"^/SaJAIND JW' ^1 %y^i Ay mm^'^ o ^'-TiUONV ■ :nRARY^^ 5 1. i"-"^ r\^ ^\' 'A^E-UNIVERSy/ S-ANCElfJ> ii'^i '%i39NY'Sm^' ■^/saa/viNi. .^. CAIIF0% 'sMEUNIVERSy^ o ^lOSANCElfj^ ^t-llBRARYQ/;^ ^ ^/id3AINn3\V^ .•s' ^\IL1BKAKY6; 5 ^ 13 1 ^'- o ^\\F■UNIVER% ^J'iHDKV-^ni^ AWtUNi a;^IUBKARY6/, ^ 5> v^ **5 ^OFCAllFOff^ i!=^i '■^■TiliJKV-SOi A\Atl ^01^ o r /r— *ci: '^/sajAiNaivvv^ aOSANCEl£j- '^ -< A. ^: ^ % 4n> oF-CAIIFO/i:, o 1 1 n5^ . \rtt UNIVtKV/V ivmm ^\ UNtVERV/V WtlNIVtKl' f^l rtfUNIVtDS BISMARCK AND STATE SOCIALISM AN EXPOSITION OF THE SOCIAL AND ECONOMIC LEGISLATION OF GERMANY SINCE 1870 WILLIAM HARBUTT DAWSON AutJior 0/ " German Socialism and Ferdinand Lassalle," etc. LONDON SWAN SONNENSCHEIN & CO. PATERNOSTER SQUARE 1891 "I need very little recognition, and am tolerably unsusceptible against criticism." — fiute 2, 1865. " At 3<)y rate it must be allowed that I have always expressed my con- victions decidedly, clearly, and openly." — December 17, 1873. " I am a statesman who subordinates himself to the needs and require- ments of the State in the interest of the peace and prosperity of my Fatherland." — December 17, 1873. " I have always endeavoured to learn new things, and when I have as a consequence had to correct an earlier opinion, I have done it at once, and 1 am proud to have done so, for I ever place my country before my per- son." — March 28, 1874. " I aim at definite, positive, practical ends." — October 9, 1878. " For my part I shall certainly follow to the end the way which I believe to be the best in my country's interest ; whether my reward be hatred or love, is all the same to me." — J'dy 9, 1879. " I do my duty and await the result." — April 2, 1881. — From Prince Bismarck's S/>eec/tcs. ~2)3zl- PREFACE. Tins volume is intended to be a sequel to a work which I completed two years ago, and which appeared with the title "German Socialism and Ferdinand Lassalle : a Biographical History of German Socialistic Movements during this Century." In that work — the marked friendli- ness of whose reception, both in England and Germany, was the more encouraging because not looked for — an endeavour was made to show how the seed of a politico- economical Socialism had found its way to German soil, how it had germinated, how grown from plant to tree, and finally to describe the fruit which the tree had borne and is still bearing. In the main the survey extended to Social-Democratic movements, and it did not seem pertinent to the scheme originally contemplated to devote more than passing reference to developments like State Socialism, Socialism of the Chair, and Christian Socialism. F'rom the first, however, it was my intention to discuss State Socialism in a second volume, which should be the complement of its predecessor. A number of causes have prevented tho speedier fulfilment of that intention, yet the delay has been advantageous rather than the reverse. Since the i'i iv Preface. work on "German Socialism and Ferdinand Lassalle" was finished, great political changes have taken place in Germany. Two Emperors have died, and after passing through a period of suspense and anxiety unexampled in its history, the new Empire is to-day ruled by a young monarch who has been called suddenly and without fore- warning to undertake duties among the highest and most responsible that can fall to man — duties, I will venture to add, to the discharge of which he has already brought a sagacity, a far-sightedness, and an earnestness that •^^Z augur well for the future of his government and his ^•^^country. ^ Moreover, there has recently taken place an event which ^ will mark the beginning of a new era in German politics. After faithfully serving his sovereign and nation for nearly thirty years as First Minister of the Crown in Prussia, and for twenty as Chancellor of the German Empire, and after playing a conspicuous part in European history for at least four decades. Prince Bismarck has at last sought the retirement and rest which weight of years and physical weakness long ago entitled him to enjoy. His masterly guidance of foreign affairs and his epoch- making development of domestic policy become, therefore, completed chapters in German political history. We are now able to view the Chancellor's structure of social and economic reform, as built up since the re-establishment of the Empire, while it still exhibits uniform workman- ship — while it is still the achievement of one brain and one hand. A few years hence and German State Social- Preface. v ism can no longer be exactly the State Socialism of Prince Bismarck. The building he has raised must, in the nature of things, undergo change, both by modification and addition. The following pages describe the ideal after which Bismarck strove, but which he cannot be said yet to have realised. The Chancellor's withdrawal from official life leaves us a scheme of social reform incomplete, it is true, if compared with his ultimate purposes, yet uniform and cognate, like a painting perfect in idea, yet unfinished, needing finer touches here and greater detail there. Bismarck's part in re-shaping the domestic policy of his country may now be regarded as belonging to the past, and it is no longer premature to estimate his position as a social reformer. Conversing several years ago with Professor Adolph Wagner, who has long and worthily filled a chair of political economy at the Berlin University, and who is generally, and with right, regarded as the foremost scientific exponent of State Socialism in Germany, a word of mine drew from him the remark that State Socialism would be better termed a RicJitung than a ScJiulc — a direction than a school. This designation involves two distinct ideas. Not only does State Socialism represent a particular development of economic thought, but it describes the entire tenor of recent social and economic legislation in Germany. Bearing this fact in mind, I have approached the subject from both the theoretical and the practical standpoint ; and in characterising the laws which belong to what may be called tlic Bismarck era of social vi Preface. feform, I have always kept antecedent measures in view. It is a great mistake to conclude that Prince Bismarck's State Socialistic projects left his head fully matured as armed Minerva left the head of Jupiter. Without ex- ception they were the result of organic development. What the German Chancellor did was to carry social and economic policy forward on existing lines, or to revert to principles temporarily forsaken. As to the success and permanent value of most of his measures we can as yet do little more than speculate, for sufficient time has not elapsed to allow of accurate judgment. It is signi^cant, however, that laws and institutions which at their inception excited widespread apprehension and opposition have lived down ill-repute, and now receive approbation where formerly they met with hostility. Embarking on a policy of State Socialism in the hope of grappling with Social Democracy, Prince Bismarck was assured both by friends and enemies that he was seeking to cast out a devil with the prince of the devils. Yet in spite of opposition on the one hand, and dis- couragement on the other, he has, with unflinching con- fidence and remarkable tenacity of purpose, persisted in the course to which he committed himself and his country more than a decade ago, and the best proof of his states- manlike foresight and wisdom is to be found in the en- dorsement of his policy by three successive Emperors and by an ever-growing majority of his countrymen. Since the appearance of the work whose sequel is the present volume, I have been able to investigate more Preface. vii carefully than had up to that time been possible the State Socialistic measures passed under the new Empire — conducting my inquiries as before in Germany— and I would like to repeat with emphasis the estimate of Prince Bismarck and his social reforms to which I have else- where given expression. " While we must defer judgment upon his policy, we may at once admit that he is the first German statesman who has really tried during the last sixty or seventy years to improve the lot of the labouring population. More than that, he is the first European statesman who has dared to take the social problem in hand with the de- termination, not indeed to solve it — for that is a task which he himself has admitted will require generations — but to pave the way for solution. . . . There can be little doubt that Prince Bismarck has discovered where the roots of the social evil He. He has declared, in words that burn, that it is the duty of the State to give heed, above all, to the welfare of its weaker members ; he has vowed that no opposition and no obloquy shall ever deter him from giving practical proof of that conviction ; and he has already advanced a good step on the way of State Socialism, in which he and thousands of thinking men with him alone see hope for the future of society and civilisation, whether in Germany or elsewhere. . . . Whatever opinion we may after full consideration form of the Chancellor's internal policy, we must allow to the man himself the virtue of sincerity, a virtue not always characteristic in these days of the public acts of viii Preface. statesmen. Further, philanthropy and charity demand that we shall wish him success in the great undertaking- upon which he has embarked, an undertaking whose objects are none less than the removal of the wrongs of a vast and ever-increasing class, and the restoration of peace to a great country." W. H. D. Note. — In regard to the authorities for this work, as it deals largely with legislation, I have relied in the main upon Parliamentary Reports and Papers, which I have consulted at first hand. I may, however, say with accuracy that no German work, large or small, bearing upon the questions considered has been overlooked, though not many references are given in the following pages. Here I desire to acknowledge with gratitude the uniform and marked courtesy shown by the authorities of the Royal Library in Berlin during an extended period of research. PREFACE TO SECOND EDITION. If the early call for a new edition of this work may be taken as an indication of growing public interest in the subject of State Socialism, the author will heartily rejoice. But, apart from the significance of this reissue, very real evidences exist of an unmistakable trend of public opinion, and even of legislative action, towards greater State inter- ference in the economic domain. The rigid Individualist contends that such interference is an unconditional evil, and claims that science and theory are against it. For their part, State Socialists will be willing to make their opponents a present of both science and theory, if only progress be meanwhile made in the practical realisation of their aims. They rely not upon theories, but upon the facts of experience, the lessons of daily life, when they say that the Individualism which is still so much vaunted stands self-condemned. To those who, with Mr. Herbert Spencer, claim that the Individualistic order is a perfect ideal, they simplj- reply in the words applied by that writer to Socialism: "They proceed on the assumption that all concerned will judge rightly and act fairly — will think as they ought to think, and act as they ought to act ; and they assume this regardless of the daily experiences which show them that men do neither ,x Preface to Second Edition. \ - the one nor the other." ^ Let history say how far the doctrine of Laissez-faire is justified of its fruits. Surely the present day, when sweating, industrial slavery, inordinate speculation, " trusts," "rings," "corners," and similar pro- ducts of our high civilisation are holding high revelry, is not a time at which to decry the attempt of State Socialists to place labour less at the mercy of capital, the public welfare less at the mercy of private adventure. Some of the social measures advocated by prominent English statesmen to-day have long been anticipated in Germany. Especially is this the case with industrial assurance. To the careful observer it must become in- creasingly apparent that in the system of assurance estab- lished by Prince Bismarck we have the model after which we shall have to work. Were the consummation of this great work the only service he had rendered to the toilers of his country, the late Chancellor would have earned their lasting gratitude. Thanks to the threefold plan of assurance developed between 1883 and 1889, the German working- man is able to anticipate the hour of sickness and incapacity without anxiety, and to face old age with confidence. Truly, as an English leader of public thought recently said, to grant to the toiling masses such a boon were better than to win a great victory. Who will give to the British working- man the blessing which Prince Bismarck has conferred upon his German brother? W. H. D. May, 1891. * '• A Plea for Liberty," p. 13. CONTENTS. CHAPTER I. PAGB Theory of State Socialism • . i CHAPTER H. Early Economic Policy of Prussia ...*.. 14 CHAPTER HI. Bismarck's Social Principles ....... 23 CHAPTER IV. The New Emimre 37 CHAPTER V. Abandonmknt of Free Trade 47 CHAPTER VI. The State as Monopolist 62 CHAPTER VII. State Railways 72 CHAPTER VHI. In dustrial Legisl ation ., 87 (i.) Reversion to the Guild System. __->-*^ (ii.) Employers' Liability and Industrial Insurance before the New Era. (iii.) Regulation of F'actories (I^Iours_ of Labour; Female and Juvenile Labour ; Sunday Labour). xii Contents. CHAPTER IX. PAGE Insurance of the Working Classes ..«••. 109 " (i.) ITnw the Insurance Laws originated, (ii.) S icl. 92. r.hiiio.rih- and State Socialism. be good for the individual citizen?" but "What will most benefit the whole community?" By their social value, their capacity for promoting social welfare, must the plexus of institutions, organisations, and arrangements, in and by means of which the economic life of the nation is carried on, be tried. Extended State activity in the economic domain is a necessary consequence of this estimate of society. Social interests can only be properly safeguarded when the State directly concerns itself with them. The aim must, therefore, be to widen the economic jurisdiction of the State. In Wagner's words, the task of the time is to make " national economy " ( Volkswirthschaft) rather " State economy " {Staatswirthschaft). The non-intervention principle must be abandoned, since it has only led to greater and ever greater class and personal inequalities, and therefore to growing social dis- organisation and discontent. The_State Socialists do not, like the Socialists, propose to reduce mankind to a dead level of^ monotonous uniformity. They recognise the existence of indi- vidual dit^erences, yet say that many of these are quite as much the result of civilisation — the result of social and economic institutions — as they are natural. Inequalities not due to the natural peculiarities of the individual should be checked, dis- couraged, and counteracted. " The weak in the economic struggle," to quote Prince Bismarck's phrase, are entitled to help and protection according to their necessities. Not the strong and efficient but the feeble and defective parts of the social machinery need the special care of the State. Apart, however, from the strictly ethical characteristics of State Socialism, there is the purely economic side. The State may adopt measures, legislative and otherwise, directly intended to further the nation's material interests, as, for instance, in the domain of home or foreign trade, or it may itself take part in the processes of pro- duction and distribution. No department of economic activity should on principle be closed to the State ; whether it should or not participate, side by side with private enterprise, is a matter of expediency and public interest. Where the State cannot with advantage undertake economic functions, they may be suited to public bodies, the principle of collectivism being still asserted. We should not expect the advocates of so liberal an economy Theory of State Socialism. 5 as State Socinlism to be unanimous as to the application of the principles common to all of them. A s hool which comprises rr^en of such dififerent minds as Wagner, Schmoller, Albert Schaffle, Gustav Schonberg, and Held, could not by any pos- sibility preserve agreement in matters of detail. Moreover, the cloak of State Socialism is thrown over the tatters of many theories and proposals, wild or at least un]jractical, for which the scientific representatives of the system should not be made responsible. It is evident that the principles of State intervention in economic affairs and State care and protection for the poorer classes being posited, it is difficult to say how far these principles should be carried. The State Socialists say that this must be determined by expediency, and by circumstances of time and place. Yet even here we stand on very insecure ground, and it must always be more or less a matter of subjective judgment ^beyond what limits the State may not with advantage and pro- priety go. Instead, therefore, of comparing the positions of the leading representatives of this school of political economists in Germany, it will be more useful to glance at the main doctrines advanced by the man who has done more than any one else to give to State Socialism at once scientific form and scientific foundation, Adolph Wagner.^ Wagner, it should be premised, is prepared to extend the province of government beyond the limits set by most economists of his direction.- He lays especial emphasis upon the untena- bility of the idea of finality in economic institutions. In esti- mating the value of economic principles, it seldom becomes a question of " either, or ; " it is rather a matter of " more or less." The bounds of the State's functions have not, like the earth's foundations, been fixed from of old, that they should not be removed. The jurisdiction of government is a matter not of * Wagner's views are fully set forth in his " Lehrbuch der politischen Okonomie " and in his " Finanzwissensch.ift " (vol. ii. ), where he deals with the theory of taxation ; but concise and po[)ular summaries of his State Socialistic theories and proposals are contained in his " Rede iiber die sociale Frage," published in 1S72, and in articles in the Tiilnngcr Zeitschrift for 1SS7. ■ See Wagner's " Grundlegung," chap, iv., [lart i, sec. 163, where he lays down seven propositions regarding the functions of the State. Bismarck and State Socialism. principle but of expediency. Wagner entirely rejects Kant's State, with its narrow functions, but he will not accept the eude- monistic ideal of Wolf as applicable to the present. He opposes the State's passivity in social affairs on the one hand, and he deprecates extreme intervention on the other. He takes his stand upon " the ground of the existing " {der Boden der Wirk- lichkeit), acknowledging the social and economic system and the civil law which are in vogue, with the reservation that they must undergo further organic development. He advocates a reform which, to use his own words, "is neither subversion, nor stag- nation, nor retrogression." With Wagner the social question in reality resolves itself into the amelioration of the working classes, and it is essentially on their behalf that he calls for greater State activity in the domain of economics. Self-help is laudable and desirable, and he would encourage it in every way. He grants the right of coalition, and expects much from the development in Germany of trades-unionism and co-operation. Organisation and combination may be rough and ready weapons wherewith to carry on struggles between capital and labour, but as the capif-alists swear by the doctrine of free competition, it is but logical to allow to the working classes the arbitrament of coalition, and, if necessary, of the strike. He holds that the State has no right, and no interest, to discourage labour com- binations which restrict themselves to economic purposes ; all it can fairly do is to prevent and punish excess, violence, and menace. But self-help, though admirable so far as it goes, is not enough. Unaided the working classes will never achieve their emancipation from capitalistic fetters. The assistance of the State is necessary, and that assistance should be given in no stinted measure. Incidentally, it may be noted that Wagner does not allow that free competition is an unmixed blessing. Its advantages are great, but they have in the past been exag- gerated, and they are also accompanied by many serious dis- advantages. He would not dream of going back to the guild system, thus renouncing some of the best results of the modern system of production, but he is prepared to consider whether a certain restriction of personal freedom might not be beneficial in such matters as migration and settlement (in order to prevent Theory of State Socialism. over-population in towns, to the disadvantage of the country), marriage (so as to check premature and improvident unions), .^a^, and even handicraft (in the interest of more skilful and con- scientious production). The great thought which underlies Wagner's proposals of economic and social reform is the " ethical factor " which, in his i opinion, should be considered in the settlement of economic problems. He laments and condemns the existing "moral indifferentism in the domain of economic dealings." It is not 1 enough to talk of buying and selling labour, and to give and \ receive money for labour as its price ; we must remember that the relation of employer and employed, of producer and consumer, is that of man to man. To him the idea of "regarding labour- power as a commodity and wages as its price is not only unchris- tian, but is inhuman in the worst sense of the word." ^ He says plainly that the object he has in view is to give the working classes a better share in the advantages and the blessings of civilisation, which are so largely the results of their labour. Not only have they a right to generous education, and to free enjoy- ment of the agencies of culture possessed by the nation, but they can justly claim a higher degree of material welfare, — in other words, a larger share in the national income. How is the latter to be secured ? There are two ways in which the desired end may be reached, (i) The workman may benefit by the increas- ingj)roductivity of national labour. This, however, would at best be a slow and uncertain process, and Wagner advocates a more eft'cctive method of raising the position of the working-man. (2) Labour may benefit at the expense of capital — the lower classes may benefit at the expense of the higher — by the latter giving to the labourer better remuneration, higher wages, which implies the reduction of profit, interest, and rent in tlieir various forms. Wagner's position difters from that of the Socialists in that they would abolish social inequalities, while he would only seek to diminish them. He makes no concealment of the fact that he projjoses to take from the rich for the benefit of the poor. The rich might comjilain of this, but it would not be with reason. ' *' Rede iiber die sociale Frage," pp. 8 and 9. 8 Bismarck and State Socialism. " What would be taken from the higher classes the workman has hitherto had to do without, with far greater hardship than his more privileged fellow-man would in future experience through its loss, for his position would still remain far better than the labourer's." Coming now to Wagner's demands in detail, he requires in the industrial domain that wages shall be increased, so that a higher standard of life may be maintained ; that the hours of work shall be reduced, so that a workman's physical strength may be econo- mised and leisure be afforded for mental improvement and rational enjoyment; and that Suiiday labour shall be abolished, in the interest of morality and religion. He would not object to the State regulating the hours of labour, to the extent of fixing a maxi mum work-day, but he thinks Boards of Arbitration and Labour Chambers better fitted to deal with the question. Hand in hand with the regulation of the hours of labour would go the exercise of a strict supervision over the conditions of labour, which, both from the sanitary and the moral standpoint, should be such as to shield both mind and body from deleterious influence. Naturally the industrial insurance laws now in operation in Germany have Wagner's approval ; indeed, years before their inception he called for laws affording to the working classes maintenance in times of sickness, accident, and old age. The " wages-contract " should also be an equitable one, and measures should be devised for securing to the workman continuous employment as far as possible ; the least the State can do is to ensure the giving of ample notice in case of employment ceasing. Wagner favours co-operation in distribution on the basis of the English co-operative movement, and also, to some extent, in production. Having derived Social- istic stimulus from Rodbertus and Lassalle, we need not wonder that he should advocate the productive partnership for working- men, making the labourer at once the undertaker, the workman at once the capitalist. Indeed, he goes so far as to say that Lassalle's proposal of State credit might with advantage be adopted. At the same time he admits that practical objections exist, such as the difificulties of organisation, of administration, of exercising the State control which would be necessary, and of regulating the rela- tions between the various undertakings carried on with State funds. Theory of State Socialisvi. In a work published a number of years ago he, however, suggested that an experiment might be made in this direction by the State converting some of its mines and smelting works into industrial partnerships, broadly hinting that in the event of a successful result being achieved it might not be out of the question to compulsorily convert private undertakings into co-operative con- cerns. All Wagner's proposals in this domain proceed from the desire to improve the workman's lot by restricting the capitalist's power over him, which also implies the restriction of the capitalist's power over his own means of production. But the working classes can be helped in other ways, and one is by lightening their taxation. Wagner strongly favours Jn- dii_ect taxes, but he stipulates that the objects of taxation should be such as lightly touch the labourer. Thus the taxes and duties on corn, beer, sugar, tea, coffee, salt, and upon dwellings should be kept within moderate bounds. On the other hand, the luxuries of the rich may be taxed liberally. As regards direct taxation, the labourer's income should, as far as possible, be exempted, and the well-to-do classes should pay proportionately more. IiT_tiixing in- cornQj. however, a distinction should be drawn between the income derived from business and personal service, which should be liL;htly dealt with, and funded income, proceeding from land and investments, which should be highly taxed. Taxation should also be progressive, whatever the source of income. Wagner would allow the national treasury to share more liberally in^dead men's gold. If the State sees that a legator's heirs receive their own, it should be well recompensed for its service. He proposes a legacy tax progressive according to the distance of relationship and also according to the extent of the bequest. Distant relatives he is prepared to disqualify in favour of the State. Wagner further jiroposes to tax unearned increment heavily, as will be shown, and to male, Jeder seJie, 7C0 er blcibe,' ^ ' He who is not strong enough to stand must be knocked down and trodden to the ground,' ' To him that hath shall be given, and from him that hath not shall be taken away even that which he hath,' — that doctrines like these should be applied in the State, and especially in a monarchically, paternally governed State. On the other hand, I believe that those who profess horror at the intervention of the State for the protection of the weak lay themselves open to the suspicion that they are desirous of using their strength— be it that of capital, that of rhetoric, or whatever it be — for the benefit of a section, for the oppression of the rest, for the introduction of party domination, and that they will be chagrined as soon as this design is disturbed by any action of the Government.'" More than a decade before Prince Bismarck inaugurated his] social-political legislation, he liad, as Prussian Minister President,! exerted his official influence in favour of State, or at any rate Crown, help for the working classes. When in England in 1S62 he was struck with the magnitude and the success of the co- ' From Goethe's " Zahme Xenien " : — " Eines schickt sich nicht fiir Alle ! Sehe Jeder, wie ci"s ireibc, Seho Jeder, wo er bleibe, Und wer stehl, dass er nicht falle." A prose rendering would be : " The same thing is not suited to all. Let every one care for himself, and let he who is standing take heed that he do nut fall." ee Trade nearly twenty years before. A good deal of the credit for Prussia's gradual conversion to what soon began to be known as " Manchesterdom " (" Manchestertlium "), is due to the Economic Congress established at Gotha in 1S58. This congress was made up of members lepresentative of all German States. At its gatherings proposals favourable to the spread of Free Trade principles were discussed, and resolutions were passed. But the influence of the congress was not confined to academic debates. It was regarded as the duty of the delegates to take measures to popularise the principles and aims of the congress in their indi- 37 38 Bismarck and State Socialism. vidual States, and many of them discharged this obligation to good effect. The congress represented essentially the interests of trade, shipping, and capital, but not the interests of agriculture and the land. Nevertheless Prussia's economic legislation was largely informed by the spirit of this assembly until the middle of the seventies. We know on Prince Bismarck's own authority that he was never in sympathy with Free Trade so far as con- cerns Germany. He has, indeed, declared that he "holds Free Trade to be altogether false," as an absolute principle. B'!t during the period of Liberal ascendency in economic affairs his attention was wholly occupied with the weightier matters of State, and he acquiesced in what was done without taking the trouble to inquire whether it was right or wrong. He was surrounded by ministers imbued with Liberal principles, and it was due to their influence that Prussia and afterwards the new Empire embarked on a policy nearly akin to that of Free Trade, a policy which continued uninterrupted until 1878 or 1879. But the Free Traders were not to be allowed to retain pre- dominance for ever. A reaction had for some years been increas- ing in strength, and it was soon to make its influence felt in practical ways. Just as in 1858 the trading and monied interests established an organisation for the spread of Manchester princi- ples, so the agrarian party and the advocates of protection formed an association with the purpose of convincing the Government and the nation of the necessity for returning to the old Prussian policy. This association, the Association for Social Politics {Verein fiir Sosia/J'o/itik), was established at Eisenach in 1872; and though it partook somewhat of an academic character, its influence upon the social-political laws of the last fifteen years has been considerable. Its ruling idea was the untenableness in modern times of the Laissez-faire principle, the one-sidedness of the theory that the State should restrict its activity to the mere maintenance of the law and the promotion of peace without and within. It demanded State encouragement and protection of trade, industry, and agriculture. State promotion of the interests of culture in general, and State intervention for the improvement of the working-man's condition. The New Empire. 