Peoples Shares In Volkswagon
JUNE 01, 1965 by WELLINGTON LONG
Mr. Long is Chief Correspondent in
By car, bus, train, and bone-cracking motor scooter, they plunged toward a village in
The analogy was apt, or so many thought, for they were owners of "People’s Shares" which had trebled in price since issuance six months earlier. Now they were gathering for their first shareholders’ meeting.
When all were jammed inside a factory hall in
In later years, the crowd at the annual meeting has dwindled to about 3,000. But the popularity of "People’s Shares" in Volkswagen and other former state-owned enterprises is undiminished, and the West German government intends to sell quite a lot more of its industrial holdings.
Ludwig Erhard, who guided
"It is hardly an exaggeration for me to say that now the era of the class war can finally be considered as having been overcome, and a new socio-political image is recognizable according to which the care, the improvement, and the expansion of productive capital is no longer the duty of the entrepreneur alone, but the concern of all citizens.
"If also the wage and salary earner and the small saver is better able to recognize that their fate, their social security, and the future of their children depends on the maintenance of our productive powers, then it must almost inevitably lead to a change of attitude, in the sense of a higher consciousness of responsibility of the individual for the whole. And that appears to me to be the best basis for any democratic order."
The conviction that German workers were hostile to the idea of owning property, other than perhaps their home, was widely held until the mid-1950′s. Despite the disastrous experiences of state ownership in
But it was clear from the way the votes were being cast in parliamentary elections that a considerable number of workers had become disenchanted with Social Democratic dogma. The "social market economy" ideas developed by Erhard, as Chancellor Konrad Adenauer’s Minister for Economics, showed more results than the socialistic theories adopted in neighboring countries. The Social Democrats found themselves in a minority even in their traditional strongholds in the industrial
Some of the men who supported Adenauer and Erhard thought "Christian Democracy," as they styled their philosophy, ought, however, to go beyond simply providing wage earners with a relatively high standard of living. They also were concerned over the dominant position the government had inherited in certain manufacturing industries as well as in mining and electricity. As the legal successor to the Third Reich,
Hermann Lindrath Calls Turn
One such man was Hermann Lindrath, a banker and municipal administrator from
From 1945 to 1951, Lindrath stayed on in
Ideas into Practice
In his new job, Lindrath saw a chance to put his theories about individual ownership into practice. Chancellor Adenauer’s government policy statement of
The government’s holdings were organized as joint stock companies. Lindrath proposed to sell some or all of the shares of each to company employees or other low-income groups.
He was entering unexplored territory when he offered shares in the PREUSSAG (Preussiche Bergwerks and Huetten AG) on
60,000 Anticipated, 200,000 Applied
Even Lindrath was astounded at the reception his scheme received. "We anticipated 60,000 buyers," he said. "More than 200,000 signed immediately the lists were opened."
The demand was so great that Lindrath promptly offered another 52 million marks ($13 million) of PREUSSAG shares for sale, so that the government wound up holding less than 25 per cent of the shares.
Only persons with annual incomes of less than 16,000 marks ($4,000)—about 50 per cent more than a production line worker earns—could buy PREUSSAG shares. None could hold more than 1/100th of the total issue, a provision thought necessary to prevent speculators from gaining control of the company.
Lindrath kept part of the shares in the government’s hands so it could gather experience. But he promised the remainder would be sold soon, too.
More confident than ever, after this initial success, Lindrath expanded his philosophy. “True freedom," he declared," "is unthinkable without property. The possibility to dispose over personal property in its various forms assures the individual greater security and greater independence of the vagaries of life than the Federal constitution is capable of doing. And it provides the basis for a special tie to and responsibility for the state and society.
"Beyond that, experience teaches us that there is no real freedom which is not spiritual freedom and at the same time material freedom. Freedom merely as a right guaranteed by the constitution is not real freedom as we understand it. The Federal constitution alone is incapable of making men free in the exercise of their daily lives. Constitutional freedom requires a foundation, and we want to create this by making the Germans a people of property owners.
"But only if the shares come into the hands of those who so far have had an insufficient share of the economy’s productive capital can this be considered progress along the road from class war to responsibility… The class warrior of the past shall become an economic citizen."
The most obvious property for the government to sell next was the Volkswagen works. Hitler had wanted a "People’s Car" and tens of thousands of trusting Germans had paid their money to his "Labor Front" in anticipation of the day cars would roll off the lines in the sand hills of Lower Saxony for civilian instead of for military use.
After the war, the Federal government in
Lindrath died before the deal was closed. But his successor proposed that of Volkswagen’s 600 million marks ($125 million) capitalization, the government sell 60 per cent or 360 million marks ($90 million) in "People’s Shares." The Federal government and
"People’s Shares" in Volkswagen would have a nominal value of 100 marks ($25), but be sold for 350 marks ($87.50). The rule prohibiting sales to anyone earning more than 16,000 marks ($4,000) a year was retained. But married men earning less than 12,000 marks ($3,000) per year would be given a 20 per cent "Social Discount."
Again the government underestimated the popularity of the scheme. It announced buyers would be limited to five shares each. But just as fast as the banks and brokers could record their names, 1,547,000 persons subscribed for shares. After some fast reckoning, the government announced each subscriber would get two shares, and the right to participate in a drawing for a third share. About one-third of the subscribers received a third share.
