Nov 27, 2022

Economic Elite Cooptation in Authoritarianization: The Case of Nazi Germany

Written By: Shiqi Duan

The economic elite in a society wield a disproportionate amount of power when it comes to determining the health of the regime. One such case that is most well-known in this day and age is the Koch brothers, who own and operate Koch Industries—the second-largest private company in the US—and are known to influence US politics through their donations to the Republican Party and through their advocacy group, Americans for Prosperity. In a liberal democracy, any individual is entitled to advocate for their interests—but when it comes to people with such economic resources, such expressions are bound to have major impacts. Would-be authoritarians can take advantage of this power to make or break their movement, and in the process, make or break their authoritarian regime. In the case of Nazi Germany, the regime’s cooptation of the existing economic elite—intentional or unintentional—cemented their ruling position, and marked the final demise of the Weimar democracy. 

The elite cooptation by the Nazi Party goes in two ways: firstly, the party, after Hitler’s appointment to Chancellorship, pursued policies that disproportionally benefit existing capital owners in the country in designing its recovery plan from the Great Depression. Secondly, the party’s social policies allowed for elites who have a good relationship with the regime to receive disproportionate advantages over competitors. The two factors combine to create an incentive structure that promoted a mutualistic relationship between the authoritarian party and the economic elite: the party will use its power through state institutions to squash workers’ movements and design policies favorable to business interests, so long as the business interests used their resources to support the authoritarian party. 

This piece is mainly informed by Adam Tooze’s The Wages of Destruction, a seminal book on the economics of Nazi Germany. 

From the onset of Hitler’s ascend into power, the Nazi Party was faced with the backdrop of the Great Depression. The most immediate reaction from Hitler was to, firstly, appoint a conservative to be in charge of the financial portfolio who opposed credit-based work creation, and instead focused on tightening the monetary supply to maintain the value of the Reichsmark. The policy immediately benefits capital holders, whose whose wealth was to be defended. To protect the value of the Reichsmark became a central concern of the Nazi Party, which viewed it as a “symbol of the new regime’s reliability and trustworthiness” as the UK abandoned the gold standard in 1931 and the US devalued the dollar in April of 1933. The policy further defends existing wealth, and reduces debt pressure as Germany’s debt to the US from the Dawes Plan reduced in Reichsmark value. The decrease of German firms’ competitiveness in foreign trade was alleviated by both export subsidies and the shielding of the domestic market from foreign competition. Business groups, institutions that go back to the Weimar period designed to act as a mediator between the Reich Ministry of Economic Affairs and individual firms, were instead used to limit German imports. Only which that was necessary and could not be internally produced were allowed to be imported, and therefore the domestic market was protected for to be taken by German businesses. A system of mandatory cartels decreased domestic competition and further favored the existing economic elites. In 1933, the Ministry of Economic Affairs granted itself the authority to impose compulsory cartels and power to oversee those cartels. The cartels themselves were allowed to “control investment in their sector and to rationalize the existing structure of the industry through systematic ‘buyouts’.” A Weimar-era protection was also annulled so that the cartels were allowed to pursue outsiders through legal means. As the state aimed to control the economy through government oversight of cartels, it created institutional environments which favored existing large concentrations of capital by granting them a state-sanctioned organization and ability to force out competition through state institutions. For the masses, the Nazi party practiced a policy of demobilization that also served the interests of business elites. Wages were frozen in 1933 and was placed under state control in 1934. Left-wing organized labor was destroyed by the regime’s anticommunism, while the party created Trustees of Labor positions to rein in the Nazi worker organizations. The power of the paramilitary right-wing masses, most notably that of the SA, was purged in the Night of the Long Knives. Through conservative currency policies, protection of the internal market, state-sanctioned cartels, and suppression of labor and other mass-level movements, the Nazi Party decisively defended the economic elite from most of the major social stressors at the time. 

The Nazi Party’s favoritism for the big business invited support therefrom. In 1933 and 1934, the Nazi Party saw generous donations to its national programs by prominent German firms, on the promise that it would “crush [Communists and Social Democrats] completely.” IG Farben, the most major chemical company in Germany and in the world at the time, approached the party as early as 1932, so as to secure a deal that would allow the company to acquire more resources for synthetic oil production in the form of oil import tariffs and government subsidies, following the discovery of oil in the Americas in the 1920s that drove down oil prices and made synthetic oil economically unviable. Coal interests further branded synthetic oil as a matter of “fuel self-sufficiency,” which served Hitler’s nationalist rhetoric, and indeed created a program that allowed the country to be self-sufficient. A similar story played out in the steel industry, where existing major steel capitals—Krupp and Vestag—aligned themselves more with the Nazi regime so as to secure government contracts, which mostly came from the rearmament initiative. The loyalty of the economic elite was therefore secure for the Nazi regime. 

The regime cooptation of the economic elite in Nazi Germany created a stable regime, one where the state protects business interests in exchange for their loyalty and cooperation in the management of the masses. The highly unstable economic environment following the Great Depression created a situation for the existing, powerful economic elite where the sole reliable possibility for protecting their wealth rested with the Nazi Party. The economic elite was willing and able to support the Nazi Party in their initiatives for economic recovery, and in so doing, helped create an authoritarian regime. From here, there are a few points of entry to solve the authoritarianization issue: had there been a non-authoritarian political player that could defend elite interests, or an economic elite that was too weak to support the Nazi plan for recovery (where the regime alone did not have enough resources to see its plans through), or had there not been an economic crisis that became a major enough threat to the economic elite in the first place, the history would have played out differently. Of course, further inquiry is needed into other instances of authoritarianization—but the German case nevertheless offers some normative insight into the political challenges today, in the aftermath of the 2008 Financial Crisis, and the global revival of right-wing authoritarianism. 

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1 Comment

  1. Thomas McCarthy

    The tie between money and power, even in politics where the playing field is supposed to be even keeled, is nothing new. It is a sad fact that time and time again we see the candidate with the most funding win elections. The campaign trail tends to be a fundraiser more so than a true competition of political savvy. As you pointed out, once someone is elected, the ever unquenchable thirst for money continues. You pointed out the Koch brothers, and there are many other examples. It was quite interesting to hear about this from the time period of Nazism in Germany. Like most countries, the Nazi’s and Hitler cared most about protecting the rich from losing their vast amounts of wealth, instead of caring about the well-being of their ordinary citizens.

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