German Finance - Encyclopedia




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"GERMAN FINANCE, 191021 The period from about 1895 up to the outbreak of the World War in 1914 had been one of growing economic prosperity for Germany. From time to time the advance had been interrupted by intervals of depression, but they were short-lived, and when they passed the progress continued. Between 1907 and 1913, for instance, German coal production rose from 143 million tons to 191 million tons, or roughly by one-third; the production of lignite from 621 to 87 million tons, or two-fifths; of pig iron from 13 to 29.3 million tons, or nearly one-half. Germany's imports increased in this period by 2 milliards (thousand millions) of marks 1 (£Ioo,000,000) and German exports by well over 3 milliards of marks (LIso,000,000), the total foreign trade of Germany increasing from 152 milliards (775,000,000) to 20.7 milliards of marks (LI,035,000,000).

German imperial finance reflected economic progress only to a small extent in its budget. Confederation had left the Empire itself in a weak position financially by reserving the most important sources of taxation for the individual component states. The governing theory was that direct taxes appertained to the states, while the Empire must rely on indirect taxation. In spite of the general financial and economic prosperity, the imperial debt had risen in 1910 to 5,016 millions of marks (having been 1,240 millions in 1890, 2,201 millions in 1895, 2,418 millions in 1900, and 3,323 millions in 1905). German statesmanship had been slow to adapt the needs of the imperial budget to the changing conditions. In 1909, however, an important fiscal reform was introduced. New sources of revenue to a total amount of about Soo millions of marks were tapped; the long-continued period of recurring deficits seemed at an end, and the hope of surplus income appeared justified. The additional expenditure on armaments, necessitated by the army estimates of 1912 and the naval estimates of 1913, amounting to about 185 million marks, was covered by increases in the customs duties and new property 1 Up to the outbreak of war, the German mark was practically equal to the English shilling (see Exchange, Foreign). Its subsequent depreciation in value makes it impossible to convert the later figures for paper marks, as given in this article, into their real money value. Only where gold marks are referred to, the pre-war parity with sterling holds good. - (Ed. E. B.) taxes were introduced. It was proposed to cover the extraordinary expenditure, estimated at about one milliard of marks, by a single " defence tax," levied as a capital-tax on properties of io,000 marks up to 15,000 marks at 0. '5%, increasing to 1.5% on amounts of over 5 millions, and as an income-tax, starting with 1% on incomes of 5,000 to 10,000 marks and increased to 8% on incomes of more than 50o,000 marks. This " defence tax," levied in 1914-5, brought in 976.9 millions of marks, but, as events turned out, it was merely swallowed up in the exigencies of war expenditure.

The imperial budgets for 1910-3, for total revenue and expenditure ordinary and extraordinary, showed the following figures, in thousands of marks: - 1910, revenue 2,943,419, expenditure 3,024,260; 1911, revenue 3,057,592, expenditure 2, 8 97,4 0 3; 1912, revenue 2,915,384, expenditure 2,893,337; 1913, revenue 3,698,829, expenditure 3,698,829. There was a deficit in 1910 of 80,841,500 marks, and in 1911 and 1912 there were surpluses of 160,188,800 and 22,046,400 marks respectively.

Table of contents

War Finance

The pre-war " defence tax " was not an organic reform. It had provided the power to attack income and property as a source of imperial revenue, but only once. The Empire thus entered the war with an undeveloped system of taxation - without, indeed, any large current revenue from taxation which (like an income-tax) could easily be increased in proportion with the enormous requirements of the war. To introduce it during the war would not have been an easy matter, and the view prevalent in Government circles was not in favour of such a course. They counted on a war of short duration, and did not wish to exacerbate the feelings of the population, greatly distressed as it was through sacrifice of blood and life in the field as well as through the blockade, by imposing heavy burdens of taxation. They did not wish to interfere with the right of the individual states to obtain their own revenue from direct taxation, and desired to make as little alteration as possible in the existing arrangements. Therefore, the decision arrived at was that the cost of the war should be met not out of taxation, but by the issue of loans; only the interest on the loans issued was to be debited to the current budget and covered by income. The current budget itself was artificially assisted by taking out of it, at first in part and later in full, the largest items, i.e. the current expenses for the army and navy, and debiting them as extraordinary expenses of the war. In the course of the war, other expenses too, only indirectly connected with the war, such as bonuses to civil servants to compensate for the rise in prices, were debited to the war fund. On the other hand the revenue, which it was at first quite impossible to estimate, was simply included in the price of peace, although the most important part of it, for instance the customs revenue, suffered an immediate and very sharp reduction through the blockade and the resulting reduction in imports, as well as the suspension of customs duty on corn, grains and other articles of pressing need, which took place immediately on the outbreak of the war. It was a system which at first seemed to lighten the burden, but afterwards made it only heavier, and which, the longer the war continued, was found less and less adequate.

The German system of war economics was directed by the enormous demands of modern war on men and material on the one side and by the blockade on the other side. Strict economy was to be observed in all that was necessary for the war, especially in raw material required for war purposes and the not less important labour, while distribution was to be organized in such a manner that everybody received at least a share of the necessaries of life. To increase production to the utmost for the requirements of the war, and to make the whole of the economic system subservient to its satisfaction, was from the first the ruling idea. This transference of all economic activity to the needs of the war provided at the same time the financial means of carrying on the war. As the German people were increasingly, if not totally, cut off from foreign supplies, they were more and more dependent on home produce, and the profits of the war expenditure remained for the most part at home. The continuance of the regular savings system, combined with the retrenchment necessitated by the lack of opportunity for spending, liberated funds for investment in the war loans. In this process, however, the stocks of industry and commerce were drawn upon without being replaced; buildings, works and plant were used more fully, without attention being possible to necessary repairs; the agricultural land was farmed without its being invigorated by proper manuring; and finally the holdings of foreign paper and securities were liquidated as far as possible by transference to neutral countries in order to gain the means of paying for obtainable imports. Thus there went on a continuous usingup of the national capital, which was spent by the Government, and became for the private possessor paper mortgage bonds of the Empire.

At the outbreak of the war, loan-banks (Darlehnskassen) for making advances of money were established, which granted loans at a low rate of interest against pledged securities and goods. At the same time, in order to safeguard the gold reserves of the Reichsbank, its obligation to redeem its notes in gold was sustended. The indirect, proportionate " covering guarantees " of the Reichsbank were also abolished, i.e. the provision in the Bank Law that the Reichsbank had to pay 5% per annum to the Treasury on the amount by which the bank-note issue at any time exceeded the cash reserve plus a sum of 550,000,000 marks, or, on the quarterly balance, 750,000,000 marks. The Reichsbank was thus enabled to issue any quantity of bank-notes without increasing the discount rate. This, on the other hand, led to a constantly increasing deterioration of the proportion between the bank-note issue and the means of covering it. Still, the creation of the offices for advancing money (Darlehnskassen) and the abolition of the restriction on the note issue enabled Germany to dispense with a legal moratorium. A kind of substitute for a moratorium was furnished by the regulation empowering the law courts to grant delays, so that they could allow payments of cash and of mortgages to be deferred in cases of necessity. Men who were away at the front were in particular protected from proceedings for the enforcement of judgments. Lastly, debtors unable to meet their obligations were saved from bankruptcy and the consequent wasteful realization of their assets by a law (Aug. 8 1914) which enabled them to apply for an official control of their businesses (Geschditsaufsichtsgesetz). According to this law the debtor could request the bankruptcy court to appoint a trustee to exercise supervision over business assets and their disposal, thus avoiding the personal disabilities and the effects as to property which are the normal consequences of public bankruptcy.

These were, on general lines, the sources whence the subscriptions to the war issues were derived. The Empire made the funds necessary for the war available at the issuing bank by discounting Treasury bills, and then appropriated in regular intervals the accumulated cash of the population ready for investment, by issuing war loans and funding the floating debt.

This system of war finance only succeeded completely up to the autumn of 1916. The first four war loans, with their subscriptions of 4,460 millions (autumn 1914), 9, 060 millions (spring 1915), 12,101 millions (autumn 1915) and 10,712 millions (spring 1916), brought in sufficient to cover the Treasury bills issued up to that time. Up to the autumn of 1915 there was even a considerable surplus, which helped to finance the carrying-on of the war for the succeeding months. But from the autumn of 1916 this condition of affairs was altered. The war loans issued regularly every half-year continued to produce large amounts: 10,562 millions in the autumn of 1916; 13,112 millions and 12, 626 millions in 1917; 15,001 and 10,443 millions in 1918. But the Treasury bills put into circulation regularly increased to a greater extent: in the autumn of 1916, 2 milliards remained uncovered; in the autumn of 1917 the amount had risen to 141 milliards; in the autumn of 1918 to 39 milliards; and in Nov. 1918 when the Armistice was concluded, besides the 98 milliards in war loans there were already in circulation 50 milliards in Treasury bills as floating debt of the Empire, this total being subsequently still further increased.

The reason for this state of affairs was the enormous increase in the cost of the war and the continued rise in prices. The average cost of the war per month was estimated for the first year of the war at 1.7 milliards of marks, in the second year 2 milliards, in the third year 3 milliards, in the fourth year 3.8 milliards, and in the last year 44 milliards of marks. In the extraordinary budgets of the five years 1914-8, the general war expenses were as follows:-1914, 6,935.7 millions of marks; 1915, 2 3,9 089; 1 9 16, 2 4,739.3; 1917, 4 2, 188.4; 1918, 33,928.4. In the same years the total indebtedness of the Empire rose by 11.3, 22.1, 3 0.3, 36.3 and 50.9 milliards; to this must be added 13.5 milliards in obligations undertaken towards Germany's allies. The full amounts of the actual costs of the war, however, are not shown in these figures. Very. considerable sums, as the accounts got more and more in arrears, only became due a considerable time after the war was over. These amounts and the cost of demobilization, reaching additional milliards, burdened for the most part the budgets of the years following.

The enormous increase of the State debt naturally resulted in a proportionate increase in the yearly expenses for interest. Where in 1913 the management and interest of the debt swallowed 147 millions, 375.6 millions were required in 1914, 1,2481 millions in 19 1 5, 2,518.5 millions in 1916, 4,2 4 8 millions in 1917 and as much as 6,4309 millions of marks in 1918. At the same time important sections of the revenue declined. Customs, yielding in 1913 a revenue of 679.3 million marks, provided in 1914-8 only 560.8, 359.9, 34 8.3, 232.7 and 133 millions, the decline being plain evidence of the growing effect of the blockade. In the same way the profitable enterprises of the Empire (posts and telegraphs and railwrs - at that time still not including the lines belonging to the individual states) suffered under the influence of the war, and instead of being sources of revenue became burdens; in 1913 they showed a surplus of 140.9 million marks, but in 1914-8 they required subventions of 53'6 42.2, 5 0.5, 1 39.8 and 596.5 million marks. The revenue from spirits dwindled considerably. It became therefore more and more a pressing necessity to find funds for the war, not only by the issue of war loans, but through taxation. In the summer of 1916 the tobacco duty, the stamp duty on freight notes, and postal. and telegraph charges were raised, but the resulting improvement in returns was meagre and insufficient even to cover the interest on the debt. In 1917 came a coal-tax and duties on passenger and goods traffic, and in 1918 a number of taxes were increased and new taxes introduced - an increased bourse-tax, a turnover-tax, stamp-tax on bills, taxes on sparkling wines, beer, tea and coffee and mineral waters, etc., while the tax on spirits was extended into a monopoly. There came also increases in the direct taxes in the individual states, whose finances under the influence of the war were also suffering severely.

The most important new source of taxation, however, was the taxation of war profits. It started with the law of June 21 1916, which covered not only the profits gained on war products but any and all profit gained during the war from whatever source, i.e. the difference between the taxable property of end 1916 and end 1913, and which took from the property remaining intact a supplementary duty, in so far as the taxable property did not show a reduction of more than io%. This supplementary duty was one per mille, and the duty on the increase 5% on the first io,000 marks, rising to 50% on increases over 1,100,000. Then. came a tax on the surplus profits of companies, beginning with io% on a surplus profit of 2% on the capital up to 30% on a surplus profit of 15% on the capital, and further progressive super-taxes based on the total rentability of the companies. In 1917 an advance of 20% was claimed on this war-tax of 1916, and in 1918 this was further extended. The Imperial Government proposed, besides the existing charges, a single war-tax on income, which would hit people with an income of 20,000 marks at the rate of 3 to 20%. This was shelved through the traditional objection of the states, which were still disposed to combat the annexation of the revenue from direct taxation by the Empire. Instead, the surplus income per head, that is the difference between the peace-time income and the war-time income, where such difference exceeded 3,000 marks, was made the subject of a tax calculated at 5% on the first 10,000 marks of the taxable surplus income, up to S o % if the difference in income amounted to over 201,000 marks. Then came the property-tax beginning with one per mile on the first 200,000 marks, rising to 5 per mile on a fortune of over 2 million marks. Thirdly, came a considerable increase of the tax on companies: it was based on a fixed rate of 80 /0 on the surplus profit, which obtained a reduction of 10 to 50% only when the surplus profit did not exceed a very moderate amount or where it did not exceed a very moderate return on the capital. The final extension of the war-profit tax took place in 1919. It again hit the individual with a tax on the surplus income, commencing with 5% and rising to 70% on a surplus income of only 400,000 marks. The war-tax on companies was also repeated. More particularly a tax was levied on total increase of fortune between Dec. 31 1913 and July 30 1919 and that at an extraordinarily high rate. Exemption from the tax was allowed only up to an increase of 5,000 marks, from which amount the tax began with io%, increasing to such an extent that an increase in fortune of 376,000 marks was taken in full and in no case could the taxpayer keep more than 172,000 marks of the increase. All that individuals gained during the war and the first period of transition over an increase of 172,000 marks was claimed by the State under this last extension.

The revenue from the war-tax of 1919 was estimated at 12 milliards, when it became law. In the years of the war the defence-tax, war-profits tax of 1916, and surplus-income tax of 1918 brought in the following amounts:-637.4 millions in 1914, 307.8 millions in 1915, 65.1 millions in 1916, 4,853.1 millions in 1917, 2,410.3 millions in 1918, and 4 million marks in 1919. The total yield of the defence-tax was 976.9 million marks; of the 1916 war-tax, with its increases, 5,777.1 millions; and of the 1918 war-tax 2,686.2 millions, a total of 9.4 milliards of marks.

Revenue

Expenditure

191

2,350.8

8,653.8

1915 .

. .

.

.. .

1,735.2

25,708'4

1916 .

. .

.

.. .

2,029'4

27,740'9

1917 .

. .

.

.. .

7,830.3

52,015.4

1918 .

. .

.

6,795.0

44,030'7

Nothwithstanding these considerable amounts, and the increased revenue obtained through other forms of taxation, the German war budget was a most unfavourable one. The appended table gives the total revenue and expenditure of the Empire for the years 1914 to 1918, and, as already stated, a great part of the actual war costs are not included in the expenditure, as it only appears in the accounts for the years following: Revenue and Expenditure 1914-8 (in millions of marks). The war was financed, almost entirely, by an enormous increase in indebtedness, at first through issues of loans, and later, in ever-growing measure, through increasing the floating debt. The taxes and levies introduced during the war were barely sufficient to meet the current requirements, greatly increased through the interest on the debt as well as through decrease of revenue from peace-time sources. As far as the property and income-tax is concerned these were not permanent sources of income but were only available once, and terminated as soon as their result was obtained. But the expenses remained, and necessitated imperatively the replacement of the single levies through regular sources of revenue.

After the War

It was in this desperate situation financially that the war came to an end. The collapse which followed it, together with the crushing conditions of the Armistice and the Peace Treaty, disorganized the whole economic and financial life of the country. The effect of the war appeared after the defeat with frightful clearness. Of the German population 1,700,000 were killed, 1,50o,000 injured and thus had their capacity to gain a livelihood impaired. And the civil population, through the physical and moral strain of the war, showed a greatly increased mortality; more especially, countless children and old people were victims of the privations imposed by the blockade. The increased mortality of the civil population in 1914-9 is estimated at 800,000 souls. A still heavier blow was the fall in births through the separation of the sexes in consequence of the war. For the period of six years this reduction amounted to 3,700,000. Besides actual losses in numbers, there was also exhaustion of those who remained alive and the destruction of the means of productivity.

