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for Germany and discord among other nations. In 1875, disappointed at the rapid recovery of France after her disasters, and fearing or professing to fear her desire for revenge, he proposed to attack her again. Russia, whom he sounded on the subject, gave him to understand that she should stand by France, and he desisted. In 1887, to frighten France away from a rapprochement to England, he threatened her with war over the Schnaebele incident. Otherwise his policy was that which he thus sketched in his 'Thoughts and Memories':

"We ought to do all we can do to weaken the bad feeling which has been called forth through our growth to the position of a really great Power, by the honourable and peaceful use of our influence, and so convince the world that a German hegemony in Europe is more useful and less partisan, and also less harmful to the freedom of others, than would be the hegemony of France, Russia, or England."

And so, while confining his foreign policy to sowing dissension among other powers and creating the Triple Alliance with Austria and Italy, he bent his efforts to domestic concerns, with the aim of inoreasing Germany's wealth and commercial prosperity.

In the years immediately following the Franco-German war there was much to occupy the attention of the Chancellor. Three years passed before the German army was entirely withdrawn from France. That

army had to be reorganised; Alsace - Lorraine had to be brought into line with the rest

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We will deal first with the question of transport. If the products of German industry were to compete favourably with those of other nations, means of transport must be made cheap and easy. In her rivers and canals Germany possessed the nucleus of a good system of water transport, and their improvement was taken in hand; but as the river and canal system attained its highest development after Bismarok's dismissal, and has an important bearing upon Germany's sea policy, we shall defer treating of this subject till it comes in its place later on.

Until the seventies German railways had been built for the most part by private enterprise, but occasionally private companies had been assisted by the State, and still more rarely the State had itself built strategio lines. But there was no comprehensive railway organisation, no uniformity of rates, no combination for the benefit of passenger traffic or goods traffic. In 1876 1876 Bismarck said

"Germany is divided into sixtyendowed with all territorial and three railway territories, which are feudal rights and privileges, including the right of making war; and

the railway boards avail themselves of these privileges, and even make war against each other, for the sake of power and as a kind of game. In my opinion the railways are intended rather to serve the requirements of trade than to earn a profit for their owners."

He summed up the evils of the existing system, showing how it caused unnecessarily high working expenses, involving high charges to the public, chaos of freight charges (1400 different tariffs constantly changing), and impediments to the direct travel over the country of passengers and goods, and how in consequence it damaged trade and industry. He began by proposing to regulate the tariffs by Imperial law; and again laid stress upon the abuses of the present system. He said that a higher freight rate should be charged to imported goods than to those of home production.

In October 1879 the Minister of Railways brought in a bill for the taking over by the State of the lines owned by private companies, urging that the national interest must take precedence of railway interests, and that the railways must be made truly national for the defence of the country, and for the development of its prosperity.

There is nothing more remarkable in Bismarck's career than this. He hated Socialism; he combated Socialism for all he was worth. But he put theories rudely on one side; he saw that this measure was suited to the needs of his country at the time, and he acted upon his one and only

principle, "Salus publica." In the next few years Prussia bought up all the private lines. Between 1879 and 1905 Prussian State ownership increased from about 4000 miles to 20,000 miles, and private ownership fell approximately to zero.

The other German States followed suit, and before long German railways were a State monopoly. In the ten years from 1886 they increased in growth no less than 66 per cent under the hands of the State, British railways having in the same period increased less than 30 per cent; the rolling stook was more than doubled in the same time, passenger and freight traffic more than quadrupled, and the profits earned in the year 1905 were 7 per cent on the total capital of all the railways of Prussia. The total capital has, moreover, been written down till it stood in 1906 at less than at the time of the purchase. The Prussian State Railways were acquired at cost of 475 millions sterling. Of this 150 millions have been written off, so that they now stand at a value of only 325 millions-less than a third, according to the State Department estimate, of their real intrinsic value.

But Bismarck did not purchase the railways as a profitable investment or a speculation. He bought them to help commerce and industry. And this is what has come about. Freight charges are uniform throughout the country, so much per ton per kilometre for each class of goods. The classes are few and simple, and

it is said to be as easy to calculate the cost of freight for a consignment to any part of Germany as it is to calculate the cost of postage of a letter or a book. Foreign raw material for the use of German manufacturers is carried cheaply, but foreign manufactured goods are made to pay a higher rate than native goods. The charges for both goods and passengers (third and fourth class) are extremely low.

Now we come to Fiscal Policy. The traditional policy of the Zollverein had been Protection. After the Zollverein a period of modified Free Trade ensued. To this, in a letter to the Minister of Finance, Bismarck attributed "the deterioration in the economic position" of Germany, and "the shrinkage in the prosperity of the population," which caused him anxiety in the early seventies. In 1875 he wrote: "Nothing but reprisals against their products will avail against those States which increase their duties to the harm of German exports." The following year he called for proposals from the Minister of Finance, and expressed his his opinion against concluding commercial treaties which would limit freedom of action with regard to tariffs. A year later he wrote: German industries ought to be effectively protected against the injuries at present being inflicted on them." In 1878 he called a conference to consider a revision of fiscal policy, and in that and the following year issued several State papers, advocat

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ing Tariff Reform not merely for the purpose of producing revenue, but for the protection of German industries. And in 1879 he introduced his protective policy in Parliament in a speech in which he said, "In my opinion we are slowly bleeding to death owing to insufficient Protection," and made this remarkable statement

"I see that those countries which possess Protection are prospering, and that those countries which possess Free Trade are decaying. Mighty England, that powerful athlete, stepped out into the open market after she had strengthened her sinews, and said, 'Who will fight me? I am prepared to meet everybody.' But England herself is slowly returning to Protection, and in some years she will take it up, in order to

save for herself at least the home

market."