39 Various circumstances tended to favour the propaganda of the Eisenacli school, and especially the commercial and financial crisis which followed the famous Bubble Era in 1873. The French war, with its political consequences, gave a mighty impulse to German national life. It heralded a new birth. Old things passed away and all things became new. What the French humiliation did for Germany in a political sense, the French indemnity did for her commercially. The dispersal of the milliards filled the country with gold, and the phenomenal con- dition of the money market led to a ])erfect mania of speculation. A wild race after fortune was run, and all classes entered the com- petition. Nobleman and manufacturer. Government official and l)etty pensioner, Jew and Greek, shopkeeper and artisan were alike inflamed by the suicidal passion for gold. The entire economic condition of the country became changed. Production increased to an enormous extent. Speculation on the Stock Exchange and elsewhere took dimensions and forms never heard of before or since. Those who had money squandered it with a prodigal hand, and those who had it not gambled with borrowed gold and with doubtful credit. For a time all went well. It might have seemed that a commercial millennium had arrived. Many fortunes were made. Industries which had hitherto lan- guished showed the appearance of prosperity. Wages rose, and for a time the working classes seemed to have been placed upon a new and higher level of existence. But the beautiful picture was soon found to have a sad reverse. The inevitable reaction set in. The French milliards became exhausted ; enterprise slackened ; and the revival of' mercantile prosperity proved a delusion and a snare. The credit market was entirely disorganised. A host of undertakings launched by unscrupulous adventurers, and floated by the money of inexperienced Peter Simples, turned out to be as rotten as touchwood. Many other enterprises, introduced to the world amid the trumpeting of highly respectable but too sanguine promoters, shared similar disaster; and when the aggre- gate balance-sheet of the bubble companies was drawn up, it was seen that while a vast amount of capital had been frittered away, the only ])eople who had benefited were the wire-i)ullers, whom abundance of wit and resource compensated for want of con- D 40 Bisiunrck avd State Socialism. science.^ Trade and industry had the same tale of misfortune to tell. Manufacturers woke up one morning to find the market glutted past hope of recovery. Goods had been produced in quantities which the demand did not justify, and it was im- possible to find buyers either at home or abroad. Failure followed failure. Factories were stopped, warehouses were closed, and industrial fortunes, built up slowly by the accumulation of hard-earned profits, disappeared like the snow beneath the sun. Labour fared even worse than capital. The wages which had risen so rapidly fell with a shock, where, through the cessation of employment, they were not entirely lost to the toiler's family. Agriculture, too, had long been suffering severely. Prices had fallen while taxation had risen. In many parts corn could no longer be grown at a profit on account of the enormous imports of foreign grain, and the area under cultivation had considerably decreased. The imports of rye, barley, and oats over the Russo- Prussian frontier or by the Baltic Sea had doubled in two years : — Rye. Barley. Oats. 1875 .. 6,869,324 530,107 .. 2,368,663 cwts. 1876 .. 11,361,144 .. 594,312 .. ,. 3,196,049 „ 1877 .. 13,266,203 1,920,778 3,620,447 „ The imports of American corn had also increased greatly. The disastrous commercial crisis which Germany passed through at this time gave great stimulus to the movement for protection. The reactionary party redoubled its efforts, and by means of the Parliamentary tribune, the public platform, the Press, and by pamphlets and ephemeral literature endeavoured to convince the country of the folly of " Manchesterdom." But success was not to be attained just yet. Prince Bismarck has placed it on record that the year 1877 was the decisive year in which he came to a turning-point in his life so far as concerned economical and social questions. Then he began to make eco- nomics a serious study. He has said : — " During the first fifteen years of my ministerial activity I was absorbed by foreign politics, and I did not feel called upon to * See Appendix P. : " The Babble Era." The Nezv Empire. 4 1 trouble myself much with the internal politics of the Empire, nor had I the requisite time. I took it for granted that the internal affairs were in good hands. Afterwards, when I lost the help which I had thought relial)le, I was compelled to look into matters myself, and I found that though I had up to then sworn in verba viai^istri, the actual results did not come up to the expectations which underlay our legislation. I had the impression that since the introduction of the Free Trade system in 1865 we fell into atr()i)hy, which was only checked for a time by the new blood of the five milliard contribution, and that it was necessary to adopt a remedy." Up to 1876 Bismarck had entrusted the country's economic policy entirely to Minister von Delbriick, but in that year this colleague resigned office. The reason given for the withdrawal of Dr. Delbriick was " motives of health," but every one knew that he left the Chancellor because of irreconcilable disagreement of views. The resignation of Dr. Delbriick, who occupied the posi- tion of President of the Chancellery, was followed by that of Herr Camphausen, Minister of Finance, and before two years had passed the Ministers of Commerce and the Interior had also withdrawn from office. Everything was now propitious for the inauguration of a new economic era. Prince Bismarck referred as follows in the Prussian Dower House on February 4th, 1S81, to the Delbriick secession : — " Before I concerned myself personally with customs questions, I did not represent my own convictions, but those of my colleague Delbriick, whom I regarded as the right man in the right place, for I had no time to form my own views. ... It was the retirement of Delbriick which compelled me to form views for myself and to express them. I cannot properly say that I formerly held other views than now : you might as well dispute with me as to whether I had been of this or that opinion, had held this or that theory, respecting some scientific question. I had no time to form a definite ])icture of mercantile politics. I deny that my former views were opposed to my present, for I had none : I was the obedient disciple of Herr Delbriick, and I expressed his views when I expressed views at all. But when he retired from the partnership, I was compelled to represent my own opinions. 42 Bisjiiarck and State Socialism. which perhaps deviated in many respects from his; but I certainly did not formerly hold contrary opinions, which now I have changed." The other side of Prince Bismarck's new policy was in the narrower sense of the word social. Here he was primarily influ- enced by tlie discontent of the working classes, which had found loud and emphatic expression in the phenomenal growth of Socialism. That discontent was due to various causes, some political, some economical and industrial. German Socialism is unlike the Socialism of other countries in that it sprang from a political soil. Social factors in time exercised great influence upon its growth and form, but the seed and soil were alike political. The first perceptible impulse came Trorh the French Revolution of last century, but the national decline of the German States, and of the absolute government which was one of their oldest traditions, effectually prevented any response to the lawless cries which were wafted across the Rhine in 1789. During the next half-century, however, the political aspirations of the German peoples grew in vigour, and the revolutionary movements of both 1830 and 1848 produced great excitement amongst not a few of the heterogeneous populations, and greater still amongst the various Governments. It was in the latter year that Germany formally opened her doors to Socialism.^ Hitherto the forces of Communism, Social- ism, and revolution had united for the subversion of the existing political system. With the granting of constitutions to many of the States, political agitation declined, and Socialistic agitation took clear and definite form. " Socialism emerged from the convulsions and the ferment of those years as a fresh goal of popular aspirations. It was Socialism that remained after the earthquake, the tempest, and the fire had passed away. Succeed- ing events greatly stimulated the new movement. Politically the •working-man became free, for the equality of all citizens in the eyes of the law passed from the region of theory to that of fact. ' " Geniiaii Socialism and Ferdinand Lassalle " (by the same author), p. 22. To this work the reader is referred for an extended consideration of early as well as modern Socialistic movements in Germany. TJie New Empire. 43 The development of industry, however, exerted quite a contrary effect, for it perpetuated and increased the economic and social subjection of the labouring classes. The more the capitalist system was extended, the more social inequalities multiplied. The law made equal and capitalism made unequal. Thus the position of the labourer became ambiguous. As a citizen and a subject of the State he was perfectly free, sharing the civil rights of the wealthiest; but as a member of the community of industry he occupied a position in reality dependent and unfree. It was inevitable that this condition of things should conduce to social discontent and class antagonism." ^ In the middle of the century wages were everywhere very low, and the standard of life amongst the working classes was in con- sequence the same. Statistics of the period show that as a result of arduous toil, long hours, and poor food, the mortality amongst working-men was far higher in Prussia than in England or France. The social and economic inequalities which made the lot of the labourer so unhappy told greatly in favour of Socialism, which had at the time powerful advocates in the persons of men like^^ Marx and Lassalle. Schulze-Delitzsch tried to induce the working classes to seek salvation in the co-operative movement, and he was successful in establishing numerous societies between the years 1849 and 1858, when his cause reached its high-water mark. This movement, however, never touched the poorer of the working classes. Those who chiefly and almost exclusively benefited by it were artisans and people possessing small capitals. As an antidote against Socialism co-operation failed. Possibly Schulze- Delitzsch might have been more successful had not a rival ap- peared upon the scene in Ferdinand Lassalle, the father of German Social-r)emocracy, whose brief public career did more for the Socialistic cause than the previous half-century of indiscriminate agitation. On Lassalle's death in 1S64 there was a series of in- glorious contests amongst the more prominent of his followers for the vacant leadership of tiie party he had organised and led to triumph, but in spite of dissensions the cause continued to grow rapidly. ' ." German Socialism and Ferdinand Lassalle," pp. 33, 34. 44 Bismarck and State Socialism. In 1 87 1 the Socialists returned two members to the Reichstag, three years later their representation increaF-ed to nine, and in 1877 the number of Socialist deputies was twelve. The Socialist votes polled in the first ordinary returns were : in 187 1, 124,665, out of a total of 3,892,160; 1874, 351,952, out of 5,190,254; and 1877, 493,288, out of 5,401,021. In the last year the political parties represented in the Reichstag numbered fourteen, and the Socialist party took the eighth place in point of Parliamentary representatives and the fifth in point of votes polled. Up to the year 1878 Prince Bismarck had planned no measure of repression against the Socialists, though he had long been suspicious of their growing strength. In that year, however, two attempts — the first oh May nth and the second onjune 2nd — were made upon the life of the aged Emperor William, and the universal horror and apger created by the crimes enabled the Chancellor to carry on October 19th, 1878, a drastic law intended to check Socialistic agitation. Prince Bismarck had on his side the combined forces ee Economic Union of the Reichstag," with a view to investigate the question of economic and fiscal reform, and in October, 1878, they published a declaration calling for a revision of the customs tariff, in view of the hostile mercantile policies pursued by neighbouring States and the severe depression then afflicting trade and agriculture The declaration was published on October 17th, and a week later the Government was interpellated on the question. The Chancellor replied that the Federal Governments had so far come to no decision, but he was himself favourable to the appeal of the Economic Union, and he promised that no further com- mercial treaties should be concluded until the country's entire economic system had been examined. It IS not clear that the Government at this time contemplated the introduction of strictly jjrotective duties. In the previous August the Finance Ministers of the various German States had 48 Bismarck arid State Socialistn. met at Heidelberg to consider the financial condition of the Empire, and had drawn up a scheme for the augmentation of the imperial revenues by a series of fiscal duties. Now, how- ever, that Prince Bismarck saw how the wind was blowing, he determined to widen the scope of the reforms proposed. The programme of the Heidelberg conference was laid on one side, and the Chancellor asked the Federal Council to appoint a committee to consider the revision of the whole tariff. This proposal was accepted, and before the end of the year a com- mittee of fifteen members had been nominated. On December 15th, 1878, the Chancellor addressed to the committee a memorable letter, in which for the first time he developed a scheme" of taxation and protection. After premising that financial reform was his first consideration, and that he sought to increase the Empire's revenues by means of indirect rather than direct taxation, he expressed his conviction of the desira- bility of returning to the principle of the " customs liability of all imported articles," which " was laid down in the Prussian customs legislation from the year 1S18 onward, and later found expression in the universal import doty imposed by the customs tariff of the Zollverem up to 1865. Exemption from this liability to pay duty would be allowed to raw materials indispensable to industry which, like cotton, cannot be produced in Germany, and, according to circumstances, to those which can only be produced in insufficient quantity or quality. All articles not specially exempted should be subjected to an import duty graduated according to the value of the commodity and on the basis of various percentages, according to the requirements of home production. The customs rates thus to be laid down would be reduced to weight-units, as is the rule in the existing customs tariff, and in this way levied, so far as from the nature of the object the levy of the duty may not be desirable per piece (as in the case of cattle) or according to value (as in the case of railway carriages or iron river craft)." The imports of the year 1877 amounted to 3,877,000,000 marks, and articles to the declared value of 2,853,000,000 marks were admitted free of duty. Prince Bismarck estimated that under the new system articles would be exempted of duty to the . Abandonment of Free Trade. 49 value of 1,400,000,000 marks, and that if the future import duty averaged 5 per cent, ad valorem, the revenue from customs would yield an additional 70,000,000 marks yearly to the imperial treasury. But the financial argument was not the only one that commended the revision of the tariff. There was the economic and mercantile aspect of the question. " I leave undecided," proceeded the letter, " the question whether complete mutual freedom of international commerce, such as is contemplated by the theory of free trade, would not serve the interests of Germany. But as long as most of the coun- tries with which our trade is carried on surround themselves with customs barriers, which there is still a growing tendency to multi- ply, ft does not seem to me justifiable, or to the economic interest of the nation, that we should allow ourselves to be restricted in the satisfaction of our financial wants by the apprehension that German products will thereby be but slightly preferred to foreign ones. The existing Verein tariff contains, together with the purely fiscal duties, a series of moderate protective duties intended to benefit certain branches of industry. The abolition or decrease of these duties does not appear advisable, especially in the pre- sent position of industry. Perhaps, indeed, it would be well to reintroduce duties on a number of articles, or to increase the pre- sent rates, in the interest of various depressed branches of home industry, in accordance with the results of the commissions now in progress. Yet protective duties for individual industries, when they exceed the limit imposed by regard for their financial ])ro- ceeds, act as a privilege and arouse on the part of representatives of unprotected industries the antipathy to which every privilege is exposed. A customs system which secures to the entire home production a preference before foreign production in the home market, while keeping within tiie limits imposed by financial in- terests, will not run the risk of this antipathy. Such a system will in no way appear partial, because its effects will be more equally spread over all the productive circles of the land than is the case with a system of protective duties for isolated branches of industry. The minority of the population, which does not produce at all but exclusively consumes, will apparently be injured by a customs system favouring the entire national i)roduction. Yet if by means 50 Bismarck and State Socialism. of such a system the aggregate sum of the values produced in the country increase, and thus the national wealth be on the whole enhanced, the non-producing parts of the population — -and especially the State and communal officials who are dependent upon a fixed money income — will eventually be benefited ; for means of counterbalancing hardships will be at the command of the community in case the extension of customs-liability to the entire imports should result in an increase of the prices of the necessaries of life. Yet with low duties such an increase will in all probability not take place to the extent to which consumers are accustomed to apprehend, just as, on the other hand, the prices of bread and meat have not fallen to an appreciable degree in consequence of the abolition of the duties on corn-grinding and cattle-killing in the parishes where these used to exist. The real financial duties, imposed on articles which are not produced at home and the import of which is indispensable, will in part fall upon the consumer alone. On the contrary, with articles which the country is able to produce in quantity and quality adequate to the home consumption, the foreign producer will alone have to bear the duty in order that he may compete in the German market. Finally, in cases in which part of the home demand must be covered by foreign supply, the foreign producer will in general be compelled to bear at least a part and often the whole of the duty, and thus to reduce his profit to the extent of this amount." Upon these lines the revision of the customs tariff was to be conducted. The financial necessities of the Empire were to be provided for, but at the same time industry, trade, and agriculture were to be aff"orded protection against foreign competition. The Chancellor's declaration was followed by a forecast of legislation, contained in a speech from the throne dated February 12th, 1S79. In this the Emperor stated : — "The Federal Governments are considering legislative measures for the removal, or at least the diminution, oif the economic evils from which we are suft'ering. The proposals which I have made, and still intend to make, to my allies aim, by providing the Empire with new sources of revenue, at placing the Governments in a position to desist from levying the taxes which they and A bandomnent of Free Trade. 5 1 their Legislatures recognise as the hardest to enforce. At the same time I am of opinion that the country's entire economic activity has a right to claim all the support Avhich legislative adjustment of duties and taxes can afford, and which in the lands with which we trade is, perhaps, afforded beyond actual requirement. I regard it as my duty to adopt measures to preserve the German market to national production so far as is consistent with the general interest ; and our customs legislation must accordingly revert to the tried principles upon which the prosperous career of the ZoUverein rested for nearly half a century, but which have in important particulars been deserted in our mercantile policy since 1865. I cannot admit that actual success has attended this change in our customs policy." A few days later, February 21st, Prince Bismarck gave open ex- pression to protectionist views. " I propose," he said, " to return to the time-honoured ways of 1S23 to 1S65. We left them in the latter year." He declared frankly that though self-contradic- tion did not tend to increase one's dignity, he was willing to con- fess his past error, for the interests of the country required it. It was necessary that the fiscal policy should be changed, and he was ready to change it himself or to make way for somebody else likewise prepared to undertake the duty. Deputy Richter charged him with having had secret protectionist sympathies in 1862, when he became Prussian Minister President, but the Chancellor denied the imputation, while not shrinking from it. " I should be proud if, as is alleged, I had had ' economic ten- dencies ' of any kind in 1S62 ; but I must confess, to my shame, that I had none at all." Those days, however, brought him other and weightier duties than the direction of Prussia's economic policy. He had then to do with grave imperial questions, with constitutional and diplomatic problems of far-reaching conse- quences, with military enterprises which would eitiier make or mar his country. " I did not," he said, " mix myself up witii economical questions, but endeavoured to secure the most pro- minent statesmen who were willing to assist in carrying out the work which I had undertaken. Undoubtedly I did not entertain the economic views of Herr Delbriick, and though we were not agreed, I do not know how the various questions between us were 52 Bismarck and State Socialism. settled ; but I suppose I must have surrendered in most cases, for I willingly made sacrifices, both politically and in my own opinions, in order to retain an uncommonly effective co-operation for the cause to which I was devoted." The revised customs tariff came before the Reichstag for first consideration on May 2nd. It was accompanied by a voluminous Begriiiidung — a statement setting forth the reasons for legislation — in which the Government maintained that only by stringent msasures of protection could the national market be preserved for native industry and agriculture. The iron trade was said to be languishing, and "iron producers as a whole regard the re-intro- duction and partial increase of the iron duties as the only remedy. The representatives of the industries engaged in the manufacture of machinery, tools, and other implements likewise call for pro- tection." As to corn, it was stated that the market was flooded with foreign produce, sold at rates with which home producers could not compete, so that ruin stared them in the face. " It is, therefore, not only to the interest of the farmers, but to that of the entire community, that corn-growing should be maintained." Prince Bismarck opened the debate by explaining the fiscal side of the Government's scheme. But a larger revenue was not all that was wanted. Industry must unconditionally be protected. Hitherto Germany, owing to the policy of practical Free Trade, had been a country where the goods of all the world might be \ deposited, the result being to depress home prices and to destroy home trade. " Let us close our doors and erect somewhat higher barriers," said the Chancellor, " and let us thus take care to pre- \serve at least the German market to German industry. The :hances of a large export trade are nowadays exceedingly pre- /carious. There are now no more great countries to discover. The globe is circumnavigated, and we can no longer find any large purchasing nations. Commercial treaties, it is true, are under certain circumstances favourable to foreign trade ; but ^whenever a treaty is concluded, it is a question of Qui trompe-t-on til — who is taken in 1 As a rule one of the parties is, but only after a number of years is it known which one." He declared that in remodelling the economic system of the country national interests would alone be considered. Abandonment of Free Trade. 53 In defending the proposed increase of tlie corn duties the Chancellor had to oppose Dr. Delbriick's contention that the only result would be to make the price of grain dearer without bene- fiting agriculture. He laid down the proposition that low corn prices are an economic evil. The position of the farmer depends upon the revenue he obtains from the sale of his produce, and the better his position the more prosperous is the nation's economic life as a whole. " If cheap corn is the goal at which we should aim, we ought long ago to have abolished the land tax, for it burdens the in- dustry which produces corn at home, which produces 400 million cwts. against the 27 or 30 millions which we import. But no one has ever dreamed of such a thing ; on the contrary, in times when theory has been the same as now, the land tax has been gradu- ally increased throughout Germany so far as I know, and in Prussia 30 per cent, since 186 1, being increased from 30 to 40 million marks." He held that farmers had a right to demand that the home market should be saved to them. Prices were so depressed that it was already a question whether agriculture could be carried on successfully. If the time should come when corn could not be "profitably cultivated, " not only agriculture, but the Prussian State, and the German Empire itself, would go to ruin." This eventuality would not, however, occur. " Twenty million German farmers will not allow themselves to be ruined. It is only neces- sary that they should become conscious of what is before them, and they will try to defend themselves by legal and constitutional means." The Radical party opposed the Government's reactionary policy to the Tast, but the country was on the side of the proposed cliange, and the revised tariff passed into l aw on July 7th, 1879, when, by saying good-bye to Free Trade, Germany ceased, accord- ing to the Chancellor's view, to be '• the dupe of an honest con- viction." The voting was : for the new tariff, 217 ; against, 117. The Conservative party, the Clericals, sixteen members of the National Liberal i)arty, and the Alsace-Lorraine members voted for the tariff; and the Radicals, the majority of the National Liberals, and the Social-Democrats opposed it 54 Bismarck and State Socialism. It would be a mistake to suppose that Prince Bismarck is in favour of unconditional protection. With him Free Trade and Protection are categories of time and place. He regards neither principle as apodictically true. What is good for one country may be very bad for another. It is, in fact, a question of ex- pediency, not of natural law. He has pointed out that England herself, the home of Free Trade, " used to have high protective duties until the time came when she had been so strengthened under protection that she could come forward as a Herculean combatant, and challenge all the world with ' Enter the lists against me ! ' " As England was led by self-interest to Free Trade, Germany was led by self-interest to Protection. In this as in all matters Prince Bismarck refuses to be guided by the dicta of science. " In the domain of political economy," he once said, "the abstract doctrines of science leave me perfectly cold, my only standard of judgment being experience." It is not hard to understand how a statesman of his strong national sympathies should, in view of the prevailing industrial and agricultural de- cline, have resorted to so extreme a measure as the reversal of the country's economic policy. It now remains to glance at the later modifications of the policy adopted in 1879. Two years later Prince Bismarck felt so con- fident of the success of his bold enterprise that he declared to the Reichstag (March 28th, 1881) : "In the development of our tariff I am determined to oppose any modification in the direction of Free Trade, and to use my influence in favour of greater pro- tection and of a higher revenue from frontier duties." Three years later (December ist, 1884) he could tell Parliament that the new commercial policy had " freed the country from its poverty of blood," and that the prosperity of trade and industry generally was on the increase. Home and foreign commerce was larger, and there was greater briskness in the shipping of all or most of the ports. Agriculture alone had failed to benefit by the increased duties. Industry had evidently reaped good results from the out- set, for the exports of manufactures had grown from 1,026,500,000 marks in 1878 to 1,368,300,000 marks in 1880, an increase of 341,800,000 millions, or over 33 per cent., in three years. Better still, wages were, even by 1880, higher in many trades, even though AbandoHDient of Free Trade. 