Opinion

The Nazi origins of privatization

Summary

Pro-privatization liberals who compare ethnic chauvinism in Sri Lanka to Nazi Germany have more in common with Hitler than they think.

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Privatization of state-owned entities is a standard prescription for developing countries like Sri Lanka to reduce expenditure, raise revenue, and enhance free competition. From 1977 to 2005, two-thirds of SOEs were privatized, yet no real progress was made in advancing industry.

The failure of privatization is conveniently blamed on corruption, communalism, and war – as if privatization policies themselves did not contribute to these phenomenon. This is largely because privatization is presented in vague theoretical terms, and not based on actual historic experience.

The term “privatization” has not always existed in the English language. In fact, its origins are German. The English word used by scholars to describe the process of privatizing steel and coal in the UK in the 1950s was “denationalization”. In the 1980s, Margaret Thatcher chose the term privatization over denationalization due to the negative connotation of the latter.

According to research by Germa Bel, an economist at the University of Barcelona, the English term “reprivatization” and “privatization” first appear in studies of the Nazi economy in the early 1940s. Reprivatization referred to the process of transferring publicly-owned companies like United Steel “back” to the private sector after they had been nationalized during the Great Depression.

Though it may be hard to imagine today, nationalization and state-ownership of enterprises was a key component of economic policy in the wake of the Great Depression. The New Deal in the capitalist United States and socialist industrialization in the Soviet Union are two major examples. Likewise, the pre-Nazi German economy also featured state-ownership of the commanding heights of the economy. 

The word “reprivatization” is likely an English translation of the German term “Reprivatisierung”, which appeared in articles in German newspaper Der Deutsche Volkswirt in the 1930s, following Adolf Hitler’s rise to power. Notably, the editorial page of the Der Deutsche Volkswirt was considered a mouthpiece of Hitler’s Minister of Economy and President of the Reichsbank Hjalmar Schacht.

Contrary to popular belief, Hitler’s rise to power was not fully backed by German industrialists, who were wary of the Nazi’s election manifesto proposals to further nationalize the economy. Once in power, however, Hitler oversaw arguably the first real program of privatization in order to win political support from big businesses and to finance the war. 

Between 1934 to 1937, 1.4 percent of Germany’s fiscal revenue was derived from privatization of stakes in a range of public enterprises including railways, steel, mining, banking, shipbuilding, and shipping. In comparison, between 1997 and 2000, the heyday of neoliberalism in the European Union, privatization contributed just 0.65% of Germany’s fiscal revenue.

Nazi policies privatized not just productive state-owned enterprises, but also state-funded public utilities and public services. Programs such as Winterhilfe (Winterhelp), which distributed goods to the poor, were privatized and transferred to party-affiliated organizations – a process similar to the taking over of welfare services by non-governmental organizations funded by corporations.

Contemporary debates about privatization rarely delve into this troubling history. Liberals who are quick to compare Sri Lanka’s polarized identity politics to Nazi Germany, would do well to study how their own economic policies provide the pre-conditions for Nazism.

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