join
the Nazi Party was not out of ideological conviction but to avoid interference from the Nazi Party in the
Kruk (1936a, p. 319) and Reichs-Kredit-Gesellschaft (1937, p. 55).
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
sold its remaining shares in the steamship company Hansa Dampf to a consortium made up
of the Deutsche Bank & Berliner Handels-Gesellschaft. The sale of shares amounted to Rm. 5
Local public utilities. The Nazi government imposed several types of limitations and obstacles on
municipally owned enterprises. Since 1935 the municipal firms were subject to taxation (Sweezy,
1941, p. 32). Administrative and financial requirements were made more restrictive (Marx, 1937, p.
142; Pollock, 1938, p. 145). Privatization of local public utilities was important from 1935 onwards
(Sweezy 1940, 394). Data presented in Sweezy (1941, p. 33) on income from enterprises owned by
municipalities show that in 1934 the revenue was Rm. 494 million, up from Rm. 481 million in 1933.
In 1935 the revenue decreased to Rm. 456 million, and the decline continued in 1936 to Rm. 360
million. The decrease in revenues in 1935 and 1936 occurred while the economy grew. Therefore, it
must have been the result of a reduction in the number and business of local public utilities as a
consequence of privatization (Sweezy, 1941, p. 33).
III. Transferring to private hands the delivery of public services.
Besides the transfer to the private sector of public ownership in firms, the Nazi government also
transferred many public services (some long established, others newly created) to special
organizations: either the Nazi party and its affiliates
or other allegedly independent organizations
which were set up for a specific purpose (Nathan, 1944a, p. 321). In this way, delivery of these
services was privatized.
Work related services. Die Deutsche Arbeitsfront (German Labor Front) was not part of the machinery
of the State, but a legally independent organization of the Nazi Party (Guillebaud, 1939, p. 194).
was in charge of delivering services –some of them previously delivered by the public administration
The Vereinigte Industrie Unternehmungen A. G. of Berlin (VIAG) was the holding concern by which the German
government controlled its property in banking and industrial undertakings. These undertakings comprised the
Reichs-Kredit-Gesellschaft, various electrical concerns which make the German Government the second
largest producer of electricity in Germany; the Vereinigte Aluminium-Werke, one of the biggest aluminum
producers of the world; and a number of other concerns producing bicycles, gun metal, nitrogen, ships, etc.
According to The Economist [June 16 1934, 118(4738), p. 1308], in contrast to many Government enterprises
elsewhere, the subsidiaries of VIAG were run on strictly commercial lines, and most of the companies always
made profits.
Der Deutsche Volkswirt, July 9, 1937 [11 (41), p. 2021].
Pollock (1938, p. 43-68) provides an extensive revision of the organizational characteristics of the Nazi
Party holding of organizations.
Nathan (1944a, p. 321) also points out that Education no longer remained the exclusive function of the
public school system, but was moved in part to the Hitler Youth Organization.
Völtzer (135, pp. 4-6) offers a thorough review of the legal configuration of the German Labor Front.
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
– such as supervision of vocational training, inspection of factories regarding issues of health in the
workplace, amenities, etc.
Its ‘recommendations’ were compulsory (Guillebaud, 1939, p. 195).
Membership, also theoretically voluntary, was in fact compulsory. The fees received from the
workers and the employees made substantial resources available for use by the Labor Front.
According to Guillebaud (1941, p. 37) its revenue in 1937 was Rm. 360 million. Estimates in Nathan
(1944b, p. 94) are lower: Rm. 240 million in 1937. Either scenario gave the Labor Front huge wealth
and political power.
Social services. Public welfare, largely under the jurisdiction of local and district authorities before
1933, was partly transferred by the Nazi government to affiliates of the Nazi party, particularly to the
Nationalsozialistiche Volkswohlfahrt (National Socialist People’s Welfare Organization–NSV). The most
important activity was the Winterhilfe (Winter Help), the distribution of money and goods among the
poor. NSV was funded with a fee charged on the earnings of employed workers, and with quasi-
compulsory levies in cash or in kind from farmers, peasants, employers and the middle classes
generally (Guillebaud, 1941, pp. 96). Financial control of Winter Help was in the hands of the
Treasurer of the Nazi Party (Pollock, 1938, p. 164), and the compulsory character of the
contributions was so clear that they have been considered an additional source of fiscal revenues
(Balogh 1938, 472). In 1933/34 the NSV raised 350 million marks, a figure that rose to 408.3 million
marks in 1936/37 (Pollock, 1938, p. 138; Guillebaud, 1941, pp. 97). Estimates in Nathan (1944b, p.