Superficial critics have been apt to observe that Germany itself was saved from the ravages of the war, since it was fought, with the exception of a short incursion of the Russians in East Prussia, outside its frontiers. Herein lies a fallacy. The German industrial works were not indeed destroyed, but the greater part of the machinery and plant was used up to the utmost by war production without there being a possibility of seeing to repairs and renewals. Similarly, the agricultural areas were exhausted. Industry and commerce had lost the materials that were used up in the war; cattle had gone from the stalls; transport undertakings were crippled to an incredible extent. At the end of March 1920 only 45.9% of the existing locomotives were usable, whereas at the end of July 1914 the number under repair was only 19.1%. Germany in the late autumn of 1918 was not only in a state of military defeat and political chaos; financially and economically it was at its last gasp. What was needed was help from abroad, through importation of foodstuffs and raw materials, which alone could facilitate a transition from war to peace conditions. A complete change in the direction of its productive energies was required. During the years of war production was solely for war requirements, the Government being the sole big buyer, always eager for goods; when the demand for war requirements stopped suddenly it was necessary again to produce for peace requirements, and to find a market for them. First and foremost there was the task of again taking into the labour market the millions of people released from the army and of finding places for them in agricultural and industrial undertakings, in the works and factories and offices. Elaborate plans for this demobilization of the army had already been made during the war. They were, as so many other schemes, rendered useless by the destructive conditions of the Armistice. The periods fixed for the return and release of the army were too short, and all organization in that direction collapsed. The enormous supplies taken for the army, the value of which was estimated at several milliards of gold marks, and the return of which was imperative for the use and nourishment of the people during the first part of the period of transition, could not be stored in the given time. Moreover, Germany had to deliver up to the Allies 5,000 engines and 150,000 wagons, and the transport crisis already threatened was thereby rendered complete. In accordance with the supplementary conditions of March 1919 Germany had to hand over the biggest part of its commercial shipping, and this again greatly increased the difficulties of distribution. Worse still, the blockade still continued for months, and thus there was the severest restriction of imports of necessary provisions and raw materials, for which also only inadequate means of payment were available. Terrible were the results of these regulations. Not only was the political and social crisis rendered more acute, but the German economic position was disordered to such an extent that repeatedly a total collapse seemed unavoidable. The result was the loss of hundreds of thousands of lives among the civilian population, whose weakened condition was unable to withstand the continued privations. According to an estimate based on 375 German towns of 15,000 inhabitants and over, as against 140 deaths per io,000 in 1913 there were 175 deaths in 1919 and 158 in 1920. The mortality from tuberculosis alone was increased from 15'7 in 1917 to 27.1 in 1919, and in 1920 it was still as high as 18.4. That was not all. With the Armistice began the Allied occupation of the left bank of the Rhine and the bridgeheads on the right bank. A difficult economic situation was thus produced, which again became peculiarly acute in the spring of 1921 through the London " sanctions," for Germany lost control of her most important customs frontier; the " hole in the west " was torn open, and a flood of foreign goods, to the value of milliards of marks, poured without regulation or control into the starved country, aching for commodities of all descriptions. Whilst the German population was without the means to satisfy its re quirements in absolute necessaries, the country was flooded with foreign articles of luxury. Although masses were facing starvation, the carrying-out of the conditions, first of the Armistice and later of the Peace Treaty, permitted the classes which had profiteered out of the war and the revolution to satisfy their vulgar greed.

The Peace Treaty of Versailles, as adopted by the Allies in May 1919, and imposed on Germany by the threat of renewing the war, completed the work of economic ruin. Germany lost with its territories a total population of 5.3 million souls. With Alsace-Lorraine, moreover, Germany lost nearly threequarters of its capacity for iron production; out of pre-war deposits of iron ore valued at 2.3 milliards of marks in Germany and Luxemburg (which had a customs treaty with Germany), there remained a value of only 0.403 milliard within the new German frontiers. Germany also lost with Alsace-Lorraine 26% of its potash. It lost with the transfer of the Saar valley to France roughly 9% of its pit-coal production, and was also obliged to agree to deliver to the Allies large quantities of coal, fixed in Oct. 1920 in Spa at 2 million tons per month. It was threatened with the loss of Upper Silesia, which had produced 23% of German pit-coal, 80% of zinc and 61% of raw zinc. Germany lost, moreover, almost all its commercial shipping, all overseas cables, its colonies, - in fact all the bases of its commerce abroad. Germany lost in the N. and the E. of its empire large agricultural districts which had formerly furnished about 25% of its supply of grain and potatoes, and io to 12% of its cattle. And while the Peace Treaty thus raised for Germany the crucial question whether it would be at all possible in future to supply a population now amounting to 61 million souls with nourishment and occupation on German soil - whether indeed within its new frontiers it was not really a case, from the economic point of view, of "20 million souls too many " - the country also found itself burdened with external financial obligations of unexampled magnitude by way of reparation payments to the Allies.

The Depreciation of the Mark

The first effect of the defeat, - the internal collapse, and the terms of the Armistice and the Peace Treaty, - was the almost total breaking-down of the German currency system. The depreciation of the mark abroad had pursued a progressive course already during the war. In consequence of the blockade, and of increasing demands for war requirements in industrial production, German exports had declined much more quickly than the imports; and since the cover formerly available for excess of imports, arising from shipping charges, freights, etc., failed entirely and foreign investments were largely unrealizable, it was almost impossible to obtain credit abroad, which in normal times would have covered the deficit. By the end of the second year of the war (summer of 1916) the exchange in Switzerland, for instance, had fallen from a normal rate of 12 3.4 6 francs per 100 marks to 95.60 francs, showing a loss in exchange of 22.60%. Though depreciation still went on, in Oct. 1918 the Swiss rate was still as much as 7150 francs and the loss in exchange not more than 42.10%. But after the end of the war the fall became steeper. The Swiss exchange was 622 francs per loo marks at the end of Nov. 1918, and the rate descended month by month to 352 francs at the end of May 1919, and then, after a brief reaction, to 26 francs at the end of Sept. 1919, 11.50 francs on Dec. 31 1919, and 6.15 francs (equal to a loss of 95%) at the end of Feb. 1920. From this point there was again a reaction in the summer of 1920, and on May 31 1920 the Swiss rate was 14.75 francs, but in the autumn of 1920 the depreciation recommenced, and towards the end of June 1921, the Swiss exchange for loo marks was 810 francs. (See Exchanges, Foreign, for the German exchange.) German currency depreciation during the war, as well as afterwards, was one of the factors which restricted the possibility of getting help from foreign capital. And though the value of money in Germany itself declined much more slowly than the mark exchange abroad, another result was that foreign purchasers were able to buy whatever was obtainable in Germany, stocks of goods and merchandise, town property, securities, plant and machinery, up to complete industrial enterprises, at catastrophically low prices. Another consequence was an enormous increase in German indebtedness towards foreign countries. The German mark note became the gambling counter of the world. The German notes went abroad in milliards at everfalling rates in payment for imported goods, to be bought up by big and little speculators, down to the hotel porter and the domestic servant who hoped to profit by any rise in exchange. Enormous foreign holdings of mark notes resulted also from credits given by banks in marks, also with an eye on an improvement in the exchange. Only in this way was it possible for Germany to pay for its large excess of imports over exports, which marked the destruction of Germany's economic position in these years of greatly reduced production at home. The price was a foreign indebtedness, the yearly burden of which in interest charges was estimated at the end of 1920 by competent judges at one milliard gold marks and by some critics at an even larger figure.

Apart from all other difficulties attending economic reconstruction after the war, every attempt of Germany to reach a real internal consolidation was hampered by the monetary instability. On the one hand it raised prices, and on the other it depreciated the value of property and income. While, towards the end of the war and just after, wages had often been increased beyond the rise in prices, so that a moderate increase in real wages resulted to the worker, it was not possible to continue this for any length of time in view of the unhappy state of production. Much less was it possible for people enjoying fixed incomes, officials, civil servants, and brain-workers, to increase their income in proportion with the reduction of money value, and they sank lower and lower in the social scale. The worst sufferers were people relying on incomes from rents. Every reduction in the value of money amounted to a favouring of the debtor at the expense of the creditor. Those who had invested their capital in Government securities, mortgages, etc., at fixed rates of interest, were helpless against the reduction in money value, which reduced their capital as well as the interest to a fraction of its former amount. Producers themselves might be able, through the rise in prices, to obtain some compensation for the reduction in the value of money. But any such compensation could only be reached by a very small part of the population. No doubt, as in all periods of economic revolution, some lucky people found the means of enriching themselves to an extraordinary extent. But the high profits nominally realized by many German companies, if the amount were reduced to the actual value of money, represented not only no advantage, but a loss if compared with pre-war times. The large middle class was hit particularly hard. This class, the main repository of national culture, was in danger of being swallowed by the proletariat.

Such a situation was bound to influence the State finances to a deplorable extent. Whatever services were required had to be paid for at a nominally higher rate. It was necessary too to spend enormous sums on subsidies for reducing the price of necessaries to the public, for keeping down the cost of transport, and for the relief of the unemployed. On the other hand, uneconomic State finance was itself a factor in the decline of money values. The State had to cover its financial requirements in default of taxation by further issues of paper money, increasing from week to week and month to month.' It was itself the producer of the artificial purchasing-power which brought in its train the continued rise in prices. The bank-note press, in substitution for the taxation machine, created a continually growing inflation. It was the uninterrupted use of the printing-press, as a means of meeting the expenditure, that characterized State finance in the first years after the collapse.

Taxation Reform,1919-20

The National Assembly of the new German Republic had to face the task of laying the foundations of a new financial system and re-creating it out of chaos. The old privileges of the separate states of the Empire, in depriving the central Government of the benefit of the most important sources of tax-revenues, had to go. The German Reich now had 1 On Jan. 1 1919, the regular note issue amounted to 22,188 million paper marks (as against 11,467 millions a year earlier) and the loanbank note issue to 10,109 millions (6,264 millions in 1918). On Jan.

I 192 the total was about 120,000 millions.

to bear by far the largest part of the costs of the war, the interest on the war debts, the war pensions and compensations, the whole of the burdens of the Peace Treaty, etc.; these swelled the budget expenditure to such an extent that the requirements of the individual states were left far behind. The great sources of direct taxation had now to be made free for obtaining revenue for the Reich. Events had made compulsory a strong centralization in German finance. By an order of the Finance Department of the Reich on Sept. 10 1919, the management of all fiscal levies was handed over to the central Government. A further order, of Dec. 13 1919, provided for the formal right of taxation. A decisive step was taken in the National Taxation Law of March 22 1920, which fixed on a new basis the position of the three great receivers of taxes, the Reich, the individual states, and the subordinate local Governments towards each other. Whereas the pre-war rule was that the use of certain sources of taxation by the individual states forbade the Imperial Government to use such sources, the new regulations reversed the position, ruling that the use of certain sources of taxation by the Reich forbade the collection of similar taxes by the individual states and local communities unless expressly empowered to collect a supplementary levy. Counties and municipalities kept their most important independent tax sources-the taxes on landed property and industrial activities. They were obliged to levy an amusement-tax, and were entitled to tax the lowest incomes which escaped the general income-tax. In principle they became pensioners of the State, receiving of the revenue from Reich taxation two-thirds, of the companies-tax also two-thirds, of the inheritance-tax one-fifth, of the tax on acquistion of landed property one-half, and of the turnover-tax 15% (i.e. Io % for the counties and 5% for the municipalities). This was a most important step in the direction of laying a sound basis for Reich finance.

In the place of the various tax departments of the individual states there had to be created the gigantic machinery of a central Finance Department for the entire Reich. It could not come into existence without much early trouble and failure. The new department was at first quite unable to carry out the regulations, and only slowly and gradually came the introduction and collection of new taxes. And another difficulty followed quickly in consequence of the new regulations for financial management. The unification of the railways in Germany had been, like the unification of taxation, an old demand, but one which could not be carried out in times of peace, when the railways were a valuable source of revenue to the states, more especially to Prussia. Now it was accomplished, and the Reich, which previously had managed only the railways of AlsaceLorraine, from April 1 1920 took over all the railways. But the railways, instead of bringing in a profit, now found themselves with a deficit. From the moment, however, that the Reich had taken over the important sources of tax revenue, it was obliged to take over the railways as well, since the individual states were not able to carry their losses, and these losses now fell on the Treasury of the Reich.

With this basic change in organization came now the extension of the field of taxation. Between Sept. 1919 and March 1920 a system of new taxes for the whole Reich was created. The taxation of income was catjied out in three different ways.

Amount of Income

For part or the whole of the first 24,000 marks.

For every additional (whole or part) 6,000 "

5,000

Rate per

cent

10

20

25

5,000

30

5,000

35

5,000

40

70,000

45

80,000

50

200,000

55

" all further amounts .

60

First comes the unified tax on income, which came into force on April 11920. The rate of taxation is as follows: Thus, 60% of any income exceeding 400,000 marks (now paper marks) has to be handed over as tax to the Treasury. On an income of 30,000 marks the tax is 3,600 marks; on 50,000 marks it is 10,000 marks; on 200,000 marks it is 81,600 marks; and on i,000,000 marks it is 551,600 marks.

A reduction in these rates is allowed only in so far as an existence minimum and the numbers in the family are taken into consideration. This is arranged so that, for every person subject to pay tax and for each member of his household not independently taxed, the taxable amount of income is reduced by 120 marks, provided the dutiable income does not exceed 60,000 marks, and by 60 marks where the income is between 60,000 and ioo,000 marks. A married man subject to the tax, with four children and an income of 24,000marks, will, for instance, obtain a reduction of 720 marks. Taxation of those who receive salaries or wages is assured by making the employer answerable for retaining from the salary or wage a proportionate amount in advance and paying it over to the tax collector.

To this income-tax, affecting the total income of the subject, is added, as super-tax, a levy on income from investments, in distinction from earned income, i.e. from dividends on shares, etc., interest on loans and mortgages of all kinds, interest on advances of any description, especially on deposits in banks and savings banks, rents, etc., and discounts on bills, including Treasury bills. The tax is ro % on the whole return on the capital. An exception is made only in the case of small investors over 60 years of age or incapacitated from work. These have the tax on returns from capital included in their income-tax, as follows: on an income of not more than 5,000 marks, the whole amount; up to 6,000 marks 90%, the rate being reduced with every further i,000 marks by io%. On incomes of over 14,000 marks this relief terminates.

The third form of taxing incomes is the companies-tax, which operates as a super-tax on enterprises carried on by companies, including foundations, institutions and other societies for the management of property. This tax is ro % generally, on the total dutiable income. For societies working for gain (companies with shares, societies with limited liability, etc.) there is, in addition, a special tax on the distributed profit, calculated on the proportion of the distributed amounts to the capital, so that where the profit is only 4% on the capital the tax is 2% on the distributed amounts, rising by 1% up to Io % of the distributed amounts if the profit on the capital is 6, 8, It), 12, 14, 16, r8 and over. The first 3% of profit on the capital is tax-free. The total taxation on income, from the three forms of levy, works out as follows: Income from shares, for instance, is taxed under each of the three forms. The company itself has to pay on its income in proportion to its own liability; then the distributed profit is reduced by the io% tax on return from capital; and finally the shareholder has to pay income-tax on his dividends.

following table (in marks) indicates its working:--

Increase in

Property

Amount

of Tax

10,000

I,000

15,000

1,750

20,000

2,500

25,000

3,500

30,000

4,500

35,000

6,000

40,000

7,500

50,000

10,500

100,000

30,500

150,000

55,500

200,000

83,000

300,000

148,000

400,000

233,000

500,000

333,000

800,000

633,000

1,000,000

833,000

2,000,000

1,833,000

4,000,000

3,833,000

5,000,000

4,833,000

10,000,000

9,833,000

Taxation on property (capital) was also imposed in three forms. First of all came the war-tax (Kriegssteuer) on property increase, which hits any increase of over 5,000 marks in the value of property during the war and immediately after the war (difference in property between June 30 1919 and Dec. 31 1913), nobody keeping a larger increase than 172,000 marks. The Through this war-tax increase in property is for the greater part annexed. But secondly, a further tax levied for the " need of the Reich " (Reichsnotopfer) makes a deep inroad on unincreased property, as calculated on Dec. 31 1919. This affects companies, especially companies with shares, and other societies for gain, on their net property, that is without the paid-in capital and without reserve funds intended for general utility or benevolent objects, at a rate of io%. It also applies to the property of individuals, leaving only a property of 5,000 marks tax-free, though in the case of married couples this is increased to Io,000 marks tax-free, and, for those who have children, a further amount of 5,000 marks tax-free is allowed for the second and each additional child. Consideration is also extended in the case of proprietors of industrial enterprises who are liable to be hampered by the depletion of capital, the capital employed in the business being calculated not to the full amount but only up to 80% of its value.

