Thomas Ferguson and Hans-Joachim Voth write:
From Indonesia and Malaysia to Italy, politically connected firms are more valuable than their less fortunate competitors. Yet a key event in the history of the twentieth century has not been examined in terms of the value of political connections—the Nazi rise to power. We systematically assess the value of prior ties with the new regime in 1933. To do so, we [Ferguson and Voth] combine two new data series: A new series of monthly stock prices, collected from official publications of the Berlin stock exchange, and a second series that uses hitherto unused contemporary data sources, in combination with previous scholarship, to pin down ties between big business and the Nazis. . . .
Drawing on previously unused contemporary sources about management and supervisory board composition and stock returns, we find that one out of seven firms, and a large proportion of the biggest companies, had substantive links with the National Socialist German Workers’ Party. Firms supporting the Nazi movement experienced unusually high returns, outperforming unconnected ones by 5% to 8% between January and March 1933. . . .
By international standards, the value of connections with the Nazi party was unusually high. Comparison with the results of Faccio (2006) suggests that in her sample of 47 countries from around the globe, only Third World countries with poor governance showed similarly high returns. Also, associations with the NSDAP were formed voluntarily, not through family links; also, they were not in place decades before their political value became apparent, as in many Third World countries. One question for future research is how many of these connections turned out to be valuable in the end and through which channels the party rewarded its supporters. Though some businessmen felt that the donations were large, their value was small compared to the rise in stock market value of connected firms. Interestingly, even recently formed affiliations such as those resulting from the fundraising party in Berlin on February 20, 1933, appear to have boosted firms’ fortunes on the stock market. Returns were not arbitraged away by many other firms entering the fray. This suggests that Hitler’s rise to power may have come as a genuine surprise to many, that an ideological distaste for his party kept numerous businessmen from contributing, or that NSDAP representatives deliberately focused their attention on a subgroup of sympathetic business contacts.
Interesting stuff. Certainly not what you usually see in the history books.
P.S. This reminds me of the question of the very high rate of return that seems to be available from political contributions in the U.S. I mean, I know that not every contribution brings a benefit, and many contributions are defensive, designed to stop legislation that would hurt a company. Nonetheless, the total amount of money spent on campaigns is so much less than the amount of the economy that is affected by government policy, that it still seems to me (without doing any calculations) that the returns to contributions must be something like 1000%. I don’t know how much money the big agribusinesses give to Congressmembers, but it must be a small fraction of what they get back in government subsidies. (And ditto for universities: I don’t know what Columbia spends on lobbyists, but I’m sure they get back much much more in student loans, government grants, etc.)
I saw Steve Ansolabehere give a talk where he claimed that contributors don’t really get anything for their money, but I just found it hard to believe. As my friend Phil said when he heard that Kentucky legislators were getting busted for taking $400 bribes, “Hell, for that amount of money I could afford a legislator of my own!”