In the six years that elapsed between the Fascist victory and the outbreak of war, Nazism erected a system of production, distribution, and consumption which defies classification in any of the usual categories. It was not capitalism in the traditional sense; the autonomous market mechanism so characteristic of capitalism during the last two centuries had all but disappeared. It was not State Capitalism; the government disclaimed any desire to own the means of production, and, in fact, took steps to denationalize them. It was not socialism or communism; private property and private profit still existed. It was, rather, a combination of some of the characteristics of capitalism and a highly planned economy. Without in any way destroying its class character, a comprehensive planning mechanism was imposed on an economy in which private property was not expropriated, in which the distribution of national income remained fundamentally unchanged, and in which private entrepreneurs retained some of the prerogatives and responsibilities which were theirs under traditional capitalism. This was done in a society which was dominated by a ruthless political dictatorship.
In considering the changes wrought by the Nazis one thing should be kept clearly in mind. Economists make use of a conceptual apparatus originally designed to describe the theory, and to some extent the practice, of early capitalism. Private property, private profit, competition, and many other concepts used throughout this book, reach far back into the past and carry into the present suggestions of former meanings which are misleading. To be at all useful as descriptive categories, these terms are in need of constant redefinition as the economic system they are meant to picture undergoes significant change. The changes introduced by the Nazis are a case in point, and unless one is careful in using these old concepts to describe the phenomena of the Nazi economy, there is bound to be misunderstanding, and much superficial generalizing that is more dramatic than it is accurate.
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Property, for example, continued to be a source of large and unearned income. But ownership of property no longer carried with it the discretionary right to interfere in the productive process. Private profit continued to exist as one of the important claims on national income. But the profit motive and competition ceased to perform the functions assigned to them by traditional capitalism. Instead of their former roles in the production and investment process they now functioned primarily as energizers, to stimulate businessmen to extend themselves to improve the productivity of their enterprises. All these developments meant that the role of the entrepreneur in the economy had changed. The daring entrepreneur of the nineteenth century, who risked his own capital in pursuit of high profits, was already on his way out in the highly “organized” capitalism of pre-Nazi Germany. German Fascism eliminated him completely, and in his stead called into being an entrepreneur who could exercise his initiative and accumulate wealth, but who was compelled to operate strictly within the limitations of a government determined program of economic activity. “Private enterprises,” declared a semiofficial publication in 1937, “have become public trusts. The State is, for all practical purposes, a partner in every German enterprise. . . . When the enterprise is a public trust, its survival, and the profitability of the invested capital become maters of public interest.’” If the Nazi entrepreneur could not invest freely, he was compensated by the fact that full employment and the willingness of the government to subsidize submarginal producers, made the profitability of his enterprise much more secure than it had ever been before.
{From the conclusion of The Nazi Economic System by Otto Nathan, 1944}
