A Fun Fact about Privatization: With Scattered Reflections on “the State”

James Meek’s LRB article about electricity privatization in the UK includes an interesting tidbit:

How did we get here? In 1981, with inflation and unemployment at 10 per cent plus, with the recently elected Conservative government forced to yield to the demands of the miners, public spending cuts provoking general outrage and Thatcher’s prime ministerial career seemingly doomed to a swift, ignominious end, a 38-year-old economist from Birmingham University called Stephen Littlechild was working on ways to realise an esoteric idea that had been much discussed in radical Tory circles: privatisation. Privatisation was not a Thatcher patent. The Spanish economist Germà Bel traces the origins of the word to the German word Reprivatisierung, first used in English in 1936 by the Berlin correspondent of the Economist, writing about Nazi economic policy. In 1943, in an analysis of Hitler’s programme in the Quarterly Journal of Economics, the word ‘privatisation’ entered the academic literature for the first time. The author, Sidney Merlin, wrote that the Nazi Party ‘facilitates the accumulation of private fortunes and industrial empires by its foremost members and collaborators through “privatisation” and other measures, thereby intensifying centralisation of economic affairs and government in an increasingly narrow group that may for all practical purposes be termed the national socialist elite’.

That’s right: privatization of government functions and state-owned industries was literally invented by the Nazis.

This reminds me of something I’ve been meaning to blog about for months. In Birth of Biopolitics, Foucault points out that one of the major intellectual triumphs of the early neoliberal theorists was casting the Nazi disaster as a story of excessive state power when, in reality, the Nazi party instrumentalized state apparatuses while leaving the primary power in the hands of the party and in Hitler’s person insofar as he was the “Führer,” which was not actually a government office. The Soviet experience is often cast in “state vs. civil society” terms as well, but it also doesn’t fit. There “were” official state functions to a certain extent, but they didn’t really matter — sometimes Communist Party officials also held formal government office, but that wasn’t the source of their power. In fact, one of Gorbachev’s biggest and most disruptive innovations was to attempt to build and empower “neutral” state functions that would not be simply identical to the Party. The story is similar in China and arguably in contemporary Russia, too, where Putin appears to have power because he’s Putin rather than because of whichever rotating office he happens to be holding at a given moment.

All these facts are well-known, yet they don’t seem to shake the hegemony of the notion that the most important power struggle in the modern world is between civil society and the state. In reality, it probably makes sense to say that the most important power struggles take place among competing mafia-like groupings, with control over state apparatuses as one among many points of contention — the countries where the government is itself an important player in the struggle, with self-identified interests separate from that of other power groupings, are surely the exception rather than the rule. (In the U.S., one could argue the military plays such a role, but not “government” as such.)

8 thoughts on “A Fun Fact about Privatization: With Scattered Reflections on “the State”

  1. The final lecture of B.o.B also casts the invention of ‘civil society’ in its current form as a response to problems caused by the creation of the market, If I recall correctly. Incidentally Mussolini is widely credited (though I don’t know how accurately) with claiming fascism is the merger of state and corporate power- and while ‘corporate’ in the 20s and 30s meant something a little different to now- the idea that such a process would be a one way street pushing corporate power :into: the state is perhaps only a retrospective application by liberal democrats.

  2. I think I get the point re: hegemony of civil society vs. the state paradigm, but why is wikipedia wrong when it says that privatization is a lot older than the Nazi regime?

  3. It’s an earlier concept than that, however. The great economist Pareto, though he doesn’t use the term “privatization”, was clearly arguing for it in the 1910s and 1920s. Mussolini pretended to be using Pareto’s work as an underpinning of his regime (in the economic realm at least), and it’s not as clear as some would like it that Pareto would have been opposed to that. Pareto did accept an invitation from Il Duce to become a member of Italy’s Senate in the last year of his life.

  4. Can we not go back earlier? Bentham did not use the word privatize (surprisingly, since he coined minimize, maximize, codification, international, etc), but he does have passges in his discussion of prisons, schools, and charity companies, advocating for their ownership and management by private companies for the explicit reason of the efficiency they would provide over against government management (see for example the vol. 2 of his writing on the poor laws – also, ignore most of what Foucault says about B). Privatisation is right there as an alternative option at the origin of state bureaucracy. But then we could probably go back to the East India Company…

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