sci.econ, alt.slack

http://michaelperelman.wordpress.com/2006/09/11/the-nazi-heritage-of-privatization/

The Nazi Heritage of Privatization
Posted September 11, 2006

Privatization is very popular among laissez-faire types today. The
recent issue of the Journal of Economic Perspectives offers a different
tale in which the term, privatization is falsely credited to Peter
Drucker. In fact, Nazis coined the term. Their intent was to skew the
distribution of income toward the rich, with the objective of reducing
consumption. After all, the rich have a lower marginal propensity to
consume.

The term seems to have been first introduced into academic social
science by Maxine Yaple Sweezy, wife of the distinguished Marxist
economist, Paul Sweezy.

Bel, Germa`. 2006. ""The Coining of "Privatization" and
Germany's National Socialist Party." Journal of Economic
Perspectives, 20: 3 (Summer): pp. 187-94.

187-8: "The standard story on the coining of "privatization"
reports that in 1969 Peter Drucker used the term "reprivatization"
in the sense that economists understand it today. In The Age of
Discontinuity (1969, p. 229), Drucker makes a negative appraisal on the
managerial capabilities of the public sector: "Government is a poor
manager .... It has no choice but to be `bureaucratic.'"
Drucker's (p. 233) analysis of how government works leads him to what
he takes as "the main lesson of the last fifty years: the government
is not a doer." Thus, Drucker (p. 234) proposed adopting a
"systematic policy of using the other, the nongovernmental
institutions of the society of organizations, for the actual `doing,'
i.e., for performance, operations, execution. Such a policy might be
called `reprivatization.'" Drucker referred to
"reprivatization" because he proposed giving back to the private
sector executive responsibilities that had been private before the
public sector took them over through nationalization and
municipalization starting in the last decades of the nineteenth
century."

189-90: "In the late 1930s and the early 1940s, a number of works
were devoted to the analysis of economic policy in Germany under the
rule of the National Socialist Party. One major work was Maxine Yaple
Sweezy's (1941) The Structure of the Nazi Economy. Sweezy stated that
industrialists supported Hitler's accession to power and his economic
policies: "In return for business assistance, the Nazis hastened to
give evidence of their good will 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). One of the main
objectives for this 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
(p. 28), "was thus secured by `reprivatization' .... The practical
significance of the transference of government enterprises into private
hands was thus that the capitalist class continued to serve as a vessel
for the accumulation of income. Profit-making and the return of
property to private hands, moreover, have assisted the consolidation of
Nazi party power." Sweezy (p. 30) again uses the concept when giving
concrete examples of transference of government ownership to private
hands: "The United Steel Trust is an outstanding example of
`reprivatization.'" This may be the first use of the term
"reprivatization" in the academic literature in English, at least
within the domain of the social sciences."

192-3: "The primary modern argument against privatization is that it
only enriches and entrenches business and political elites, without
benefiting consumers or taxpayers. The discussion here suggests a rich
historical irony: these modern arguments against privatization are
strikingly similar to the arguments made in favor of privatization in
Germany in the 1930s. As Sweezy (1941) and Merlin (1943) explicitly
point out, German privatization of the 1930s was intended to benefit
the wealthiest sectors and enhance the economic position and political
support of the elite. Of course, this historical connection does not
prove that privatization is always a sound or an unsound policy, only
that the effects of privatization may depend considerably on the
political, social and economic contexts. German privatization in the
1930s differed from the privatization of Volkswagen in the 1950s, and
both of these situations differ from, say, the British privatizations
of the 1980s, the Russian privatizations of the 1990s, or the
privatizations across Latin America over the last two decades."

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