First 50,000 marks (in full

or in part).. .

io

Next 200,000 marks

500,000 "

35%o

40

Next 50,000 marks .

12

500,000

45

" 100,000 "

.

15

1,000,000

.

50

" 200,000 "

200,000

20

25

2,000,000

" 2,000,000 "

55

60

" 200,000 "

30

All further amounts .

.

65

Taxable

property

Amount of

tax

Taxable

property

Amount of

tax

1,000 marks

loo marks

350,000 marks

56,00o marks

5,000

500

400,000

66,000 "

10,000 "

1 ,000

450,000 "

78,510 "

15,000 "

1,500

500,000

91,000 "

20,000 "

2,000 "

550,000

103,500

25,000 "

2,500

600,000

116,000 "

30,000 "

3,000

650,000 "

131,000 "

35,000

3,500

700,000 "

146,000 "

40,000

4,000 "

750,000

161,000 "

45,000

4,500

800,000

176,000 "

50,000

5,000

850,000

193,500 "

55,000 "

5,600

900,000 "

211,000

60,000

6,200

950,000

228,500 "

65,000 "

6,800

1,000,000

246,000

70,000

7,400 "

1,500,000

446,000 "

75,000 "

8,000 "

2,000,000 "

671,000 "

80,000 "

8,600 "

2,500,000

921,000 "

85,000 "

9,200 "

3,000,000 "

1,171,000 "

90,000 "

9,800

3,500,000 "

1,446,000

95,000

.10,400

4,000,000 "

1,721,000 "

100,000 "

II,000 "

5,000,000 "

2,271,000 "

150,000

18,500 "

6,000,000

2,871,000 "

200,000

26,000

7,000,000

3,471,000

250,000 "

36,000 "

8,000,000

4,121,000 "

300,000

46,000

For each additional

1,000 marks 650

marks more

The rate for individuals is as follows: This works out as set forth in the following table: The tax has to be paid in cash or in war loan, but may be paid in yearly part payments, the unpaid amount being charged 5%, and it must be paid off within 26 years. If real property is given as security, where the payment is secured by entry in the official register 46 years are allowed for payment.

The third form of property-tax, inheritance duty, consists of a considerable extension of the former inheritanceand gift-tax, with the addition of a succession-tax after the pattern of the English estate duty. Inheritanceand gift-tax are calculated under six classes, according to the relationship of the beneficiary: Class I-Wife or husband and children, including illegitimate children recognized by the father.

Class 2-Descendants of the children.

Class 3-Parents, brothers and sisters.

Class 4-Grandparents, descendants of first degree of brothers and sisters, parents-in-law, step parents, children-in-law, step children and adopted children.

Class 5-Descendants of second degree of brothers and sisters, brothers and sisters of the parents, brothersand sisters-in-law. Class 6-Other beneficiaries (except as regards communities, churches, benevolent and utilitarian societies, foundations, etc., in which case the rate is always io %).

Class

I

Class

2

Class

3

Class

4

Class

5

Class

6

For first 20,000 marks tax-

able part or full. .

4

5

6

8

io

15

For following 30,000 marks

5

6

8

10

12

20

50,000 "

6

8

10

12

15

25

50,000 "

8

10

12

15

20

30

50,000 "

10

12

15

20

25

35

100,000 "

12

15

20

25

30

40

200,000

15

20

25

30

35

45

250,000

20

25

30

35

4 0

50

250,000

25

3 0

35

40

45

55

500,000 "

30

35

4 0

45

50

60

All further amounts. .

35

4 0

45

50

60

70

The following are the rates of the tax per cent for the different c)asses, an allowance, however, being made for 5,000 marks being tax-free for the first five classes, and Soo marks for the sixth class: The highest rates apply where the taxable benefit exceeds one and a half million marks. The tax increases by i % of the amount; that is, if the already existing property of the beneficiary is Ioo,000 marks but not over 200,000, for each Io,000 marks; where the existing fortune exceeds 200,000, for each 20,000 marks. The increase must not exceed 100% of the tax. The total of the inheritance duty must not exceed 90% of the benefit. For a legacy arising before April i 1935 the tax is reduced i % for each year down to April i 1925, and for each earlier year 2%. Reduction down to March 31 1921 is therefore 20%.

The succession duty (estate duty) is calculated solely on the property which has been left, without reference to relationship or number of beneficiaries; it applies to landed property, business capital, and personal property in so far as it exceeds 50,000 marks. The tax does not apply to gifts between living persons. The rate of tax is, for the first 200,000 marks (part or whole), i %; for the following 300,000, 2%; for the following 500,000, 3%; for the following i,000,000, 4%; and for further amounts 5%. If the value does not exceed 200,000 marks the first 20,000 marks are tax-free.

It is necessary to consider the effect of all these taxes together on property and income, to obtain a clear idea of what the burdens mean. At the Brussels Conference of 1920, the German Government submitted to the British delegates a statement which gives examples in explanation: Example No. i.-A private individual with property worth on June 30 1919 100 million marks, showing an increase of 25 millions, dies in 1920 and leaves his property to two nephews in equal shares. One nephew has no property, the other has property stated at one million marks. Taxation on the too millions is as follows: (I) War-tax on increase. 24,828,000 marks (2) " Need of Reich " levy, on balance of 75,172,000 marks.. .

(3) Succession duty on property (27,392,450 marks) (4) Inheritance duty to be paid by nephew who has no property (5) Inheritance-tax to be paid by nephew who has property of 1,000,000.. 7,548,367 " Total taxation. .. .. .. 86,520,784 marks There remains, of the original property of 1[00,000,000, only 13,479,216.

Example No. 2.-A private individual has property worth 10,000,- 000 marks of which 4,000,000 are from shares in a company for gain, which could have paid in 1920 a dividend of 20%, if it had not 'been obliged to pay companies-tax. The rest is landed property, returning 5%. There is no increase in property. Without taxes this person would have an income of 1,100,000 marks per annum. The " Need of Reich " levy exacts 5,417,750 marks, leaving 4,582,250 marks. The untaxed income on this would be 800,00o marks from dividends and 29,112 marks from rents, or 829,112 marks. This is reduced by 160,000 marks for companies-tax, 64,000 marks for return on capital, and 315,160 marks for income-tax, leaving an income of 289,952 marks.

Example No. 3.-A private individual has property worth 1,000,000 marks; no war profit. Property rented out brings 5%. One-third of the " Need of Reich " levy (244,250 marks), 82,250 marks, is paid, leaving a balance of 162,000 marks, on which there is 62% interest to pay. On the remaining property, 917,750 marks, the income is 45,887 marks. Out of this there is to be deducted :- 62% on 162,000, 10,530 marks; return on capital-tax, 4,588 marks; income-tax, 7,272 marks; or 22,390 marks in all, leaving the remain 47,779,550 1,332,622 5,032,245 ing income at 22,497 marks. This person, who before the war, after deduction of tax, had an income of about 45,000 marks (or say £ 2,250), had thus, in 1920, after deduction of taxes an income not merely reduced by half, but, in view of the depreciation of money, no better than that of an ordinary working-man.

The work of tax reform under the young German Republic was not exhausted by this extension of direct taxation. There was added a great extension of indirect and transport taxation. Its most important item was the tax on turnover. At first it consisted in a stamp duty of one per mille, rising in the last year of war to five per mille, but by the National Assembly's regulation of Dec. 24 1919, which came into force on Jan. I 1920, it was fixed at 12%. This turnover-tax is applied also to articles of luxury, specially mentioned, at a rate ten times increased, namely 15%. Further it includes a restaurant-tax, advertisement-tax, cloakroom-tax, etc., etc., and covers certain kinds of service such as letting-out furnished rooms, taking in advertisements, holding in trust money, securities, valuables and furs, letting riding horses on hire, the rate of tax being io%. It is to be noted that the normal rate of 12% does not represent the total amount, which really is very much higher on the average, and in the case of semi-manufactured and manufactured goods it has to be paid as many times as the commodity changes hands. The tax is therefore a real tax on consumption in the largest sense. Similarly, the coal-tax is collected at 20% on the value at the pit-head, and rises in proportion with the selling-rates. Various single taxes on tobacco, matches, playing-cards and sales of real property were also to be added, as well as repeated increases in the charges for letters, telegrams, postal-orders, trunk-telephone messages and railway rates.

A gigantic increase of the burden of taxation on the whole of German national economy was the result of these reforms, though even then they were not sufficient to balance the budget of the Reich.

f

Funded debt

(Treasury bonds

Floating debt

and interest-

bearing

(Treasury notes

without interest)

Total

Treasury notes)

March 31 1918

71.9

33.3

105.2

March 31 1919

92.4

63.7

156.1

March 31 1920

92.0

91.5

183.5

March 31 1921

78.3

176.6

244'9

Development of Reich Finance, 1919-21

The most significant feature of the financial position in these first years after the war was the rapid increase in the national debt. The figures each year were as follows, in milliards of marks: - The reduction shown in the funded debt in 1921 arises from cancellation by means of collection of war-tax and " Reich need " levy, and by the sale of army property. Against this the increase in floating debt in 1921 includes a part of the purchase price paid by the Reich on taking over the railways from the individual states, whilst, on the other hand, a number of other obligations are not included. If these are taken into consideration, and the Reich and the individual states are taken together, there appears for Oct. I 1920 a total debt of 294.8 milliards of marks, compared with 22 milliards 'on March 31 1914. The large increase of debt was the result of slow returns from the new taxation, the depreciation of money which continually caused a greater expenditure on goods and services and repeatedly upset the budget estimates, the subsidies given on necessaries in order to adjust prices to the depreciation of money, the large rise in the interest charge on the debt, the deficits on the railways and post-office, and finally the beginning of large payments under the provisions of the Peace Treaty.

In the regular budget for 1919 a revenue was shown of 12,753 million marks and expenditure of 15,087 millions (of which 8,389 millions was for debt alone). The deficit was covered for the most part through returns from the taxes on war profits. Not so the extraordinary budget, which showed a revenue of 4,154 millions of marks and an expenditure of 39,779 millions. The deficit of 35,625 millions had to be covered by loans. Very large items of arrears in war expenditure were included here, and it seemed justifiable to hope that, with the closing of such expenditure, the deficit would be reduced. But the opposite came to pass. The estimate for 1920, in which for the first time larger returns from the new taxes were included, forecast in the ordinary budget a revenue and expenditure of 39,891 millions, or more than three times the revenue estimated for the previous year; and under the expenditure 12,693 millions was included for the service of the Reich debt, 3,967 millions for pensions and 9,405 millions for the states and local governments as their share in the new Reich taxes. The extraordinary expenditure was estimated at 52,579 millions, of which 3,955 millions was for the paying-off of the old army and 41,440 millions for the execution of the Peace Treaty, while losses on the postal, telegraph and railway management were put down at 19,221 millions, so that there remained to be covered by loans a total of about 70 milliards, besides 32 milliards representing deficits in the individual states. Unfortunately the event did not contradict these unfavourable estimates. The revenues from direct taxation, transport duty, customs, tax on consumption and other levies, brought in 46.10 milliards, or an excess of 37.70 milliards compared with the previous year and even an excess of 6.10 milliards over the estimate, largely as a result of the " Reich need " levy, by which 9.33 milliards was collected (the estimate having been 32 milliards). From the new income-tax 9.59 milliards was received (estimated at 12 milliards), from the new tax on return of capital 909 millions (estimated 1,300 millions), from the newly extended tax on turnover 4.2 milliards (estimated 3.65 milliards). The coal-tax brought in 4.67 milliards, an increase of 3.32 milliards over the previous year; the new tobacco duty brought 1.76 milliards. But the total net revenue accruing to the Reich after deduction of the costs of collection and the amounts transferred to the states and local governments was only 27.7 milliards and the net expenditure was 73.7 milliards, in addition to 10.4 milliards for interest on debt and 18.2 milliards for subventions and for cost of management of railways and post-office. There resulted a deficit of 74.9 milliards which again could be covered only by an increase in the floating debt.

This disastrous picture was repeated in the 1921 budget. On March 26 the provisional estimate, passed in the Reichstag, provided for an expenditure of 46,945 millions in the ordinary budget and 43,667 millions in the extraordinary budget. Three months later a supplementary estimate entirely upset these figures. Expenditure in the ordinary budget was now put at 4 8 ,459 millions, the estimated deficit of 4,250 millions on the revenue side requiring to be covered by fresh tax proposals. The expenditure in the extraordinary budget was placed at J9,680 millions, against which there was an estimated revenue of io,50o millions (of which 7,800 millions would come from the " Reich need " levy). The subventions for post-office and railways were estimated at 18,383 millions. Here was a deficit, in round figures, of 50 milliards of marks, apart from one of 44 milliards on the ordinary budget. No allowance is included here for the reparation payments to the Allies.

As in the accounts for 1920, the liabilities under the Peace Treaty made a considerable showing by themselves in the budget for 1921, the estimate being 262 milliards. The delivery of live animals involved three milliards; the costs of the settlement department for the liquidation of the pre-war debts between German subjects and those of former enemy countries were provisionally placed at two milliards; for reparation deliveries, apart from shipping, cables and cattle, 8,630 millions. The cost of Allied troops of occupation on the Rhine was put down at 7,266 millions, further augmented by 757 millions for the cost of land and buildings for their use, together with further incidental expenses. For the Rhineland Commission itself 109 millions was estimated, besides 1,220 millions for economic help for the occupied territory, to which the states and local governments had to contribute. Finally there came the reparation demand, which put before Germany economically and financially a problem of tragic magnitude.

The Reparation Demand. - According to article 233 of the Versailles Peace Treaty the Reparation Commission fixed on May 5 1921 the amount of the war indemnity to be furnished by Germany and arranged the scheme of payments. By a renewed threat of an ultimatum the Government of the German Republic was forced on May 10 1921 to declare that they were " resolved to comply with the obligations placed on them by the Reparation Commission without reserve and without conditions." The total burden to be borne by the people of Germany was fixed at 132 milliards of gold marks, to be reduced, on the one hand, by the sums already paid on account of reparations and such sums as were to be credited to Germany according to the Peace Treaty or by decision of the Reparations Commission, but to be increased, on the other hand, by the taking-over by Germany of Belgium's debt to the Allies. Germany was required to deliver bonds in three series, of which the first two, in amounts of 12 to 38 milliards of gold marks, were to be issued at latest by July 1 and Nov. 1 1921 respectively, while the last series of 82 milliards subject to the above-mentioned modifications was also to be issued and delivered by Nov. 1 1921, but was only to be put into circulation by the Reparations Commission so far as their bonds were secured by the German annual payments. The interest on the bonds was to be 5%, the yearly sinking-fund 1%. For this purpose Germany had to provide a fixed annuity of two milliards of gold marks, besides a variable annuity corresponding to 26% of the annual value of German exports, or a proportionate sum to be fixed by further agreements. According to the existing position shown by the amount of German exports this meant an annual payment of 3 to 34 milliards of gold marks, added to which were the other burdens of the Peace Treaty, the cost of the occupation, payment for liquidation of foreign claims, and similar charges. On the basis of the current value of German money, this meant a yearly burden of about 60 milliards of paper marks.

The financial prospects for Germany in 1921, on these calculations, might be regarded, from a German point of view, as apparently only too clear. If the 1921 estimates placed the total budget expenditure at about 108 milliards, with a revenue deficit of about 54 milliards, both these amounts would be increased (until means to cover the deficit had been found) by 50-60 milliards. And with this it could not be expected that the highest point had been reached. If the depreciation of German money went still further, as it must do if Germany was forced by financial necessity to decrease the subventions for the cheapening of means of existence, and, in order to reduce the budget deficit, increased the postal and railway charges as well as the price of coal, the expenses of the Reich for official salaries, wages of labour and other requirements must grow automatically, and for this further cover must be found. A further increase of the floating debt, by resorting to the help of the printing-press in the issue of bank-notes, could only lead to a catastrophe. Only one alternative was visible, and that was to open up new sources of revenue for the Reich. But that would mean, in view of the concurrent financial requirements of the states and local governments, that year by year an amount of perhaps 200 milliards of marks would have to be drawn forcibly into the Treasury through the power of the Government from the hands of private earners of income and possessors of property. It remained to be seen whether any Government, and particularly one so weakened by national disorganization, could exercise such power.