94) give figures of Rm. 340 in 1934/35 and Rm. 370 after 1937. Reichs-Kredit-Gesellschaft (1939, p.
101) gives an estimate of Rm. 400 million in 1938, according to official statistics.
As explained in The Banker (1937, p. 171), the German government had provided Winter Help
before the Nazi regime. A comparison between the expenditures of the Reich Winter Relief in 1931
and the Nazi Winter Relief in 1933 “shows that this new Nazi organisation has not provided in
Winter Help more than the former contribution made by the Reich alone….Under the Nazi system
…. a huge apparatus has been created to carry out a service formerly provided as a ‘side-line’ by
private and public bodies.” (p. 171). In short, delivered by private and public bodies before the Nazi
regime, Winter Help was privatized completely by the Nazi government and was transferred to a
Party Organization. The funding of the service was based on a compulsory scheme of fees and levies.
As a result, the Reich Budget was relieved of the expenditure that this social service program
It also delivered new services such as the leisure program Strength through Joy (Kraft durch Freude). These are of
less interest to our analysis.
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
IV. An assessment of the quantitative relevance of Nazi privatization.
In the late 1930s and the early 1940s, academic works that mentioned operations of privatization
in some detail (e.g. Poole, 1939; Sweezy, 1941; Lurie, 1947) used basically one source of
documentation: The report Germany’s Economic Situation at the Turn of 1936/37, published in English in
1937 by the German State-owned bank Reichs-Kredit-Gesellschaft.
Page 55 of this report displays
summarized information about four reprivatizations, affecting the German Shipbuilding and
Engineering Co., the United Steel Trust, the Hamburg-South American Shipping Company, and the
Commerz –und Privatbank. The information included the approximate date of the operations and, in
some cases, the amount of Reichsmarks involved.
As mentioned, the German budget for the fiscal year 1934/35 was the last one for which detailed
information was published (Pollock, 1938, p. 121) and no detailed information on financial
operations was published thereafter. With the end of detailed public budgets in 1935, Der Deutsche
Volkswirt became the primary source for information about privatization in Germany. The paper’s
editorial page was considered a mouthpiece for Hjalmar Schacht,
appointed head of the
Reichsbank by Adolf Hitler and then, in 1934, Minister of Economy. Der Deutsche Volkswirt provided
detailed information on the Ministry’s position on reprivatization and its implementation.
In fact, two articles published by Max Kruk (1936a, 1936b) in late 1936 provided the information
mentioned in the Reichs-Kredit-Gesellschaft (1937). The information in the earlier article (1936a)
provides fuller coverage of the financial characteristics of the operations. In addition to this, several
articles and news reports published in Der Deutsche Volkswirt in 1937 provide information on
operations of privatization implemented during that year.
Based on all this material, I have been
able to compile quantitative information on many of the privatizations implemented at the Reich
level after the 1934/35 Budget up to the end of 1937.
Table 1 presents an estimate of the proceeds from privatization. This estimate inevitably presents
minimum amounts, since (1) no detailed information is available from the Budget after 1934/35, and
Along with the Reichs-Kredit-Gesellschaft (1937) report, Sweezy (1941, p. 32) also used the League of
Nations’ 1938 report Money and Banking 1938, which provided some additional information on the
reprivatization of banks. As with the information published in Reichs-Kredit-Gesellschaft (1937), the
information provided by the League of Nations usually took news and analysis published in Der Deutsche
Volkswirt as its source.
The Economist, April 18, 1936 [123 (4834), p. 127]
See, for instance, the editorial page in Der Deutsche Volkswirt, April 9, 1936 [10 (28), p. 1315].
For instance, Der Deutsche Volkswirt, July 9, 1937 [11 (41), pp. 2020-21] and Baumgarten (1937).
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
(2) some operations may have been implemented but would not have appeared in the sources of
information used.
Estimates presented in table 1 show that between the fiscal years 1934/35 and 1937/38
privatization was an important source of revenue for Germany’s Treasury. In the period as a whole,
privatization proceeds represented almost 1.4 per cent of total fiscal revenues.
Table 1. Privatization proceeds in Nazi Germany. April 1934- March 1938.
Period Proceeds from privatization
Million Reichsmark (1)
Fiscal revenues
Million Reichsmark (2)
(1) / (2) in %
1934/35 & 1935/36 242.6 17,877 1.36%
1936/37 & 1937/38 352.9 25,456 1.39%
April 1934/March 1938 595.5 43,333 1.37%
Notes: * Fiscal years begin in April and end in March
* Data are aggregated in biannual periods because the original information does not identify the
precise fiscal year in which some operations were effective.