55 the prices of a large number of manufactures had fallen. By the year 1885 further advance still had been made. Taking 103 large industrial companies, it could be shown that, while in 1878-79 the percentage of profits was only 2-29 per cent., it was 5"3o per cent, in 18S4-85. Again, 206 large smelting and machine works employed in 1885 40*5 per cent, more men than in 1879, and their wages had substantially increased. Of these works 89 were companies; and while in 1879 o"^y 55 worked at profit, the number which so worked in 1884 was 79. A compre- hensive return prepared by the Association of German Iron and Steel Manufacturers, embracing 247 works, showed that the number of employees was in 1884 over 35 per cent, more than in 1S79. This greater trade had an appreciable effect upon shipping. While the tonnage of German steam and sailing ships was 1,117,935 the year before the passing of the new tariff, it was 1,294,288 in 1885. The number of sailing vessels had greatly decreased, in consequence of the growing competition of steam ; but the increase in the number of sea-going steamships had been so marked — from 336, with a tonnage of 183,379, in 1878, to 650, with a tonnage of 413,943, in 1885 — that the falling off was more than compensated for. While, again, only 21,472 German vessels, with a tonnage of 2,505,779, arrived in home ports in 1875, the number in 1885 was 36,115, and the tonnage 4,513,692. On the other hand, 18,223 German vessels, with a tonnage of 2,076,234, left home ports in 1875, and 34,211, with a tonnage of 3,989,052, in 1885. It is one of Prince Bismarck's/ favourite theories that increasing emigration is a sign of prosperity. His argument is as follows : — The emigrant requires capital to\ enable him to leave his country, if not to settle in his new home. This capital is the result of saving. A small emigration indicates that the home-weary people who are financially equipped for the costly undertaking of leaving one country for another are few in number. According to the Chancellor's theory of emigration, the years succeeding the introduction of the new tariff must have l)een prosperous ones ; for while in 1879 the emigrants by way of German ports and Antwerp numbered 33,327, the number was 106,190 in 1880 and 210,547 in 1881, though it fell to 143,586 in 1884. 56 Bismarck and State Socialism. However trade may have benefited by the measure of 1879, it is certain that agriculture did not improve. Prince Bismarck had, during the discussion of the new tariff, expressed the conviction that the price of food would not be increased. This prediction proved correct, for, instead of rising, prices fell considerably, owing largely to foreign competition, which, though it received a temporary check, continued to press heavily on the home corn- growers. To take Prussia alone, while the average price of wheat per 100 kilog. was 227 marks during the twelve years 1867 to 1878, and 21 •! marks during the years 1879 to 18S2, it fell to i8"5 marks in 1883 and to 17 '3 in 1884. The prices of rye for the same periods were i7"7, i7"5, 147, and 147 marks respectively; of barley, i6"5, i5"9, i4'6, and i4"9 marks; and of oats, i5"9, 147, 137, and i4"4 marks. It was evident to the agrarian party, and it soon became evident to Prince Bismarck, that the corn duties needed raising. This work was taken in hand in 1885. The Begriindiing to the new tariff law stated that while the pro- tective measure of 1879 had "in general been attended by bene- ficial results," and had " diverted Germany's economic policy from a false course," the "natural development and amendment of the tariff" were desirable to the attainment of the purposes advocated in 1879. It was shown by statistics that the foreign producer still had his own way in the German market. The imports of wheat had fallen 50 per cent, from 1878 to 18S4, but those of rye had hardly decreased at all, those of barley were unaltered, while of oats and maize a far larger quantity was imported than before the tariff was revised. The Government proposed to increase the duties on all kinds of corn, on timber, live stock, as well as a {q'n classes of textile goods, and a few miscellaneous articles, and the Reichstag again gave a ready ear to the voice of the protector. Before this various of the States had through their legislatures declared for higher agricultural duties, and the proposal was in sympathy with the general feehng of the country. Prince Bis- marck took a prominent part in the debates. He was able to throw into the teeth of the Cassandras of 1879 all the forebodings with which they had endeavoured to prevent the first revision of the tariff. "The fear has been expressed," he said on February loth, Abandonment of Free Trade. 57 1885, "that the price of corn will, in consequence of the higher duties, increase very considerably, and that social dangers will thus arise. Well, you will remember that six years ago the same prophecies were made in this very hall, and in part by the men who have spoken to-day or who will yet speak. We were told that prices would reach such a height that they would curtail the labourer's earnings and food, and that we were inviting the social dangers which we desired to resist and remove. All these pro- phecies have proved false ; not one of them has been fulfilled. The corn laws of that time have everywhere worked beneficently. Only in one direction have they proved ineffective where the reverse was perhaps expected, though not by me, for I thought otherwise : they have not had the effect of improving the prices of agricultural products. On the contrary, corn is now cheaper than it has been for a long time, and in proportion to the present value of money cheaper than it has ever been this century. The effect then predicted has in no way been produced. Whether it will be produced when the duty is trebled I will not venture to say with certainty, though I hardly think it probable. It may, however, be the case, and if it is, well and good, for the farmer will benefit by an increase in prices ; but if not, the duties will certainly be borne by foreign countries ; and why should not the Finance Minister of the German Empire accept the duties which America and Russia are willing to pay him? ... In any case I should rejoice if the law led to an increase of prices ; for the improvement of the position of the farmers would be to the advantage of the entire population, and would be far from injuring others." He believed that Germany could produce herself all the corn she needed if only her agriculture were protected against countries more favourably situated as to climate, soil, and wages. Far more corn would be grown than in the past so soon as corn-growing became remunerative. His desire that corn prices might increase was again expressed in the following words : — " I hoi)e that the price of corn may increase ; I hold its in- crease to be necessary. There must be a limit when the State must try to raise the price of corn. I asked you to imagine the price of rye falling 50 Pfennig ; or I will name the p'ice which 58 Bismarck and State Socialism. now and again really occurs in the inner Russian governments, the price of one mark. Is it not quite clear that our agricul- ture would then be absolutely ruined — that it would not be able to exist any longer — and with it all the labourers and all the capitalists dependent upon it ? Quite apart from the farmer — who isj of course, a corpus vile on which the town folk can experi- ment — though it must be remembered that the towns would no longer have buyers in the farmers ; the labourers would be without employment and would stream to the towns. In short, it is un- doubtedly a national calamity when the price of corn, the every- day means of subsistence, falls below the rate at which it can be cultivated with us. I will regard the maxim as admitted, that there is a limit below which the price of corn cannot fall without the ruin of our entire economic life. The question, then, is : Has this limit been reached or not ? Minister Lucius has given us statistics which must compel us to admit that it has already been reached. But it should not be reached ; for when it is reached it will be too late, and we shall already have suffered most enor- mous losses. . . . When rye with us falls to a price at which it cannot be cultivated, we are living in unsound conditions and are going to decay. This decay may be deferred by the use of the capital we may have laid up, but we create an untenable situation : this is as clear as that two and two make four." Similarly the timber duties were intended to protect forestry in a vulnerable part. They were aimed principally at Austria and Sweden. In Silesia the forest workmen looked with mournful faces as heavy trains laden with Galician timber passed by rail through the forest. So keen was foreign competition that forestry was fast becoming an unremunerative industry. By the new duties it was hoped to keep sawn wood out of the country and to compel exporters to send timber in a raw state. Prince Bismarck said on February loth, 1885 : — " We wish that Swedish planks may no longer come to us, but only Swedish timber for the support of the wood industries on the Baltic coast, in Holstein, and on the North Sea coast, and as much of that as possible — more than hitherto. We only desire to ensure to our labourers the work that is to be performed upon this timber, from the first and roughest work of chopping and plank AbandoHDicnt of Free Trade. 59 sawing to that of planing. That is our intention. We shall not however, fully succeed, for even the present high duties do not completely protect us on the Upper Rhine." The Reichstag applauded the Chancellor's proposals, and the higher tariff was sanctioned by 199 against 105 votes on May 13th. By another customs measure passed on March 3rd of the same year Bremen followed the example of Hamburg, and agreed to cease being a free city. The independence of the Hanseatic towns as to customs administration had long been recognised as untenable, and their disfranchisement and embodiment in the ZoUvereiti followed the re-establishment of the Empire as a matter of course. The end of the Free Towns of Germany came in 1888, but Hamburg and Bremen both had a liberal indemnity in the shape of imperial gold, which has been or is being used in the development of their harbour accommodation. It remains to be added that a still further increase of the corn duties had to be asked for in the winter of 18S7. Early in that year the Prussian Government was appealed to in the Diet to urge the Imperial (Government to afford agriculture greater protection. The Minister of Agriculture, Dr. Lucius, in reply, acknowledged that the revenue from the corn duties had increased from fourteen to thirty million marks, but he added, " The duties have been of little use to agriculture." Before the year was out the duties were increased, some a hundred per cent., for the third time in eight years. A Liberal journal reminded the Chancellor that the duties were now far higher than he in 1879 believed the "maddest agrarian " capable of raising them, and it commented patheti- cally upon this piece of political irony : " Times change, and duties with them." Has Germany's protective system succeeded ? This work does not profess to be a history of trade or even of trade movements. It would, therefore, be palpably foreign to the purpose to enter fully into the subject of commercial development in Germany during the past ten years, during which the Free Trade prin- ciple has been more and more abandoned. Several years ago it might have been difficult or impossible to prove or disprove the contention of the Protectionists that the economic interests of the country have benefited by the policy inaugurated in 1S79, 6o Bismarck and State Socialisjn. Controversy as to the wisdom and expediency of that policy was then far acuter than it is now. Party polemic was more excited and an objective judgment was harder of attainment. Now, however, the question can be viewed with more of the historical coolness and impartiality which are so necessary to the forma- tion of fair and correct opinions. The evidence at disposal, both pro and con, has greatly multiplied ; and where formerly there was little more than speculation to depend upon, there is now a large storehouse of fact. There can be no doubt whatever that the revision of Germany's economic system has tended to encou- rage her industry and to increase her trade. Prices on the whole are hardly higher, owing to technical improvements and other factors which tend to reduce the costs of production, while on the other hand the position of the workman as to wages and condi- tions of labour is distinctly better. Agriculture, on the contrary, has experienced little or no positive benefit. Instead of increas- ing, prices have fallen still lower. The Protectionists maintain, indeed, that without higher duties the prices of agricultural pro- duce would have been less remunerative than they are now ; but this is not a necessary deduction, and in any case it cannot safely be assumed that the continued downward tendency thus presumed would have been a consequence of foreign competition. It would be an easy matter to quote from scores of Chamber of Commerce reports passages favourable to the present protective policy of Germany, and it would also be easy to find a large amount of contradictory testimony in similar reports. On the whole it would appear that while many industries have un- doubtedly experienced great benefit from protection, others have suffered corresponding injury. Thus the Diisseldorf Chamber of Commerce reported several years ago : " We can, on the authority of a searching investigation made in industrial circles, assert with satisfaction that the influence of the customs tariff has on the whole been favourable to the branches of industry affected by it in this district. The balance-sheets of the larger establishments, as well as the increase of workpeople, afford ample evidence of this." On the other hand it was found that industries relying upon for- eign countries for their raw material and half-manufactured goods suffered greally, though increased sales and technical improve- % Abandoinnent of Free Trade. 6i ments were gradually enabling them to overcome their difficulties. In 1 88 7 the Association of German Iron and Steel Manufac- turers, already mentioned, instituted inquiries into the number of workpeople employed and the wages paid by the concerns it em- braces both before and since the re-introduction of the iron duties. The results were found to be very remarkable. Two hundred and thirty-three large iron and machine works employed 124,262 workpeople, receiving 7,681,291 marks wages monthly (an average of 6 1 '83 marks per head), in January, 1879. In the same month of 1887 these works employed 162,320 workpeople, or 38,058 = 30*6 per cent, more, and ])aid them 10,740,056 marks (66*17 marks per head), or 3,058,765 marks = 4-34 marks per head more. Taking the year 1886, the wages of the workpeople — boys and men included — were 52*08 marks a head more than before the return to protection. That these higher wages could well be paid was proved by the fact that while the concerns alluded to made in 1878-79 profits equal to 215 per cent, of their share capital, the profits in 1885-86 were equal to 3 94 per cent. One swallow does not make summer, and one testimony to the favourable effects of protection in Germany would not be conclu- sive. But evidence on the point is abundant. An unprejudiced mind cannot but acknowledge that, owing to the peculiar economic position of Germany in the last decade, protection was eminently calculated to stimulate and support her industries and commerce. In technical matters on the one hand, and in practical experience and genius for business on the other, Germany was far behind older rivals like England and France. She was only beginning to force her way into foreign markets, while she was yet a great con- sumer of the productions of other countries. In 1878 the im- port of industrial articles alone was 570 million marks ; but after the introduction of the new tariff the reduction in the first year was to 395 millions, or 31 per cent, less; while during the same period the industrial exports rose from 1,026 to 1,368 millions, or 33 per cent. more. Unlike England, Germany had industries to create, trade to build up, and she determined to defend iierself against the skill and enterprise of older countries during the period of her industrial juvenescence by submitting herself to tlie leading-strings of protection until she co uld with assi'.rance and safety walk alone. Vy\}^tr3 y^' ">^*^^ ^^-'^ n-.-*-*^ c^a^^;^ CHAPTER VI. THE STATE AS MONOPOLIST. When specifying in 1869 the articles which he regarded as most fitted to bear high taxation, Prince Bismarck included in the list tobacco and brandy. Of these two articles the Chancellor has within the last few years endeavoured to establish a State mono- poly. His efforts have so far failed completely, but we have his own assurance that he does not despair of ultimate success. It becomes now necessary to review his State Socialistic policy in regard to production, manufacture, and trade. The principle of nationalisation ( Verstaatlichung) was first introduced in modern Prussia by the purchase of railways, and this was so gradual that it can scarcely be said to have ever come before the country as an entire innovation. The State began by helping shaky railway companies \ then it proceeded to buy and build lines for itself, until the acquisition of railways by the State became a recognised and legitimate part of national policy. State ownership of railways began more than a generation ago in Prussia, but such State connection with commerce as is involved in the tobacco or brandy monopoly was not heard of until a com- paratively few years ago. Prince Bismarck's early speeches make no mention of this form of State Socialism. He has, however, stated that his mind was made up on the question of a tobacco monopoly as long ago as 1867. It was in 1878 that the idea which had been revolving in his head so long first found expres- sion. Speaking in the Reichstag on February 26th of that year on a bill for the increase of the tobacco duties, he said bluntly, "I do not deny, and do not regard it as superfluous — even though doubts have been expressed as to wliether there are monopolists in our midst — to avow openly, that 1 am aiming at a monopoly, 62 TJie State as Monopolist. 63 and that I only accept this measure as transitional." This admis- sion produced little short of a sensation both within and without the Reichstag. It was like a bolt from a clear sky. A part of the House was opposed to sanctioning the further taxation of tobacco ; most of the members were flattering themselves with the thought that if they voted the Chancellor the duties he asked they would be deserving well both of him and their country. Yet here they were told that the taxation of tobacco, however high they consented to screw it up, would only be regarded as a make- shift measure, for the State hoped sooner or later to take the entire industry into its own hands. From that day to the present the air has never been free from monopoly projects and rumours of them. Prince Bismarck's attachment to State undertakings of this kind is primarily based on linancial reasons. The monopoly appears to him the best means of raising revenue upon an article which can with justice be saddled with heavy taxation. At the same time he holds that the State is likely to be a better and more conscientious trader than the private undertaker, whose ends begin and end with gain. From the social standpoint, too, he predicts good results from the appearance of the State as an employer in spheres of industrial activity upon which a great number of people are dependent for tlieir livelihood. When it was objected in the Reichstag in 18S2 that his monopoly projects savoured of Socialism, he did not deny the imputation, but welcomed it, observing: "Many measures which we have adopted to the great blessing of the country are Socialistic, and the State will have to accustom itself to a little more Socialism yet. We must meet our needs in the domain of Socialism by reformatory measures if we would display the wisdom shown in Prussia by the Stein-Hardenberg legislation respecting the eman- cipation of the peasantry. That was Socialism, to take land from one person and give it to another — a much stronger form of Socialism than a monopoly. But I am glad that this Socialism was adopted, for we have as a consequence secured a free and very well-to-do peasantry, and I hope that we shall in time do something of the sort for the labouring classes. Whether I, however, shall live to see it — with the general opposition which 64 Bismarck and State Socialism. is, as a matter of principle, offered to me on all sides, and which is wearying me — I cannot say. But you will be compelled to put a few drops of social oil into the recipe which you give to the State — how much I do not know. . . . The establishment of the freedom of the peasantry was Socialistic ; Socialistic, too, is every expropriation in favour of railways ; Socialistic to the utmost extent is the aggregation of estates— the law exists in many provinces — taking from one and giving to another, simply because this other can cultivate the land more conveniently ; Socialistic is expropriation under the Water Legislation, on account of irrigation, etc., where a man's land is taken away from him because another can farm it better ; Socialistic is our entire poor relief, compulsory school attendance, compulsory construction of roads, so that I am bound to maintain a road upon my lands for travellers. That is all Socialistic, and I could extend the regis- ter further ; but if you believe that you can frighten any one or call up spectres with the word 'Socialism,' you take a standpoint which I abandoned long ago, and the abandonment of which is absolutely necessary for our entire imperial legislation." In the same year that Prince Bismarck for the first time de- clared openly for the tobacco monopoly, a commission was appointed by the Imperial Government to investigate the general subject of tobacco taxation, including the question of monopoly. The eleven members of the commission included eight State officials and three experts, one representing tobacco cultivators, another tobacco manufacturers, and the third tobacco traders. By eight votes to three the commission reported against a monopoly. Even the commissioner delegated by the Prussian Ministry of Finance condemned it. The result was that the Government contented itself with higher taxation for the present, and this was granted in 1879, at the same time that the customs tariff was revised. But although the Chancellor had suftered a reverse, the anti-monopolists were thoroughly alarmed, and with- out delay they took steps to secure an emphatic declaration from the Reichstag on the subject. On April 2Sth, 18S0, the Radical leader, Herr E. Richter, asked the House to say by re- solution that " the further increase of the tobacco duty or the introduction of a tobacco monopoly is economically, financially, The State as Monopolist. 65 and politically unjustifiable." This resolution was rejected, but an amendment, less severe in tone though equally decided, was adopted by 181 votes against 69, asserting the Reichstag's ati- hesion to the principle of taxation laid down by the customs and excise laws of the previous year, and calling upon the Government to abandon definitely the idea of a monopoly. In spite of this Prince Bismarck in the following February convened the Prussian Economic CounciP {Volkswiriliscliaftsratli) — a body established in November, 18S0, for the purpose of assisting him in the de- liberation of measures affecting trade, industry, agriculture, and forestry — and laid before it a full-fledged Tobacco Monopoly Bill. The Economic Council decided in favour of the Government's proposals, and the next step was the mention of the monopoly in an imperial message of November 14th, 1881. This stated : " The further development of the reform in taxation begun in recent years points to the desirability of seeking productive sources of revenue in indirect imperial taxes, in order that the Government may be enabled to abolish oppressive direct State taxes and to relieve the parishes of poor and school charges? additions to the land and personal taxes, and other heavy direct imposts. The surest way to this result is shown by the experience of neighbouring countries to be the introduction of a tobacco monopoly, respecting which we intend to seek the decision of tlie legislative bodies of the Empire." The promised measure was introduced in the Reichstag the following spring. The speech from the Crown opening Parlia- ment stated: '"Amongst the objects suitable for taxation by the Empire, tobacco takes a prominent place. Opinions do not differ as to this, but as to the form which higher taxation should take, and a decision will have to be obtained by legislation. The majority of the Federal Governments regard the form of a monopoly as that which best conserves the interests of consumers and tobacco cultivators, while at the same time surpassing all * The Prussian Economic Council consists of seventy-five members, of whom forty-five are recommended to the Government for nomination by representa- tives of trade, industry, and agriculture and forestry (fifteen members each); wliile thirty are called by the Government, fifteen at least of these representnig the artisan and labour classes. Election is for five years. 66 Bismarck and State Socialism. other forms of taxation in productiveness. They would only re- sort to other proposals if they were compelled to abandon the hope of obtaining legislative assent to the monopoly." Thus was the monopoly project ushered into publicity. It must be ad- mitted that the imperial benediction upon the proposal was not a cordial one, and that the manner of its recommendation to the Reichstag might have been more urgent. Not a few people thought that the Government, in essaying the monopoly scheme, had chosen to ride for a fall. Certainly the lukewarm tone of the imperial utterances and the suspicion of indifference which seemed to show through some of the Chancellor's later references to the subject acted prejudicially against the project. The bill on the subject was introduced on May loth, being based in part on the experience of France, Austria, and Italy. It is worth while to inquire what was the extent of the industry which it was proposed to hand over to the State. Statistics pre- pared three years before (for the year 1879) showed that there were in Germany 159,321 tobacco planters, located in 3,490 places, 81,607 producing for their own consumption, while the total area under cultivation was 1,799,722 ares. In the manu- facture of tobacco 15,028 businesses were engaged (including Hamburg and Bremen, then out of the Customs Union), em- ploying 140,775 persons, 99,704 in manufactories, and 22,301 in the house industry. For the sale of tobacco there were in 1877 no fewer than 7,898 businesses of a large kind, with 359,275 businesses where the sale of this article was not the exclusive trade. Vast as the tobacco interest was, the revenue accruing to the State in taxation was inconsiderable. Up to 1879 tobacco had yielded 0*34 mark (about 4^.) per head in taxation in Ger- many, though the amount in France was 5 "68 marks, in England 4-86 marks, in the United States 4'36 marks, in Austria 3'4i marks, and in Italy 2-53 marks \ and yet, excepting Austria alone, Germany had the greatest consumption per head. No wonder that Prince Bismarck should have declared in 1881, "Tobacco must bleed more than it has hitherto done." He now proposed that it should bleed to the extent of ;^8,ooo,ooo a year, the net proceeds of the monopoly being estimated at 163,673,167 marks. The bill, if carried, would place in the hands of the State the The State as Monopolist. 67 entire production, manufacture, and sale of tobacco.' It was a measure of State Socialism which frightened some of the warmest of the Government's supporters. As for the Radicals they were in arms instantly. On May loth they proposed an amendment to the bill declaring that " after the large increase of the tobacco duty caused by the law of July i6th, 1S79, ^"X "^^^ troubling of the tobacco industry by further alterations in taxation are in- expedient, and therefore the increase in the tobacco tax contem- plated in the speech from the throne of April 27th is not less unpermissible than the introduction of the monopoly." This was straightforward enough, but the Radicals made their retort to the Government's proposal more stinging still by adding a rider to the resolution to the effect that if the Chancellor wished to re- move inequalities in taxation, he could so by exercising economy in the disposal of the revenue possessed. Prince Bismarck, owing to indisposition, did not speak on the first reading of the bill, which was referred to committee on May 13th, though everybody knew that it had no chance of success. For this polite and painless method of administering to the mo- nopoly its quietus 162 members voted, while 121 voted for the summary extinction of the measure. Inside and outside Parlia- ment a violent controversy raged, and many sharp things were said and written on both sides. Heinrich von Treitschke, the Prussian historiographer, supported the monopoly because he despised the tobacco industry and all connected with it. " A man in the middle class," he declared, " who does not know what to do with himself and his leisure has only two ways of killing time : he either sells cigars or writes leading articles." But there were not wanting, and that in abundance, prominent men who ap- proved of the Government's proposal from economic as well as financial motives. The debate on the second reading was opened by the Chan- cellor on June 12th, the committee having meanwhile rejected the bill by twenty-one votes to three. He stated that the monopoly was not an end in itself; it was a means to an end, that end being the alleviation of taxation, especially the class and school taxes. • For an explanation of the bill see Appciulix C. 68 Bisiiiarck and State Sucialism. "We have never doubted," he said, " that the monopoly in itself is an evil, and that in its introduction — as in the introduction of every new tax, and indeed of every reform — the primary ques- tion is, whether there are not other evils in comparison with which the monopoly is a lesser one. When this institution is con- sidered on its merits, and without regard to the purpose which it is intended to serve, it is placed in a disadvantageous and indeed unjust light. The monopoly is only a means to the reforms which the Government is endeavouring to carry out, it is not their end ; but the financial reforms at which the Imperial and Federal Gov- ernments are aiming are rendered difficult by the fact that the employment of the means is subject to the decision of the various Diets, and the provision of the means to the resolution of the Reichstag. Thus the opponents of the Government have an advantage here in the Reichstag, for when a grant is asked they can say, ' We can grant nothing unless the purpose is told us,' while in the Prussian Diet or in other Diets they may say, ' We cannot decide upon the use of grants so long as the grants are not voted.' It is self-evident that we are sent from Pontius to Pilate, so that we get no further with our reforms ; and of this difficulty the Government's opponents have made good use." Again : " We have proposed the monopoly because we regard it, after careful deliberation and weighing of the question, as the best and most expedient means of taxation, and we require its rejection before we turn to other measures. We shall never be frightened into keeping back a measure which we believe to be rational by the fact that the monopoly is unpopular, and is arti- ficially made more unpopular than it need be by means of elec- tioneering dodges. I never ask if a measure is popular — I only ask if it is rational and expedient. Popularity is a transient thing, which is with one thing to-day and with another to-morrow — a thing which I have both enjoyed and lost, though I have easily consoled myself in its loss by remembering that I had done my duty and left the rest to God. The popularity of a thing makes me rather suspicious about it than otherwise, and I am induced to ask myself if it is also sensible." He held that the social advantages of a monopoly would be great, for the position of the workpeople engaged in the tobacco industry The State as Monopolist. 