Apart from the internal financial difficulty, there was also the economic problem: how Germany was to make payments abroad in such immense amounts annually. Germany in 1921 had not only a financial but also an economic deficit. Its imports had exceeded exports annually since the end of the war by several milliards of gold marks. Only by increasing foreign indebtedness and by transferring abroad considerable parts of the property of the German population had it been possible hitherto to cover this economic deficit, and an enormous additional economic burden had already resulted from the liability for interest on this debt. This method of adding to the foreign debt and financing the operation by transference of the substance of the people's wealth might be pursued still further in order to meet the demand for reparation payments. But its limits were bound to be relatively narrow. For permanent use there could only be one really practical means of payment, by obtaining a favourable trade balance in an excess of exports over imports. Germany must strive to restrict internal consumption still further, and, to increase production, it must reduce imports and increase exports to the utmost. It was a strange piece of irony, and a contradictory policy difficult for Germany to understand, that the very Powers which were imposing the demand for reparations were at the same time hampering and restricting German production by economically closing up the Rhineland through the " sanctions " resorted to in 1921, instead of furthering such power of production and allowing it to develop. If they wilfully stimulated the imports of luxuries into Germany through the " hole in the west," although the stoppage of such imports would help to provide reparation money for them by economies on the part of German consumers; if they sought to render German exportation more difficult by stringent customs regulations, in spite of the fact that an increase in German exports was the obvious economic method of complying with the reparation demand - in spite, indeed, of the fact that, through the export index, according to which 26% of the value of the current German export trade was to be taken as the amount of the variable annuity, any increase in exports would mean a rise in the yearly amount payable - the position would then become self-contradictory, and, for Germany, more and more hopeless.

Even without such embarrassments it remained to be seen how, on the one hand, Germany could attain the necessary increase in production in the short time contemplated, and whether, on the other hand, international commerce would be able to adjust itself economically to an acceptance of Germany's increased supply of goods and services, while at the same time producers elsewhere had to deny themselves a market in Germany owing to its being without means to buy.' It must be sufficient here to indicate these problems, which faced all parties in 1921. The German Government had in May - July declared its fixed will to overcome them and to fulfil to the utmost the obligations that had been undertaken. It 1 It should be observed that in the middle of Aug. 1921 it was calculated by the Frankfurter Zeitung that the wholesale prices of commodities had risen 16-fold in Germany since 1914. Consequently a commodity which had cost 20 marks (then equal to £1) before the war had come to cost 320 marks, which, as it happened, was also in mid-Aug. 1921 just about the value of £i in the exchange market. That is to say, £i sterling would buy in Germany just about the same amount of commodities at wholesale prices in mid-Aug. 1921 as before the war, in spite of the 16-fold rise. On the other hand, in England during the same period the rise in wholesale prices represented an addition of 80%, so that in mid-Aug. 1921 it cost there about £i 16s. to buy the same amount of commodities wholesale which could have been bought for £i before the war. Consequently, in respect of this difference at all events, German manufacturers and traders were in a position of advantage over British in being able to underbid them in the sale of goods. To equalize wholesale prices of commodities in German and English currencies in mid-Aug. 1921, either the German prices would have had to show a 29-fold, and not a 16-fold, increase as compared with the pre-war level, or else the mark exchange would have had to stand at 180, instead of 320, marks to the £i; or, correspondingly, English prices would have to be lowered. The mark, however, actually depreciated still further in Sept. and Oct. 1921, reaching on Oct. 17 an exchange of 750 to the f i. The explanation of the relatively low prices (in sterling) of German commodities at this time was presumably to be found in the higher productivity of the German workman and his lower standard of living, though the situation was also being affected by the difference in the economic conditions generally. German wages, though increased nominally about 8-fold as compared with the pre-war standard, were now much lower than British. But the fact here noted with regard to the relationship between prices and currency in the international market was in 1921 some set-off to the mischief done to Germany by the depreciation of the mark. The low German exchange was, in itself, an advantage to Germany in respect of her export trade in competition with England in the international market, so far as the German capacity for exporting goods at all could be made effective, since it lowered the cost of German goods to the foreign purchaser. English manufacturers in the summer of 1921 were in fact complaining that they were undersold. On the other hand, the depreciation of the mark was a severe handicap to Germany in buying anything abroad, including the materials required for producing goods for sale in the international market.

(Ed. E. B.) was engaged in perfecting its powers for doing so. A new period of German financial and economic management had been entered upon; and a new period of world economics had also begun, - to what end a later generation would have to discover.

(A. F.*) THE Republican Constitution 1. From the Old Reich 1 to the New. - The German constitution which arose out of the Prussian and German victories of 1866 and 1870 had culminated in three supreme organs - the Emperor (Kaiser), the Federal Council (Bundesrat), and the Reichstag (National Representative Assembly). Bismarck, by taking over into his constitution the democratic Parliament of the Frankfort Paulskirche (see 11.866) of 1848, linked that constitution with the democratic and national movement for unity which had continued to live in the mind of the German people since the Wars of Liberation against Napoleon, but which had not been able of its own strength to carry through the political transformation of Germany in accordance with its own ideas. Although Bismarck diverted this popular tendency into the paths of his own policy, he had not realized its aims. The Reichstag was linked up with the idea of 1848, but in the Federal Council the organ of the old Federation of Sovereigns survived. And this representation of the " Federated Governments " (die Verbiindeten Regierungen) was, according to the terms of the constitution, endowed with greater plenitude of power than the representation of the people, the Reichstag. The status and the construction of the Federal Council prevented the emergence of an independent and politically responsible Government, and thus obstructed evolution towards the parliamentary system. On the other hand this situation made the dynasties and governments of the individual states feel their subordination to the hegemony of Prussia less keenly; they were able to regard this subordination as the inevitable premium which they had to pay for mutual insurance under the Prussian protection. Prussian hegemony in the federally organized Empire was the natural consequence of the fact that Prussia embraced in population and territory four-sevenths of the whole Empire, and that she possessed the strongest military and administrative organization. The constitution of the Empire gave outward expression to this fact by making the king of Prussia the German emperor. But the real basis of the political power of Prussia in the Empire, as in its other aspects, lay not in the emperor's prerogatives but in the position of the Prussian Crown. The old public law of Germany always regarded its conception of monarchy as realized solely in territorial sovereignty. It remained, therefore, in this instance an open question and a matter of controversy whether the German emperor could be correctly described as monarch of the Empire and whether imperial Germany could be described as a monarchy. The political unification of Germany had not in fact been accomplished as in Italy, through the supersession of the territorial sovereignties by a national monarchy. On the contrary, the old Federation of Sovereigns (Fiirstenbund) had, after the expulsion of Austria, been more firmly compacted under the leadership of that member of the Federation which was now the strongest - Prussia; and it had been popularized and modernized by the addition of the Reichstag elected by the democratic suffrages of the whole nation.

No doubt, in the course of those succeeding. decades which brought an apparently assured position of power to the Empire in its external aspects, together with a splendid growth of economic prosperity, there arose a natural tendency towards development in the sense of the modern national State. Under the influence of this tendency the centre of gravity of public life was more and more altered in favour of the Empire; the political influence of the Reichstag and the independence of the Govern 1 The words " Deutsches Reich" were, before the revolution of Nov. 1918, invariably translated " German Empire." But the word " Reich " has, for historical reasons, been retained by the German Republican Commonwealth as its official territorial and political designation. " Reich " is an old Germanic word found in various forms in Early and Middle English, and surviving in composition in the English word " bishopric." - (Ed. E. B.) ment of the Empire were more and more strengthened. Nevertheless, this development never reached the point of giving distinct form and substance to the powers and responsibilities of a national Government. The extension of the political mentality of the people did not keep pace with that of its economic and social capacities; its political evolution could not overcome the tenacious resistance of the old powers and the obstruction of the old order of things. There remained an unsolved and apparently insoluble discord between the development that was necessary and the political dynamic forces that had been inherited, a conflict which was one of the deeper contributing causes of Germany's national disaster.

The military and political catastrophe with which the World War ended threatened likewise the internal political existence of the German people with a terrible twofold peril. Bitter disappointment and despair brought the complete dissolution of the national commonwealth appallingly near by producing the criminal delusion that single portions and fragments of a shattered Empire might be able to bear the dreadful consequences of defeat better than the nation as a whole in firm political unity. And at the same time the desperately bitter feeling of large sections of the people directed itself, in view of the collapse of all the old authorities, against the foundations of any and every order of the state and of society, which these sections, following the example of their neighbour, Russia, dreamed that they could overthrow by means of a world revolution and the dictatorship of the proletariat. The only salvation from these two deadly perils, which menaced the political and social existence of the German people and indeed of all Europe, was to be found, if anywhere, in the conception of a national democracy. This idea had lived through generations in the soul of the German people; it had survived failures and defeats, and it had only been relegated to the background by the successes of Bismarck's policy. What was now needed was to revive with resolute determination this idea of national German democracy. Not as a federation of sovereigns, nor as a federation of separate states (now without sovereigns) under Prussian hegemony, could the German Reich continue; it could only be perpetuated as a national commonwealth, the outward political expression of German national unity, by virtue of the sense of a common nationality and by democratic self-determination. The fundamental idea of German national democracy had therefore to be " grossdeutsch " 2 (greater German). The " kleindeutsch" (smaller German) imperial Reich had been built upon dynastic foundations, and had therefore been compelled to exclude the Germans of the Habsburg Monarchy from the empire of the Hohenzollerns. But once the empire of the Habsburgs had been shattered to pieces in the name of the principle of nationality,. the national and democratic German Republic would necessarily have been abjuring that very principle and the idea on which it was itself based, if it had not kept the door open for the Austrian Germans to enter and unite with their common stock. And, further, as the democratic idea of national unity was the only thing that could be effectively opposed to national disintegration, so it was only with the idea of complete democratic equality of rights for all members of the nation that the destructive attempts to set up a lawless class despotism of the proletariat could be successfully encountered.

It was for Germany a piece of good fortune in the midst of bad that social. democracy, which, after the collapse of the old authorities, had come to the top, should at this critical juncture have taken its stand upon the platform of political democracy and gradual social reform. The Social Democratic " Commissaries of the People " 3 promulgated the Electoral Law of Nov. 30 1918, which was drafted at their request by the Democratic Secretary of State for the Interior, Dr. Preuss. In accordance with the The idea of Greater Germany, i.e. of Germany including German Austria, had been opposed since 1848 to the idea of " kleindeutsch," i.e. Germany, excluding Austria, which was adopted and carried out by Bismarck.

The first Provisional Government by six " Commissaries of the People (Volksbeauftragte)" set up under Ebert and Haase after the revolution of Nov. 1918.

terms of that law a Constituent National Assembly (Deutsche Verfassungsgebende Nationalversammlung) was elected by all German men and women over 20 years of age, and the definitive decision with regard to the future constitution of Germany was entrusted to this democratic National Assembly. It met on Feb. 6 1919 at Weimar. The Secretary of State, now become Minister of the Interior, laid before it a draft of the new constitution of the Reich, which, it is true, had been strongly modified in a Particularist sense by the representatives of the Governments of the individual states in the States Committee. These modifications were, however, for the most part eliminated by the National Assembly and its Committee on the Constitution. On July 31 1919 the National Assembly adopted the new constitution of the Reich by 262 votes, cast by the Majority Socialists, the Centre (Catholics) and the Democrats, against a minority of 75, composed of the two parties of the Right and the party of the extreme Left. This Constitution of Weimar was promulgated by the president of the Reich on Aug. i 1 1919, and thus came into force. The fact that the young German Republic had to pass under the terms of the Peace of Versailles simultaneously with the establishment of its constitution prejudicially affected the chances of the latter's becoming familiar to the popular mind, and compromised the new order of the State in a way that was fraught with mischief.

2. Democracy and Reichstag

While the old constitution was headed by the statement of the fact that it had originated in a federation of sovereigns under the leadership of the King of Prussia, the new constitution is prefaced in deliberate contrast by the declaration of the national and democratic conception which guided its construction: The German nation, united in its peoples (Stamme) and inspired by the determination to renew and to establish its Reich in freedom anti justice, to promote peace at home and abroad, and to further social progress, has given itself this Constitution." If Germany had possessed a national monarchy, there might perhaps, even after terrible defeat, have been a possibility of preserving it. But it was quite impossible, after the collapse of the 22 dynasties and their Prussian head, to entertain the idea of restoring monarchy. The maintenance of the political unity of the German people was only practicable in the form of a democratic republic. The new constitution, nevertheless, retained the designation of " Reich " for the national commonwealth, in spite of the danger of misapprehension which might arise from the connexion existing between the words Reich (Empire) and Kaiser (Emperor) in the French and English languages. In the soul of the German people the idea of its unity has for centuries been so intimately identified with the name " Deutsches Reich " that there could really be no thought of abolishing that designation at a moment when Germany's whole destiny depended upon the vivifying power of the national sense of unity. The German democratic republic is a Reich without an emperor and without sovereigns. This is expressed by the first article of the new constitution as follows: The German Reich is a Republic. The powers of the State proceed from the people.

Linking itself with the traditions of the old German democracy which inspired the movement of 1848, yet at the same time clinging to the memory of the economic expansion of Germany during the last decades, Article 3 enacts: T he colours of the Reich are black, red and gold. The flag of the mercantile marine is black, white and red 1 with the colours of the Reich in the top inside corner.

While the constitution of the Reich is designed to realize at home the democratic State based on law, it takes its stand in its external aspects with deliberate emphasis upon the basis of international law, for Article 4 says: The universally recognized rules of international law are accounted as binding constituent parts of the law of the German Reich.

The democratic principle is carried out by the constitution of the Reich in a twofold shape; first in the forms of representative democracy, the highest organs of the German Republic - the 1 The colours of the Hohenzollern Empire.

Reichstag and the Reichsprasident - being elected by the most extensive democratic franchise; secondly, in an institution of direct democracy - the referendum, which has been introduced alongside of the other and, according to the circumstances of the occasion, is exercised as the vote of the people (V olksabstimmung), the initiative or demand of the people (V olksbegehren) and the decision of the people (Volksentscheid). The suffrage for the Reichstag was universal, equal and direct under the constitution of the Empire; the new constitution (Art. 22) has reduced the age for the exercise of the suffrage from 25 to 20; while for the " passive franchise," i.e. eligibility for the Reichstag, the lowest age limit of 25 has been retained in the Electoral Law of April 27 1920. The vote and likewise eligibility have been conferred upon women entirely on the same footing as upon men. The system of election by majority in single constituencies has been replaced by the proportional system with scrutin de liste. Finally, the election must take place on a Sunday or public holiday. These changes correspond to the demands which the Social Democrats had long ago put forward in regard to these points in their political programme.

There is the same franchise for the election of the president of the Reich as for the referendum. According to the Electoral Law now in force, which, however, will probably one day be altered, the whole territory of the Reich is divided into 35 electoral districts, each of which elects a large number of deputies on the system of strictly separate and closed lists. Thus the list is elected, not the single deputy. To every list as many seats are allotted as the number of times by which the number of votes cast for that list is divisible by 60,000. On this basis the candidates are elected in the order in which their names appear on their list. The total number of Reichstag deputies is accordingly not a fixed number; it is determined by the number of votes recorded at the election. The 35 electoral districts are combined into 17 groups of districts, and within the limits of each of these groups the parties may associate their lists in order to secure that remainders of votes under 60,000 may be reckoned conjointly. The further votes which still remain after this process throughout the whole Reich are credited to what is called the " Reichsliste" of the party for which they are cast, and a deputy is elected for every 60,000 of these remainder votes.

A remainder which exceeds 30,000 votes is counted as 60,000. It follows that out of all the votes cast for any party throughout the whole Reich 30,000 at the utmost can be lost as regards their effect upon the result of the elections. In consequence of the extent of the suffrage, which is as wide as it can possibly be, 60% of the whole population of Germany now possess the franchise. The census of 1919 showed the population of Germany to be about 60,000,000. There are therefore close upon 37,000,000 persons in the German Reich who enjoy the franchise.

The old Reichstag itself used to decide disputed elections; but the decision was frequently long delayed, often indeed until the very end of a legislative period; and its impartiality was once and again doubtful. In point of fact, such decisions bore essentially the character of the exercise of a judicial function for which Parliament, swayed by political parties, is little fitted. Yet so long as a Parliament has not be y ,one absolutely sure of its power in the State, it is wont to watch over this right as over all its other prerogatives with jealous vigilance. Under the new order in Germany the Reichstag is now strong enough to dispense with this judicial function. For the investigation of disputed elections the new constitution of the Reich (Art. 3r) transfers the decision to a court composed of judges and of members of the Reichstag. The mixed composition of the court was adopted in order that the deciding body might continue to have the benefit of expert parliamentary knowledge.