Sources: * Privatization revenues: Author’s estimates, based on information published in Der Deutsche
Volkswirt, Reichs-Kredit-Gesellschaft (1937), League of Nations (1938), Baumgarten (1937) and Kruk (1936a,
* Fiscal revenues: Reichs-Kredit-Gesellschaft (1939, p. 98). Yearly figures are as follows (million
Reichsmark): 1934/35: RM 8,223; 1935/36: RM 9,654; 1936/37: RM 11,492; 1937/38: RM 13,964.
How important were privatization proceeds in 1930s Germany? It is not possible to compare
them with those in other European countries, since German privatization policy was an exception.
However, it is possible to compare Germany’s figures in the mid-thirties with figures from European
Union countries (the former EU-15) in the late 1990s. For purposes of comparison, we can take the
period of four fiscal years 1997-2000. We should note that this 4-year period saw the highest
proceeds from privatization in all the former EU-15 countries except the United Kingdom, where
privatization had almost finished by the mid-nineties.
Figure 1 shows the ratio (privatization proceeds/fiscal revenues) in all countries in the former
EU-15 for the period 1997-2000, as well as for 1934-1937 Germany. The ratio is presented as a
percentage, and the raw data is presented in table A-1 in the appendix. The ratios obtained for
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
Luxembourg, the United Kingdom, the Netherlands,
Belgium and Germany in this period are well
below the Nazi Germany figure. Denmark’s ratio is slightly above, and the other nine countries
clearly exceed Germany’s. Interestingly, in the case of Germany, even though 1997-2000 was the
period with largest absolute proceeds, the ratio is 0.65, which is less than half the ratio for Germany
in 1934-37. Overall, the relative dimension of privatization proceeds in 1934-37 Germany is close to
the ratio for the EU-15 in 1997-2000, at 1.79 per cent.
Figure 1: Privatization Proceeds / Fiscal Revenues
For all countries UE-15, period 1997-2000
0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%
United Kingdom
Germany 1934-37
Ital y
Ir e l and
In the case of the Netherlands, there had been major privatization proceeds in 1996. Hence, taking a period
larger than 1997-2000 would increase the ratio in the Netherlands. This is not the case in the other countries
in figure 1. As already mentioned, the UK ratio is not comparable.
Leaving out the UK, the EU-14 ratio would be 2.05 per cent.
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
While sales of public ownership provided revenue, privatization of public services was an
important source of fiscal relief for the German Treasury, since, as explained above, funding for
these programs was based on an effectively compulsory scheme of fees and levies. Table 2 shows the
relative dimension of the funds privately managed through programs related to work and to social
services. Indeed, as a percentage of fiscal revenues the expenditures avoided to the Treasury were
quite relevant.
Table 2 Funds privately managed for delivery of public services.
Public Service Delivered by Millions of
Equivalent to
% Fiscal
Equivalent to %
Work related
Labor Front (Min)
240 2.1% 0.34%
360 3.1% 0.51%
Social services National Socialist Welfare
Organization NSV
370 3.2% 0.52%
408 3.6% 0.57%
Notes: Estimates are for 1937.
Sources: Author’s estimate, based on:
Funds managed:
Nathan (1944b);
Guillebaud (1941);
Pollock (1938).
Fiscal revenues and National Income: Reichs-Kredit-Gesellschaft (1939).
The fiscal importance of privatization proceeds to 1934-37 Germany can hardly be denied,
particularly in comparison to modern privatizations like those applied recently in the European
Union countries. However, it is worth noting that the general orientation of the Nazi economic
policy was the exact opposite of that of the EU countries in the late 1990s: Whereas the modern
privatization in the EU has been parallel to liberalization policies, in Nazi Germany privatization was
applied within a framework of increasing control of the state over the whole economy through
regulation and political interference.
V. Visions of Nazi privatization in the economic literature of the late 1930s and 1940s
Privatization policy in Germany was discussed in the late 1930s and the 1940s in academic works
such as Poole (1939), Guillebaud (1939), Stolper (1940), Sweezy (1941), Merlin (1943), Neumann
(1942, 1944), Nathan (1944a), Schweitzer (1946), and Lurie (1947). Most of these works analyzed
these issues within the framework of the controversy between two positions (Schweitzer, 1946, pp.
99-100) that held either that private property and property rights were left untouched by the Nazis,
or that the Nazis destroyed such rights.