69 would be improved, since their livelihood would become more certain than it could be when dei)endent upon the arbitrary whim of private undertakership. He could not understand the logic of the Radicals. They professed the utmost solicitude for the future of the tobacco workers — who would most benefit by the monopoly — yet they never had a word to say for the " hundred thousand workmen in the iron trade who, with their wives and children, fell victims to the Moloch of Free Trade " a few years before. Nor during the introduction of the railway monopoly long ago was the question asked, " What will become of the carters and the innkeepers ? " though that monopoly was worse than the tobacco monopoly, in that it was a private one. Yet the Chancellor knew beforehand that his project was doomed to rejection, and, like a good diplomatist, he at once took steps to remove the asperity he had excited. '• No enmity even if you do reject the monopoly !" he said on the same occasion. "You must not be vexed with us for having proposed it. Indeed, I do not know why any anger should be manifested — as though we had been busy with high treason, the disregarding of all constitu- tional rights, the breach of the constitution ! When we simply ask you whether you will raise the money needed in this way or in another — for no onethinkb o fquestioning your right of rejecting the monopoly — I do not understand why angry jealousy should be shown on a question which is purely one of utility." Prince Bismarck evidently thought himself that the Government, in pro- posing the monopoly, had gone a little too far, and he was not surprised when it was rejected on June 14th, the voting being 43 for and 277 against. Though defeated so signally, the Government professed not to be dismayed, and three years later the Minister of Finance, Herr von Scholz, gave the Prussian Diet to understand that the pro- ject had not been definitely abandoned, though the country would not hear of it again for a long time. 'I'he only other attempt which Prince Bismarck has since made to introduce a State monopoly is the equally unsuccessful brandy monopoly project. This was recommended to the goodwill of the Reichstag early in 1886, and the Government pleaded the same motives as in the case of tobacco — social, economic, and 70 Bismarck and State Socialism. especially financial. The Chancellor spoke in favour of the measure on March 26th, and the Radical attack was led by Deputy Bamberger, who declared, " The tobacco monopoly is a little innocent child when compared with the brandy monopoly and its inevitable consequences." The opposition in the country was unmistakable, and Herr Bamberger spoke with reason when he said, " Never have I seen so spontaneous, wholesale, natural, and voluntary a demonstration proceed from the sense and heart of the nation as that which has been directed against this mo- nopoly." The proposal was defeated, and the following year the Government easily induced the Reichstag to increase the taxa- tion of brandy instead. So far Prince Bismarck has had no success with his monopoly schemes, yet it would be a mistake to suppose that his approba- tion of the principle involved is confined to tobacco and brandy. He is known to be in favour of a State monopoly of the insurance system, regarding it as contrary to reason that the capitalists who work the insurance companies should be able to fill their pockets at the expense of the community. No doubt his national and compulsory insurance laws for workpeople have helped to convert the Chancellor to this form of monopoly. Perhaps it should not excite surprise that in days when the principle of State interven- tion has been applied in Germany so extensively, many proposals of an extreme and even extravagant kind are forced on the Government's attention. Such is the proposal that the State should claim a corn monopoly. Passages like the following are not rare in the ephemeral literature with which the State Socialistic era has deluged Germany : " There is no doubt that the entire social question is essentially a food question, and the measures taken must be such as accord with the necessity of the case and with the dignity of the State. Half measures are of no use ; radical measures are imperative — hunger must be appeased. This will only be possible when the State takes the corn trade into its own hands and by fixing prices makes an end at once to the usurer and the speculator." Such a reversion to the policy of Joseph in Egypt has not, of course, many sympathisers amongst reasonable people. The influential Association for Social Pohtics, which numbers among its active members some of the leading The State as Monopolist. 71 political economists in Germany, goes a long way in the direction of State monopoly. One of its resolutions, adopted in 1873, i)ro- poses that the State, or at least the province, district, or parish, should supplant private enterprise in all public undertakings, and that companies and individual capitalists should be restricted to " private departments of production." It needs no prescience to say that upon the question of State monopoly the last word has not been said in Germany. CHAPTER VII. STATE JiAILWAYS. The nationalisation of the railways is another measure whose partial adoption marks the conversion of Germany to the principle of State enterprise in the domain of economic activity.^ Here, again, it is Prussia which has led the way, though her recent policy in this matter is in direct opposition to early practice. The Prus- sian Railway Law of 1838 laid down the principle — based on the English custom — that the construction of railways should be left to private industry and should not be undertaken by the State, though the latter should retain a wide control, the monopoly of the post, the right of taxation, and the eventual right of purchase thirty years after the opening of a railway on condition of taking over the debt and paying to the shareholders twenty-five times the amount of the average dividend for the preceding five years. During the seven or eight years immediately following the passing of this law, twelve large lines were built in Prussia by private enterprise. Circumstances, however, compelled the Prussian State to depart in time from the policy of non-intervention with which it entered upon the railway era. It became necessary to guarantee interest to the investors in certain railways in order that these might either be completed or carried on profitably. It was, of course, less out of solicitude for the fortunes of indivi- dual persons than from regard for the public interest that this responsibility was undertaken by the State, but for whose helping hand railway projects calculated greatly to benefit the community would have fallen on evil days. Up to 1874, when the German * The word nationalisation is throughout taken as the equivalent of the German Versiaailichung. It is right to say at the outset that no significance can be attached to the fact that in 1S8S the German Government obtained a large grant from the Reichstag for the purpose of strategic railways required for imperial defence, to be built by the Empire conjointly with Prussia. 72 State Raihvays. 73 railway system reached a turning-point, Prussia had paid in sub- ventions of this kind the sum of 6,908,587 marks (some ^340,000). Annexation brought Prussia the railways of Hanover and Nassau and the Frankfort part of the Main-Neckar line. The State also began, about 1848-9, to buy and build; and in one decennial period, 1866 to 1876, the Diet voted 725,000,000 marks (over thirty-five and a half million pounds) for railway construction. In 1875, of sixty important lines in Germany forty-six were Prussian, and of these eight belonged to the State, eight were private lines under State management, and the rest were private lines in private hands. The Bavarian, Saxon, Baden, and Wurtemberg railways belonged as a rule to the State. The standpoint of Prince Bismarck on this question was known as early as 1847, when he spoke and voted in the United Diet, which met in Berlin, on behalf of the granting of a State loan to a private railway enterprise. From that time forward, whether as private deputy or Minister, he never failed, when opportunity occurred, to promote the close connection of the State and the railways, always keeping in view the ultimate end of a thoroughly nationalised 'system of railway communication. While Germany was still disunited, his motto as Prussian Minister President was, " The railways for the State." When, however, the imperial throne was again raised, his motto became at once, " The rail- ways for the Empire." The annexation of Alsace-Lorraine gave to Germany the nucleus of an imperial railway system, but the uniform administration of the lines in the recovered province only served to throw into greater relief the utter chaos which prevailed in the rest of Germany. The railways were of half a dozen kinds. There were, first, the imperial railways. Then there were the State railways pure and simple. There were private lines in private hands, and private lines managed by the State. Some State lines were, on the other hand, managed by l)rivate enterprise, and there were finally lines leased by the Empire, as in Luxemburg. Had Germany been a single State instead of a congeries of States, the difficulties arising out of a plural system of railway management might not have been so very serious, or at any rate insuperable. But as each of the many States' had its own system — or rather multiplicity of 74 Bismarck and State Socialism. systems — the confusion created soon came to be recognised as a national disgrace. Prince Bismarck spoke impatiently of the "sixty-three railway i^rovinces " which still divided the Empire he was striving to unify both in word and in fact. " The traveller from Berlin to Karlsruhe," says a writer, " had to pass through the hands of half a dozen independent railway administrations, while upon the sender of a parcel from Konigsberg to Metz it was incumbent to calculate the freight of this consignment according to the rates of nearly fifteen hundred different tariffs." In seeking to reduce this chaos to order, to introduce uniformity of adminis- tration, the Chancellor had two objects in view. There was the utilitarian object suggested by the interests of commerce, and the convenience of travellers. If the railways were managed more uniformly, their national purpose, as the greatest means of conveyance and locomotion, would be better achieved. Then there was the political aspect of the question. He believed that the nationalisation of the railways would vastly increase the strength and accelerate the unity of the new Empire. The first step taken towards the attainment of his ideal was the embodi- ment in the imperial constitution of April i6th, 1871, of clauses securing to the Empire very considerable rights in regard to railway supervision. Article 4 says that the railways shall be " subject to the surveillance of the Empire and to imperial legislation." By article 8 a permanent committee of the Federal Council is to be formed for railways, with the post and telegraph- and article 41 sets forth : " Railways which are considered necessary for the defence of Germany or for the purposes of general commerce may be constructed for the account of the Empire by an imperial law — even in opposition to the will of those members of the Confederation through whose territory the railways pass, without prejudice to the sovereign rights of the countries concerned ; or private persons may be authorised to construct such railways, and receive rights of expropriation. Every existing railway administration is bound to allow new railways to be connected with its system at the expense of these lines. Legal provisions granting to existing railways the right of injunction against the construction of parallel or competitive lines are, without prejudice to riglits already acquired, repealed State Railways. 75 throughout the entire Empire. Such right of injunction cannot be granted in concessions to be given hereafter." The following article (42) provides for uniform administration : " The Federal Governments undertake, in the interest of general commerce, to administer the German railways as a uniform system, and for this purpose to have new railways constructed and equipped according to uniform regulations." Article 43 says: "Accord- ingly uniform arrangements for the working of the railways shall be made as soon as possible, and especially shall identical regu- lations be introduced for the railway police. The Empire shall lake care that the railway administrations shall at all times maintain the lines in such a condition as is required by public safety, and that they shall keep them adequately supplied with rolling stock." Article 45 provides that the Empire should have control over tariffs, and that uniform regulations and, as far as possible, uniform rates and charges should be introduced as soon as possible, agriculture and industry to have special privileges. Article 46 contains a characteristic provision : " In case of distress, especially in the event of an extraordinary rise in the price of food, the railway administrations shall undertake to adopt temporarily a low special tariff, adequate to the necessity existing, for the carrying of grain, flour, pulse, and potatoes, the tariff to be fixed by the Emperor on the motion of the Rail- way Committee of the Federal Council ; but this tariff shall not be below the tariff for raw products on the line concerned." Most of these provisions exclude Bavaria, though the Imperial Government has the power to introduce uniform regulations as to the construction and equipment of railways in Bavaria which may be of importance for the defence of the country. These constitutional provisions allowed the Chancellor ample scope for the legitimate furtherance of his favourite ideas. If the Reichstag and the individual Legislatures were only of his mind, the constitution ottered no objection to the transference of all the railways in Germany to the Empire. Could he expect such unselfishness on the part of the States as would prompt them to such loyal renunciation ? That was the question which experience had to answer, and the Chancellor soon received a reply which was not to his mind. Particularism on the part ^6 ISismafck and State Socialism. of the States, and individualism on the part of political parties, proved obstacles against which his most cogent arguments and his most pressing appeals were futile. The first practical step in the direction of uniformity in railway administration was taken by the establishment of an Imperial Railway Board {Reichseise7iba]ma7nt), which came into existence in the summer of 1873. The project emanated from private members of the Reichstag, yet the Government heartily welcomed it. It was stated that at that time there were at least ninety railway admin- istrations in the country, with 1,357 different tariffs. The whole system was a farce. There was everywhere want of plan and system, and as for community of action between railway and railway, or between State and State, it was not thought of. In order to remedy the existing difficulties, a Reich s aint filr Eisen- bahnsacheii (Imperial Board for Railway Affairs) was proposed, this authority to control the action of the various administrations, to see that constitutional and statutory requirements were ob- served, and to pave the way for further legislation in the direction of uniform tariffs. Prince Bismarck said on May 17th: "I welcome this proposal gladly, as one welcomes reinforcements long looked forward to." A Railway Board seemed the very thing that had been wanting to the realisation of his ideal of uniform railway administration, followed by the acquisition of the railways by the Empire, though he did not say so at the time, for had he done so the Board would probably not have been established. Speaking later, he excused his past inactivity in this matter on the ground of ill-health and pressure of State affairs, since he had recognised the absolute necessity for the proposed authority. He was willing to begin with a Court of Complaints, which should deal with irregularities on imperial. State, and private railways, for that would probably force the observance of existing regulations. " Hitherto," he said, " whenever any contravention of the provisions of the constitution has taken place, the imperial authority (the Railway Committee of the Federal Council) has merely been able to write to the Government concerned : ' In your State such and such irregularities exist in the management of the railways : if you will take steps to remedy them, you will be conforming to State Raihvays. yj the constitution, and be doing the public a favour.' Then as a rule, there was an end of the matter ; the Government answered, and there was correspondence on the question, which was only investigated by the parties interested." On June i6th, 1873, the Imperial Railway Board Bill was passed, and the Board soon gave evidence of activity by requiring considerable grants in aid. In March of the following year the Board published the draft of an Imperial Railway Law, the purport of which was to confer upon the new authority far-reaching control over the railway systems of the country. This measure excited no enthusiasm, and the only result of its introduction into publicity was the fall of the first president of the Board, who found that he had undertaken a thankless office. In April, 1875, Herr May- bach, the then president — afterwards Prussian Minister of Public Works — a capable and diligent public official, published another Railway Law, bolder than the first, for it not only laid down the principle of imperial surveillance, but plainly hinted at the transference of the railways to the Empire, meanwhile advising the various States to get possession of their own lines. This proposal likewise failed, and the Chancellor's confidence in his new Board began to waver. It was evident that tentative measures were useless, and worse than useless. Hitherto the Imperial Government had done nothing which could unduly alarm the opponents of nationalised railways, yet its regard for tender susceptibilities had not been generally reciprocated. Prince Bismarck determined to have re- course to heroic measures. Without reserve or qualification, he would at once propose that the States should hand their railways over to the Empire, and he would begin with Prussia. Prussia had led the way to national unity in the past, and he knew he might appeal to her again with confidence to set to the rest of Germany the example of self-sacrifice, yea, of self-extinction, for the sake of the Empire. On April 26th, 1876, the first reading took ])lace in the Prussian Diet of a bill for tiie " transference of the Slate's property and other rights in railways to tlie German iMiipire." The Radical party attacked the measure unmercifully, hut the Chancellor himself led the defence, and he carried his scheme safely through both Houses. Replying to the Radical y8 Bismarck and State Socialism. leader, Herr Richter, he ridiculed the idea that "the freedom and unity of Germany, the peace of the world, the Eastern question, the financial crisis, and the momentary stagnation in trade " all depended upon " whether the Empire or the Prussian State ac- quires a few railways more or not, and whether these railways are in the possession of Prussia or the Empire." He had no fear that German liberty and unity would " travel away with the first imperial locomotive." The question was solely one of economics. Besides, he was but endeavouring to make real an article in the constitution which had hitherto been a dead letter. " The imperial constitution makes very valuable promises to the commerce of the German Empire and to all the subjects of the same in regard to the treatment of the railways. As an official of the Empire, I am responsible for the imperial action directed to the carrying out of the imperial laws, the chief of which is the consti- tution; and I cannot emulate the light judgment of any important part of the constitution which distinguishes Deputy Richter— in spite of his generally so constitutional views — when he speaks of article 41 of the constitution as of a dead letter, and refers to it in a contemptuous tone, such as I should not dare, as a minister, to employ in speaking of any part of the Prussian or imperial con- stitution. I recollect that when the constitution of the North German Federation was adopted, neither the Governments nor the bodies which co-operated with them spoke in this tone of any part of it. On the contrary, great hopes foe the future — hopes that were certainly too sanguine — were associated with the con- stitution. I then reckoned more on the initiative of the Govern- ments — one must always observe the development of things before he can properly understand them — I expected that the Govern- ments would regard more seriously the obligations which they undertook (' The Federal Governments bind themselves to cause the German railways to be administered in the interest of a uni- form traffic,') and that the Prussian Government especially would do this, since this part of the constitution was drawn up in the Prussian Ministry of Commerce. But I have been completely deceived in this. Then I believed that the constitution of the Imperial Railway Board, as a Board of Control, might remedy matters. Experience, however, has only shown how impotent the State Raihvays. 79 Empire is per se, and how strong the territorial State is. The Imperial Railway Board has become an advising, deliberative, petitioning authority, which writes and does very much, witliout any one taking any notice of it, an authority whose occupation is such that I can with difficulty prevent the excellent officials who have devoted themselves to it from giving way to the discourage- ment which is connected with all arduous yet unsuccessful labour." He complained that instead of any advance having been made in the direction of that uniformity and co-operation desired by the constitution, confusion only tended to become worse confounded. "In regard to railway communication we have arrived at a state of things which has not been peculiar to Germany since the Middle Ages. We have, I believe, in Germany sixty-three different railway provinces — that is, however, saying too little, for they are more independent than provinces, I might call them railway territories — of which perhaps forty fall to Prussia. Each of these territorial governments is fully equipped with the mediaeval rights (jf staple-right, customs and toll, and arbitrary imposts on trade for the benefit of its own private purse — yes, even with the right of arbitrary retaliation. Nowadays we see that railway adminis- trations, without benefit to the raihvays and the shareholders, and, as it were, as a kind of sport, wage with each other wars which cost much money, and which are wars of power, without financial competition, more than anything else." This was certainly not the ideal sought by the imperial constitution. But how to mend matters ? If all railways could not be transferred at once to the Empire, Prussia must take the lead in the movement for consolid- ation, and must offer to place her railways in the hands of the Imperial Government. " In view of the obligation which we owe to the Empire, I hold it to be our duty, so long as the possibility of doing it lasts, to strive after the strengthening of the Empire, and not promote the power of a 'Great Prussia ' — not to allow the strongest State in the Empire, if we can help it, to gain further preponderance in the economic domain as well, but to otTcr the elements of this preponderance to the Empire. In my opinion, this is the only way in which the imperial constitution can become a reality." Still, he did not think the Reichstag would be willing to accept 8o Bismarck and State Socuiiisin. such an offer, even if Prussia made it. Were its answer a refusal, however, Prussia would at least have done her duty to the Einpire. He did not expect that his ideal of a complete imperial railway system would be attained during his lifetime. " But let the development be as slow as it may, let the struggles to be undergone be as great as they may, what important achieve- ment has ever been realised except amidst struggles and, indeed, through struggles ? Let them, therefore, be as great and as dilifi- cult as they may, we shall not, conscious of the good ends we have in view, be frightened by them, nor shall we be enfeebled and discouraged, for I am convinced that^when public opinion has once grasped a right thought — such as I hold this to be — it will not disappear from the order of the day until it has been realised, until, in other words, the imperial constitution, as whose represen- tative I stand before you, has even in the railway article become a reality." The bill passed and with larger majorities in both Houses than the Chancellor's friends had expected. Unfortunately, however, for Prince Bismarck's ambitious scheme — though not contrary to his expectation — the measure has been a dead letter, for the Empire has not yet thought well to relieve Prussia of her railways. It is with reason assumed that the cause of the deadlock in the Federal Council on the subject is the dislike of the project showed by the Central German States, especially Bavaria, Wur- temberg, Baden, and Saxony, which fear that with transference of their railways to the Empire their political importance would suffer, and Prussia would be further glorified. The immediate effect of the law was to cause the Prussian Government to extend its purchases of private lines. During one Parliament — 1879 to 1882 — 9,500 kilometres of railway were bought and 2,159 'kilo- metres were passed from private into State management, and now the transfer is fast approaching completion. The Radical party is the only party in the Prussian Diet which has offered an unbroken front to the process of nationalisation. The Conservatives have invariably gone with the Government, while the Clericals, the National Liberals, and the. Poles have always been divided, though their overwhelming strength has been on the side of private enterprise. State Railways. 81 A German writer has said of the nationalisation of the railways in Prussia that it is a measure which "constitutes one of the most beautiful leaves in the Chancellor's wreoth of fame." Certain it is that from the financial point of view, the policy inaugurated — or rather first seriously carried out — in 1876, has proved a great success. The result of the various transactions has been to place in the Prussian treasury millions of marks which otherwise would have gone into the pockets of share- holders, and the taxation of the country has been alleviated to some extent as a consequence. The authority quoted above contends that if the profits made on the State-owned and State- managed railways were to be applied to the redemption of the railway debt, " Prussia would after a few generations possess the property free of interest, and the conveyance of passengers and goods might be cheaper than in all adjacent countries." Prince Bismarck, however, avowedly disapproves of the idea of making the State railway system a mere revenue-raiser. It is unquestion- able that he had financial thoughts in his mind when he per- suaded the Prussian Diet to commit itself to a policy of nationali- sation, but he did not expect from the State railways immediate gain. He said on one occasion : — " I do not regard railways as in the main intended to be an object of financial competition : according to my view railways are intended more for the service of traffic than of finance; though it would, of course, be foolish to say that they should not bring financial advantages. The surpluses which the States receive in the form of net profits, or which go to shareholders in the form of dividends, are really the taxation which the States might impose upon the traffic by reason of its privilege, but which in the case of private railways falls to shareholders." The same view is held by the Minister who has up to the present time administered the Prussian State railways with un- varying success, Herr Maybach, who holds the portfolio of public works, and who declared on February 22nd, 18SS, that he had always acted on the princii)le that " the railways should not be a source of revenue nor yet a cause of deficit." As to the general administration of the State railways, he told the Prussian Lower House on February 4th, 1887 : — Bismarck and State Socialism. " This year we have made a surplus of 5 1 millions (marks) beyond the amortisation of three quarters per cent., and next year we expect a surplus of 49 millions, which can be applied to other State purposes. Last year we were able to make a sur- plus which exceeds by 29 million marks the entire interest on the national debt (of Prussia), and we hope next year to make a larger surplus still when we have built several small lines in order to complete the railway network. This year we have laid aside 784,500 marks for the improvement of the salaries of the officials of private lines taken over by us — a total of 9,700,000 marks applied to this purpose. Moreover, we have made considerable financial sacrifices in order to give railway employees rest on Sunday. Go through the country and ask the people whether or not the nationalisation of the railways has benefited them. You will hear from the overwhelming majority a loud 'Yes.' (Loud applause from the Conservatives.) When, after a few years, we have completely surmounted the difficulties of transition, we shall be able to tell what the State railway administration can do. I am not altogether dissatisfied with what it has done already, but I think it will do better still." That on the whole Prussia is well satisfied with the change from private to State railways admits of no doubt. It may not be that the interests of industry and commerce always receive the consideration which they deserve, but a sincere desire is mani- fested by the administration to manage the railways at once efficiently and economically. English residents and travellers in Germany may often wonder that in railway and other branches of government, public convenience is not in every detail made the loadstar of official ambition ; but it must be remembered that public opinion does not carry the same weight in Germany as in England, nor does it make the same pretensions which it rightly asserts in a country where vox populi is held to be equivalent to vox Dei. The objections raised to the nationalisation of the railways in Germany — and they may be supposed to apply, as a rule, to other countries — are partly political and partly economical. It is lield that excessive centralisation is an evil. In the case of Germany this objection must be allowed to carry with it considerable force ; for State Railways. 