The Reichstag is elected for four years. The duration of the legislative period is a natural subject of conflict between democratic and parliamentary tendencies. Democratic tendencies are in favour of enabling the people, the electorate, to make its voice heard as frequently and as directly as possible, and it therefore urged that the duration of the representative assembly should be brief. On the other hand the efficiency of parliamentary government depends upon allowing an adequate period to elapse between the travail and the after-pangs of a general election for Parliament to have time for quiet political work. The four-year legislative period adopted in the constitution of the Reich represents a compromise between the old legislative period of five years and the demands for a two or three years' period. From the point of view of reasonable parliamentary democracy a period of four years does not seem too long, especially as there is the referendum; and, moreover, the president of the Reich can, by dissolving the Reichstag, appeal from the elected to the electors. It is true that he can do this only once on account of the same matter (Art. 25). This limitation was introduced in order to prevent any attempt by an autocratic president and a complaisant Government to weary the people by repeated dissolutions and thus impose their will.

The date of the meeting of the Reichstag is not subject to the pleasure of the Government; it has the right to convoke itself. The first meeting of a newly elected Reichstag must take place at latest on the thirtieth day after the elections; otherwise it must assemble every year on the first Wednesday of November, unless its president, on the demand of the president of the Reich or of two-thirds of the deputies, convokes it earlier. The Reichstag itself determines the close of its session and the date of its reassembling (Art. 23, 24). In other respects, too, the Reichstag enjoys the fullest rights of parliamentary autonomy, which its president, elected by itself, officially safeguards. Its proceedings are public; it is only on a proposal backed by 50 members and on a resolution supported by a two-thirds majority that the publicity of the proceedings can be suspended (Art. 29). The press cannot be called to account so long as it gives accurate reports of the Reichstag's public proceedings (Art. 30). The parliamentary immunity of the deputies is secured in the most consistent fashion. This does not merely embrace inviolability of privilege for their votes and speeches in the House and their exemption from arrest or legal proceedings without the consent of the House; they have also the right to refuse to give evidence regarding persons or facts with which they become acquainted in their quality of deputies (Art. 36-38).

3. The Reichstag and the President. - According to the old constitution the assent of the Reichstag was, no doubt, required for laws, taxes and the budget; but its influence was decisive only in a negative sense; it could prevent things from being done, but it had no power of creative political action. Upon the composition of the Government and, therefore, upon the general tendency of its policy, the Reichstag had no constitutional influence. The political direction lay quite definitely with the federated governments represented in the Federal Council (Bundesrat), with the Prussian Crown at their head. The new constitution of the German Republic puts the Reichstag at the centre of the life of the State by establishing the parliamentary system of government on the broadest democratic foundations. This in no way signifies unlimited autocratic sovereignty of Parliament. On the contrary, the principle of the constitutional state, established on the basis of law, requires the co-existence of several supreme organs of the State between which parliamentary government forms the elastic link; and it requires the control of independent courts which can determine the legality of all private and public acts. In a parliamentary monarchy the hereditary crown is coordinate with the Houses of Parliament. In a republic an elected head of the State is substituted. If he is elected by Parliament his position is not coordinate with, but rather subordinate to, Parliament; he has no authority of equal standing with that of Parliament; and he is therefore unable in critical situations to supply any counterpoise to excessive manifestations of the one-sided domination of party. In a democracy the only element of equal standing and equal weight with the Parliament is a head of the State who is likewise elected by the whole people.

Accordingly, in the democratic German Republic the President of the Reich is elected by the whole German people.' He is 1 President Ebert was, however, elected by the National Constituent Assembly at Weimar. He was really provisional president, a definitive election not being considered expedient until the definitive elected for seven years. Every German who has completed his thirty-fifth year is eligible. A woman may be elected (Art. 41, 43, 109). The special Electoral Law of May 4 1920 enacts that all electors for the Reichstag have a vote for the president; that the suffrage is direct and secret; and that an absolute majority on the first ballot is decisive. Should there, however, be no absolute majority on the first ballot, then the result is decided in the second ballot by relative majority. The President of the Reich is thus as much a direct representative of the people as is the Reichstag; he is not dependent upon the Reichstag either for his original election or for his reelection. It is true that the constitution gives the resolutions of the Reichstag the greater decisive force; but, in the case of the Reichstag, the representation of the people is distributed among more than 400 deputies, while in the case of the President of the Reich it is concentrated in a single person. The position of this " plebiscitary " president may present many of the features of a tribune of the people, but the danger of degeneration into Caesarism or Bonapartism is meant to be counteracted by the strict practice of the system of parliamentary government, which makes every act of the President absolutely and without exception conditional upon the cooperation and countersignature of the Ministry of the Reich, which, again, is dependent upon the Reichstag.

Unquestionably as a democratic republic was in the circumstances the only possible form of state for Germany, it might nevertheless have been open to serious doubt whether the parliamentary system of government was suitable for that country. This system, it is maintained, cannot with any prospect of success be imposed by rigid legal statutes. It is rather the organic product of a long political development, which can only be created by tradition, political training and by the self-control of political parties, without which parliamentary party government cannot politically subsist. This kind of tradition and the selection of steady leaders, which depends upon it and is indispensable for parliamentary government, are most naturally created where there is a development that has started from aristocratic parliamentarism, has progressively widened its bases, and, finally, through the plutocratic parliamentarism of the middle classes, leads to perfect democracy. In Germany historical development did not supply these favourable conditions. The political progress of that country lagged far behind its economic and social evolution. And now, by means of the new constitution, the parliamentary system and the most complete democratization, which had become inevitable, were simultaneously introduced, and that at a time when there was an entire lack of any leadership traditional and acknowledged by the free play of custom; at a moment, too, when the external situation was the most unfortunate conceivable; and when a very powerful social movement was asserting itself in the country. This is so; and yet what was necessary had also to be rendered possible in the midst of this decisive crisis of the destinies of the German people. For a people of 60 millions the organization of a pure, direct democracy could not be entertained. Suggestions were made from many quarters that, on the model of the American constitution, the executive power should be wholly entrusted to the president elected by the people, with a ministry dependent solely upon him and not upon Parliament. But this dualistic system, which lays excessive stress upon the separation of powers, has exhibited great imperfections when confronted with the demands of modern political life. The absence of a system of parliamentary government is, perhaps, the most serious defect in the otherwise admirable edifice of the American constitution. And Germany's own experiences of the unbridged dualism of Government and Parliament under the old regime offered no inducement to reestablish it in a republican form. In spite of all the objections which have been mentioned, the new constitution had therefore to decide in favour of the parliamentary system in the confident hope that the practice of this system would itself gradually produce the political conditions requisite for its extent of the German Reich had been decided, e.g. by the destiny of Upper Silesia.

success. This is the explanation of the circumstance that the constitution contains many express rules for the conduct of the parliamentary system, which in other countries is founded upon custom and convention, not upon written laws.

The Chancellor and, upon his suggestion, the Ministers of the Reich are appointed and dismissed by the President of the Reich. (Art. 53.) In selecting the persons whom he might appoint, the President of the Reich is thus legally free, and is not confined, for instance, to the members of the Reichstag for his choice. But this is subject to precise conditions: The Chancellor and Ministers of the Reich require for the exercise of their office to possess the confidence of the Reichstag. Any and each of them must resign if the Reichstag by an express vote withdraws its confidence from him. (Art. 54.) The Chancellor lays down the guiding lines of policy and bears the responsibility for them to the Reichstag. Within these lines every Minister of the Reich conducts the affairs of the department which has been entrusted to him independently and on his own responsibility to the Reichstag. (Art. 56.) The President of the Reich can, therefore, only appoint a Government which is able to obtain the support of a majority of the Reichstag; and only so long as it commands such support can it remain in power. The Chancellor and the Ministers form a Cabinet (Kollegium), at the head of which the Chancellor of the Reich corresponds to the English Prime Minister.

The President of the Reich has in regard to foreign and internal affairs all the prerogatives which usually belong to the constitutional head of a State; but the declaration of war and the conclusion of peace are effected by legislation of the Reichstag; and political treaties concerned with matters which form the subjects of legislation require the approval of the Reichstag (Art. 45) :- All ordinances and dispositions of the President, of the Reich, including those relating to the armed forces, require for their validity the counter-signature of the Chancellor or of the competent Minister of the Reich. By the counter-signature responsibility is assumed. (Art. 50.) This likewise applies to the dissolution of the Reichstag and to the institution by the President of the Reich of a referendum of the people upon decisions of the Reichstag. If the Ministry, supported by a majority of the Reichstag, refuses its countersignature to these acts, the President of the Reich can appoint another Ministry, and can, with the counter-signature of this Ministry, dissolve the Reichstag. The people finally decide the matter by the general election.

The constitution draws a sharp distinction between political and legal responsibility; the latter signifies responsibility for the lawfulness, the former for the expediency and the success, of the acts of the Government. Political responsibility is not a legal question which could be decided by a court of justice by means of legal proceedings in accordance with statute law; it involves a judgment regarding political values, which is materially influenced by the party point of view. Political responsibility is, therefore, enforced by a vote of no confidence on the part of the Reichstag, entailing the resignation of the Ministry or of a minister, but involving no judgment at law. As a general rule the political responsibility of the Ministry covers the President of the Reich. It is only for the exceptional case of an intolerable conflict between the President of the Reich and the Reichstag that, as the counterpart of the President's prerogative of dissolution, the Reichstag is similarly given the faculty of appealing from the elected to the electors. The Reichstag by a resolution, which must be carried by a twothirds majority, can submit to the people a proposal for the deposition of the President. If this proposal be rejected by the popular vote, its rejection is taken to be equivalent to the reelection of the President for a fresh term of seven years, and it at the same time entails the dissolution of the Reichstag (Art. 43). Legal responsibility on the other hand is the same for the President of the Reich as for the Chancellor and the Ministers. On the proposal of at least roo of its members the Reichstag can by a two-thirds majority impeach President, Chancellor or Ministers for having culpably violated the constitu tion or a law of the Reich. Judgment is given after regular proceedings at law by the Court for State Affairs (Staatsgerichtshof) for the German Reich, invested with the independence of a Supreme Court of Judicature (Art. 59).

4. The Reich and the Territories.'

Although the new constitution of the Reich did not originate, like the old one, in a federation of the separate states but in the national and democratic unity of the people, it has not abolished the existence of the separate states. Notwithstanding the more compact organization of the national commonwealth and a considerable extension of its competence, the smaller commonwealths continue, although they are no longer called " States " (Staaten) but " Territories " (Lander). Whether the German Republic should now be called a federation of States (Bundesstaat) with strong national central authority, or a unified State (Einheitsstaat) with strong territorial decentralization, is hardly more than a theoretical controversy about terminology. A great obstacle in the way of genuine federal organization and at the same time of consistent political and administrative decentralization is the manner in which territory is distributed among the different German countries. This distribution arose out of the accidents of the dynastic policy of the former reigning houses. It is in many instances a patchwork of fragments of territory which have no real connexion with each other; and above all there is a vast disparity in the size of the territories. Prussia alone embraces in territorial extent and population four-sevenths of the whole Reich; it is therefore by one-third as large again as all the other territories put together and some hundred of times larger than the smallest of them. Corresponding with this proportion was the position of hegemony which Prussia enjoyed under the old constitution of the Reich, but which has now been completely abolished in constitutional law. Yet this has not solved the difficulty of treating as equals territories which are actually so unequal, whether federative organization or the decentralization of the functions of the Reich be the question at issue. The necessity of giving the new constitution a proper basis by a territorial rearrangement of the component parts of the Reich has certainly been acknowledged; but under the pressure of perils without and within this right idea could not for the present be carried out. The 2 5 territories were therefore provisionally taken over in their old extent; and the constitution of the Reich merely prescribes the procedure by which a rearrangement may be effected at some future date. Meanwhile seven of the smallest territories have spontaneously combined to form the single new territory of Thuringen (Thuringia).

Within the organization of the Reich the individual territories are not represented, like the separate states of the American Union or like the Swiss cantons, by a separate House of Parliament, but only by a non-parliamentary body (Kollegium), the Council of the Reich (Reichsrat). The Reichstag consists of a single House. In the American Senate and in the Swiss Council of Estates (St y nderat) there are two representatives of each separate state, elected by that state but representing the political opinion of their party. Not so in the Reichsrat. That body is composed of members of the Governments of the different territories or of substitutes appointed by them, who speak and vote in the name of those Governments. In view of the vast disparity in the size of the different German territories it is impossible that each of them should have the same number of votes. Each territory has at least one vote and the larger territories several votes, in the main according to population. No territory, however, may have more than two-fifths of all the votes. Without this limitation Prussia alone would command a majority in the Reichsrat, so that the representation of the other territories would have no significance. Moreover, in future, half of the Prussian votes 1 The different countries and cities federated in the German Empire (Reich) of 1871-1918 were called States (Bundesstaaten). In the constitution of the new republican Reich they (e.g. Bavaria, Wurttemberg, Saxony, etc.) are designated Territories (Lander), but also in their political aspects Free States (e.g. Freistaat Sachsen, Bayern, etc.).

are to be assigned to the provinces of Prussia, which thus for the first time will obtain direct representation in the Reich on the same footing as the other territories. At present there are 65 votes in the Council of the Reich; of these Prussia has 26, of which 13 are to be assigned to her 13 provinces, including Berlin as a province.

In composition and external aspect the Reichsrat is undeniably the successor of the old Federal Council (Bundesrat); but its real character and its constitutional position are essentially different. The Federal Council was the real seat of the authority of the Government and of the Prussian hegemony. Its President, the Imperial Chancellor, was at the same time Prussian MinisterPresident, and it was this that gave him real power; the direction of the Empire was very intimately connected with the Government of the Prussian State. In legislation the Federal Council had constitutional equal rights with the Reichstag, and as it likewise was in possession of the powers of Government, it actually predominated over the Reichstag. The Imperial Chancellor could not introduce any measure into the Reichstag without the assent of the Federal Council; and no measure or resolution passed by the Reichstag could come into force if the Federal Council did not agree to it. This position of the Federal Council had been the barrier against progress in the parliamentary system in imperial Germany, for it rendered impossible a Government really responsible to the Reichstag. In all these aspects the position of the Federal Council has now been so transformed that the path has been cleared in the German Republic for parliamentarism. The Reichsrat is presided over by a member of the Government of the Reich; but that Government is now entirely independent of the Prussian Government, and it is also independent of the Council of the Reich. It is not the Council but the Ministry of the Reich which conducts the Government and administration and issues general ordinances. Only in so far as the execution of the laws of the Reich falls within the competence of the authorities of the territories is the assent of the Reichsrat required for this purpose. For the rest, the Ministers of the Reich have to keep the Council informed regarding the conduct of the affairs of the Reich and to consult its committees in matters of importance. The Government of the Reich lays its bills in the first instance before the Reichsrat. If the Council rejects them, this does not bar the way to the Reichstag; the Government can introduce its bill together with an exposition of the dissentient views of the Council. The Council has the right to enter an objection to bills passed by the Reichstag; in that case the bill goes back to the Reichstag. If the Reichstag maintains its vote by a two-thirds majority the objection of the Council falls to the ground, unless the President of the Reich ordains that there shall be a popular referendum on the subject. If, however, the Reichstag only votes by a simple majority against the objection of the Council the bill is dropped, unless the President of the Reich institutes a referendum on the matter. The Reichsrat has thus a suspensory veto; the real seat of legislation is the Reichstag.