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
On one hand, the intense growth of governmental regulations on markets, which heavily
restricted economic freedom, suggests that the rights inherent to private property were destroyed. As
a result, privatization would be of no practical consequences since the state assumed full control of
the economic system (e.g. Stolper, 1940, p. 207). On the other hand, the activities of private business
organizations and the fact that big business had some power seemed to be grounds for inferring that
the Nazis promoted private property. Privatization, in this analysis, was intended to promote the
interests of the business sectors that supported the Nazi regime, as well as the interests of the Nazi
elites (e.g. Sweezy, 1941, pp. 27-28; Merlin, 1943, p. 207; Neumann, 1944, p. 298).
Guillebaud (1939, p. 55) stresses that the Nazi regime wanted to leave management and risk in
business in the sphere of private enterprise, subject to the general direction of the government. Thus,
“the State in fact divested itself of a great deal of its previous direct participation in industry….But at
the same time state control, regulation and interference in the conduct of the economy affairs was
enormously extended.” Guillebaud (1939, p. 219) felt that National Socialism was opposed to state
management, and saw it as a “cardinal tenet of the Party that the economic order should be based on
private initiative and enterprise (in the sense of private ownership of the means of production and
the individual assumption of risks) though subject to guidance and control by state.” This can be
seen as the basic rationale for privatization in Guillebaud’s analysis.
Perhaps the most suggestive work on privatization in Nazi Germany was Maxine Sweezy’s (1941)
The Structure of the Nazi Economy. On one hand, Sweezy endorses the idea that Nazi privatization was a
policy applied “In return for business assistance” (Sweezy, 1941, p. 27). In Sweezy’s view, the Nazis
paid back industrialists who supported Hitler’s accession to power and his economic policies “by
restoring to private capitalism a number of monopolies held or controlled by the state” (p. 27). This
policy implied a large-scale program by which “the government transferred ownership to private
hands” (p. 28).
On the other hand, to explain Nazi privatization Sweezy puts forward an interesting hypothesis
consistent with the macroeconomic design of Nazi economic policy. She argues that one of the main
objectives for the privatization policy was to stimulate the propensity to save, since a war economy
required low levels of private consumption.
High levels of savings were thought to depend on
inequality of income, which would be increased by inequality of wealth. This, according to Sweezy
“was thus secured by ‘reprivatization’…. The practical significance of the transference of
In fact, private consumption in terms of national income decreased from 83 per cent in 1932 to 59 per cent
in 1938 [Overy, 1982, p. 34].
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
government enterprises into private hands was thus that the capitalist class continued to serve as a
vessel for the accumulation of income.” (Sweezy, 1941, p. 28).
Consistent with Sweezy’s approach, Merlin (1943, p. 207) states that the Nazi Party was looking
not only for business support, but also for increased control over the economy. In this way,
privatization was seen as a tool in the hands of the Nazi Party to “facilitate the accumulation of
private fortunes and industrial empires by its foremost members and collaborators.” This would have
intensified centralization of economic affairs and government in an increasingly narrow group that
Merlin termed “the national socialist elite.” (p. 207).
Early analysis of Nazi privatization explicitly stated that German privatization of the 1930s was
intended to benefit the wealthiest sectors and enhance their economic position, in search of their
political support. This interpretation reflected the predominant idea that big industrialists strongly
supported the Nazi Party and Hitler’s accession to power. The next section discusses these issues.
Thus far, regardless of specific interpretations, it is clear that a wide privatization policy was applied
in Germany in the mid-thirties and that analysts and researchers of the time recognized its
importance. Even international organizations such as the League of Nations took note,
international interest was reflected in a change in the English language: in the mid-1930s the German
term ‘Reprivatisierung’, and the associated concept, were brought into English in the term
‘reprivatization’ (Bel, 2006).
VI. Analyzing the Objectives of Nazi Privatization
Contemporary economic literature has shown the multiplicity of objectives targeted with
privatization policies (Vickers and Yarrow, 1988, 1991). The analysis of privatization usually
identifies three types of objectives in the recent privatization processes: (1) Ideological motivations;
(2) Political motivations; (3) Pragmatic (economic) motivations.
VI.a. Ideological motivations: Did the Nazi Government use privatization to change the way in
which society was organized? Privatization was not included either in the Nazi Party electoral
manifestos or in the successive revisions of the Economic and Social Program approved in 1920 by
Thus, the 1937/38 League of Nations report on banking and finance conditions commented that “The
process known as ‘reprivatisation’ of the big Berlin banks by the purchase on behalf of private persons of
their shares held by the State of public corporations since the reconstruction following the 1931 crisis was
completed by the end of 1937.” [League of Nations, 1938, p. 92]
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
the Nazi Party.