83 it cannot be doubted that from stress of circumstances, apparently admitting of no check, the strengthening of the Empire is tanta- mount to the strengthening of Prussia. With every augmentation of imperial institutions, Prussia has been thrust into greater promi- nence. Despite the Chancellor's natural contempt for Particular- ism, it is not to be wondered at that the secondary States should object to losing the last remnants of individuality which remain to them under the new order of things. Then, too, there is the argu- ment, of which the Radicals by preference make the most use, that the institution of an imperial railway system would place in the hands of the central Government a dangerous accession of political power. In the first place, the railways might be made an effective weapon with which to tight the constitution as personified in the elected Reichstag. Hitherto the Government has been kept under control by the simple expedient of Parliament maintaining a tight hold of the purse-strings. The idea of making the Government financially independent of the Reichstag has always been un- popular with a majority of the House, and in every new grant of taxes care has been taken that the Empire should be compelled to appeal to the individual States for matricular contributions in order to meet the last few millions of its annual bill. If, however, the railways of the country were handed over to the Empire, the great revenues attainable might be used — unless the constitution were modified — to secure for the Government greater freedom from Parliamentary control than might be desirable. A further objection is, that the institution of imperial railways would vastly increase the number of State officials, and thus, again, the Govern- ment would be given a dangerous amount of political influence in the country. Prince Bismarck once objected to the establishment of an Imperial Insurance Office, in connection with the compul- sory insurance of workpeople, as an undesirable extension of bureaucracy. Here, however, his critics point out, is a far greater application of the bureaucratic principle. In the absence of Par- liamentary government the official classes recognise only one control, that of the Executive, in other words of an authority totally independent of Parliament, because appointed by and responsible in the first instance and the last to the Emperor. Naturally State servants throw all their influence, both individ- 84 Bismarck and State Socialism. ually and officially, in the scale of the Government, and inde- pendent political parties are always placed at a great disadvantage. By the political power which would accrue by the nationalisation of the railways, the Government would be able still further to exercise pressure in election times with a view to securing a tractable House of Deputies. The Radicals are strong on this question. They grant that the Railway Minister, Herr Maybach, declared some time ago that "railway officials must hold aloof from all political agitations and from political manoeuvres ; other- wise we should have officials discharging their duties according to party colour, and that we will not have." Yet they contend that this principle is continually ignored, and that officials, high and low, use their positions for the promotion of party mterests. Finally, there is the objection that the nationalisation of the railways takes from private enterprise a legitimate sphere of economic activity. Those who hold this view say that the intervention of the State in the economic domain should be exceptional, and that no depart- ment of commercial life whiere private individuals or companies can operate with advantage to the community should be invaded, much less monopolised, by the State. They contend, too, that by abolishing competition the interests of the public run a chance of being neglected. The State is not susceptible to those motives of self-interest which are the spur of private' enterprise. It is likely to do less what the public may wish than what is pleasing to itself, that is, to the handful of officials who form the administration. The argument that the State is not well fitted to manage the railways economically may be passed over, as it is a question less of theory than of fact, and the results of the nationalisation of the Prussian lines so far afford little encouragement to those who take this ground of objection.^ These are a few of the reasons advanced against the carrying out of Prince Bismarck's project of an imperial railway system. The truth is certainly not to be found entirely on one side or the other. Great allowance must be made for national characteristics, national training, national traditions, and ^ For a trenchant critique adverse to imperial railways from the financial standpoint, see Moritz Mohl's " Die Frage von Reichs-Eisenbahnen " (Stutt- gart, 1876). State Railways. 85 national habits. In Germany the principle of individualism has never attained the acceptance which it enjoys in England, and the change there from private to State railways cannot be said to have occasioned anything like a shock in economic minds. As a mat- ter of fact, though the pros and cons of State railways are still greatly discussed in Germany, State lines are now the rule and not the exception in that country. The development of the future is the conversion of the State railways into imperial ones. Prus- sia has already declared for this measure, and having shown the rest of the States the way, there is little reason to doubt that, whether for good or ill, they will eventually follow where she has led. A few words only are called for by the post and telegraph system of Germany. Both post and telegraph are imperial insti- tutions, except that Bavaria and Wurtemberg are by the constitu- tion (article 4) secured considerable independence of administra- tion. The surplus on the operations of the post and telegraph go to the imperial treasury, and are applied towards the liquida- tion of the ordinary expenditure. The Post Law of 1S71 forbids the transmission of letters and newspapers, etc., from one place to another except through the imperial post, but the private town post is not prohibited. The consequence is, that in a number of large towns one or more local posts exist for the delivery of let- ters, printed matter, and general consignments within the urban district. In Berlin especially the imperial post has suffered severely from this local rivalry, but so far no amendment of the law has been proposed. Several years ago at least three city posts, carried on by companies and, it must be confessed, worked very admirably, existed at the same time. A law of December, 1875, supplemented the originallmperial Post Law by introducing numerous clauses intended to bring the post and the railway into accord. Tiie law makes great demands on the railways of the country in the interest of public convenience. Germany is acknowledged to be in the very van of countries so far as enlight- ened postal arrangements are concerned. It was largely owing to her initiative that the IVeltpostverein., or International Postal Convention, was established in 1874, this invaluable institution coming into active existence in July of the following year. The 86 Bismarck and State Socialism. Emperor William I. had as early as 1868 endeavoured to bring European countries into postal union, and but for the Franco- Prussian war the international " work of peace," as the union was called, would have been completed sooner than it was. Dr. von Stephan, Germany's sagacious Postmaster-General, had a good deal to do with the introduction of this beneficent agency of civilisation. Though Germany has not yet a uniform postal system, this desideratum is only a matter of time, and the postal legislation is at any rate the same for the whole Empire — a vast improvement on the state of things which prevailed in 1857, when there were seventeen different postal administrations in Germany. As the telegraph and post go hand in hand in Germany as in other countries, special reference to the former is not necessary. CHAPTER VIII. INDUSTRIAL LEGISLATION. The special legislation which Prince Bismarck has either passed oF^pirrposecr^for the_benefit_of_the_ working classes has taken two dfsTmcT^irections. On the one hand he has endeavoured by suitable measures to make the lot of the factory operative and general workman, whether industrial or agricultural, more toler- able, and on the other he has aimed at improving the social con- dition of the artisan, while restoring his craft to its former efficiency and dignity. Prince Bismarck once compared the social reforms contemplated in this domain with the land reforms introduced by Stein and Hardenberg. What was done for the peasantry after the Liberation War, the new Empire desired to do for the indus- trial classes. " To this tendency," he added, " laissez-faire, the abandonment of the weak to their own resources and to private help, is in diametrical opposition." I. Reversion to the Guild System. It is advisable to deal first with measures and movements which have had for their end the improvement of the position of handi- crafts and of the artisan, since substantial results have here been achieved. Industrial freedom {Gewerbefreiheit)., the right of the individual to follow the calling of his choice, was virtually uni- versal in (Germany before the North German Trade Law of 1869 became an imperial statute. Prussia, as usual, took the initiative. As early as 181 1 the Stein and Hardenberg laws dealt a fatal blow at the guild system, by abolishing guild privileges and making it easy for a man to follow the trade he desired. The movement towards industrial freedom grew in favour until the Prussian Trade T^w, passed in 1845, practically recognised the institution as inevitable and unassailable. The political troubles of 1848 and 1849, however, led to a partial reaction. Conscious of its strength, S? G 88 Ihstiiarck and State Socialism. the Brandenburg-Manteufell Ministry of 1849 introduced master examinations, the preUminaries to which were three j ears of ai> prenticeship and a like period of journeymanship, with journey- man examinations. On this occasion Bismarck, then a private politician, spoke in the Prussian Parliament in favour of compulsory guilds as a remedy for over-production ond as a guarantee fur the maintenance of the artisan class in prosperity and efficiency. But the innovation was contrary to the spirit of the time, and it did not work well. The examination never became regarded as of practical value, and the principal part of the proceeding, where it was observed, was the payment of the prescribed fees. The present leader of the Radical parly in the Reichstag has recorded : "When in 1861 I held the office of a Landrath, the Ministry ot the day addressed a question to the authorities as to whether and how the Trade Law of 1849 had succeeded. Reports lay before me from seven mayors, mostly urban, which differed considerably ; some could hardly estimate highly enough the blessing of the Trade Law, while the others raised critical doubts. I went to the bottom of the matter, and soon found that the entire Trade Law of 1849 had never been introduced in this district. At first an attempt was made to establish examination committees, but it was not possible to maintain the examination system. No one was any longer examined in the district, and no one applied to be examined. In the entire district there was not a single person legally qualified to build houses, though a large amount of build- ing was carried on." ^ Li time the demand for the legislative recognition of industrial freedom became so general that the legal restrictions were first ignored and then abandoned, and finally the principle was embodied in the North German Trade Law of 1869. Before that law was passed all sorts of antiquated commercial privileges, monopolies, and restrictions existed, and their abolition had long been greatly desired. In Mecklenburg, for instance, the old soke-mill retained the exclusive right of corn-grinding. The towns of the duchy could require rural alehouse-keepers to buy their beer within a radius of two miles, and to buy the beer used at baptisms, marriages, and burials at the nearest towns, ^ Speech made by Herr Eugen Richter at Berlin, Februaiy nth, iSSi Industrial Legislation. S9 while jtrivate brew' ig in the country might be prohibited by the towns. The same exclusiveness formerly existed in regard to horse-shoeing, chimney-sweeping, and flaying. In Reuss j. L. a monopoly in music-playing in public places was granted, and the inestimable privilege of collecting rags was enjoyed by an outside paper manufacturer. In Waldeck there were monopolies in shav- ing, hair-cutting, and whig-making. Prussia, however, was on the whole free from the old monopolies and privileges. Early in the seventies, however, another reaction in the direction of guilds began. Artisans had suffered seriously by the develop- ment of the factory system, which took their livelihood away, and attempts began to be made to secure the prosperity of the few, where the many could no longer maintain a thriving existence, by reintroducing something of the monopoly and exclusiveness of old. All sorts of measures were proposed by the friends of the guilds, such as the high taxation of machinery, restriction by law in the number of apprentices which an artisan might have, the provision of technical schools for the instruction of apprentices, and the inevitable examinations and certificates of capacity. The Government was not slow to lend its support to the guild move- ment, and in 187S it introduced an amejidm ent to the Trade L aw,^ the object of which was to help artisans to compete mor e suc- cessfully against ca pital and the factory, and this was to be done by the reorganisation of the voluntary guilds, which were to be charged witli miportanf functions m regard to the training of ap- prenticesT'etcr From that time the Trade Law has been amended nearly every year in the interest of the guild system, the principal amendments being those of 1881, 1884, and 1886. The avowed object of the various modifications to which indus- trial freedom has been subjected by law in Germany during the last ten years is the protection of the artisan class against the growing power of capital as represented by the factory system. The idea is to promote esprit de corps and self-respect amongst workpeople by their organisation in trade societies, and to ensure better and more conscientious work by the systematic training of ap[)rentices and their later examination for proof of eflficiency before the stages of journeyman and master can successively be entered upon. The Trade Law so far has been amended in the 90 Bismarck and State Socialism. following among other esseniial matters. Restrictions are placed upon the right of artisans who do not belong to guilds to employ apprentices. A guild is given the power of absolutely forbidding such artisans from engaging apprentices. Various agencies may be introduced for the benefit of apprentices and journeymen — such as technical schools and classes for the former, and night-quarters (in case of travel) and labour offices for the latter— and to the maintenance of these even those artisans who refuse to join guilds may be compelled to contribute, it being taken for granted that they will indirectly benefit by the establishment of such insti- tutions. The demands of the guild party go a good deal further than legislation yet goes. They will not be satisfied until guilds are made compulsory institutions, and until examination and the taking out of certificates of proficiency are incumbent upon journeymen and masters alike. Already the leading clause of the Trade Law is virtually meaningless so far as liberty of action is concerned. It says, " The carrying on of an industry is per- mitted to every one, save in so far as exceptions and restrictions are provided for." But so numerous have the " exceptions and restrictions " become, that a Radical journal some time ago com- pared this clause of the Trade Law to the announcement of a humor- ous journal, which said, " This newspaper appears daily with the exception of week-days." In other words, industrial freedom is no longer the rule in Germany. This result has not, however, been arrived at without deliberation and intent. Encouraged and supported by the Conservatives and the Catholics, the Govern- ment has voluntarily entered upon the path of reaction, hoping that the artisan class, and indirectly the whole community, will benefit as a consequence. In 1877 a member of the jNIinistry announced in the Reichstag that the Government " intended to adhere to the principle of industrial freedom." That ground has, however, been definitely abandoned. It is self-evident that the guildjiiovenient has always found in the Radicals uncompromising opponents, inasmuch as it destroys the principle of industrial freedom. They deny that the adoption of this principle has injured handicrafts, and point to the greater skill of the modern artisan as evidence to the contrary. The guild system they regard as an artificial prop which will aftbrd Industrial Legislation. 91 handicraft no substantial assistance, and they especially object to the application of compulsion, and condemn as unjust the power given to guilds to compel non-members to contribute towards the guild costs. The Government, on the other hand, is determined to develop the guilds still further, and a speech from the throne of as late date as November 25th, 1886, declared it to be an imperial duty to give these trade organisations support with a view to the restoration of a vigorous artisan class. Up to the year 1886 no fewer than 9,185 guilds existed in Germany. In Berlin, the most Radical city in the country, nearly half the artisans belonged then to guilds. The total number of artisans was 35.330. of whom 13,249, employing 3 1,988 journeymen and 7,554 apprentices, were organised in guilds. While, however, the Government has during the last few years passed many industrial measures which can fairly be regarded as reversing the established order of things, some of its proposals in this domain have met with universal approbation, and one of these is the Board of Arbitration for trade and industrial questions, composed half of employers and half of employees. II. Employers' Liability and Industrial Insurance before "the~New Era. In considering the questions of employers' liability and the in- surance of working people it is necessary to remember that, when dealing with the period preceding the State Socialistic era, we have to do with many systems because there were many indepen- dent States. The questions need only be treated generally here, as underlying principles interest us more than actual i)ractice. To refer first to sick insurance. The systems in vogue in North and South Germany were different. In the South German States it was usual for the parishes to levy a small insurance ta.v on dependent workpeople and domestic servants, in consideration of which maintenance and attendance were afforded in time of sickness. This jjarochial system of industrial insurance was of a very inefficient and arbitrary kind, but it served its purpose for a long time. In North Germany the i)revailing system was that of the miners' relief society {Knappscluiftskasse) as it had existed gi Bismarck and State Socialism. under Frederick the Great, the distinguishing characteristics of which were the compulsory membership of the colliers belonging to a particular mine and equal premiums by employers and employed. This relief society not only supported its members during sick- ness and provided them with free medical attendance, but assured pensions in time of indigence, contributed towards funeral costs, and gave assistance to the widows and orphans of deceased members. The Knappschaftskassen were diligently promoted by Frederick the Great and his successors, and about fifty years ago a good deal was done by legislative means to strengthen them. So efficient have these societies proved that modern reforming legisla- tion has dealt with them very indulgently. The principle of compulsory membership in a sick relief society was introduced into industrial legislation in Prussia in 1854, by a law which provided for the establishment of societies for various industries based on local codes of regulations. Entrance was com- pulsory, as was contribution by employers. Of societies founded on the strength of this law some 5,000 existed in Prussia in 1874, their membership being 800,000, their capital 13,000,000 marks (some ;^65o,ooo), and their annual revenue 9,000,000 marks (roughly ^450,000). In addition there were about 2.000 guild relief societies and many private factory societies. The other North German States for the most part followed the example of Prussia — which had taken the miners' relief society for a model — and in 1875 it was estimated that the total number of relief societies in Germany was 12,000, their membership being 2,000,000, and their capital ;!^3, 500,000 to ;2^4,ooo,ooo. In 1876 the miners' societies of Prussia alone had 263,688 members ; supported 15,710 indigent members, 19,090 widows, and 32,650 children ; and paid wholly or partially for the education of 58,548 children • their revenue being ;^6oo,ooo and their yearly expenditure ^^560,000. There were also in Prussia in this year 5,239 sick relief societies of various kinds for artisans and factory opera- tives, though the number decreased nearly a thousand during the following four years. In 1S76 a law was passed with the in- tention of placing the sick insurance societies of the country upon a better footing, and of encouraging voluntary insurance amongst the working classes. But the wishes of the promoters of this law Industrial Legislation. 93 were not rtalised, and when a compulsory insurance law was in- troduced in 1882 it was justified by the plea that "Experience has abundantly shown that the universal adoption of sick insur- ance, which must be characterised as one of the most important measures for the improvement of the condition of the working classes, cannot be effected on the lines of the legislation of 1876." To be just, it must be admitted that the system of sick relief which prevailed until Prince Bismarck made the State play a prominent part in industrial insurance had worked fairly well on the whole in the principal States. It had not proved effective in every trade and industry, but where it operated a good work was undoubtedly done. Such praise cannot, however, be bestowed upon the old system of accident insurance. Here the law was faulty and insufficient, and the protection given to the working classes was very limited and precarious. As early as 1838 Prussia passed a law imposing upon railway companies and adminis- trations nominal responsibility for the accidents which happened to their employees, save in the case of the latters' neglect and blame. But the companies had a knack of escaping liability. Either they contracted tliemseives out of the Act, or they intro- duced into their regulations provisions which effectually check- mated the purpose of the law. Where employees claimed com- pensation for injuries, they were generally bullied into silence; or if it came to judicial proceedings, the strong found it easy to oppress the weak. Very late in the day the Government passed an amendment to the law declaring all evasions to be illegal and of no effect, yet even then the railway companies were able to bid defiance to the statute. In the rest of Germany the position not only of railway em- ployees but of workpeople generally in regard to compensation for accident was lamentable, and so it continued to be until the time came when imperial legislation of a far-going kind could be passed on the subject. Early in 1869 a large body of men em- ployed on North German railways petitioned the Government for greater protection, and their representations attracted great atten- tion at tiie time. Wages, it was said, were very low for long hours of work — one to two shillings per day of twelve hours — and the 94 Bismarck and State Socialism. conditions of work were both exhausting and dangerous beyond the rule of English and other foreign railways. Statistics of that period show, indeed, that the lives of Prussian railway employees were, on the whole, culpably trifled with. While in 1864 Prussian railways only carried one-seventh the number of passengers carried in England, with one-fourth the amount of merchandise — the mileage being less than one-sixth that of England, and the number of trains run only one-twelfth the number in England — as many railway officials of all kinds were killed in Prussia as in this country, and England's roll of accidents to railway employees was not thrice longer than Prussia's. But not only did railway employees begin to agitate for real legal protection. In industry, too, the movement spread with rapidity. Miners and factory operatives joined hands with their brothers on the railway, and the question soon entered the domain of practical politics. In 187 1 a law was passe d in the new Re i dietau niakinii the ow ners and conductors of railways, mines of all kind S j quarries, and factories liable for the injuries or death caused to their em- plo yees throug hT accidents resul dng from— the p ursuit of the jr callings, so long as the victims were not themselves to blame. In case of fatality the person or persons liable might be compelled to bear the costs of the medical measures attempted, the costs of burial, the loss caused to the deceased's relatives during eventual illness, and in case the deceased were legally liable to support another or others, the latter might recover the loss thus sustained. In case of accident the compensation consisted of medical costs and the loss of wages suffered during illness or through temporary or permanent incapacity. The law was compulsory, and there was to be no contracting out of it. For a time the new protection thus offered to the working classes promised to be of great benefit ; but as soon as they could decently do it, the employers again conspired to defeat its ends. When a workman claimed compen- sation, an endeavour was too often — not always — made to prove that he had suffered from his own neglect. Law, too, was costly, and a poor man had no chance in an encounter with a capitalist. When in 1877 protection was given to seamen, new autiiorities were established in the form of Marine Boards for the purpose of investigating the question of liability in every individual case. Industrial Legislation. 95 But workpeople generally had only the then existing judicial authorities to fly to, and they were not always possessed of the requisite competence. Demands were made in the Reichstag yearly for the amendment of the law of 187 1, but pressure of business compelled the Government — -to the satisfaction of the Radicals — to defer further legislation on this subject. When this legislation came it formed part of a grand imperial system of industrial insurance, not only against accident, but also against sickness and against old age and indigence. It will be necessary, in the following chapter, to trace the growth of this unique piece of legislation. 111. Regulation of Factories. It must be co nfiessfxLlh at Prince Bism arck's legislative record under this head is a limited one. The German factory opera- tive, indeed, " never is but always to be blest," so far as~the^ beneficence of factory regulations is concerned. A t present he is very insufficiently protected by law. The Imperial Trade Law, it is true, contains a number of clauses which might be e.xpected to afford some safeguard against abuses on the part of inconside- rate employers, but these clauses are for the most part futile. They are in many places disregarded at will, and the authori- ties responsible for their due observance have little to say against the transgressors. It is easy to explain this anomalous state of things. The Trade Law applies to a large Empire, composed of many States having different staple industries and different in- dustrial usages. A code of regulations applicable, for instance, to Prussia may be totally unsuited to the established customs of Bavaria. This is only one of many cases in which the difficulty of introducing uniform laws for the entire Empire has made itself conspicuous. It is, moreover, certain that, during late years at any rate, the Imperial Government has been averse to taking any measures which might render the manufacturer's financial position more unfavourable than Prince Bismarck's exacting series of social reforms — particularly the workpeople's insurance laws — must necessarily make it. Hence the disposition to wink at the breach of some of the regulations laid down in the Trade Law. To mention several of the defects of this law or of its adniinis- g6 Bismarck and State Socialism. tration. Sunday labour is nominally forbidden, but in reality the jrohibition is of no effect. Children under twelve years should not be employed in factories, and those of from twelve to fourteen years may only be employed six hours a day. " Young people " — from fourteen to sixteen years — may only be employed ten hours daily, and mothers may not return to work until tliree weeks have passed. These regulations, and others of the same kind, read very well, but they are frequently and flagrantly disregarded, and one principal reason of this is the utterly inadequate system of factory inspection which is provided for by law.