Neither the President nor the Government of the Reich possesses the right of veto on legislation; they must dispatch the laws which have been constitutionally enacted and must promulgate them within a month's time in the official Law Gazette of the Reich (Reichsgesetzblatt). The President can, however, submit a law passed by the Reichstag to the referendum within the month's period. Moreover, the promulgation of a law must be postponed for two months, if one-third of the members of the Reichstag demand this, and if the law has not been declared urgent by the Reichstag and the Reichsrat. If promulgation is postponed the law must be submitted to a referendum, if one-twentieth of the total electorate request it. The initiative in legislation is also admissible by way of the referendum; this is designated the popular demand (Volksbegehren). The popular demand must be based upon a fully drafted bill, the submission of which must have been demanded by onetenth of the electorate. If such a demand has been brought forward the Governnent lays the bill, accompanied by an expression of its own opinion, before the Reichstag; if the Reichstag does not pass the bill without any alteration the final decision must be taken by a referendum. On the budget, on taxation bills and on votes. for salaries the President alone can institute a referendum. Bills and resolutions passed by the Reichstag can be annulled by the referendum only if the majority of the whole electorate has participated in the popular vote. If it is a case of an alteration of the constitution for which a popular demand has been advanced, the assent of the majority of the whole electorate is requisite for the validity of the popular decision. For the rest, decisions of the Reichstag for alterations in the constitution can only be effected if two-thirds of the legally qualified members are present and if at least twothirds of those present vote. Similarly in the Reichsrat laws for altering the constitution require a two-thirds majority. If the Reichstag has voted an alteration of the constitution to which the Reichsrat objects, the President of the Reich may only promulgate the alteration if the Reichsrat does not within a period of two weeks demand a referendum on the subject.

The referendum has hitherto been tried on a comparatively small scale only, as in Switzerland and in individual American states. On so large a scale and with a mass of some 37 millions of voters it will now, under the new constitution of the German Reich, be tried for the first time. This is an experiment which cannot be made without some misgivings; there are circumstances in which it might seriously complicate legislative procedure. In view of the situation in Germany, however, this modification of pure parliamentarism in favour of the direct intervention of democracy was necessary. The hope may be entertained that it will have the effect of promoting the political education of the masses; the precautions which have just been enumerated will at any rate militate against its abuse.

5. Fundamental Rights

In the distribution of tasks between the Reich and the territories the new constitution like the old defines only the competence of the Reich, and tacitly leaves everything else to the competence of the territories. But the sphere of this competence of the Reich is materially broadened and more strictly outlined as compared with the old arrangements. The constitution of the Reich prescribes for all the German territories the republican form of government and popular representation based, like the Reichstag, upon equality of franchise; upon this representation the Government of the territory must lean. The same suffrage is also prescribed for the communal representative bodies.

In respect of legislation the competence of the Reich ipso facto excludes the competence of the territories for a variety of subjects, in particular for foreign relations, questions of citizenship 1 or nationality, freedom of migration within the Reich, emigration and immigration, extradition; similarly for the organization of the national forces and for coinage, customs, commerce, posts and telegraphs. For a very large number of other subjects the legislation of the Reich is also competent, but the territories also retain their competence as regards these subjects until the Reich exercises its prerogative. Besides this, the Reich can, in case of need, enact uniform laws dealing with public welfare and for the preservation of public order and security; and it can lay down principles for dealing with religious societies, schools, the legal status of officials, land laws, etc. In the matter of taxation the competence of the legislation of the Reich is almost unlimited. The law of the Reich prevails over the law of the territory - that is to say, territorial laws which contradict laws of the Reich are of no effect. In case of dispute the decision of the Supreme Court (Reichsgericht) may be invoked.

In administration, too, the direct competence of the Reich extends to the most important spheres, embracing foreign policy, military forces and navy, communications, especially posts, telegraphs, railways, inland navigation and waterways, customs and, for the most part, taxation as well. For the rest the laws of the Reich are executed by the administration of the territories, so far as these laws do not otherwise provide. Over this part 1 A German is both a citizen of the Reich and of the German territory or state (e.g. Prussia or Bavaria) to which he belongs.

of the activity of the authorities of the territories, however, the Reich exercises supervision, and it can give these authorities general directions. In cases of difference a Supreme Court decides. If a territory does not fulfil the duties incumbent upon it according to the constitution or the laws of the Reich, the President of the Reich, with the aid of armed forces, can make it do so. Similarly, if in any part of the Reich public security and order are seriously disturbed or imperiled, the President can adopt the measures necessary for their restoration, and he can at the same time suspend certain of the fundamental rights. He must without delay inform the Reichstag of all these measures, and, if the Reichstag so demands, he must revoke them. In the spirit of the State based upon law the constitution of the Reich contemplates at all points the decision of disputed questions of justice by independent courts. It sets up the leading principles for securing this independence and for the judges' tenure of their office for life. It prohibits emergency courts, enacts the abolition of military jurisdiction and, on the other hand, secures the existence of courts of administration for the protection of the individual against ordinances of the administrative authorities. A Supreme Court of Administration (Reichsverwaltungsgericht) is to be established by a special law.

In addition to the part which specially deals with organization and is entitled " Construction and Duties of the Reich " - in fact the whole scheme of government - the constitution sets up as its second part a declaration of rights entitled " Fundamental Rights and Duties of Germans." These rights embrace partly statute rights which are directly applicable, but, for the most part, the declaration lays down guiding lines for a programme of legislation for the Reich and the separate territories. These, in a multitude of diverse provisions, have reference to the individual, life in communities, religion and religious societies, education and schools, and economic life. In contradistinction to earlier declarations of the rights of man and of the citizen they lay stress, not merely upon the preservation of individual liberty, but above all upon the obligations and the solidarity of society. Of special importance from the point of view of organization is Art. 165, which declares that the workers and salaried employees and their organizations are to be brought into cooperation on an equal footing with the employers in the arrangement of social and economic life. The declaration prescribes the formation of workers' industrial factory councils, of district economic councils, and of an Economic Council of the Reich (Reichswirtschaftsrat). Before the last-mentioned Council social and economic bills of fundamental importance must be laid by the Government of the Reich for its opinion. The Council can also itself propose such measures and can have them advocated by one of its members before the Reichstag. The constitution does not, however, give the Economic Council of the Reich a decisive vote; the Council is, therefore, not an actual organ of legislation.

6. The Constitution of the Free State of Prussia. - From the collapse of Nov. 1918 there did not emerge a common Revolution-` ary Government for the Reich and Prussia. Accordingly in Jan. 1919, eight days after the elections for the German National Assembly, a separate Prussian Constituent Assembly was likewise elected. After many difficulties and obstacles had been overcome this Assembly completed on Nov. 30 1920 the republican constitution of Prussia.

For Prussia the revolution had infinitely greater significance than for any other German state. In view of the distinctively monarchic structure of the old Prussian State the transition to a republic was in itself something that bore the aspect of a prodigy. This change at the same time brought with it the complete alteration of the position of Prussia in the Reich, a position which had hitherto been characterized by the imperial dignity (Kaisertum) attaching to the Prussian Crown. And not only was this hegemony, the close connexion of the Prussian Government with that of the Reich, abolished; important rights and instruments of power, as, in particular, military organization and railways, passed from Prussia to the Reich. Finally this brought about a further change in the other direction in the relationship between Prussia and her own provinces, which had till then been held together by the compact centralization of monarchy.

The contents of the Prussian constitution are determined and influenced in a far-reaching and decisive way by the new constitution of the Reich. The republican form of government, the basis of the suffrage for the election of the Landtag (the Prussian Diet or Legislative Assembly), and a Government supported by the confidence of the representatives of the people, were prescribed for the constitution of this territory by the law of the Reich. The new Prussian constitution merely carries out these instructions. But, in its close connexion with the constitution of the Reich, it designedly goes considerably further; for the majority of the Prussian Constituent Assembly desired to strengthen as much as possible the unity of the Reich. But for the sake of this object they had to deviate in one important particular from the pattern of the constitution of the Reich. If they had set up a president of the Prussian State in addition to the President of the Reich, friction of the most serious character would have been inevitable. The Prussian Republic has, therefore, no president. The Diet (Landtag) is elected on the same franchise as the Reichstag and, like it, for four years. It elects, without debate and by an absolute majority,' the Minister-President, who then appoints the rest of the Ministers. The Minister-President and the Ministry of the state hold a position as regards each other and as regards the Diet analogous to that of the Chancellor and the Ministers of the Reich as regards the Reichstag. Their political and legal responsibilities are regulated in the same way as in the Reich. The Staatsrat (State Council) holds a position in accordance with the Prussian constitution similar to that of the Reichsrat in the Reich.

So long as a new territorial arrangement of the territories (states) which compose the Reich cannot be carried out, the attempt is being made to diminish the difficulties arising from the disproportionate size of Prussia in comparison with the Reich by increasing the independence of the Prussian provinces by means of thoroughgoing decentralization and enabling them to enter upon direct relations with the Reich. This at the same time meets the popular desire in many districts of Prussia, which are hardly inferior in extent, in population and in cultural and economic importance, to any of the non-Prussian German territories, and are, indeed, superior to most of them in these respects. In the sense of this policy the constitution of the Reich has conferred half the Prussian votes in the Reichsrat to the Prussian provinces. In the same spirit the Prussian constitution prescribes a great extension of provincial autonomy, and has created the Staatsrat (State Council) to represent the provinces in the legislation and administration of the state. The Staatsrat is no more intended to be a second chamber than the Reichsrat; the Parliament consists of one House. But, as the Prussian provinces have no independent Governments of their own, the Staatsrat cannot, like the Reichsrat, be composed of the members of Governments. Its members are elected by the different provincial Diets, which, again, are the products of equal suffrage like the Reichstag and the Landtag. The procedure is that the members of the Staatsrat are elected on the proportional system immediately after every general election for the provincial Diets. They give their votes in the Staatsrat without instructions in accordance with their own unfettered convictions. Every province sends up at least three representatives and an additional one for every half-million inhabitants. All men and women who are citizens of the Reich, have completed their twenty-fifth year, and have been domiciled in the province for one year, are eligible. In the legislation of Prussia the Staatsrat plays a part analogous to that of the Reichsrat in the legislation of the Reich. If it raises objection to decisions of the Diet the objection can be set aside by a repetition of the vote of the Diet by a two-thirds majority or by a referendum which the Diet can institute. The assent of the Staatsrat is requisite if the Diet wishes to vote expenditure exceeding the amount 1 A candidate, in order to be elected, must have received one more than half of the number of votes cast.

which has been proposed or approved by the Ministry. A referendum is not admissible in this instance. In the administration the Staatsrat cooperates by giving its opinion on the general ordinances which are to be issued by the Ministry. The President of the Staatsrat, elected by itself, is entitled to cooperate in the dissolution of the Diet, which, in the absence of a President of the State, is decided upon by a body (Kollegium) composed of the Minister-President, the President of the Diet and the President of the Staatsrat. The Landtag can also be dissolved by its own vote or by popular demand. For the rest the referendum, the popular demand and the popular decision are admissible in a form similar to, though somewhat more restricted than, that which is prescribed for the Reich.

It is only by a gradual and tranquil development that the immense transformations in every sphere of the State, which find expression in the constitution of the Reich and Prussia, can establish themselves and take firm root in the mind of the people, in which, naturally, traditions and memories of the past were still not obliterated in 1921. (H. P. *) Administration The business of the German Reich is conducted by the Ministries of the Reich, consisting of departmental ministers and ministers without portfolio. The departmental Ministries are as follows: Foreign Affairs, Interior, Finances of the Reich, National Defence (Reichswehr), Justice, National Economy (Reichswirtschaft), Labour, Post Offices and Communications, Treasury, Food, Reconstruction.

In Prussia affairs are conducted by the Ministry of State, composed of Ministries of the Interior, Justice, Finance, Public Welfare, Commerce and Industry, Agriculture, Domains and Forests, Education and Public Worship (Kultus-Ministerium). The Territory and Free State of Prussia is now divided into ten provinces: Brandenburg, Pomerania, Lower Silesia, Upper Silesia, Saxony, Schleswig-Holstein, Hanover, Westphalia, Rhein Province, Hesse-Nassau. The municipality of Greater Berlin, created by the law of April 27 1920, also ranks as a province, as does the border region (Grenzmark) of Posen and West Prussia, being the remainder of the two former Prussian provinces bearing those names which was left to Prussia by the Treaty of Versailles. A Prussian province is at once a Regional State Authority (Staatsteil) and a self-governing local authority.

According to the new Prussian constitution (Art. 72), the provinces are to be administered by their own administrative organs in accordance with the terms of an Autonomy Law which is to be enacted. This administration is concerned with (i.) matters falling within the administrative competency of the provinces, having been either assigned to them by legislation or voluntarily taken over by them; (ii.) delegated affairs, i.e. affairs of State which have been transferred to the provinces.

The State authorities of the provinces are the Chief President (Oberregierungsprasident) and the Provincial Council; the local authorities are the Landeshauptmann (in some regions known as the Landesdirektor), the Provincial Diet and the Provincial Delegation (Provinzialausschuss). The provinces are divided as territorial parts of the State into districts (Regierungsbezirke), at the head of which is the district president. The districts are divided into sub-districts (Kreise), wjlich are of two kinds, urban and rural sub-districts (Stadtand Landkreise). These form part of the State Government like the provinces, and are also independent, self-governing units. The constitutions of local government units, i.e. the provinces, the urban and the rural subdistricts, are determined by provincial and local statutes, which differ for different parts of the country. The electoral system, on the other hand, has been made uniform for the organs of local government by a law of Dec. 3 1920. The suffrage is the same as for the Reichstag, with proportional representation.

In the sub-districts the organs of administration are the Landrat, the Kreistag and the sub-district delegation (Kreisausschuss). A town with a population of more than 25,000 inhabitants may separate from the rural sub-districts to which it would otherwise belong and form an independent urban sub-district. Rural sub-districts are divided into communes (Gemeinden), which again are either urban or rural communes. The pre-war statutes as to the administration of urban and rural communes are still in force. The organs of State administration under the Landrat are the Amtsvorsteher (sub-district officials); the organs of the communal administration are the Gemeindevorsteher (communal officials). The larger landed estates constitute Gutsbezirke, the administrative organs of which are the Gutsvorsteher. In the towns there is a council of aldermen (burgomaster and aldermen) at the head of the administration, and there is likewise a council of elected municipal deputies. All these administrative organs are being reformed on uniform and modern lines. Greater Berlin has, by the law of April 27 1920, been made into a single urban community, consisting of 8 urban communes, 59 rural communes and 27 manorial communes (Gutsbezirke). This permanent organization replaced the union of Greater Berlin, which had been provisionally effected for certain special purposes.

The status of officials as regards the Reich is based on Art. 128-131 of the constitution. They are appointed for life except in cases where the contrary is provided by statute. In Prussia their position is regulated by the Prussian constitution (Art. 77-79). Every official of the Reich has to take an oath of fidelity to the constitution of the Reich, and every Prussian official to the constitutions of the Reich and of Prussia. The scale of salaries has been revised for the Reich by the laws of April 30 and Dec. 17 1920, for Prussia by the law of May 7 1920. According to the law of the Reich of Dec. 21 1920, the remunerations and allowances paid by the individual states, the local authorities or by other public corporations to their officials and the teachers in their schools must not be higher than the salaries paid to the officials of the Reich who occupy corresponding positions (Beamtensperrgesetz). In Prussia a maximum age limit has been introduced by the law of Dec. 15 1920. For officials directly employed by the State and for national-school teachers it is 65; for judges, teachers in universities and higher technical colleges, 68.

Socialization

According to the new constitution of the Reich (Art. 156) the Reich may convert into property of the community all enterprises which are suitable for socialization. The Reich may associate itself, the individual states or the communes, with the administration of such enterprises, and it may out of separate industrial undertakings form self-governing cooperative bodies. The Socialization Law of March 23 1919 had been promulgated before the constitution was enacted. According to this law the Reich had the power (i.) to socialize all suitable enterprises, especially those occupied with the extraction of minerals and with the exploitation of natural sources of power; 1 (ii.) in case of urgent necessity to regulate by means of administration in the public interest the production and distribution of economic products. A Socialization Commission was set up whose business it is to make proposals for laws for carrying out the Socialization Law.

The rules for the working of the Statute of March 23 1919 dealing with the coal industry were promulgated Aug. 20 1919. At the head of the coal administration is the Coal Council of the Reich (Reichskohlenrat), under which is the Coal Association (Reichskohlenverband). The latter supervises the main lines laid down by the Coal Council for dealing with the whole industry in fuel. Germany is divided into II mining districts; all the collieries of each district are united into a syndicate. Similarly all gas-works in the district are united in one Gas Coke Syndicate. The Chancellor, and, under him, the coal commissaries of the Reich, exercise supervision over distribution of all the coal which is produced in Germany.