In fact, among the 25 points in this Program, points 13 and 14 included proposals
of nationalization of trusts and banks (Stolper, 1940, p. 232; Barkai, 1990, p. 23). Proposals of
nationalization were also recurrent in the Nazi electoral manifestos. Hence, privatizing State-owned
firms was contrary to the Nazi economic program and election proposals.
Nazi policy was heavily dependent on Hitler’s decisions. Hitler made no specific comments on
nationalization or denationalization in Mein Kampf. Even if Hitler was an enemy of free market
economies (Overy, 1994, p. 1), he could by no means be considered a sympathizer of economic
socialism or nationalization of private firms (Heiden, 1944, p. 642). The Nazi regime rejected
liberalism, and was strongly against free competition and regulation of the economy by market
mechanisms (Barkai, 1990, p. 10). Still, as a social Darwinist, Hitler was reluctant to totally dispense
with private property and competition (Turner, 1985a, p. 71; Hayes, 1987, p. 71). Hitler’s solution
was to combine autonomy and a large role for private initiative and ownership rights within firms
with the total subjection of property rights outside the firm to State control. As Nathan pointed out
(1944a, p. 5) “It was a totalitarian system of government control within the framework of private
property and private profit. It maintained private enterprise and provided profit incentives as spurs
to efficient management. But the traditional freedom of the entrepreneur was narrowly
circumscribed.” In other words, there was private initiative in the production process, but no private
initiative was allowed in the distribution of the product. Owners could act freely within their firms,
but faced tight restrictions in the market.
Given this combination of private ownership within the firm and extreme State control outside
it, the core question here is whether Hitler was against public property or ideologically favorable to
privatization. On this issue, it is interesting to note two interviews in May and June 1931, in which
Hitler explained his aims and plans to Richard Breiting, editor of the Leipziger Neueste Nachrichten, on
condition of confidentiality (Calic, 1971, p. 11). With respect to his position with regard to private
ownership, Hitler explained that “I want everyone to keep what he has earned subject to the
principle that the good of the community takes priority over that of the individual. But the State
should retain control; every owner should feel himself to be an agent of the State….The Third Reich
will always retain the right to control property owners.” (Calic, 1971, p. 32-33). Another indication of
According to Stolper (1940, p. 231), “this program has remained the spiritual foundation of the movement.
It is being taught in every school, referred to in all training courses of all the various units of the party. It
constitutes, together with Mein Kampf by Hitler, the directing force of the intellectual concept and trend of the
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
Hitler’s position on the state ownership of the means of production is found in Rauschning
pp. 192-3), which reports the following answer by Hitler when questioned on socialization: “Why
bother with such half-measures when I have far more important matters in hand, such as the people
themselves?. . .Why need we trouble to socialize banks and factories? We socialize human beings.”
It seems clear that neither the Nazi Party nor Hitler had any ideological devotion to private
In their theoretical work on the relationship between politicians and firms, Shleifer and
Vishny (1994, p. 1,015) stress that anti-market governments are compatible with privatization, as
long as they can retain control over the firms through strong regulation. Nazi privatization in the
mid-1930s is consistent with Shleifer and Vishny’s proposition 15 (1994, p. 1,021). As suggested in
Temin (1991), property ownership was instrumental for the Nazis. Hence, it is not likely that
ideological motivations played a major role as a rationale for Nazi privatization.
VI.b. Political motivations. Did the Nazi Government use privatization as a tool to obtain political
support? The idea that industrialists massively supported the Nazi accession to power was widely
accepted in the early literature on Hitler’s rise to power. Nonetheless, this position was by no means
unanimous, and there was early opposition to it (e.g. Drucker, 1939, pp. 130-131; Lochner, 1954).
Following Turner’s more recent work (especially, Turner 1985b) it is generally accepted that Hitler
only achieved wide support among industrialists when his accession to power was seen as
unavoidable, from about mid-1932 onwards (Barkai, 1990, p. 10).
The fact is that Nazis came into power with limited parliamentary support
and faced great
difficulty in establishing stable alliances. In addition, fighting unemployment was their top priority,
and that required big business cooperation (Overy, 1982, p. 40). As stressed in Barkai (1990, p. 114)
Hitler did not want to frighten the economy. Consequently, the new regime tried hard to break down
business mistrust (Hayes, 1987, p. 33).
Once the Nazis came to power, it did not take long for the government to produce official
statements against nationalization. In 12 February 1933, Mr. Bang, an important advisor in the team
Hermann Rauschning was National Socialist President of the Danzig Senate in 1933-34. He was later
expelled from the Nazi Party.