^ Factory inspection is a comparatively new institution in Germany, and it cannot be said to have taken root firmly as yet. Prussia intro- duced inspection of factories first for Berlin and Silesia in 1874, and then for the remainder of the State. The kingdom of Saxony followed suit, and finally it was made obligatory throughout the Empire in 1878. The Radicals called the innovation " police despotism," and there was at first considerable opposition on the part of large manufacturers and ultra-individualists, but this was gradually overcome. Even now, however, the system is very faulty, especially in regard to the fewness of the inspectors. Moreover, no normal work-time is stipulated, either for women or men, the result being that factory operatives are in general employed during an injuriously excessive number of hours, while even women may be employed during the night. It is no exaggeration to say that fourteen, fifteen, sixteen, and even eighteen hours a day are often worked in factories.^ Then, again, while the Trade Law allows combinations for the purpose of obtaining higher wages, the Socialist Law practically takes away the right of coalition. Professor SchmoUer said in 1888: "We may doubt whether we possess the right of coalition in Germany." («) Hours of Labour. Many attempts have been made of late years to amend the law in regard to the duration of work in factories. A normal * The author here speaks from the results of his own inquiries in Germany, as well as on the authority of the Factory Inspectors' reports, in which abun- dant evidence of the existence of irregularities is to be found. 2 See debates in the Reichstag, December 15th, iSSi ; January 14th, 18S5, etc. ludiistnal Legislation. 97 workday has been repeatedly deiiiandetl not only by the Social Democrats as the right of the individual, but by Conservatives and Catholics as a right and in addition asocial necessity. Prince ]5ismarck has, however, invariably opposed State intervention in the matter. He said on January 9th, 1882 : — " In special businesses the hours of labour cannot be dictatori- ally curtailed in all cases. Every business has its ebb and flow. We only need to remember the holidays behind us in order to see this. What business in Berlin has not its flood in December — before Christmas? And so in other businesses there is at all seasons of the year a regular return of ebb and flow. If the hours of labour or a maximum period were to be fixed, not to be exceeded, then at Christmas time, when people readily sacrifice their nights in earning money, an unjust and disturbing interfer- ence with industrial activity would take place. But in other businesses, apart from the holidays, ebb and flow occur from the very nature of trade. If at times when there is a large demand for a certain product — let me say coal — the labourers cannot be put to a greater strain than at ordinary times, when coal is offered and cannot be got rid of, and when the shifts have to be so re- duced that only three are given to the same men in a week, then the entire mining industry, which depends on the year's trade, suffers. There must be freedom of action, so that with a larger trade more forces may be employed than is the case with a small trade. Then the normal work-day entails the further danger that the maximum hours fixed would in many cases exceed the present number."" Upon the latter point he said on January 15th, 1885 : — " A maximum work-day would be attended with the danger that every employer would feel justified in going to the maximum, even those who had not formerly worked so long. If it were ordered that fourteen hours — which, by the way, I regard as a monstrous work-day and one which is intolerable — might not be exceeded, the employer who had hitherto, perhaps, only worked ten or twelve hours might say, ' I can legally work fourteen hours.' Therein lies the danger of a maximum regulation. A normal work-day would be extremely desirable if it couKl only be attained. Who does not wish to help the working-man when he sees him 98 Bismarck mid State Socialism. returning home at the close of the day, tired and needing rest, when he finds him embittered that this rest is not allowed him through the imposition of overtime — the rest which he would rather have than the money he earns by overtime? The man who has not earnestly wished to help the working-man in his grievances cannot have a heart at all. But how is it to be done?" This he confessed he did not know. If the hours of work were to be reduced 20 per cent., wages would fall to the same extent ; and what would the working classes do then ? At present they earned just sufficient for their needs, and the reduction of their wages would mean want and distress, unless, indeed, the State were to step in and make up the deficit. It was impossible to expect employers to pay the same wages if the hours of labour were reduced : that would be to increase the cost of production, to cripple trade, and particularly to strike a heavy blow at export industries. Thus there were "rocks on both sides : a Scylla on this, and a Charybdis on that." Neither on this occasion nor since could the Government be induced to take any action. In 1887 a definite bill was intro- duced in the Reichstag by private members fixing the normal work-day at eleven hours, except on Saturday and the eve of a festival, when it should be ten ; but it failed. The pecuHar clause appeared in this measure that when factories had worked less than the legal maximum all the year round, they might for three weeks work overtime as long as was required to make up for lost time. A consequence would have been that workpeople who had for eleven months worked an hour less than the maximum every day might during the following month be compelled to work night and day continuously — a course of servitude which the promoters of the bill certainly never contemplated. Equally persistent has been the endeavour to secure for the ' women and children employed in factories and other industrial works greater legal protection. From the year 1881 down to the present, efforts in this direction have been unceasing. The initia- tive has invariably been taken by the Catholic and Conservative p?rties, sometimes independently, sometimes conjointly; but the Socialists have not been slow to make far-reaching demands. It I is worth while to glance at the Socialist demands on this question. Industrial Legislation. 99 A bill which they introduced in the Reichstag in March, 18S5, proposed (i) a normal factory work-day of ten hours, except Saturday eight hours, for workpeople above sixteen years; (2) for underground work the maximum day to be eight hours ; (3) no work on Sundays and festivals, except in the case of railways and canals, means of communication, places of recreation, and industries where uninterrupted work is necessary ; (4) no shops to be open more than five hours on Sundays and festivals, and to be closed then by six o'clock ; (5) night work to be prohibited except where expressly sanctioned by the authorities ; (6) forma- tion of an Imperial Labour Bureau for the promotion and pro- tection of the interests of labour, and of Labour Boards and Labour Chambers, as well as Boards of Arbitration ; it should be the duty of the Labour Boards to supervise industrial concerns ; while the Chambers, formed equally of employers and employed, were to interest themselves in questions such as those of wages, prices, customs and excise duties, commercial and navigation treaties, continuation schools, pattern and sample exhibitions, working-men's dwellings, the health and mortality of the indus- trial j)opulation, and economical and industrial aftairs in general. This ambitious scheme of the Socialists was courteously referred to a committee of the House, and the world heard nothing more of it. {b) Female and Juvenile Labour. Towards all proposals for the restriction of female and juvenile labour in factories the Government has observed an attitude of benevolent neutrality. Prince Bismarck himself has always favoured the principle in the abstract. He advocated on Janu- ary 9th, 1S82, the exclusion of women from factories from domestic and social reasons. " I regard it as in the highest degree desir- able," he said, " if factory operatives could stand upon the same footing as nearly all rural labourers, that, as a rule, women should not go to work, but should remain at home the whole day, with the single exception of the time when in agriculture there is a lack of men, that is, in the various harvest operations. Whether this is possible with factory operatives I do not know, but the wages which the wife earns — be the amount half, a third, or two-thirds 100 Bismarck and State Socio I is in. of the husband's earnings — are always a supplement to the do- mestic budget." But the Chancellor's sympathy has not yet taken an active form, in spite of the importuneness of his best friends in the Reichstag. It is clear, however, from the reports of the fac- tory inspectors that the question of female and juvenile labour is an urgent one. The returns for 1886 showed that the employ- ment of both women and young children tends to increase. The number of women employed was 8 per cent, more than in the preceding year. What is worse, women must work the same long hours to which men are subjected, and like them they must, if required, work through the night. As to juvenile labour, the number of children of from twelve to fourteen years employed in factories increased as follows from 1881 to 1886 : 1881, 9,347 ; I 1882, 14,600; 1883, 18,395; 1884, 18,865; ^"^d 1886, 21,053. I An inspector in the Diisseldorf district reported in 1886: "I often found in polishing shops, small weavers' works, and belting works, children from four to twelve years of age who were said not to be working, but were only being looked after by their parents or relatives. In very few cases, however, in spite of the untruth of such representations which was shown by the children's hands being soiled by the material used, was I able to prove that they were being employed." Even worse stories were told of the excessive employment of children in the house industries. A Plauen inspector spoke of children of seven years and less who, besides attending school, were kept to work at home for ten hours a day. In order to strengthen the hands of the Government, the Reichs- tag, at the instance of the Clerical and Conservative parties, adopted in the summer of 1887 amendments to the Trade Law raising the minimum age of factory-employed children to thirteen 'years, with the proviso even then that the school requirements should first be complied with ; fixing the maximum work-time for phildren under fourteen years at six hours, and those between fourteen and sixteen at ten hours daily ; forbidding the employ- ment of women in mines, quarries, wharves, smelting, rolling, and iron works, and timber yards ; and prohibiting the employment of women in factories by night save in the event of extraordinary stress of work. The Government was also requested to take into Industrial Legislation. lOI consideration the advisability of fixing a maximum work-day for adults. Upon all these points reforming legislation is still, how- ever, lacking. {c) Sunday Labour. One of the most disputed of industrial questions in Germany is that of Sunday labour. The Trade Law of the country, which is virtually a copy of the North German Trade Law of June 21st, 1S69 — this in its turn being based upon Prussian law — says expressly in article 105 : " Employers cannot require their work- peo[)le to work on Sundays and festivals,"' unless from the nature of the industry (as in the case of the chemical industry) un- interrupted work is necessary. This provision of the Trade Law has, however, been from the first a dead letter, employers having regarded it as meriting infraction rather than observance. ^Vhat is more, the Government has winked at the disrespect shown for the nominal law, the reason being the impossibility of enforcing legal regulations which do not coincide with the convictions and customs of the community. Since the establishment of the Empire attempts have continually been made by several parties in the Reichstag — particularly the Clericals or Ultramontanes — to induce the Government to abolish Sunday labour. But these attempts, like all definite legislative proposals introduced upon the subject by private members, have always failed, and that signally. The Postal Department did, indeed, make a small con- cession in 1880 by discontinuing one of the two Sunday deliveries of letters then customary in Berlin, while the Prussian State rail- way authorities began to give their employees one Sunday in every three, but the postal reform was abandoned several years ago. The evil did not rest entirely, or even principally, with manu- facturers. Although in some parts of the Empire Sunday labour in factories and workshops was very common, shopkeepers and merchants were on the whole more addicted to the custom. A Sunday Rest Association, established at Bremen in iSSo, col- lected returns on the subject from all parts of Germany, and these acquitted most of the large towns of Sabbath desecration so far as mills were concerned, while proving that Sunday employment laigeiy prevailed in workshops, offices, and shops. Another fact 102 Bismarck and State Socialism. established by these returns was the comparative absence of Sun- day labour from States or districts in which industry was greatly developed, Saxony, Alsace, and the Lower Rhine being among the illustrations given. The first serious endeavour to convert the Government upon this question was made in the winter of 1881, when the Clericals called for the amendment of the Trade Law in the direction of less or no Sunday labour. Baron von Hertling had no difficulty in proving that the imperial law on the subject was systematically disobeyed. He quoted from the report of the Wiesbaden factory inspector, who wrote in 1876: "Even if workpeople cannot legally be compelled to work on Sunday, they are still in many cases defenceless against their employers owing to the interpreta- tion given to section 105 of the Trade Law. In times such as those which we have passed through of late years no labourer can refuse to work on Sunday unless he is prepared to receive the answer that he need not return to his work on the week-day. What this means in the many places where there is but a single industrial concern in which work can be found, I scarcely need point out." The case was mentioned of a large Rhenish manu- facturer who kept his employees at the wheel all the year round, Sunday and week-day, with the exception of such high festivals as Christmas Day and Good Friday. At this manufactory prisoners from a neighbouring gaol were regularly employed, but the governor of the prison only allowed them to work six days a week. Convicts enjoyed a free Sunday, but free workpeople were, on pain of money fine, compelled to toil every day of the week. It was, moreover, pointed out that without Sunday labour the hours worked were sufficiently exacting in the textile industry, fourteen and fifteen a day being the rule, and sixteen and eighteen being common. Prince Bismarck manifested great interest in the subject, and replied on January 9th, 1S82, in a long speech. "It is," he said, "a tradition of the dynasty which I serve that it takes the side of the weak in the economic struggle. Frederick the Great said, ^Je serai le roi des giieux,^ and in his own way he car- ried out this precept with strict justice to high and low, according to the manner of the age. Frederick William III. gave to the bond peasantry of his day a free position, and in this it was able — Industrial Legislation. 103 until a retrogressive movement set in some fifteen years ago — to prosper and become strong and independent. My present master is animated by the lofty ambition to at least give an impetus in his old age to measures which may secure to the weakest class of our fellow-citizens, if not advantages equal to those secured to the peasantry seventy years ago, at any rate a material improvement in their position, and in the confidence with which they can con- template the future and the State to which they belong." He was himself strongly in favour of Sunday rest for the working-man, yet he would not agree to take the initiative. That must come from the industrial classes. The law nominally forbade Sunday work already, but it was broken because the nation as a whole did not sympathise with it To pass another law before it could be shown that it was called for would be unpractical and inexpedient. He asked for time, therefore, and promised to institute exhaustive inquiries into the question. So the matter dropped. In January, 1885, the question of Sunday labour was again raised in the Reichstag, and this time by three parties at once, their proposals being referred to committee. The result of the ' committee deliberations was that in March the Conservatives and Clericals introduced a joint bill proposing at once to greatly re- strict labour on Sundays and festivals, and to promote the forma- tion of trade guilds. Not to be beaten, the Socialists made propositions more stringent still, and the various projects went in the ordinary way to the committee room. This time the committee reported in favour of Sunday rest for factory opera- tives, journeymen, apprentices, etc., condemned the present law as useless, called on the Government to issue a commission on the subject, and finally suggested the amendment of the Trade Law in the direction of Sunday observance. Replying on May 9th, the Chancellor repeated his approval of the principle at issue, but declined to move until the Federal Council had better data to go upon. In this way originated a highly important commission which in 1 886 and 18S7 inquired into the custom of Sunday work in all l>arts of the German Empire. The results of its exhaustive in- vestigations were published in four volumes, which threw invalu- able light not only upon this question but upon the condition of H 104 Bismarck and State Socialism. industry and of the working classes generally. It was shown that Sunday work was largely carried on in most trades, both in manufactories and in workshops, and that shops and offices were more frequently open than closed on Sunday. Of course, the views of manufacturers differed widely, though the majority were favourable to less or no work on Sunday. A Saxon employer declared that " besides the manufacturer's greed of gain there is no reason for Sunday work, and all the justification advanced is pretence." On the other hand, many manufacturers — as in the chemical and paper trades — regarded Sunday work as imperative, though even here absolute agreement did not exist. While one Saxon employer wrote : "As I am dependent on water for my engine, and on wind, rain, and sunshine for the drying of my paste- board, I must use them as God gives me them," another con- tradicted this statement by declaring that " technical difficulties can scarcely be an objection to the discontinuance of the Sunday working of paper machines." As a rule the workpeople appealed to declared for one day of rest in the week. " Now we hardly see our children," was the plea of one witness ; and another said that while prohibition of Sunday work would " certainly reduce his yearly earnings by one-fourteenth, on the other hand there would be compensation in the pleasures of a more regular family life." Yet another spoke of the prevaihng system as " frightful torture," and the general attitude of the industrial classes proved to be one of desire for a free Sunday and of indifterence as to the consequent reduction of wages. The Government did not take immediate action on the question, and the Clericals therefore re- introduced in 1888 the proposals made by the committee of 1885. As yet, however, no legislation has resulted. The reasons which have hitherto prevented Prince Bismarck from proposing legislation forbidding Sunday labour are two in number. In the first place he regards this as a working-men's question. He is not prepared to aboHsh Sunday work, or, indeed, to propose any diminution in the hours of labour, at the expense of the employers. If the workpeople are willing to lose the earnings which come to them by reason of Sunday employ- ment, he will consider the advisability of restricting their work to the six week-days. But until he is assured of their readiness to Itidnstrial Legislation. 105 make such sacrifice, he declines to interfere, though heartily wish- ful to see Sunday labour abolished. Speaking in the Reichstag on May 8th, 1885, he said : "As soon as I am convinced that, the working classes really desire to be protected from Sunday labour, and will be grateful to me if it is forbidden on pain of punishment, I shall be glad to promote the matter in the Federal 1 Council. But I must have this assurance first." Then the I Chancellor is loath to make any further attack upon the tradi- tional rights of employers at present, since the several work- people's insurance laws passed during recent years have entailed upon them great sacrifice. While wishful to secure to the working classes all the legislative protection and assistance they have a right to claim, he is too far-seeing to carry the principle of State intervention to such an extent as would endanger the prosperity of industry. It is neither to the interest of the State nor of the working classes that the employers should be laid under social obligations so heavy as to make it impossible to trade with profit. " Where is the limit," the Chancellor once asked when discuss- ing the Sunday labour question, " up to which industry can be burdened without killing the hen that lays the labourer's golden egg ? When requirements are imposed upon industry for the ful- filment of State purposes — and the giving to all employees of a higher measure of contentment, as to which industry may itself be indifferent, is a State purpose — it is necessary very accurately to know the limit up to which this industry may be burdened. If we proceed to work without considering this limit, and it may be without seeking it, we run the risk of loading industry with burdens which it may be unable to bear. No one carries on an industry at a loss, or even for small profits. The man who is contented with five per cent, interest on his capital has a more comfortable time of it when he confines his attention to the coupon-scissors, which are never used up, and never fail — it is a clean business. But the man who incurs risk by investing a large amount of capital in enterprises whose career no one can foretell does so for the profit which he hopes to make, for the increase of his future pro- vision for his family. If this profit disappears a misfortune falls upon the workman, and one which, in my opinion, is far worse than the long duration of his work, viz., the danger of destitution, io6 Bismarck and State Socialism. with the transitional stage of decreased wages. The evil is first felt in the curtailment of wages when the demand for labour is so diminished that instead of the complaint being that too much work is required it is that there is too little, so that only three days' employment are offered for six days' time ; until eventually the industry upon which the workman depended fails, and the difficult problem of complete destitution appears in a menacing form. We cannot overlook the fact that every one of the im- provements which we are introducing in the interest of the working classes is a fresh burden upon industry. If we, even without knowing it, reach the limit at which the pressure upon industry becomes no longer tolerable, but the consequences to which I have referred set in, shall we be prepared to give State support to the industry from which we have demanded sacrifices in the fulfilment of State purposes ? " As the imperial commission on Sunday work has made it clear that a measure of prohibition would not be unacceptable to the country, it is not too much to expect that it will be proposed before long. [Since the above pages were written the German Emperor's famous rescript proposing an international conference on labour questions — an utterance which does as much credit to his heart as his head, and which increases his reputation for far-seeing statesmanship — has been issued ; and whatever be the fate of his conference plans, the document certainly indicates the lines upon which future industrial legislation will advance in Germany. The rescript of February 4th, 1890, says : — " Besides the further extension of the scope of the Working Men's Insurance Law, an examination is necessary into the present provisions of the Trade Laws as affecting factory labour witli a view to meeting in this direction any complaints or wishes as far as these may be justified. It is the duty of the State so to regulate the duration and nature of labour as to insure the health, morality, and economic wants of the working-men, and to preserve their claim to legal equality. For the promotion of peace between em- ployers of labour and working-men legal measures must be taken Industrial Legislation. 1 07 to establish regulations which will empower working-men to be represented by delegates enjoying their confidence in the settle- ment of their affairs, and in guarding their interests in negotiations with their employers or with the representatives of the Govern- ment. Such an arrangement would enable the working-men to give expression to their wishes and grievances freely and in a peaceable manner, and would give the authorities of the State an opportunity of informing themselves at all times upon the condi- tion of the working classes, thus keeping in touch with them." The Emperor followed up this rescript by convening the Council of State in order to consult it upon the questions raised. Addressing the Council on February 14th, his Majesty said : — "The task for the accomplishment of which I have called you together is a serious and responsible one. The protection to be accorded to the working classes against an arbitrary and limitless exploitation of their capacity to work ; the extent of the employ- ment of children, which should be restricted from regard to the dictates of humanity and the laws of natural development ; the consideration of the position of women in the household of work- men, so important for domestic life from the point of view of morality and thrift, and other matters affecting the working classes connected therewith, are capable of better regulation. In the consideration of these questions it will be necessary to examine with circumspection and the aid of practical knowledge to what point German industry will be able to bear the additional bur- dens imposed upon the cost of production by stricter regulations in favour of workmen, without the remunerative employment of the latter being prejudiced by competition in the world's markets. This, instead of bringing about the improvement de- sired by me, would lead to a deterioration of the economic position of the workmen. To avert this danger a great measure of wise reflection is needed, because the satisfactory settlement of these all-absorbing questions of our time is all the more important since such a settlement and the international understanding proposed by me on these matters must clearly rest one upon the other. No less important for assuring peaceful relations between masters and men are the forms in which workmen are to be offered the guar- antee that, through representatives enjoying their confidence, they loS Bismarck and State Socialism. shall be able to take part in the regulation of their common work, and thus be put in a position to protect their interests by negoti- ation with their employers." The invitation addressed to the Powers to take part in a con- ference was readily accepted, but the scope of the deliberations was for some reason or other practically narrowed to the question of female and juvenile work. The principal points in the pro- gramme issued from Berlin were : (i) The regulation of work in mines with reference to the question of prohibiting the labour of women and children underground, and to the desirability of re- stricting the duration of the shifts in unhealthy mines ; (2) the regulation or prohibition of Sunday labour; (3) the regulation of children's labour ; (4) the regulation of the labour of young people ; and (5) the regulation of female labour. The conference met in Berlin in the middle of March.^ As the programme con- tains no proposal for the reduction of the working hours of adult males, it is to be feared that the practical results of the conference will disappoint many friends of the labouring classes. That, how- ever, the Emperor is actuated by lofty motives, and by a strong and sincere desire to better the lot of the toilers, is proved by his frequent utterances during the preliminary deliberations of the Prussian Council of State, which laid down the basis of the con- ference. His last words to the Council, spoken on February 2Sth, when it dispersed, were as follows : " I beg you to combat in public the opinion that we are assembled here to find the secret for curing all misery and social ills. We have together loyally sought for such means as will lead to the amelioration of many things, and also for such measures as may conduce to the protec- tion of the workman."] 1 The resolutions adopted by the Conference appear in Appendix D. CHAPTER IX. INSURANCE OF THE WORKING CLASSES. Replying once to the accusation made by an opponent in the ' Reichstag that his social-political measures were tainted withj Socialism, Prince Bismarck said, " You will be compelled yet to " add a few drops of social oil in the recipe you prescribe for the State ; how many I cannot say." In no measures has more of the Chancellor's " social oil " been introduced than in the industrial insurance laws. These may be said to indicate the high-water mark of German State Socialism. That they are the result of organic development has already been shown. The Sickness Insurance Law of 1883, the Accident Insurance Laws of 1884 and 1885, and the Old Age Insurance Law of 1889 are based upon the principle of compulsion which was introduced into the sick insurance legislation of Prussia in 1854. The laws relating to insurance against sickness and accident were rendered neces- sary by the inadequacy of the existing statutes. The law intended to protect the workman against the ill-effects of a helpless and indigent old age had no prototype in either German or Prussian legislation, yet it followed as a logical consequence, if not of the laws already mentioned, at least of the principles upon which they were avowedly based. After all, the idea of insuring the indus- trial classes against the time of old age and incapacity for work was heard of in Germany long before the re-establishment of the Empire. As early as 1850 a Chemnitz manufacturer proposed- in the Frankfort Parliament that the State should levy a tax upon all employers of labour for the benefit of workpeople who had through advancing age or other causes become less efficient, and for the establislunent and maintenance of homes for aged and worn-out labourers. The proposal, however, found no support. ,' log no Bismarck and State Socialism. I. How THE Insurance Laws originated. Before the Government of Prince Bismarck had promised the trio of insurance laws which are now in operation, a small body of Conservatives in the Reichstag urged the introduction of obli- gatory insurance against old age and indigence. This was in 1878 and 1879, ^i^d the Ministerial reply was not altogether negative. The Socialist Deputy, Herr Bebel, strange to say, advocated in the latter year insurance by the State direct — a principle which two years afterwards the Government unsuccess- fully endeavoured to carry into effect. The attitude of the Gov- ernment in 1879 was thus explained by Minister Hofmann: "The • Government accepts the theory that the working-man who has become incapacitated through age, or in consequence of his work, should not be a burden upon the public, but should be provided for by other institutions. It is, however, difficult to say /? 