The potash industry is regulated by the law of the Reich of April 24 1919. The chief control is in the hands of the Potash Council. This body is competent to give its assent to the conclusion of syndicate contracts and to business regulations for the potash industry. It may forbid the opening of new potash-fields and may close down existing works. It fixes the price at which potash may be sold in Germany and also the average wage to be paid in the industry. Wage bureaux of first and second instance have been instituted for the latter purposes. All producers of potash are united in one obligatory syndicate, which has the sole right to sell and to import potash products. The potash control office supervises the execution of the instructions of the Potash Council of the Reich. It fixes the extent to which each of the potash-works is to participate in the general production. An application for revision of its decisions may be made to the Potash Board of Appeal.

Socialization of electricity has been initiated by the law of Dec. 31 1919. Associations are to be formed for the production and distribution of electrical power in all districts where there are electrical works. In the case of larger works the Reich has the right to take them over.

Settlement and Housing

By the Settlement Law of Aug. 8 1919 the individual states are obliged to establish settlement associations in the public interest for the creation of small independent settlements. These associations have the right of preemption for all properties over 25 hectares in extent unless they pass into the possession of a husband or wife or near relations of the owner. In settlement districts where more than 10% of the agricultural land is in properties exceeding 100 hectares in extent the properties form a land supply association with cooperative rights. This association A great development of water-power was in progress in 1921, especially in Bavaria.

has to place at the disposal of a settlement association lands for settlement up to one-third of the agricultural area as it existed in 1907 on the properties concerned.

According to the Small Holdings Law of May to 1920 the Reich, the individual states and the communes may assign small holdings for the erection of dwelling-houses and for cultivation by a small holder. The holding may not be partitioned or mortgaged without permission of the authority which has assigned it. The assigning authority has the first right to purchase, except where property passes to a husband or wife or near relation of the owner, and it also has a claim to the reversion of the holding if the small holder manages the place badly or does not properly look after it.

The housing difficulty has since 1918 necessitated measures of compulsion. In accordance with the proclamation of Sept. 9 1920 the communes may prohibit the demolition of buildings and the use of living-rooms for purposes other than habitation; they may also demand the notification of rooms which are not in use. In districts where there is an actual housing crisis the commune can also be empowered to issue further regulations for such purposes as sequestration of houses and rooms for compulsory billeting. Profiteering by house agencies is forbidden and is punishable. For increases of rent a certain percentage in addition to the peace-time rent of July I 191 may be fixed as a maximum.

Courts of Law. - The principal courts of justice in their order from the lowest to the highest are: the Local Courts (Amtsgerichte), Provincial Courts (Landgerichte), Superior Provincial Courts (Oberlandesgerichte) and the Reichsgericht at Leipzig. The Reichsgericht is the only court which is maintained by the Reich; all the others are courts of the individual states. The judgments of the courts are issued in accordance with the new constitution of the Reich, under the heading " In the Name of the People." 1 All the courts act as civil courts, as criminal courts and as courts having jurisdiction in non-contentious matters.

The Amtsgerichte are, according to the Statute of March II 1921, declared to be competent in all actions involving values up to 3,000 marks, and as regards some classes of actions (such as claims for maintenance, purchase of cattle, suits relating to rents and transport, etc.) without regard to the value of the object. The Anitsrichter sits as sole judge. An appeal from his judgment to the Landgericht may be made, but only when the value of the object is more than 300 marks.

The Landgericht sits in divisions consisting of 3 judges in civil actions and of 5 judges in the case of the more important criminal trials. In the more important districts the Landgericht has also a commercial division with one professional judge and two lay judges taken from the commercial classes. From a judgment of a civil or commercial division an appeal lies to the Oberlandesgericht, sitting in senates of which each is composed of 5 judges. From the judgment of this court there is again an appeal on pure questions of law to the Reichsgericht, sitting in senates of which each is composed of 7 judges; such appeals only lie where the value of the object exceeds 4,000 marks, or in special classes of action (e.g. matrimonial suits, claims against the State, etc.).

Minor criminal cases are tried by the courts of first instance, Schoffengerichte, which are presided over by the Amtsrichter and are composed of him and two lay judges. From the judgment of the Amtsgericht an appeal lies to a Strafhammer (Criminal Division of the Landgericht), and on points of pure law there is a further appeal to a criminal division of the Oberlandesgericht, in which 5 professional judges sit. Criminal cases of medium gravity are tried before a Strafkammer of the Landgericht as a court of first instance. An appeal lies from its judgment, not on questions of fact but only on the ground of misapplication of the law, in most cases to the Reichsgericht at Leipzig, but in some classes of cases this appeal goes to the Oberlandesgericht.

The gravest crimes are tried before a court composed of 3 judges sitting with a jury; the jury consists, as in England, of 12 persons. There is an appeal to the Reichsgericht against the judgment of a court sitting with a jury, but only on the ground of faulty procedure.

The Reichsgericht at Leipzig, in addition to being the court of revision in civil and criminal matters, is also competent, as a court of first and final instance, for the trial of cases of high treason, ordinary treason and military crimes. In order to obviate the extradition of the Germans accused of war crimes (as provided for in Art. 228 seq. of the Treaty of Versailles), the Reichsgericht was declared by a Law of Dec. 18 1919 to be competent for the trial of war crimes and offences.

Amtsgerichte, Landgerichte, Oberlandesgerichte and the Reichsgericht are designated as regular (Ordentliche) courts. There are, in addition, special courts (Sondergerichte); for example, industrial and commercial courts for disputes between employers and employed. In these there is a permanent president with assessors consisting of employers and employed in equal numbers. There are courts dealing with profiteering (Ordinance of Nov. 27 1919). There is further the Reichswirtschaftgericht (Ordinance of May II 1920), or economic court of the Reich for dealing with certain kinds of disputes arising out of the war and the conclusion of peace. Other special courts are 1 In the monarchical states the heading was " In the name of the King " or of the Grand Duke, Duke or other Sovereign.

the extraordinary tribunals with expedited procedure, such as those which the President of the Reich, acting by virtue of emergency powers conferred on him in Art. 48 of the constitution, set up to deal with cases arising out of the communist disorders. These courts are presided over by 3 professional judges; there is no appeal.

Legislation for Carrying Out the Treaty of Versailles

The Peace of Versailles was signed on June 28 1919, and accepted by the Reichstag by the Law of July 16 1919. According to the concluding article of the Treaty it was to come into force so soon as Germany and the three leading Powers had ratified it, and a " First Protocol " regarding the deposition of the Acts of Ratification had been drawn up. This was done on Jan. 10 1920. That day is, therefore, to be regarded as the day of the conclusion of peace for Germany in her relations with those States which had at once signed this protocol.

Germany had previously promulgated two laws of Aug. 31 1919: a law for the execution of the Treaty of Peace, and an Expropriation Law for the purposes of the Peace Treaty. According to the former, the settlement of claims and debts arising from transactions entered upon before the war between Germans and enemy nationals could as a rule be effected only by means of official investigation and through clearing offices (Treaty of Peace, Art. 72, 296); but where an enemy Power had not, according to Art. 296e, given notice to Germany, within a month's time after its ratification of the Treaty, of its intention to adopt the clearing-office system, direct negotiations were permitted. On April 24 1920 a statute was formed setting up a central clearing office of the Reich in Berlin, with. 15 branch offices in the more important towns.

Up to May I 192 the following States had declared their participation in the clearing-house system: Great Britain, France, Italy, Belgium, Siam, Haiti. The following States had so far decided for direct negotiations: Brazil, Japan, Bolivia, Guatemala, Peru, Poland, Czechoslovakia, Uruguay, the British Union of South Africa and the British Protectorate of Egypt, Yugoslavia, Cuba, Portugal, Liberia, Rumania, Honduras, Nicaragua, Panama.

The law for executing the Treaty further authorized the Government of the Reich to requisition, subject to compensation, the service of agricultural, forest, industrial and mercantile enterprises, for the purpose of fulfilling the obligations arising out of the Treaty.

The Expropriation Law of Aug. 31 1919 empowered the Reich to confiscate and expropriate provisionally by summary order without legal procedure objects which were to be transferred to the Entente.

For the execution of the Peace Treaty a special commissariat of the Reich for works of reconstruction was instituted in the Ministry for Reconstruction, and also a commission for restoring machines and material to the enemy. According to the Law of the Reich of May 3 1920 information must be given to the authorities regarding all property rights and interests of German nationals in the territories of the Entente States.

Compensation for services and supplies to the enemy forces in occupied regions was provided for by the Law of March 2 1920.

Military and Naval System

By the new constitution of the Reich, and under pressure of the Treaty of Peace, the military system of the German Reich was completely transformed. According to Art. 173 of the Treaty of Versailles universal service was abolished in Germany, and the German army might be recruited and vacancies filled solely by voluntary enlistment. According to Art. 160 and 183 of the Treaty, the whole peace strength of the German army might not exceed 100,000 men, while that of the naval forces was limited to 15,000 men - in both cases including officers. In execution of these provisions the Law " for the abolition of universal service and for the regulation of the obligation to serve for a long period " was promulgated on Aug. 21 1920. A provisional Reichswehr (army of the Reich and navy of the Reich) had at first been created by the laws of March 6 and April 16 1919; the Reichswehr Law of March 23 1921 was issued, and according to this law the armed force of the German Republic is the Reichswehr.

Those who enter the army or navy as soldiers or sailors undertake the obligation of serving for 12 years. After that period, unless three months' notice to leave is given, the contract is prolonged for an additional year. During the period of service either party may dissolve the contract on special grounds. Every member of the army or navy can be promoted to the highest posts in accordance with capacities and services.

The career of an officer is intended to be for life. A candidate, before he is appointed to the position, has to contract a written obligation to serve uninterruptedly for 25 years. This contract, however, like that of the men, can be annulled on special grounds before it expires. The electoral rights of officers and men as citizens remain in abeyance during their period of service (Electoral Law of the Reich of May 27 1920, §2).

Provision is made by law for soldiers who have left the service and for the surviving dependents of soldiers and sailors. Provision for those officers of the former German army and those non-commissioned officers under contract to serve for a long period (Kapitulanten), who were not taken over into the new army of the Reich, was made by the Officers' Compensation Law and the Non-commissioned Officers' (under contract) Law, both promulgated on Sept. 13 1919. Officers of the different reserves, the men, and the military officials (i.e. those belonging to the Reserve, the Landwehr and the Landsturm) were released from all military obligation by an ordi nance of the President of the Reich and the Reichswehr Ministry dated Jan. 21 1920. The settlement of the amount of pension or provision to which they might be able to lay claim was reserved.

In accordance with the new constitution of the Reich (Art. 105) the former Militar y Courts of Honour were abolished, as was the whole system of military jurisdiction, apart from penal proceedings in time of war and on warships in commission. Apart from these courts-martial on land in time of war and in general on sea, criminal cases against members of the army and navy can be tried by the civil courts.

A law of the Reich of May 12 1920 deals with provision for former members of the German forces on land and sea, and with surviving dependents of such in cases where injury or death was incurred in the service. This law applies to claims for pensions or payments arising out of the war. The provision which is made, apart from medical treatment and social aid by means of gratuitous training in a trade or occupation, usually consists in a pension (Rente), the amount of which is regulated in accordance with the disability of the recipient to pursue his calling, and in accordance with the nature of his occupation, the numbers of his family and the place of his residence. The pension for surviving dependents in case of the death of a member of the army or navy in consequence of injuries received on service takes the form of a pension for widows, orphans and parents. Persons who are entitled to receive support may obtain instead of a pension a capital sum for the purchase of land, or for the economic amelioration of land which is their property.

In execution of Art. 173 seq. of the Treaty of Versailles the disarmament of the German population was undertaken in accordance with the Disarmament Law of Aug. 7 1920, 1 under the direction of a commissary of the Reich with an advisory council of 15 members chosen by the Reichstag. By the Law of the Reich for executing Art. 177 and 178 of the Peace Treaty participation in unauthorized military associations was made punishable by a fine not exceeding 50,000 marks, or by incarceration in a fortress or imprisonment for a period not exceeding 3 months.

According to Art. 228 of the Treaty of Peace the Powers of the Entente were entitled to bring before their military courts Germans who were accused of offences against the law and customs of war, and the German Government had undertaken to extradite all Germans demanded by the Entente and described as war criminals - an undertaking which was contrary to an express prohibition in the German penal code. The Entente ultimately intimated its assent to the arrangement that the German nationals whom it accused of these offences should be tried by German courts.

For the purpose of carrying out this arrangement a special law was promulgated on Dec. 18 1919 (amended March 24 1920 and May 12 1921). This law declared the Reichsgericht at Leipzig to be competent for trying and judging, as a court of sole instance, cases of crimes or offences against enemy nationals or enemy property committed by Germans at home or abroad up to June 28 1919, and punishable according to the law of the place where they were committed. Amnesties, proscription by lapse of time or the pronouncement of judgment at a previous trial formed, according to these laws, no bar to a new prosecution. Proceedings were to be instituted by the Oberreichsanwalt (chief public prosecutor) before the Supreme Court of the Reich; but even when that court found no ground for an indictment, the public prosecutor could demand that the decision should be given in open court after pleadings as to whether the proceedings were to be stayed or continued.

Railways

During the war-the Reichstag proposed that preparations should be made for bringing all German railways of any importance into the possession of the Empire. The Governments of the separate states resisted this scheme; they endeavoured by mutual arrangements (the so-called Heidelberg programme) to remove the chief causes of complaint arising out of the coexistence of so many railway systems. When the constitution of the new republican Reich was under consideration the unification of the railway system was assumed to be the aim in view. Art. 89 of the constitution of Aug. I I 191 enacts that " it is the business of the Reich to acquire possession of the railways which subserve general traffic and to administer them as a unified system of communications." According to Art. 171 the railways of the German states were to be transferred to the possession of the Reich by April I 1921 at latest. This transfer was actually effected on April I 1920. In accordance with the treaty of March 31 1920, between the Government of the Reich on the one part and the states which owned the state railways - Prussia, Bavaria, Saxony, Wurttemberg, Baden, Hesse, Mecklenburg-Schwerin, Oldenburg - on the other, the railways of the states which were parties to it passed as a whole, with everything connected with them and all rights and obligations involved, into the possession of the Reich. The Reich indemnifies each state in one of two ways according to the option of the particular state. It either hands over the amount of capital invested in the railways of the state calculated on March 31 1920, or it pays the amount calculated to be the average between that amount and 1 Another law was passed in March 1921 for the disarmament and dissolution of forces like the Bavarian Einwohnerwehr and Orgesch (Organisation Escherich), the object of which was to organize various voluntary service formations throughout the country.

the capital value computed on the basis of the returns for the financial years 1909-13. In addition, the states are compensated in all cases for deficits which arose between April i 1914 and March 31 1920, during the war and the period of the revolution. The total indemnification will burden the Reich with some 40 milliard marks. The Reich thus took over (according to the situation on March 31 1919) the following kilometric extent of state railways including narrow-gauge lines: Prussia and Hesse, 40,312; Bavaria, 8 ,545; Saxony, 3,367; Wurttemberg, 2,153; Baden, 1,859; MecklenburgSchwerin, 1,095; Oldenburg, 673 km. The total number of persons employed on the German state railways in 1920 was 1,030,000, including some 365,000 officials.

The Treaty of Versailles inflicted a heavy blow upon the German railway system; according to Art. 67 the German state railways of Alsace-Lorraine passed into the possession of France without any payment, whereas when Germany took possession of Alsace-Lorraine under the Peace of Frankfort (1871) the then French railway lines in those provinces were paid for by the German Empire with a sum of 250,000,000 francs. According to Art. 40 of the Treaty, Germany had further to renounce all her rights with regard to the working of railways in Luxemburg (the Wilhelm-Luxemburg railway). According to Art. 256 the state railways in the ceded portions of German territory passed into the possession of the states which acquired these territories; these states have, however, to pay the value of the railways as ascertained by the Reparations Commissions.

The whole organization of the railway system is under the Ministry of Communications. Subject to that Ministry the rights hitherto exercised by the Prussian Ministry of Public Works, the PrussoHessian central office, and the railway central office in Berlin, as well as the Bavarian central office in Munich, were maintained. The authorities for regional administration are the regional railway officials of management (Eisenbahndirektionen), and, subject to them, for local administration the offices for traffic, construction, machines and workshops.

Postal, Telegraph and Telephone System

The unification of the whole German postal system, and its transference to the Reich, was effected by the terms of the new constitution of the Reich of Aug. I I 1919. Art. 88 provides that the posts and telegraphs, together with the telephone system, are exclusively the concern of the Reich. According to Art. 170 the posts and telegraphs administrations of Bavaria and Wiirtteinberg were to pass to the Reich on April 1 1921 at latest. The transfer, however, took place on April 11920, in accordance with a law of the Reich and treaties which had been previously concluded. Bavaria received an indemnification of 620,- 000,000 marks and Wurttemberg 250,000,000 marks.