In fact, the Nazis used nationalization when they considered it convenient. It is widely known the case of
the nationalization of two aircraft companies, the Arado and Junkers firms [Homze (1976, p. 192-3)]. Less
known is the case of the nationalization, for incorporation in the Reich Railways Company, of the private
Lübeck-Büchener and Brunswick Landes Railways [The Economist, November 20, 1937, 129 (4917), p. 369].
The Nazi Parliamentary Group won 196 out of 584 seats (33.6 per cent) when Hitler was appointed
Chancellor in January 1933. Subsequent elections in March 1933 gave the Nazi Party 288 out of 647 seats
(44.5 per cent). Data on Nazi parliamentarian representation can be found in Lochner (1954, p. 23).
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
of the State Secretary of Public Economics, Alfred Hugenberg, publicly stated that “The policy of
nationalization pursued in the last years will be stopped. The state owned enterprises will be
transformed again into private firms.”
It is worth noting that Hugenberg was not a member of the
Nazi Party. In fact, most of the members of the Hitler’s first cabinets were not Nazis. Indeed, these
cabinet members were representative of the conventional right wing parties (before they were
suppressed in July 1933) and had strong ties with German industrialists.
No doubt, the paradigmatic example of the non-Nazi policymaker with business connections was
Hjalmar Schacht, head of the Reichsbank and Minister of Economy. Schacht was considered the
‘economic fuehrer’
in the first Hitler governments. Commenting on his own position in the
government, Schacht (1949, p. 78) recalled that “Inside the party there was a strong movement to
bring more and more industries into the hands of the state….Private insurance companies were
particularly conscious of this threat and they approached me to secure my intervention with Hitler in
the matter….Here, too, my intervention was successful.” It is clear that Schacht’s power was based
on a warranty given by Hitler to the big business community of friendly economic policies and
governmental attitudes towards big business interests.
It is likely that privatization – as a policy favorable to private property – was used as a tool for
fostering the alliance between Nazi government and industrialists. The government sought to win
support for its policies from big business, even though most industrialists had been reluctant to
support the Nazi party before it took power.
The policies implemented in the financial sector provide evidence of the potential of
privatization as a tool to enhance political support. Several radical officers of the Nazi Party
appearing before the Banking Investigation Committee, which analyzed the reorganization of the
banking sector, proposed the nationalization of the entire banking system in accordance with the
Nazi Economic and Social Program and the Nazi Electoral Manifesto. On the other side, the top
echelons of the Nazi government’s finance offices joined representatives of private banks in
proposing the strengthening of the regulation of the banking system while preserving private
Le Temps, 12 February 1933, p. 2.
Schacht’s power was at its peak at the time of his public speeches in 1935 defending the principles of
capitalism: in Königsberg in August (The Economist, August 24 1935, 121 (4800), p. 366) and in the Academy
for German Law in December (The Economist, December 7 1935, 121 (4815), p. 1124). The period of Schacht’s
maximum strength coincided with the period in which most privatization operations were implemented. His
power waned in 1937, and came to an end when Hermann Göring took control over economic policy.
Schweitzer (1964, p. 610) contains a detailed chronogram of Schacht’s rise and fall. When his resignation was
officially announced in November 1937, the reprivatization process was already over.
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
property. The hypothesis of an alliance between the Nazi leadership and private financial groups to
fill governmental positions and save the private property system has been stressed in Feldman (2004,
p. 21).
In the end, the Banking Investigation Committee recommended strengthening public supervision
and control of private banking and introducing new restrictions on the creation of credit institutions
and the exercise of the banking profession (Lurie, 1947, p. 62). These recommendations were
implemented through the German Bank Act of 1934, which allowed the government to exercise
tight control over private banks. Regulating banking appeared to the regime as a safe and
economically sound alternative to proposals by party radicals for controlling finance through
socialization (James, 1995, p. 291). Afterwards, and consistent with the theoretical insights of Shleifer
and Vishny (1994), the reprivatization of the big commercial banks (Deutsche Bank, Commerz-
Bank, and Dresdner-Bank) was implemented within the new regulatory framework. The alliance of
financial interests and top economic echelons in the government held the reprivatization of State-
owned banks as one of its top priorities.
The reprivatization of United Steel Works, which put Fritz Thyssen in the leading position in the
trust, appears to be an example of the use of privatization to increase political support. It is worth
remembering that Thyssen had been one of the only two big industrialists to support the Nazi Party
before it became the most powerful party in the political scene. Another privatization that can be
linked to politics is the sale of publicly owned shares of Hamburg-SüdAmerika to a Hamburg syndicate
in September 1936, when the ship-owners of Hamburg had joined the Nazi party as a group.
