Profit and Philanthropy: Stock Companies as Philanthropic Institution in Nineteenth Century Germany

Philanthropy and Civil Society is often identified with the activities of foundations and non-profit organizations. Susannah Morris pointed out already that nineteenth century philanthropy included many forms of organization which we today would not identify as philanthropic in nature. The most important such form of philanthropy was the “Philanthropy and Five Percent” model which favored stock companies in the alleviation of poverty. English, German, and American philanthropists championed the limited dividend company—a stock company which was financed through shares sold to shareholders but limited the profit to be distributed among shareholders to a maximum of 5 %—as an ideal tool to produce proper housing for working-class families. Following the model of Sydney Waterlow’s limited dividend housing company in London (the Improved Industrial Dwellings Company, 1863), similar enterprises were across Germany and the United States from the 1870s to the 1910s. The more famous such institutions were the City and Suburban Homes Company in New York City, the Boston Cooperative Building Company in Boston, and the Society for the Improvement of Small Tenements in Berlin. The belief that the capitalist market could produce social welfare was the underlying philosophy of this movement. In Germany, however, the application of this business/philanthropy model went beyond social housing. Limited dividend companies were formed to support various forms of philanthropic activities from public parks and zoos to theaters and music halls. In this essay, I will discuss the transformation of philanthropy in the course of the nineteenth century with regards to the different institutional forms of philanthropy. In the first half of the nineteenth century, German philanthropists considered associations as well as limited dividend companies as the most important and effective forms of philanthropy. Up until World War I, German philanthropists had a much broader set of institutions at their hands from which they could chose if they decided to engage in philanthropy. Only after World War I, did the definition of philanthropy in Germany begin to narrow.