720 ,, U^b) 4th 960 „ U7«) l7isnrance of the \Vorki)ig Classes. 125 employers and workpeople in equal shares, but the State also guarantees a yearly subsidy of 50 marks {£,2 loj.) for every annuity paid. Contributions are only to be paid when the insured is in work. The law fixes four wages classes, with proportionate contributions, as follows : — Wages. Contributions. Weekly. Yearly (47 weeks). 14 pfennig 3 '29 marks {y. l\d.') 20 ,, 470 ,, {4J. Sii/.) 24 „ 5-64 ,, (5 J. 7.i^o) were to be exempted. The tax was to be progressive, rising by \ per cent, stages. The Radicals, however, only secured the support of the Social Democrats for this proposal. Prince Bismarck made a bold attack on the laissez-faire principle when he passed the Usury Law of 1880. This law was particularly intended to prevent the plundering of small landowners and artisans by the predatory part of the money- lending community. The Diets of Prussia, Bavaria, and Hesse- Darmstadt had all deliberated upon the question before imperial action was taken. In 1879 ^" interpellation addressed to the Federal Government excited discussion on the subject, and the necessity of legislation was pretty generally recognised. Private bills were this year promoted for the punishment of illegitimate money-lending, and these bills were referred to committee, but without any definite result. During a Reichstag debate in 1879 a Conservative deputy went so far as to propose the introduction of legal rates of interest, viz., 6 per cent, for trade and 5 per cent, for other loans, though 8 per cent, was to be allowed in exceptional cases. This proposal did not, however, receive encouragement. On April 8th, 1880, a Usury Law was intro- duced in the form of additions to the Imperial Penal Code. This ])rovided that: " Whosoever shall take advantage of the distress, indiscretion, or inexperience of another, and persuade him to promise or give to himself or a third party interest upon a loan which so exceeds the usual interest as to be flagrantly dispro- portionate to the service rendered, may be punished for ex- tortion with imprisonment for a period not exceeding six months, simultaneous fine up to 3,000 marks (roughly ^^150), and eventually with loss of civil rights. . . . Whosoever practises such extortion as a business may be ])unished with imprisonment for a period not less than three months, and a fine varying from 150 to 15,000 marks (;^7 10^. to ;i^75o), with the loss of civil rights. . . . Contracts contravening the provisions of this law are declared to be null and void." This measure received 144 Bismarck and State Sociaiisin. the final consent of the Reichstag on May 71I1, and it became law soon afterwards. The Conservatives and Clericals supported the Government, and the National Liberals and Radicals were found in opposition. Naturally enough there have been times when Prince Bismarck and the Reichstag have both acted illogically upon the subject of State Socialism. The Chancellor, for instance, refuses to have anything to do with the payment of members principle which the Reichstag affirmed so early as February, 1874. Its advocates contend that payment of members is a reasonable con- clusion to draw from the axioms to which Prince Bismarck has accustomed Parliament, while he, for his part, believes the pay- ment system to be inexpedient and injurious to Parliamentary life. On the other hand, the Postmaster-General was in 1885 unable to pass a democratic measure like his Postal Savings Bank Law, the object of which, avowed and actual, was to promote thrift amongst the working classes. The Radicals ob- jected that it was another measure of State Socialism, the capitahsts opposed it because it was likely to injure existing savings banks, and between the two fires the bill fell. It will be clear from what has been said in the preceding pages that fiscal reform constitutes an unfinished chapter in the history of Prince Bismarck's economic legislation. CHAPTER XI. THE COLONIAL ERA. It remains now to indicate the positive measures which have been tal^en during the State Socialistic era to further the com- mercial interests of Germany abroad. One of the motives for the introduction of import duties was the protection of home trade. Foreign trade has been encouraged by the establishment of an efficient consular system, by the conclusion of favourable commercial treaties with countries offering receptive markets, and by colonisation. Perhaps no country takes so practical a view of consular functions as Germany, whose consular agents abroad are expected to aid the extension of German trade to the best of their power. The consuls are, to begin with, recommended to the Emperor for appointment by the committee of the Federal Council to which commercial questions are committed, and the law regulating the consular system says expressly tliat it is the duty of these officials " to protect and to promote the interests of the Empire, especially in regard to trade, com- merce, and navigation, as far as possible." A considerable number of the imperial consuls belong to the category Beritfs- consul {consul missus), having received legal, politico-economical, and technical training for their duties. It is safe to say that such an anomaly as a sinecure is unknown in the German diplo- matic and consular service. Even ambassadors do not regard it as derogatory — and why should they ?— to keep their eyes open to the commercial interests of their country. It was for the better qualification of its representatives in the East that an Oriental Seminary was establislied at State cost in connection with the Berlin University in 1887. Here Turkish, Arabic, Persian, Japanese, Chinese, and other Eastern languages are taught to students intending to follow a diplomatic or consular 14^ Bismarck aiul State Socialism. career. The resources of the Empire have been placed at the service of foreign commerce in a multitude of other ways, one way being the support of manufacturers participating in inter- national exhibitions, beginning with the Philadelphia and Sydney exhibitions of 1876 and 1879 respectively. But the most remarkable illustration of State intervention on behalf of industry and trade is furnished by Prince Bismarck's active promotion of colonial enterprise.^ It can hardly be said that the Chancellor here inaugurated an entirely new departure in German politics, for, long ago though the incident took place, Brandenburg had in the days of the Great Elector Frederick William secured a footing in Africa. In 1681 this gallant Hohen- zollern established a trading colony on the Gold Coast, and in 1686 made acquisitions north of Senegal, nor would his colonial enterprises have been limited to Africa if death had not removed him in 16S8, for he had purposed colonisation in America. The Great Elector's son, Frederick I. of Prussia, preserved the foreign possessions thus secured, but Brandenburg's (now Prussia's) colonial schemes received no encouragement from King Frederick William I., who, preferring the material equivalent of his trans- oceanic territories to the barren dignity of colonial empire, placed his colonies in Guinea in the market at the sum of 150,000 thalers. No purchaser could be found at the price, and ulti- mately (in 1720) a Dutch trading com[)any became the possessor for 7,200 ducats and twelve Moors, of whom six bore gold chains about their necks. In 187 1 Great Britain acquired Prussia's old Gold Coast colony by purchase, and it is now an appendage of Cape Coast Castle. Arguin, north of Senegal, was captured by the French about the same time that Frederick William I. sold his more southern possessions. From that time down to the re-establishment of the Empire, Prussia kept clear of colonial enterprises, which, indeed, had brought her no glory. Whether the inauguration of a colonial policy, whether the elevation of Germany to the position of a Colonial Power — not ^ " Deutsche Colonialcjescliichte," in two vols., by Max von Koschitzky (Leipzig : Baldamus, 1SS8), is an excellent and comprehensive work on this subject. The Colonial Era. 147 yet, indeed, of high prestige — can be numbered amongst Prince Bismarck's acts ot real statesmanship, is a question which the future will determine. It is far too soon to judge of the colonial developments of German foreign policy. All that can be said is that a beginning has been made in the building up of an empire beyond the seas, and that national honour, if not national interest, requires that, the hand having been put to the plough, there shall be no looking back. To use the words of an authoritative writer on the subject, " the colonial movement has nolens volens become an affair of honour with Germany. . . . The retrogression which some of her friends both at home and abroad so much desire is no longer possible. The motto of every patriotic German is ' Forward ! '" ^ The position could not be better stated. A host of theoretical reasons are often advanced for Germany's colonial departure, but as a matter of fact it was dictated by practical considerations alone, and by few of these. It is not at all a matter of over-population at home or of diverting the tide of emigration into new channels, but simply and solely of trade, new markets, and gold. Probably two millions of Germans have left their country for ever during the last thirty years, but Prince Bismarck did not decide to encourage the acquisition of colonies in order to establish either Greater or Less Germanics across the seas.2 It is now allowed that in none of the many colonies which have during the last six years been placed under German protection is the climate such as Europeans can tolerate. The Chancellor's colonial policy is but a practical endorsement of the old axiom that " Trade follows the flag." Germany's colonies are intended to offer new markets for her developing industries. The colonial policy of Prince Bismarck is generally regarded as having been inaugurated when the Chancellor on April 24th, 1S84, telegraphed to the German Consul at Capetown authority to immediately place the possessions of Herr F. A. Liideritz, a Bre- men merchant, in South-west Africa — by name Angra Pequena — ' Johannes liauingailcu in " Die dcuUchen Kolonien und die nalionalcn Intercsscn," pp. 8, 9. (Cologne, 18S5 ) ' tiee Appendix E for Prince Bismarck's views on emigration. 148 Bismarck and State Socialism. under the protection of the Empire. But the colonial idea was in the air long before that. It derived a certain prominence in 1880, when the Imperial Government proposed to afford the Deutsche Seehandlungsgesellschaft, a company engaged in foreign trade, financial assistance, in order to enable it the better to main- tain its prestige in the South Seas, especially in the Samoan Islands. This company intended, helped by imperial gold, to take over the lands and plantations owned in the South Seas by a Hamburg firm, and the Reichstag was asked to empower the Chancellor to guarantee the shareholders 4^ per cent, interest on their investments for twenty years, if necessary, the subsidy not, however, exceeding 3 per cent, of the paid-up capital. This pro- posal was promptly rejected, and the Government made no further attempt to gain for it the Reichstag's favour. Speaking on Dec- ember ist, 1884, Prince Bismarck said that his Parliamentary defeat on this question damped his colonial ardour, and it was only when, four years later, he believed that the country was with him that he again ventured to take up the colonial question. While Germany laid the foundation of a colonial empire by the acquisition in 1884 of South-west African territory, she had already put out feelers in West Africa the year before. In the summer of 1882, Great Britain and France concluded a convention delimit- ing and restricting their respective spheres of influence on the West Coast. Other countries were taking stock of their interests in West Africa, and Germany, not desiring to suffer disadvantage, followed the example. In a circular letter of April, 1883, the Foreign Ofiice asked the Senates of the Hanse Towns to state their wishes and possible complaints regarding trade and navi- gation in that part of the world. At this time Hamburg firms were established in Sierra Leone, Liberia (Monrovia, Grand Bassa, Sinoe, and Cape Palmas), the Gold Coast, Accra, Wydah, Little and Great Popo, Porto Novo, Lagos, Cameroon, and the coast of Biafra, Gaboon and the neighbourhood, Ambriz and Kinsembo. Bremen firms were also established at many points of the West Coast, and the North German and Basel Missionary Societies had stations in various places. The Senate of Hamburg readily ac- knowledged the fair treatment and willing protection granted by the British authorities to Germans resident in British colonies and The Colonial Era. 149 settlements, but did not conceal the disadvantages under which German trade was carried on in the absence of German rights of suzerainty and therefore of interference on the African coast. It therefore urged the Government to acquire a naval station and a piece of coast-land on the West Coast for the establishment of a trading colony, a recommendation which the Hamburg Chamber of Commerce supported. The Government at once decided to appoint a commissioner for the care of German commercial interests in West Africa, and to station ships of war on the coast. Dr. Gustav Nachtigal was the official sent out, and his instructions, as contained in a letter of May 19th, 1884, were to secure a preponderance of influence for Germany in Angra Pequena, the coast between the Niger delta and Gaboon, in the Cameroon region, and Little Popo. Dr. Nachtigal soon proved himself a zealous colonist, hoisting his flag at some points — as at Benita — where, according to his own reports sent home, other countries evidently had prior rights. The permanent acquisitions of the year 1884 were Angra Pe- quena (with Great Nama Land and Damara Land), Togo Land, Cameroon, some East African territories, and part of New Guinea. Angra Pequena was annexed contrary to the wish of the Cape Government, and dilatoriness on the part of the Colonial Office in London was alone responsible for the loss of this territory to the British Crown. It was only after the German Foreign Office had for many months vainly urged Lord Granville to state whether or not England laid claim to the country, that Prince Bismarck gave instructions for the hoisting of the German flag at various points on the coast from Cape Frio in the north to the Orange River in the south, the British possession of Walfisch Bay being, of course, excluded. At this time a veritable colonial fever infected the people of Germany, and the newspapers wrote about little else than the expansion of the Empire. Speaking in the Reichstag on June 26th, 1884, Prince Bismarck explained the Government's attitude in the following plain words : — " As regards the colonial question in the narrower sense of the words, I will explain its genesis. We were first induced, owing to the enterprise of the Hanseatic people — beginning with land pur- 150 Bismarck a)id State Socialism. chases and leading to requests for imperial protection — to con- sider whether we could promise protection to the extent desired. I have not abandoned my former aversion to colonies— I will not say colonies after the system mostly adopted last century, the French system, as it might now be called — but colonies which make a strip of land their foundation, and then seek to draw emigrants, appoint officials, and establish garrisons. This mode of colonisation may be good for other countries, but it is not practicable for us. I do not believe that colonial projects can be artificially established, and all the examples which Deputy Bam- berger advanced as warnings in committee were cases in which the wrong way had been taken : where people had wished to con- struct harbours where there was no traffic, and build towns where there were no people, the intention being to attract people by artificial means to the place. Very different is the question whether it is expedient, and whether it is the duty of the German Empire, to grant imperial protection and a certain amount of support in their colonial endeavours to those of its subjects who devote themselves to such undertakings relying upon the protec- tion of the Empire, in order that security may be ensured in foreign lands to the communities which grow naturally out of the super- fluous strength of the German body politic. This question I answer affirmatively : I certainly do so less reservedly from the standpoint of expediency, though from the standpoint of the State's duty I do so unconditionally. . . . " My intention, as approved by the Emperor, is to leave the responsibility for the material development of a colony, as well as its inauguration, to the action and the enterprise of our seafaring and trading citizens, and to proceed less on the system of annex- ing the transoceanic provinces to the German Empire than that of granting charters, after the form of the English Royal Charters, encouraged by the glorious career which the English merchants experienced in the foundation of the East India Company ; also to leave to the persons interested in the colony the government of the same, only granting them European jurisdiction for Euro- peans and so nmch protection as we may be able to afford without maintaining garrisons. I think, too, that a colony of this kind should possess a representative of the Imperial Authority with the The Colonial Era. i;i title of Consul or Resident, whose duty it would be to receive complaints ; while the disputes which might arise out of these commercial enterprises would be decided by one of our Maritime or Mercantile Courts at Bremen, Hamburg, or somewhere else. It is not our intention to found provinces but commercial under- takings." In January, 1885, the Chancellor could say that "the colonial movement has been in flux for two years, and the reception given to it has far surpassed my expectations." He complained, how- ever, that the Reichstag handicapped him seriously, for there the Radicals disputed every proposal of the Government for the strengthening and the extension of the young colonial empire. Early in the year he threatened to abandon his colonial policy unless the hostile attitude of the Reichstag were modified. There had been a sanguinary conflict between the German marines and the natives in Cameroon in December, 1884, and the Radicals made this untoward incident and the appearance of strained relations with Great Britain at the time a pretext for renewed opposition. Speaking on January loth, 1885, the Chancellor denied that there was any likelihood of a quarrel with this country either then or at any time, and he used these noteworthy words : — " I absolutely dispute this possibility ; it does not exist, and all the questions which are now a subject of dispute between us and England are not important enough to justify a breach of the peace between us either over there or on our part in the North Sea, and I do not know what other disputes can arise between us and England ; there have never yet been any. So far as I can remember we have only once in our history been at war with England; that was in the years 1805 and 1806. I will not refer to details here, but the situation was a completely unnatural one, for the Prussia of that day was coerced by the overbearing France. So far as my diplomatic experience goes, I can conceive of no cause that could possibly lead to hostility between us and England ; an inconceivable English Ministry, such as neither exists now, nor, judging by the hereditary political wisdom of the English nation, is probable, would have to attack us in the most wanton manner — then, my God, we would defend ourselves ! — but, apart from this improbability, there is no reason for a breach L 152 Bismarck and State Socialism. of the peace, and I regret that the previous speaker has, through his allusions, compelled me even to express my conviction that it is not possible. Our differences of opinion regarding England will never within conceivable time be of such moment that they cannot be removed by honourable good-will and discreet and cautious diplomacy, such as will certainly be exhibited on our side." In 1885 further stimulus was given to the colonial movement by the passing of a law empowering the Government to subsidise mail steamship lines to East Asia and Australia for a period of fifteen years to the extent of ;^2oo,ooo a year. This measure was foreshadowed as early as 1881, but a definite legislative proposal on the subject had to be rejected once by the Reichstag before it could succeed. Prince Bismarck fought for the measure with characteristic energy. " Without subsidised steamers I have no prospect of carrying on a colonial policy," he declared on March 13th, 1885, on which account he originally proposed that the State-supported lines should provide communication between West and East Africa and the home country. Africa was, how- ever, crossed out of the bill, and the Chancellor submitted, with the philosophic remark, " We must take what we can get." Nearly all Germany's colonial acquisitions were secured in the years 1884 and 1885, and those which succeeded Angra Pequena, Cameroon, and Togo Land may now be enumerated. A begin- ning in colonisation was made in East Africa the former year. The Society for German Colonisation sent an expedition out, under the direction of Dr. Karl Peters, with the result that in November and December of 1884 the territories of Useguha, Nguru, Usagara, and Ukami, coast-lands lying opposite Zanzibar, were acquired by treaty with the chiefs. Letters of protection were granted the following year to the company, which now took the name of German East African Company, and entered upon a series of important extensions of territory, including Somali Land to the north. The establishment of German influence in East Africa was not secured without serious trouble with the Sultan of Zanzibar, and at one time warlike measures were contemplated by Germany. Towards the close of 1886 Great Britain and Germany arrived at an agreement intended to secure the rights The Colunial Era. T53 of the Sultan and to determine the respective spheres of influence of the two European Powers in East Africa. This, however, did not prevent the Company from falling out with the Zanzibar potentate for a second time in 1888, when serious outbreaks oc- curred in the interior, fomented, it is alleged, by the Sultan. As a consequence the Comi)any's territories became disorganised, and a large part of the work of subjugation and civilisation already achieved was undone. Dr. Peters, the Company's pioneer and virtual founder, conducted an expedition in 1889 from the Zanzi- bar coast into the interior in search of Emin Pasha, and the report of his death reached Europe at the end of the year, though its truth has not yet been confirmed. In 1885 Germany's influence in East Africa was extended by another company of capitalists who acquired Vitu (Suaheli Land), an equatorial territory, wiiich was forthwith placed under imperial protection. With this country Germany, or rather Prussia, had had relations since 1867. It was likewise in 1884 that colonisation really began in New Guinea. In that year the territories of the " German Trading and Plantation Company " and of a Hamburg firm of merchants in that island passed into the hands of the New Guinea Company, to which letters of protection were granted in 18S5. In April of the latter year a treaty was concluded between Great Britain and Germany determining the respective spheres of influence of the two countries in New Guinea. The island is now divided amongst three States. Great Britain possesses the southern portion, opposite Australia ; Germany the northern i)ortion (called Kaiser Wilhelmsland) and the Bismarck Archipelago (New Britain Archi- pelago) ; and Holland the western portion. The possessions of the New Guinea Company, which in 18S7 drew the Solomon Islands within its net, extend to more than half the area of the German Empire. By treaty of April 6th, 1886, the limits of the German and British spheres of influence in the Western Pacific — " for the purpose of this declaration," runs the agreement, " the expression Western Pacific means that jxart of the Pacific Ocean lying between the 15th parallel of north lalilude and the 30th parallel of south latitude and between the 165th meridian of longitude west and the 130th meridian of longitude cast of Greenwich " — have been carefully defined. 154 Bismarck and State Socialism. In the summer of 1885 the Caroline Islands, lying north of New Gtiinea, were placed under German protection ; but Spain at once vigorously protested, and on the dispute being referred to the Pope, she was found to have prior rights, and the annexation was consequently renounced. As recompense, Germany the same year took the unclaimed Marshal Islands, likewise in the South Seas, so far the smallest territory placed under German protection, a territory whose trade had for many years been in German hands. The last edition of "Perthes' Atlas" (1889) gives the follow- ing table of Germany's colonies :— Africa : Square kilometres. Population. Togo ...... 1,300 40,000 Cameroon ..... 40,000 480,000 Damara and Nama Land . . 650,000 150,000 Usagara, Useguha, etc (East Africa) 61,000 750,000 Vitu 1,200 15,000 ■ 753,500 1,435.000 Oceania : Kaiser Wilhelmsland ... 181,650 110,000 Bismarck Archipelago . . . 47,100 190,000 Marshal Islands .... 400 11,000 229,150 Totals . . . 982,650 1,746,000 So far as it is possible to judge, the measures taken to establish for Germany a colonial empire do not offer brilliant prospects, but the ultimate results will naturally depend in great measure upon the foresight displayed and the discretion exercised by those private individuals upon whom depends the development of most of Germany's transoceanic acquisitions. With three exceptions — Cameroon, Angra Pequena, and Togo, which are administered as Crown colonies — these territories are left to private enterprise, though full imperial protection is guaranteed. It is significant, however, that Prince Bismarck has already been compelled by stress of circumstances to intervene to a far greater extent than he at first contemplated on behalf of purely com- mercial interests. The troubles which occurred in East Africa towards the close of 1888 led to the employment there of both naval and military forces, an eventuality which the Radicals in the Reichstag professed to have foreseen. When the intervention Tlie Colonial Era. 155 of the Empire was debated in January, 1889, the Chancellor used words which showed that his heart was not thoroughly won to the colony movement. " To this day," he said, " I am not a ' colony man,' and I entertain the gravest apprehensions on the subject, but I was compelled to yield to the general demand of the nation. I ask the assent of the lawful Assembly of the Empire to my action. If it repudiates my action, I can only admit that I have been mistaken. I shall then give up all further l)lans. The coast territory had been acquired by a German com- ])any. It is, at all events, very important and must be retained. I cannot burden myself with the reproach of posterity that I failed to protect Germans and German possessions. Neither in three weeks, nor three months, no, nor in three years, can one look for results ; but perhaps in thirty years' time people may bitterly rue the neglect of to-day. If the locomotive of the Empire has struck out a track for itself, I will not be the one to throw stones in its way." It is not to be denied, too, that the national enthusiasm for colonial enterprise has somewhat cooled down after it has been found by experience that the way to foreign empire lies through sacrifice both of life and treasure.^ ^ Naturally enough the colonial movement has called into existence a host of societies, associations, and companies, incKulint; (i) the German East African Company ; (2) German Colonial Association ; {3) Society for German Coloni- sation ; (4) New Guinea Company ; (5) East African Plantation Company ; (6) Colonial Society for South- West Africa ; (7) Vitu Company ; (8) German West African Company ; {9) Central Association for Commercial Geography and the Promotion of German Interests Abroad ; (10) West German Associa- tion for Colonisation and Export; (il) South Brazil Colonisation Society; (12) German Society for South America ; and (13) Hermann Society for German Colonisation in South America. Since the above chapter was written, a Colonial Department has been formed at the German Foreign Office under Dr. Krauel. APPENDIX. ^.—WAGNER'S STATE SOCIALISTIC PROGRAMME. (See Chapter L, page 12.) In the first of two articles — important for the studying of his position — contributed in 1887 to the Tiibinger Zeitschrift^ Professor Wagner formulates a systematic State Socialistic programme as follows : — *' I. A better system of production, by means of which production may above all things be assured an ordered course, instead of the utterly irregular one which prevails at present. Prevention of the employment of ' economic conjunctures ' by individuals at the expense of others ; therefore, checks against speculation. More compre- hensive participation by the mass of the population, especially by the working classes, but also by other people in humble positions, in the material benefits and the blessings of civilisation caused by the increase of the productive forces ; therefore, increase of wages both absolutely and relatively, considered as a quota of the produce, assured employment, restriction of the hours of labour, especially of daily labour, to an extent called for by sanitary and moral con- siderations, and suited to technical circumstances at any given time, the term varying, of course, in different branches of production ; exclusion, as far as possible, of children from paid employments, especially when the conditions are sanitarily and morally dangerous ; similar restriction of female work, particularly in factories ; adequate precautions against accidents during employment and provision for their consequences ; insurance against sickness, incapacity, and old age, with provision for widows and orphans. Consequently special development of all the legal maxims, both in public and civil law, measures, and institutions which are included in the catchwords ' protection of the working-man ' and * industrial insurance,' or * in- dustrial insurance legislation.' " II. Inclusion in the administrative duties of the State, the parish, and the other public bodies of such measures as conduce to the moral, intellectual, sanitary, physical, economic, and social advance- 156 Appendix. 