Finally, it is clear that the privatization of public services such as work related services and social
services had political objectives. Several Nazi organizations were put in charge of delivering these
services. This no doubt fostered support for Nazi Party among the beneficiaries of those services. In
addition, the Nazi Party and its members could use the huge volume of resources passing through
these programs for political patronage and corruption.
Biais and Perotti (2002) analyze the use of privatization to obtain political benefits within a framework in
which, in order to obtain political support, governments choose between privatization and fiscal
redistribution. The Nazi macroeconomic policy involved a sharp increase in taxation, so there was not much
room for using fiscal policy to provide benefits in exchange for political support. In fact, fiscal revenues from
corporate tax grew by 1,365 per cent between 1932/33 and 1937/38, whereas total fiscal revenues grew by
110 per cent in the same period. [Reichs-Kredit-Gesellschaft (1939, p.62)]
Theoretical work on privatization in Hart, Shleifer and Vishny (1997) suggests that rent seeking politicians
are more likely to use political patronage with public production, whereas contracting out and private
production are more likely to provide financial rents. Interestingly enough, privatization of public services by
franchising to Nazi organizations placed both ways of extracting rents in the hands of the Nazi elite.
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
VI. Pragmatic (economic) motivations. Did the Nazi Government use privatization to advance its
economic policy? In general terms, the main characteristics of Nazi economic policy were (1) the
growth of government fiscal intervention in the German economy through ambitious programs that
involved huge public expenditure, and (2) a tightly regulated economy, through more intense
restrictions and controls on markets. The first shock of public expenditure came in public works –
particularly the construction of highways – intended to fight unemployment. Soon after these
projects were in place, expenditure on armaments began to grow. According to The Banker (1937, p.
114), increased expenditures after 1933/34 were basically taken up by armament programs. These are
the main policies that explain the evolution of public expenditure in Nazi Germany.
As early as in April 1934, The Economist reported that military expenditure was forcing the
Minister of Finance to look for new resources. At that time, “Railway preference shares are to be
sold to the extent of Rm. 224 millions. The Reich property, which is to be ‘liquidated’ to yield Rm.
300 millions, is not identified.”
As mentioned above, 1934/1935 was the last fiscal year for which detailed information on the
Budget was officially published. Nonetheless, pieces of financial information were randomly
published in various outlets. Putting together these pieces, The Banker (1937, p. 113) published data
on public expenditure, including its own calculations for 1935/36 and 1936/37 based on official
figures. Column (1) in table 3 shows these estimates. Column (2) shows data on fiscal revenues for
these fiscal years. Column (3) shows national income in the year in which most of the fiscal year took
Table 3. Public Expenditure and Fiscal Revenue 1932/33–1936/37. Thousand million Reichmark
Fiscal year (1) Public
(2) Fiscal
(2)/(1) in % (2) – (1) (3) National
in %
1932/33 6.7 6.65 99.2% - 0.05 45.2 0.0%
1933/34 9.7 6.85 70.6% - 2.85 46.5 6.1%
1934/35 12.2 8.22 67.4% - 3.98 52.7 7.6%
1935/36 16.7 9.65 57.8% - 7.05 58.6 12.0%
1936/37 18.8 11.49 61.1% - 7.31 64.9 11.3%
Notes: Data of Public Expenditure for 1936/37 are estimated.
Data for National Income refer to the year in which most of the fiscal year takes place (e.g. National
income of 1932 for fiscal year 1932/33).
Sources: (1) Public Expenditure: The Banker (1937, p. 113).
(2) Fiscal revenues: Reichs-Kredit-Gesellschaft (1939, p.98).
(3) National income: Reichs-Kredit-Gesellschaft (1939, p.61)
The Economist, April 7, 1934 [118 (4728), p. 763]
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
Table 3 shows that the increase in public expenditure sharply reduced the ability of fiscal
revenues to cover expenditures. The public deficit as a percentage of national income increased to
exceptional figures, putting the German Treasury under intense pressure. Nathan (1944b, p. 41-ff)
distinguished between three different periods in pre-war Nazi financial policy: (1) The period of
short-term financing, 1933-35; (2) The period of “Debt Consolidation”, 1935-38; and (3) The period
of maximum mobilization. Of the two ways of the with debt consolidation, one was turning short
term debt into long term debt. The second was to obtain additional resources from, for instance, the
sale of State-owned shares in firms. Indeed, it was during Nathan’s second period (1935-38) that the
sale of State-owned shares in most public enterprises took place.