Here is another paragraph in this speech

"We have opened wide the doors of our State to the imports of foreign countries, and we have become the dumping-ground for the over- -production of all those countries. Ĝermany being swamped by the surplus production of foreign nations, prices have been depressed, and the development of all our industries and our entire economic position have suffered in consequence. If the danger of Protection were as great as we are told by enthusiastic Free Traders, France would have been impoverished long ago, for she has had Protection since the days of Colbert, and she should have been ruined long ago."

For Germany read England; for France and Colbert read Germany and Bismarck, and there is not a word that might not with truth be spoken by an English statesman at the present hour.

And so, in 1879, Germany Protective tariffs and cheap adopted her Protective Tariff, transport have no doubt been a Tariff many times subse- the chief factors in the amazing quently altered and increased, growth of German industries. and under that Tariff Germany But they have not been the has grown to be the commercial only factors. Combination and giant that we see her now. co-operation have been powerful But Bismarck was no bigot. factors in the success achieved. With him theories always gave As an example, let us take the way to practical needs, and two industries already named, finding that the German ship- steel and shipping. Immebuilding industry, owing to the diately after the introduction distance of the seaports from of Protection the various the industrial centres, could firms in the iron and steel not compete with foreign ship- industry commenced to combuilders, he gave the ship- bine into groups in order to builders Free Trade for manu- abolish destructive competifactured as well as raw material, tion. But it was not till 1904 and railway transport at bare that the numerous groups cost rates, so that the German combined into one gigantic iron and steel makers could Steel Trust, including all Gerdump their goods in German many, following the lead alshipbuilders' yards. And so ready given by the coal ingrew up the great shipping dustry, which had formed one industry. In ten years from great Coal Trust. And then the introduction of Protection the German shipbuilders enand the special boons above tered into combination and given, the yearly output of formed the Society of German German shipbuilding increased Shipyards, which embraced no tenfold. Within twenty years less than forty-two separate the number of hands employed shipyards. The shipbuilders increased fivefold, and the fleet had been in the habit of of German merchant steam- ordering their material from ships increased tenfold. one or the other of the smaller steel groups, each of which had to set up a plant to meet all requirements of the shipbuilder. The German Steel Trust at once commenced to introduce a system of specialisation among the various works forming the combine, allotting to each a special class of work, thus doing away with an unnecessary multiplication of plant, and apportioning the work in such a way as to enable each firm in the combine to turn out larger

Now take as an example of a fully protected industry the manufacture of steel. In 1880 Great Britain produced more than twice as much steel as Germany. In 1896 Germany produced nearly twice as much steel as Great Britain. Britain's yearly steel production in those sixteen years increased less than fivefold; German steel production increased eighteenfold. And this, in spite of the distance from the seaboard of the German coal and iron fields.

quantities of steel at a cheaper rate and a higher profit. The shipbuilders found their advantage in this as well as the steelmakers; and now the two Trusts work hand-in-hand, each helping the other. The shipbuilders have learnt how they can adapt their requirements to the capacity of the steel trade, so 28 to ease and cheapen the production of steel; the steelmakers have learnt how to adapt their methods to the requirements of the shipbuilder. All the small agents and middlemen have disappeared. Orders can be placed in the most rapid and economical way through the central Trust, with such certainty that they will be exactly and punctually carried out, that it suits the German shipbuilder better in the long-run to buy from the German Steel Trust than even at a possibly lower price from a British maker. The result is that Great Britain has practically lost the entire trade with Germany in plates and other steel for ships, which only ten years ago amounted to upwards of & hundred thousand tons annually.

Equally wonderful has been the growth of the chemical industries in Germany, in many of which she has gained a virtual monopoly. Yet Germany is dependent upon foreign countries for the raw material of these industries, and to a great extent for the inventions upon which the industries are based. Perhaps the most striking example is that of aniline dyes, made from

coal tar. This remarkable invention is due to Mr W. H. Perkins, an Englishman, but it is in Germany that the invention has been utilised: it is Germany that exports some five million pounds' worth of these dyes annually, largely made of English coal tar. It is Germany that, by the production of synthetic indigo, has thrown a million and ahalf acres in India that fifteen years ago were producing indigo, almost entirely out of cultivation. It is Germany that, through the skill of her chemists, has so extraordinarily increased the yield of sugar from beetroot and made that industry so profitable and that product so cheap, that, besides producing all the sugar required for her population of over sixty millions, she exports ten million pounds' worth annually, and the West Indian sugar industry has been ruined. The output of German chemioal industry-not including sugar, which is agricultural produce is estimated at about £60,000,000 annually, of which £20,000,000 is exported. Nearly 200,000 hands are employed, and their wages amount to nearly ten millions sterling yearly.

We cannot afford space to enter into details of the progress of other manufacturing industries, we must turn to the agricultural industries. Already Belgium had shown how manufactures and agriculture could flourish side by side in the same country; Germany can now show equal results. The growth of her

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