157 ment of the mass of the people ; so far as may seem necessary and expedient the expenditure of public money for these purposes, with- out fear of the 'public Communism' which would to some extent be thereby encouraged. This implies the recognition of the principle of State help —legislative, administrative, and financial — for the lower classes conjointly with self-help and the co-operative system. "III. Adjustment of financial arrangements in such manner that a larger part of the national income, which now falls, in the form of rent, interest, undertaker's profits, and profits from ' conjunctures ' [profits due to speculation, chance, spontaneous increase in values, etc.], to the class possessing land and capital and carrying on private undertakings, may be diverted into public channels. Transference to the State, parish, etc., of such land, capital, and undertakings as may economically and technically be well managed in public hands, and such as most easily develop in private hands into actual mono- polies, peculiarly tend to enterprise on a great scale, or even now are carried on by public companies, a form of undertakership which in its advantages and defects approximates to public enterprise both economically and technically. . . . (Here Wagner proposes to place such undertakings and institutions as means of communication and transport, the banking and insurance systems, water and gas works, markets, etc., in the hands of the State or the parish. His idea is that the State and public bodies would and should deal more considerately and generously with their officials and employees gene- rally than private undertakers and capitalists, and that their good example would be a social blessing.) "IV. Public revenue to be so raised as to allow of the 'Com- munistic' character of public bodies, above described, being developed wherever decided objections, consequent upon the peculiar circum- stances of the case, do not exist. This 'Communistic' character to be strengthened in favour of the poorer and socially weaker classes, with whom the economic and social struggle for existence and for social advancement is severest, by means of a system of adminis- trative measures calculated especially to benefit them, yet the cost of which shall be defrayed by the general revenue and taxes. But this 'Communistic' character of State activity to be weaker where the interests of the well-to-do and richer classes of society come especially or exclusively into question. Here expenditure should be rather covered by a just system of taxes — including taxes based on the principle of taxation according to benefit — than by the use of the general revenue. This implies the regulation of the post, telegraph, and railway tariffs, judicial charges, school fees, etc. 158 Appendix. " V. Taxation to be so adjusted that, besides fulfilling its primary function, that of providing the revenue needed to cover public requirements, it may as well as possible fulfil a not less important indirect purpose, which is twofold : (i) regulative interference with the distribution of the income and wealth of private persons, so far as that distribution is the product of free economic intercourse — as by the medium of prices, wages, interest, and rent — with a view to counteracting the harshness, injustice, and excessive privileges caused by the distribution obtaining in this intercourse ; (2) and at the same time regulative interference, supported necessarily by further administrative measures, and eventually by compulsion (as in the domain of industrial insurance) in private consumption. This latter can be done by making the lower classes provide — by means of direct and indirect taxes, especially indirect (excise), which in this connection are often very suitable — the revenue necessary for administrative purposes calculated to benefit them, this being effected by diverting income which they may be applying to improper, perhaps injurious, or at least less necessary and wholesome purposes (e.g.^ drink), to purposes more beneficial to society, the class, or the individual. This two-sided policy of taxation I call social. The second side here advanced ... is based, as concerns the mass of the population, the lower labouring classes, on the assumption that in the truest interests of the nation a guardianship may and must be exercised over the national consumption or over the application of income to personal purposes." 5.— THE " BUBBLE PERIOD" OF 1873. {See Chapter IV., page 40.) Some official statistics employed by the Government in justifying a new Company Law introduced in the Reichstag and passed June 28th, 1884, throw vivid light upon the financial rogueries of this period. It appears that there had liquidated up to that year — Of 203 companies established before 1871, 30, or 15 percent, ,, 203 ,, ,, in 1871, 52 ,, 2S"6 ,, ,, ,, 478 ,, ,, ,. 1872, 138 ,, 29 „ ,, ,, 162 ,, „ ,, 1873, 67 ,, 41 „ 30 •• •> •• 1^74. 14 .. 47 .. .. ,, 3 II 11 .. 1875, none ,, 25 ,, ,1 after 1875, 3, or 12 ,, ,, ,,63 ,, 11 time unknown, 14, ,, 22*2 „ „ Further, there had gone into bankruptcy — Appeiidix. 159 When established. r'ercentage. ^!arks. Before 1871 II 5'4 with paid up capital of 49,829,124 In 1871 14 6-9 „ ,, 16,484,337 1872 37 79 ., 59,404,530 ., 1873 8 5-6 .. „ 4,995,000 ,. 1874 5 167 ,. ,, 1,625,000 ,. 187s I 33'3 ,, 2,550,000 After 1875 I 4 >• >> ,, 1,800,000 Time unknown 2 ,, 960,000 137.647.991 The net result was that of the 203 companies founded in 1871,35 educed their capital, 52 liquidated, and 14 went into bankruptcy ; of frie 47S companies founded in 1872, 91 reduced their capital, 13S liqui- dated, and 38 went into bankruptcy ; and of the 168 companies which fell to 1873, 22 reduced their capital, 67 liquidated, and 9 went into bankruptcy. The loss to shareholders could not be accurately fixed, jut by liquidations and bankruptcies a loss of 345,628,054 marks had been suffered up to 18S4. C— THE TOBACCO MONOPOLY BILL. {See Chapter V Lepage 67.) A momentous project of State Socialism such as is contained in the Tobacco Monopoly Bill deserves nearer examination. The measure which the Reichstag was asked to adopt in 18S2 provided that the manufacture of raw tobacco and the production of manufac- tured tobacco should only take place in establishments appointed for the purpose by the ri'gie, except in so far as tobacco leaves required manipulation at the hands of the planters and the authorised dealers in raw tobacco. The re-manufacture of products supplied by the regie, and the manufacture out of other materials than tobacco of pro- ducts intended to take the place of smoking tobacco, snutf, or " twist," were prohibited. Manufactures of tobacco could only be sold within the territory of the monopoly by persons authorised by the regie. It was proposed to establish an Imperial Tobacco Office, the head of which should be the Imperial Chancellor. This authority should have the supreme administration of the monopoly, but certain powers were to be devolved upon the various Governments, which should appoint the vendors of tobacco. The customs and excise department would be responsible for the control of tobacco-cultivation, the sanc- tion and control of trade in tobacco, the control of imports, exports, and transit of raw and manufactured tobacco, as well as the watching of the frontiers for the prevention of illicit traffic. As to the culti- vation of tobacco in Germany, it was proposed to allot each year's 1 60 Appendix. requirements amongst the various States, according to a proportion to be always fixed by the average area cultivated during the six preced- ing years. The Governments of the States would, however, determine in which excise districts and parishes the cultivation of tobacco should be carried on for the r^gie and for export. For the production of manufactured tobacco for the r^gie, it was proposed to establish raw tobacco warehouses and tobacco manufac- tories, but the preparation of tobacco might still be carried on as a house industry under control of the authorities. The existing location of the tobacco industry in the various States was to be made the stan- dard for the continuance and extension of the same. Tobacco manu- factories were to be exempted from taxation either by State or parish. It was also provided that the raw tobacco required by the regie should to the minimum extent of two-fifths be of home production. Other provisions related to prices and the introduction of foreign tobacco by travellers. The bill provided for the compensation of all persons who should suffer by the prohibition of the private manufacture and sale of tobacco products. Manufacturers and dealers in raw tobacco whose factories or warehouses were depreciated by reason of the introduction of the monopoly would receive money compensation equal to the decrease in value unless the buildings were acquired by the regie. Tobacco manufacturers not selling their factories to the regie and dealers in raw tobacco would also receive compensation proportionate to the diminution of their earnings, provided that they had been en- gaged in the tobacco trade for at least four years, dating from the publication of the law, and that their business was a source of liveli- hood. Personal compensation of this kind would be based on the average net profits of a business during the years 1876 to 1881, but with the exclusion of the best and the worst business year, and would be as follows : — Duration of business. Manufacturers. 4 to s years exclus. jj times S .. 6 2i ,, 6 ., 7 3, „ 7 .. 8 3l „ 8 „ 9 4 >. 9 ,. 10 4* ,, 10 years and over 5 .. Dealers in raw tobacco, times the average yearly net profits. r By net profits was to be understood the gross revenue after deduc- tion of business costs and 5 per cent, interest on invested capital. Compensation was also to be allowed to all dealers in tobacco pro- ducts and all adult workpeople in the tobacco industry and trade who were not retained in the service of the regie. The same principle Appendix. i6l Duration of em ployment. Workpeople employed in the maniifactur* of tobacco. 4 to 5 years exclus. 2 times I 5 .. 6 6 ,, 7 7 .. 8 8 ., 9 9 .> 10 2i .. 1 |j :; : 4 .. I 4i .. lo years and ovei 5 .. 2 being followed as in th^ compensation of manufacturers and raw to- bacco dealers, the indemnities payable were as follows: — Tobacco dealers and employers in the tobacco trade. f times the average yearly salary, \ wages, or net profits. The concluding provisions laid down conditions for the cultivation, sale, and export of tobacco, specified the control to be exercised by the authorities, and fixed the penalties incurred by reason of infringement of the law. The net revenue from the monopoly was to l)e handed over to the States in the measure of their share in the population of the monopoly area. It was proposed that the law should enter into force on January ist, 18S3, so far as regarded the cultivation of to- bacco, and the rest of the provisions on July ist following, except that trade with tobacco products would be allowed as before until January ist, 1884. The Government drew out a balance sheet for the first year of the monopoly as follows : — Receipts. Sale of 1,512,998 cwts. of products: 587,528 cwts. of cigars 749,857 ,, smoking tobacco 122,425 ,, snuff 45,910 ,, ''twist" tobacco 2,628 ,, cigarettes. 4,650 ,, foreign cigars . Deduct sale fees . , Gross revenue of the r^^e . Marks. 280,413,947 67,187,169 15.548,051 8,378,502 1,011,780 16,030,875 388,570,324 40,799,882 347.770.442 Expenditure. General management Management of manufactories and warehouses . Wages : (a) 81,000 workpeople at 577 Mks. (d) 1,000 overseers at 1,200 ,, Cost of raw material : /It... .1 ( q-3,Qi2 cwts. at 144 Mks. la) toreign tobacco < S-*^ o ^ ' ^ (845,214 ,, 55 bo ,, (d) Home tobacco, 626,084 cwts. at 35 Mks. Marks. 385,000 2,314,000 46,737,000 1,200,000 13.523.328 47,162,942 21,912,940 1 62 Appendix. Marks. 5. Purchase of 4,650 cwts. of foreign cigars = 32,55o thousand at 200 Mks. per looo .... 6,510,000 6. Materials, etc. 16,379,565 7. Supervision of tobacco cultivation .... 1,000,000 8. Transport of raw tobacco and finished products . 5,500,000 9. Maintenance of buildings and repairs of machinery . 1,200,000 10. Interest on a capital (including the reserve) of 220,000,000 Mks., and redemption of the same, to- gether a,\ per cent 9, 350,000 173.174.775 Leaving a balance of . . 174,595,667 Deduct further the interest on the aggregate amount of com- pensation, estimated at 257,000,000 Mks., at 4^ per cent., in- cluding redemption .... .... 10,922,500 Net revenue . . . 163,673,167 or something over ;^8, 000,000 Z>.— RESOLUTIONS OF THE LABOUR CONFERENCE. {See Chafiier VIII., page 108.) The International Labour Conference, which met in Berlin on March 15th, 1890, sat for exactly a fortnight. The resolutions adopted regarding the questions submitted are as follows : — I. Regulation of Work in Mines. (a) Should underground employment be prohibited in the case (i) of children under a certain age, and (2) in the case of females f It is desirable (i) that the lowest limit of age at which children should be admitted to underground work in mines be gradually and as much as possible raised to the age of 14, while for southern countries this limit might be fixed at 12 years ; (2) that underground work should be forbidden for females. (b) Should a restriction of the duration of the shifts be prescribed for mines in which work is particularly dangerous to health ? It is desirable that, in cases where engineering skill has not suc- ceeded in obviating the dangers to health which are a natural risk, or are incidental to the peculiar manner of working certain mines, the duration of the shifts should be limited, the putting in practice of this suggestion, either by law or administrative measure, or by agreement between employer and workmen, or otherwise, being left to each country, according to its principles and practice. (c) Is it possible to subject work in mines to international regulations in order to assure regularity in the output of coal ? It is desirable that the engineers entrusted with the working of the mines should, without exception, be men whose experience and capa- Appendix. 163 bilities have been duly tested. That the relations between the miners and the mining engineers should, as far as possible, be direct, and thus calculated to foster a feeling of mutual confidence and respect. That a continuous effort should be made to increase the measures of prevention and relief which each country, according to its customs, has organised to protect the workman and his family against the con- sequences of illness, misfortune, premature incapacitation, old age, or death, and which are designed to improve the lot of the miner and to attach him to his calling. That an effort should be made in order to ensure continuity in the production of coal to obviate strikes. Experi- ence shows that the best means of preventing strikes is for masters and men, in all cases where their differences cannot be adjusted by direct agreement, to agree to invoke the decision of an arbiter. II. Regulation of Sunday Labour. (a) Should work as a rule be prohibited on Sunday except in case of need f It is desirable (i) that without prejudice to the exceptions necessary in each country, or to the requisite postponements of the day, one day of rest in each week should be ensured to all protected persons (chil- dren, youths, and women) ; (2) that one day of rest should be allowed to all industrial workmen ; (3) that the day of rest for protected work- men should fall on the Sunday ; and (4) that the day of rest for indus- trial workmen should also fall on a Sunday. (b) What exceptions should be allowed f Exceptions are permissible (i) with regard to occupations which on technical grounds necessitate continuity of production, or which supply to the public necessary products whereof delivery must be made daily ; (2) with regard to certain occupations which on account of their nature can only be pursued at certain seasons of the year, or which are dependent on the irregular working of natural forces. Even in the case of such exceptions, the workmen should have every other -Sunday free. (c) Should these exceptions be determined by international agreement, by law, or by administrative measures f With a view to determining the exceptions on uniform principles, it is desirable that their definite regulation should be by arrangement between the various Governments. 1 64 Appendix. III. Regulation of Children's Labour. (a) Should children up to a certain age be excluded from industrial work ? It is desirable that children of both sexes who have not yet reached a certain age should be prohibited from being employed in industrial occupations. (b) How is the age to which such, a prohibition shall continue to be fixed, and should the age be the saine or different in various branches of industry ? It is desirable that the limit should be fixed at 12 years, save in southern countries, where it might be 10 years, and that the limit of age should be the same for all industrial occupations without exception. (c) What restrictions should be imposed on the time and manner of employment for children within the permissible limit f It is desirable that the children should previously have fulfilled the requirements of elementary education ; that children under 14 should not work either at night or on Sunday ; that the aggregate hours of work should not amount to more than six hours, with an interval of at least half an hour ; that children should be prohibited from engaging in unhealthy or dangerous occupations, or at least should only be per- mitted to do so under protective conditions. IV. Regulation of Youths' Labour. (a) Should the industrial work of young persons who have passed the age of child- hood be restricted, and, if so, up to what age f It is desirable that young workpeople of both sexes between 14 and 16 should neither work at night nor on Sundays. (b) What restriction should be prescribed f It is desirable that the aggregate daily hours of work should not exceed ten, with intervals amounting in all to at least one hour and a half (c) Are deviations from the general rule to be allowed for certain branches of industry ? It is desirable that for particular branches of industry certain excep- tions should be allowed ; that for unhealthy and dangerous occupations restrictions should be imposed; and that young people between 16 and 1 8 should be assured a certain measure of protection as far as regards (i) maximum day's work, (2) night work, (3) Sunday labour, and (4) employment in peculiarly unhealthy and dangerous occupations. Appendix. 165 V. Rkgulation of Female Labour. Should the work of married women be restricted by day or by ni^htf Should the work of all females {women and girls) be subjected to certain restrictions t What restrictions would be advisable f Should exceptions be provided for in the case of individual branches of industry, and, if so, for 'L'hich f It is desirable (i) that girls and women above 16 years of age should not work either at night or on Sundays. (2) That the total number of working hours should not exceed eleven daily, and with intervals amounting, in all, to at least one hour and a half. (3) That exceptions should be admissible for certain branches of industry. (4) That restrictions should be imposed in the case of occupations especially unhealthy and dangerous. (5) That mothers should only be allowed to return to work four weeks after their continement. ^.—PRINCE BISMARCK'S VIEWS ON EMIGRATION. {See Chapter XI., page 147.) Prince Bismarck's views on emigration are so interesting that il is well worth while to quote several passages from his speeches bearing upon the subject. Speaking in the Reichstag on June 14th, 1882, he said : — " I have often drawn attention to the fact that emigration is not a consequence of over-population, for the emigration is smallest from the over-populated parts of the country ; it is greatest from the least populous provinces. . . . Why do people emigrate especially from the agricultural provinces ? Because these parts have no industry, and because the industry which was formerly tolerably busy there has been overburdened and suffocated by free trade- Frederick the Great fostered industry in those provinces. Every small town in Pomerania, Posen, and West Prussia had a large woollen and cloth industry, and isolated remains still exist ; there are also woollen weaving works, but they are in decay. After the provinces of Pomerania, Posen, and West Prussia [in extent of emi- gration] come Mecklenburg and Schleswig-Holstein. Hanover is also largely represented, because, apart from a few centres, par- ticularly the city of Hanover, it has little industry. In a purely agricultural population the career which a labourer can follow is straightforward and without change ; when he is twenty-eight or thirty years old he is able to overlook it to the end ; he knows how much he can earn, and he knows that it is impossible by means of an agricultural occupation to raise himself above his condition. . . , 1 66 Appendix. In industry a workman cannot foresee how his Hfe will clost:, even if he should not raise himself above the common level, and should have no connections. We have very many manufacturers who, in one or two generations, have risen from being simple artisans into millionaires, powerful and important men ; I need not name any such men to you — the names are on everybody's lips, and they are also on the lips of the working-man. For the artisan industry has the marshal's baton, which it is said the French soldier carries in his knapsack : this raises and animates the hope of the artisan, and he does not need to become a millionaire. Industry furnishes a thousand examples — such as I have myself seen in the province of Pomerania, little affected though it is by industry — of how the man who as agricultural labourer never gets beyond ordinary day wages, can in the factory, as soon as he shows more skill than others, earn much higher wages, and eventually rise to the position of overseer, and even higher ; indeed, skilled workmen, who often go farther as self-taught men than the most learned technologists, may hope to become partners of their employers. The prospect keeps the hope active, and at the same time increases the pleasure in work. Industry and agriculture should supplement each other ; industry is the con- sumer of the local agrarian products which agriculture could not otherwise sell in a waste district, and on the other hand, the farmer is the customer of industry, in case he has money. I believe that the lack of an industry — in other words, the lack of protection for national labour and of protective duties — is, equally with the pressure of direct taxation, the great cause why the least populous provinces have the greatest emigration. It is the destruction of hope in a man that drives him to emigration. The terra mcog/iita abroad offers him every prospect of being something there, though it has been impossible here. This is why rural labourers emigrate — because they have no industry in their neighbourhood, and because they cannot in retail convert the produce of their labour into money." Prince Bismarck advanced the same theories, though in less detail, in the Reichstag on March 8th, 1879. Again, he said, on June 26th, 1884 : — " I combat the promotion of emigration, A German who puts away his fatherland as he would an old coat is no longer a German for me ; I no longer regard him as a fellow-subject." On January 8th, 1885, he said : — " There are two kinds of emigrants : first, those who emigrate because they still possess the needful money ; and then those whom I would call the mal-contents." At the same time he added : " The Appendix. 167 statistics of emigration are a thoroughly accurate measure of the increase of our prosperity. The better off we are, the greater the emigration. The fact that the emigration of 1880-81 was higher than before is a proof that protective duties have had an effect upon our industry, and that there were many more people in that year who possessed money necessary for the sea passage and the purchase of land. That alone is the index of emigration. In the years of atrophy, when we had free trade, emigration decreased because people had not money enough to pay for their sea passage and for land. In the year 1871-72, when everybody with us felt himself rich, owing to the French milliards, there were again more people ready to emigrate. I allow that under certain circumstances the desire to escape military service, and, with peasantry, the desire to escape land taxes and high parochial taxes, may also exert an influence, but, on the whole, increasing emigration is an irrefutable proof of increasing wealth and earnings." He spoke, of course, for Germany, and explained that in Ireland it was different, adding that there the people had " less emigrated than been emigrated " at the cost of others. INDEX. Accident insurance, 109-127. Association for Social Politics, 38. Bamberger, 150. Bebel, 33, 44, no. Bismarck, Prince, industrial legisla- tion, 3, 35, 87-108, 109-127. causes of his State Socialistic policy, 37-46- and the "right to work," 19, 35, 36, 118, 119. social principles, 23-36. and the Christian State, 23, 24, 113, 118. and the province of government, 28-31, III, 112, 118. dislike of theory, 26, 54. and his prototype, Robert Bruce, 28. and Productive Associations, 30, 31- and capitalists, 31, 32. and landowners, 32, 33, 34. and peasantry, 33. views on emigration, 55, 165-167. and protection, 47-6i- and fiscal reform, 48-53. 65, 132, 133. 137-144- as State monopolist, 62-71. and Socialism, 35, 63, 64. views on taxation, 68-70, 128- 144. and insurance, 70, 109-127. and State railways, 73-85. objection to bureaucracy, 83, Ii6. Bismarck and hours of labour, 97-106. and industrial insurance, 109- 127. and colonisation, 145-155. friendly feelings towards Eng- land, 151, 152. Brandy monopoly, 62-71. Bubble period, 39, 40, 158, 159. Bureaucracy, Bismarck's objection to, 83, 116. Camphausen, Minister, 41. Catholics and the labour question, 98-106. Children, labour of, 99, 100, 106- 108. Coalition in Germany, right of, 96. Colonial movement, the, 145-155- Conference on labour, International, 106-108. Conservatives and the labour ques- tion, 98-106. Co-operation, 8, 30, 43. Co-operative production, 8, 30, 31. Corn duties, 52, 53, 56-58. Corn trade, decline of, 40, 52, 53, 56-59- Customs tariff, revision of the, 47-61. Delbriick, Minister von, 41, 42, 47, 51. 53- Elector, the Great, 15, 146. Johann Georg, 18. Frederick William, 18, 146. 168 Index. 169 Emigration from Germany, 55, 147. Ethical factor in economical dealings, 7- Factories, regulation of, 95-108. Factory inspection, 96. Fiscal reform, 47-53, 65. Frankenstein, Baron von, 141, Frederick the Great, 2, 15, 16, 20, 21, 31, 92, 102. his views of government, 2, 16- 18. Frederick I. of Prussia, 146. Frederick William I., 15, 18, 146. II., iS. III., 102. Frederick, Emperor, 123. Free Trade in Germany, 20-22, 37, 38-41, 69. Bismarck and, 41, 69. Government, province of, 28-31, iii, 112, 118. Granville, Lord, 149. Guild system, reorganisation of the, 87-91. Held, 5. Hertling, Baron von, 102. Ilofmann, Minister, no. Hours of labour, 8, 96-108. Huskisson, William, 21. Imperial railways, proposed, 73-80. Industrial legislation, 87-108. Industry, effects of protection on, 54, 55. 60, 61. Insurance, Slate, 12, 70, 91-95, 109- 127. Insurance of the working classes, 109-127. Juveniles, labourof, 99-101, 106-108. Labour Boards, 99. Labour Conference, International, 106-10S, 162-165. Labour, hours of, 8, 96-ioS. female, juvenile, and .Sunday, 99-108. organisations, 6. Lassalle, Ferdinand, 8 -10, 30, 43. and the Universal German Work- ing-Men's Association, 30. Liability of employers, 91-95, 109- 127. Liebknecht, 44. List, Friedrich, 21. Lucius, Minister, 59. Liideritz, F. A., 147. Marx, 43. Matricular contributions, the Empire and the, 138-141. Maximum work-day, 96-99. Maybach, Herr, 77, 81, 84. Mohl, Moritz, 84. Monopolies by the State, 12, 62-71, 141. in Germany, ancient, 88, 89. Nachtigal, IDr. Gustav, 149. Objections to State Railways con- sidered, 82-85. Old age, insurance against, 109-127. Peters, Dr. Karl, 152, 153. Post in Germany, the, 85, 86. Postal Savings Bank Bill, 144. Productive Associations, 8, 9, 30, 31. Protection, recourse to, 16, 37-62. effects of, 54-59. Prussia, early economic policy of, 16- 22. Prussian monarchy, characteristics of the, 15, 17, 31. Prussian commcjn law and the right to work, 19. Prussian Fconcnnic Council, 65. Radicals and Industrial legislation, 96, 114-116. I/O Index. Railways, State, ii, 62, 72-85. State railways, 11, 62, 72-85. Railway Board, creation of the Im- monopolies, 12, 62-71. perial, 76. insurance, 12, 70, 108-127. Railway servants, insurance of, 93, 94. Stein- Hardenberg legislation, 19, 20, Richter, Eugen, 29, 44, 64, 78, 88. 34, 63, 87. "Right to work," 19, 35, 36, 118, Stephan, Dr. von, 86. 119. Sunday labour, 96-108. Rodbertus, 8. Taxation, Bismarck's theories of, 68- Samter, 10, II. 70, 128-144. Savigny, 9, 10. direct and indirect, 9, 129-134. Schafflc, Albert, 5. Bismarck's views on exemption Schmoller, Gustav, 2, 3, 5, 96. from, 134-136. Scholz, Herr von, 69. Telegraph in Germany, the, 85. Schonberg, Gustav, 5. Theory of State Socialism, 1-13, 156- Schulze-Delitzsch and co-operation, 158. 43 Tobacco monopoly, 62-71, 141, 159- Sickness insurance, 91-93, 109-127. 162. Smith, Adam, 2. Trade Law, German, 87-91, 100-102. Socialism contrasted with State So- Prussian, 87-89, loi. cialism, 2, 3. Treitschke, Heinrich von, 2, 67. growth in Germany, 37, 42-45. Social- Democracy, German, 43-45, Usury, laws concerning, 143, 144. no, III, 118. Socialistic Labour Charter, 99. Wagner, Adolph, State Socialistic Social Charter of the Emperor Wil- theories, 2-13, 156-158. liam I., 114, 115. 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" A very valuable wnrk of an Italian economist." — West, Reji'. The Labour Question. / T. G. Si'VEi: •' Will be found extremely useful." — Times, British Freewomen. Suicide and Insanity. A History of Tithes. Three Months in a Workshop. Darwinism and Race Progress. Local Taxation and Finance. Perils to British Trade. The Social Contract. J. J. Labour upon the Land. Moral Pathology. Parasitism, Organic and Social. Allotments and Small Holdings. Money and its Relations to Prices. Sober by Act of Parliament. Workers on their Industries. Revolution and Counter-Revolution. Over-Production and Crises. Local Government and State Aid. Village Communities in India. Anglo-American Trade. A Plain Examination of Socialism. C. C. S'lOPi-s, Dr. J. K. Stkahai^ Rtv. H. W. Clak^h., P. GoHRE, with Pref. by Prof. Ei ^ Prof. J. B. Havcrai ; G. H. Bllnde.n. E. Burgis. Rousseau. Editf d by H. J. Tozer.. Edited by J. A. HobsJdn, M.A. Arthur E. GilkS; M.D. , B.Sc. M.vssART and Vandervelue. J. L. Green. L. L. 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