The Banker made explicit connections between increasing financial constrains and the sale of
government shares. For instance, when noting that in the fiscal year 1935/36 the demands on the
Treasury increased rapidly because of the huge increase in expenditure on armaments, The Banker
(1937, p. 112) wrote that “about 500 million marks was obtained by contributions from the
unemployment insurance, by more or less forced gifts, and by the sale of government shares” (p.
112). Later in the same issue (1937, p. 131) the report added that, “Now that the control over the
banks is complete and final the Government is no longer interested in holding their shares. Rising
prices have enabled the Government to dispose of large amounts of Commerzbank shares and the
Golddiskontbank has sold some of its Deutsche Bank shares.”
The franchising of public services to Nazi organizations shows a similar relationship between
financial constraints and increasing revenues from privatization. Nathan (1944a, p. 322) notes that all
these organizations derived most of their income from special contributions, collections fees, etc.
which fell outside the public budgets. Indeed “They were important as a source of public revenue
since they relieved the government of expenditures which it itself otherwise would have had to
carry.” Undoubtedly, this was consistent with Nazi fiscal policy, since “Without the revenue of these
unusual sources, the total amount of public borrowing would necessarily have been considerably
higher – a development which the government was very eager to avoid” (1944a, p. 331).
Nazi economic policy implied a sharp rise in public expenditure. The intensity of this increase
was unique among the Western capitalist countries in the pre-war period. Consistent with this,
financial policy was subject to strong restrictions, and exceptional methods were devised to obtain
resources. In fact, Schacht was considered more a financial technician than an economist (Thyssen,
1941, p. 138). Privatization was one of the exceptional methods used. In his useful panoramic
Research Institute of Applied Economics 2006 Working Papers 2006/7, 26 pages
analysis of modern privatization processes, Yarrow (1999) notes the general and widespread priority
given to financial objectives within this framework of multiple and coexisting objectives. Nazi
privatization in the mid-thirties was similar to the modern experience, in that financial objectives
played a central role.
VII. Conclusions
Although modern economic literature usually ignores the fact, the Nazi government in 1930s
Germany undertook a wide scale privatization policy. The government sold public ownership in
several State-owned firms in different sectors. In addition, delivery of some public services
previously produced by the public sector was transferred to the private sector, mainly to
organizations within the Nazi Party.
Ideological motivations do not explain Nazi privatization. However, political motivations were
important. The Nazi government may have used privatization as a tool to improve its relationship
with big industrialists and to increase support among this group for its policies. Privatization was also
likely used to foster more widespread political support for the party. Finally, financial motivations
played a central role in Nazi privatization. The proceeds from privatization in 1934-37 had relevant
fiscal significance: No less than 1.37 per cent of total fiscal revenues were obtained from selling
shares in public firms. Moreover, the government avoided including a huge expenditure in the
budget by using outside-of-the-budget tools to finance the public services franchised to Nazi
Nazi economic policy in the mid-thirties went against the mainstream in several dimensions. The
huge increase in public expenditure programs was unique, as was the increase in the armament
programs, and together they heavily constrained the budget. Exceptional policies were put in place to
finance this exceptional expenditure, and privatization was just one among them. Nazi Germany
privatized systematically, and was the only country to do so at the time. This drove Nazi policy
against the mainstream, which flowed against privatization of state ownership or public services until
the last quarter of the twentieth century.
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Table A-1. Privatization proceeds and fiscal revenues in the EU countries (former EU-15) 1997/2000.
Thousand million (billion) US$
Country Privatization proceeds (1) Fiscal revenues (2) (1) / (2) in %
Austria 7.13 338.65 2.11%
Belgium 5.35 454.22 1.18%
Denmark 4.68 281.24 1.66%
Finland 8.39 227.61 3.69%
France 50.63 2,600.10 1.95%
Germany 18.97 2,915.75 0.65%
Greece 11.62 237.05 4.90%
Ireland 6.31 118.25 5.34%
Italy 74.41 2,335.85 3.19%
Luxembourg 0.00 29.28 0.00%
Netherlands 3.87 654.98 0.59%
Portugal 14.09 229.04 6.15%
Spain 26.35 1,026.71 2.57%
Sweden 12.71 455.98 2.79%
United Kingdom 4.54 2,023.55 0.22%
Sources: Author’s elaboration, based on:
(1) Privatization proceeds: Clifton, Comín and Díaz Fuentes (2003, p. 95).
(2) Fiscal revenues: Organization for Economic Cooperation and Development (2005).
Risk sharing is the key institution for development. The prohibition of risk transfer mechanism in Islamic finance constitutes the foundation of the risk-sharing paradigm. In theory, risk sharing divides the burden of economic and financial risks among economic agents. This chapter emphasizes on the distinct framework of both risk transfer and risk sharing systems.
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