The day after the shares were issued, their price was quoted on the official exchanges. Within a week, they had doubled in price. Dealing in Volkswagen shares or at least following the course of their prices in the newspapers, said one commentator, "has become the national sport." By May, 1961, about two months after the shares were issued, they hit their peak of 1,108 marks ($277), 31/2 times their original price.
That first giant shareholder’s meeting conducted by VW General Director Heinz Nordhoff went off admirably, allaying the fears of those who thought it would be impossible for a crowd of that size to conduct business. A little later, he raised the price of the "beetle car." The daily Welt of
But it bounced, and by the time 3,000 shareholders gathered for their second meeting in July of that year, had again reached 550 marks ($142.50). In the years since, public confidence in Volkswagen shares has never wavered, and it has been among the steady leaders on the exchanges.
Most significant to the men who followed in Lindrath’s footsteps, however, was the tenacity with which original buyers hung on to Volkswagen shares. Four years after issue, 60 per cent of the first buyers still own their Volkswagen paper. And almost overnight, the nation had acquired two million new shareholders. In 1960, only 3per cent of West German households owned shares. Three years later, the figure was 7 per cent, on a par with the
Other Sales Projected
Trades-union leaders still argue against the "People’s Shares" scheme, proposing instead that "excess profits" be siphoned off large corporations—both public and private—into a special government-managed investment fund in which workers could buy nonvoting stock. Probably because of official trades-union opposition, only 43 per cent of the PREUSSAG employees bought shares in their company. But factory workers were soon infected by the general enthusiasm, and 97 per cent of Volkswagen’s hands ignored the union’s exhortations and bought company shares.
This summer, the government will sell "People’s Shares" in the VEBA (Vereinigte Elektrizitaets—und Bergwerks AG), a government-owned stock company capitalized at 450 million marks ($112.5 million).
Among other things, VEBA produces 10 per cent of
And there is more being made ready for sale. Werner Dollinger, the Bavarian food wholesaler and and kiln owner who is now Minister of Federally Owned Property, reports the government still owns industrial properties with a nominal value of four billion marks ($1 billion), and an annual production of 14 billion marks ($3.5 billion), including 28 per cent of the nation’s coal production, 30 per cent of its shipbuilding, and 74 per cent of its aluminum production.
The Debate Continues
The Social Democrats contend the "People’s Shares" give an illusory sense of ownership. In parliamentary debate on the VEBA bill, Social Democrat Georg Kurlbaum—himself sole owner of a Nurnberg electronics manufacturing firm—said it was foolish for a government to be at the mercy of shareholders in determining such sensitive matters as power rates. "Only in a minimum of cases," Kurlbaum contended, "does the small shareholder actually control the way his vote is cast. Large banks hold proxies for most of the small shareholders and the bankers actually vote." A more democratic system, he said, is for the government to be the sole owner and let the parliament representing all the people decide or supervise company policies. "We believe that properly used, Federal enterprises can contribute to smoothing out economic bumps, to slowing the tendency of prices to rise and to improve competitive conditions," Kurlbaum declared.
Anyway, the Social Democrat asserted, a wage earner doesn’t want a voting share in a company as much as he desires security against creeping or sudden inflation.
Minister Dollinger challenged Kurlbaum’s every point. In the first place, he said, the government was concerned at the growing concentration of capital in the hands of the state and a few private entrepreneurs. Concentration of production was perhaps inevitable and necessary in the modern world, but the government wanted to balance that process by deconcentrating capital ownership.
To Kurlbaum’s anxiety that big bankers actually would control shareholders’ votes, Dollinger said the government would insist that shareholders granting proxies state how they should be voted on each item of the annual meeting agenda.
The Social Democrat had said that for reasons of national defense, the government should maintain important holdings in the basic industries. But Dollinger believed that "precisely in such an important area as defense requirements, a healthy competition of private companies for state contracts is in the best interests of all participants."
Dollinger also objected to appropriating funds when state-owned corporations require fresh capital.
"Public monies, whether they come from the Federal, state, or municipal budgets," Dollinger declared, "are always tax monies. To use tax monies to fill the capital need of a Federally-owned undertaking means nothing less than to make the citizen poorer, while making the state richer and more powerful."
"The Federal government opposes such a solution," Dollinger reasserted. "Without personal, freely disposable property, the preservation of our personal freedom against collectivism is in the long run not possible.
"Free disposability is not exhausted in that one is able to sell his property at any time. Rather it also must include a right of co-determination, which makes the people’s shareholder a co-entrepreneur. As a matter of principle, therefore, ‘People’s Shares’ are provided with a complete vote.
"Above all, we believe a man who owns something thinks differently than a man who does not. A man thinks and reacts with more responsibility when a decision involves his own property."
Even though some critics suggest that many of the shareholders at the annual Volkswagen meeting are merely harassing the directors instead of sharing in decision-making, Erhard and Dollinger really believe a change in the attitude of newly propertied workers is apparent whenever strike votes are called by the unions during wage contract negotiations. By Erhard’s lights, shareholder-workers demonstrate more responsibility. The government admits the battle isn’t won yet, but is confident of eventual victory in the contest between collective ownership and individual property.