To Ensure “Economically Just Prices,” The Reich’s Commissar for Price Formation Suspended the Operations of the Price Mechanism

In 1933 the government issued the “Law on Compulsory Cartels,” by virtue of which it assumed the right to consolidate enterprises as a means of regulating the market for their products and reducing competition. In time, Berlin forged hundreds of such compulsory cartels, which determined, under state guidance, what their member firms could produce and what prices they could charge: the normal practice until the end of 1941 was for enterprises to operate on a cost-plus basis, presenting government agencies with evidence of costs and then being allowed to add 3-6 percent profit. In 1936, the office of the Reich’s Commissar for Price Formation was created to ensure “economically just prices.” The operations of the price mechanism of the open market were thus suspended. The cartel law made new investment conditional on state approval. State authorities also regulated dividend payments: a law issued in 1934 decreed that the profits to be distributed to stockholders were not to exceed 6 percent of the paid-in capital; another law of that year provided that any excess was to be invested in state bonds for future distribution. Holders of municipal and other bonds were compelled to convert them into new issues carrying lower interest rates. Private enterprise was constantly whipped into shape by complaints of “economic egoism” and tireless reminders that the interests of the community took precedence over those of the individual.

—Richard Pipes, Property and Freedom (New York: Alfred A. Knopf, 1999), Vintage e-book.