The secrecy of the posts, telegraphs and telephone is safeguarded by Art. 117 of the new constitution of the Reich. The German postoffice, in addition to conveying letters and parcels, conducts business in the nature of banking, such as the issue of postal orders, the collection of the price of goods on delivery or by means of postal mandates, and all payments resulting from the national insurance schemes (excepting sick pay). The post-office also performs the functions of a public recording official. It procures acceptances of bills, serves process in civil and criminal cases, collects and protests bills and cheques in case of dishonour; but its functions respecting bills and cheques do not extend to sums above 1,000 marks. Certain franking privileges which had previously existed were abolished by a law of April 29 1920. Postal tariffs have in many respects been increased by a law of March 22 1921. The postal cheque system is based upon the Postal Cheque Law of March 22 1921 and the postal cheque regulations of April 7 1921. In 1918 there were 300,562 persons who used postal cheques to the amount of 1.2 milliard marks. The whole turnover of the post-office amounted to 151 milliard marks, of which 115-5 milliards were paid without the use of currency. The administration of the telegraphs and telephone is under the supreme control of the Ministry of Posts for the Reich, subject to whom are 45 higher post directories for district administration, and under the latter are post-offices of the first, second and third class, railway post-offices and postal agencies.

Waterways

According to Art. 97 of the new constitution it is the business of the Reich to take over into its own possession and administration the waterways which subserve general traffic. The waterways and sea-marks were transferred to the Reich on April 1921 in accordance with Art. 171 of the constitution. The keenly debated scheme for a Prussian central canal for establishing a connexion by water between the Vistula, the Elbe, the Weser and the Rhine, has been extended by laws of Dec. 4 1920 and Jan. 14 1921, sanctioning further expenditure of 436,000,000 and 740,000,000 marks (Weser and Elbe canal). The administration of the waterways by the Reich is conducted through the section for waterways in the Ministry of Communications.

By Art. 331 of the Treaty of Versailles the sovereignty of the State over the five great rivers - the Rhine, the Elbe, the Oder, the Memel and the Danube - which flow through German territory, has been considerably restricted. They are " internationalized." Air Traffic. - By an order of the Council of the Commissaries of the People of Nov. 26 1918, an air-traffic office of the Reich was instituted in connexion with the Ministry of the Interior until a law should be issued for the regulation of air traffic. An ordinance for the provisional regulation of air traffic was issued on April 30 1920; dirigible aircraft travelling outside the boundaries of an aircraft station without a licence for themselves and their pilots from the Office of the Reich for Air and Motor Craft may be declared confiscated by the Reich. (E. H.) THE Post-War Army In the chaos which followed the signing of the Armistice of Nov. ii 1918, the 228 divisions which then constituted the German army as known during the World War (see Army) either demobilized themselves or placed their services at the disposal of the more popular officers. In this way, the German Government was able to raise troops to oppose the Poles and to put down the Spartacist rising in Jan. 1919. The forces raised at first consisted of the following two categories: - (i.) In the E., volunteer formations were raised for " Grenzschutz Ost " (frontier guard E.) in addition to the retention with the colours of the 4 youngest classes. (ii.) In the interior, the 1918 class and men of old army units who had no civil employment were combined into so-called Sicherheitstruppen formed from the old army units. In addition certain volunteer units of pronounced republican tendency were raised in Berlin.

The forces named under (ii.) proved so untrustworthy that the Government had to fall back on volunteer formations, which were raised during Jan. and Feb. 1919 by the personal exertions of wellknown officers of the old army. These volunteer formations, differing largely in military value, organization, methods of pay and recruiting, could only be regarded as a stop-gap, and in March the Reichswehrminister Noske obtained the consent of the National Assembly to the formation of a provisional Reichswehr, with linked Volkswehr units to be raised from the existing volunteer formations in the interior. The scheme for this new provisional army was promulgated in army orders of April 4, and was put into execution throughout the interior of Germany during April and May. The original scheme provided for 6 brigades on the higher and 12 on the lower establishment, giving a total of 177,000 men of the Reichswehr and linked Volkswehr in the interior; the main body of this force was organized from the volunteer formations stationed around Berlin under Gen. von Liittwitz and formed the Liittwitz Group.

The Sicherheitstruppen in the interior were disbanded or absorbed into the Reichswehr, and the remaining men of the younger classes were demobilized. Pay and organization of the various volunteer units and formations were regularized; gradually the scattered volunteer units and formations were transformed into Reichswehr brigades, and the former system of independent recruiting by units or commanders was transferred to the territorial army-corps districts.

The troops of Grenzschutz Ost, who were commanded by Hindenburg, were at first not affected by this new reorganization, but from mid-May 1919 the volunteer formations in Grenzschutz Ost were gradually absorbed into the Reichswehr. All men of the younger classes retained compulsorily in Grenzschutz Ost were discharged by July 31 1919. By Sept. 1919 the German Reichswehr consisted of 43 mixed Reichswehr brigades. In addition, there were still some volunteer formations in the eastern provinces. The total strength was then about 320,000 men. After the ratification of the Peace Treaty on Jan. 10 1920, the period allowed for the reduction of the Reichswehr to 200,000 men was 3 months. Up to the time of the Spa Conference (June 21 1920), however, the German army still considerably exceeded this figure. By the terms of the agreement at Spa, Germany was obliged to reduce the Reichswehr to 150,000 men by Oct. I 1920 and to ioo,000 men by Jan. I 1921.

Although the German forces were reduced to the figures laid down in the Peace Treaty, with a few minor exceptions, by Jan. i 1921, it was not until March 23 1921 that the law known as " Wehrgesetz " was promulgated by the Federal President, abolishing universal military service in Germany and definitely fixing the establishment of the new German army. By the terms of the new German Military Law the defence force (Wehrmacht) of the German Republic is the Reichswehr. It consists of the Reichsheer and the Reichsmarine, which are composed of, and recruited from, volunteer soldiers and non-combatant military Beamten (officials).

The army (Reichsheer) consists of 100,000 men, including 4,000 officers and military officials of officer's rank. In addition to these there are 300 medical and 200 veterinary officers. The Federal President is the commander-in-chief of the Reichsheer. The administration of the Reichsheer is exercised by the parliamentary Reichswehrminister, assisted b y the Reichswehr Ministry. The total number of officers employed in the Reichswehr Ministry in accordance with the Treaty of Versailles must not exceed 300. Under the Reichswehrminister the executive military command is exercised by a general, who is chief of the army command (Chef der Heeresleitung), a title for which there is no British equivalent,' and the military administration is carried out by the chief of the army command, ' The term " general staff," under the conditions of the Peace Treaty, is abolished. Practically, the chief of the army command exercises the functions of the former chief of the general staff.

corresponding practically to the quartermaster-general of the British army system. The quartermaster-general ranks as UnderSecretary of State. The executive military command is carried out through two Gruppen Kommandos (Command Staffs) who are directly responsible to the chief of the army command. The administrative services of the divisions, however, are under the control of the O.M.G. Each State of the German Federation may choose a Landeskommandant from amongst the commanders available in the State. The Landeskommandant is then confirmed in his position by the Federal President and is directly under the Reichswehrminister. The principal mission of the Landeskommandant is liaison between the Federal States and the Reichswehr Ministry. The German Reich is subdivided into 7 divisional districts. Each divisional district comprises 2 or more of the former army-corps districts. Each infantry division is commanded by a general officer, assisted by the commander of the infantry (Inf. Fi hrer) and by the commander of the artillery (Art. Fiihrer) and their staffs.

The composition of each infantry division is as follows: - headquarters; infantry H.Q. and 3 regiments of infantry; artillery H.Q. and one regiment of artillery; and, as divisional troops, one squadron of cavalry, one battalion of pioneers, one signal detachment (2 companies), one mechanical transport detachment (3 companies), one horse-transport detachment (4 companies), and one medical.

There are 3 infantry regiments in each division. Infantry regiments are numbered from I to 21, and are each composed of 3 battalions, one trench-mortar company, one depot battalion. The battalion has 3 infantr y companies and one machine-gun company.

There is one artillery regiment in each division. Artillery regiments are numbered from i to 7, and consist each of 3 groups (of 3 batteries each). The pioneer battalion is composed of 2 pioneer companies, one pontoon detachment and one searchlight section.

Each cavalry division is commanded by a general officer, assisted by a divisional staff; the composition of the cavalry division is 6 cavalry regiments and one horse-artillery group (3 batteries). The cavalry regiment consists of 4 squadrons and one depot squadron. Cavalry regiments are numbered 1 to 18.

The divisional troops in each branch are numbered from 1 to 7 according to the division to which they belong.

Armaments and Equipment. - According to the conditions of the Treaty of Versailles and subsequent decisions by the Commission of Control in Berlin, the following scale of arms was authorized for the Reichsheer: Rifles (1898 pattern), 156,080; carbines, 18,000; short pistols, 50,000; machine-guns (light), 1,418; machine-guns (heavy), 828; field guns, 7.7-cm., 204; light field howitzers, 10.5-cm., 84. An arsenal reserve of 4 °o on the above figures was allowed by the Peace Treaty.

Military Schools. - According to the Treaty of Versailles the Reichsheer is allowed to maintain one military school per arm. These schools were in 1921 located as follows: - Infantry, Munich; Cavalry, Hanover; Artillery, Jiiterbog; Pioneers, Munich; Farriers, Hanover. Physical training and sports receive special attention and encouragement in the Reichsheer.

The uniform of the Reichsheer is the standard field-grey uniform. The tunic is universal; breeches are worn by the infantry with ankle boots and puttees, and by mounted troops with knee boots. The head-dress is, for field service, a steel helmet or a grey field-service cap with cloth cockade and soft peak; otherwise a stiff service cap with cockade of the Reich surrounded by a wreath of oak leaves, above which is placed a cockade of the state to which the unit belongs. (The helmet and shako of the imperial army have been abolished.) The colour of the piping on the collar of the tunic and on the cap and the colour of the piping and of the numerals on the shoulder strap denote the arm to which the individual belongs: - infantry, white; cavalry, yellow; artillery, red; pioneers, black; signal troops, brown; trains, light blue. The former badges of rank of the imperial army, worn on the shoulder straps, have been restored to the officers of the Reichsheer, but the latter are now of dull and silver lace for junior officers, of intertwined gold and silver for field officers, and of gold lace for general officers. (X.) THE Navy The German navy law of 1900 proposed that the navy should consist of: - (t) the battle fleet, composed of 2 fleet flagships, 4 squadrons of 8 battleships each, 5 armoured cruisers, 24 light cruisers; (2) ships for foreign waters, comprising 3 armoured cruisers, 10 light cruisers; (3) and, as reserve ships, 4 battleships, 3 armoured cruisers, 4 light cruisers. Torpedo-boats and vessels for special purposes wire to be added to the establishment year by year as necessity should arise. The Reichstag passed the law, except for the omission of the ships for foreign waters. During the succeeding years, in compliance with this programme, new ships were constructed, obsolete types replaced, dockyards, harbours and coast defences built, the Kiel canal widened and deepened, the personnel increased, the organization of the higher commands extended, etc. The Navy Law was afterwards supplemented as regards particular points, to meet the requirements of new developments. In 1906 the 6 armoured cruisers which had been cut out were reinstated, and, following the example of England, battleships and armoured cruisers were transformed into dreadnoughts and battle cruisers; the number of torpedoboats was also increased. The North Sea naval bases - Wilhelmshaven, Heligoland, Cuxhaven - were strongly fortified, and submarine construction was energetically carried out. In 1912 a fifth squadron was established, the number of battleships raised by 3 to 41, the reserve ships being incorporated and the main tenance of a reserve abandoned; the number of light cruisers was raised from 38 to 40.

The naval budget increased from £21,700,000 in 1910 to £28,800,000 in 1914; and during these years the personnel of the navy increased from 57,070 to 79,070.

In the article Ship And Shipbuilding an account is given of the new warships built for Germany in these years. (See also Naval History Of The War.) At the outbreak of the World War the fleet included 15 first-class battleships, 5 first-class battle cruisers, 22 older battleships, 7 older armoured cruisers, 29 light cruisers, loo torpedo-boats, 14 mine-layers, 106 mine-sweepers, 27 submarines, 3 naval airships, 6 seaplanes and 6 aeroplanes. By Nov. 1918 it included 19 first-class battleships, 6 first-class battle cruisers, 5 older battleships, 2 older armoured cruisers, 18 light cruisers, 188 torpedo-boats, 6 mine-layers, 394 mine-sweep ers, 3 seaplane-carriers, 206 submarines, 9 airships, 879 seaplanes, and 360 aeroplanes.

The losses during the war comprised one battle cruiser (" Liitzow "), one older battleship (" Pommern "), 6 older large cruisers (" Scharnhorst," " Gneisenau," " Blucher," " Prinz Adalbert," " Yorck," " Friedrich Karl "), 18 light cruisers (" Magdeburg " " Ariadne " " Mainz," " Koln " " Hela " " Konigsberg," " Emden," " Leipzig," " Nurnberg," " Dresden," " Undine," " Bremen," " Wiesbaden," " Elbing," " Rostock," " Frauenlob," " Breslau," " Karlsruhe "), 98 torpedo boats, 3 mine-layers, 71 mine-sweepers, 55 airships, 194 submarines, and 128 other vessels.

After the War. - Under the revolution the inner organization of the navy was severely strained but not destroyed. Order was gradually restored. The authority vested in heads of staff and administration was revived as the Government grew stronger and the liquidation of the war could be begun. The surrender of the ships composing the High Seas Fleet took place on Nov. 21 1918. In the interest of historical truth it must be recorded that the German crews, who had received the news of the surrender with shouts of joy, proceeded with the ships to the Firth of Forth in the firm belief that it was a question only of a temporary internment and not of the complete surrender of the fleet. The German officers acted from a strict sense of duty and under the same conviction. It is only fair to say that it was when it became known to them that in this expectation they had been deceived, that the officers and crews sank their ships in Scapa Flow on June 21 1919.

Side by side with the fulfilment of the Peace Treaty went the reestablishment of discipline. In particular the 2 naval brigades, formed from volunteers, and a few cruisers and torpedo-boats set an example of military obedience and loyalty to duty. From the example set by them grew the restoration of the moral and organization of the navy, which was seriously but transiently disturbed once more by the Kapp " Putsch " on March 13 1920.

In 1921 the navy was organized as follows: The control of the navy was, like the control of the army, incorporated in the Ministry of the Defence of the Reich (Reichswehrministerium) in Berlin and was subordinated to the political minister at the head of that department. It includes the functions of the former Admiralty staff, Naval Cabinet and Admiralty, and therefore embraces the command and the administrative authorities. Subject to the head of the control of the navy are: - the Navy Command Department (including the defence department, for organization, training, and welfare, and the fleet department, for military dispositions, developments in fighting material, strategic and tactical questions); the General Navy Department (including the dockyards section, construction department, armament section, nautical section, and water transport section); and the Navy Administrative Office (naval stores, accounts, pay). In addition there are the central department, the financial department, and the medical department; and further, for both army and navy, the legal department and the intelligence department.

The naval forces were: - Baltic Station: the battleships " Hanover," " Hessen," and " Schleswig-Holstein "; the cruisers " Medusa," " Thetis," and " Berlin." North Sea Station: the battleships " Braunschweig," " Elsass," and " Schlesin "; the cruisers " Ham burg," " Arcona," and " Amazone "; together with two flotillas of torpedo-boats (each of 6 larger and 6 smaller boats), and 4 gunboats (" Drache," " Hai," " Fuchs," " Delphin "). Also there were several mine-sweeping flotillas. It was intended to replace obsolete ships, and a vote for the construction of a new cruiser was passed in 1920 - I. The naval dockyard in Kiel had been made over to a private company, the navy retaining only the smaller portion of it as an arsenal. The Wilhelmshaven dockyard was greatly diminished in extent. In that part which was given up there is now a fishing harbour. The shipbuilding yards are used for merchant vessels and steam trawlers.

In accordance with the peace terms the naval personnel numbers 15,000, of whom 1,500 are officers. Compulsory service is abolished. Every volunteer agrees to serve 12 years, and every officer to serve 25 years, or until the age of 45.

The legal basis of the navy is embodied in the Law of April 16 1919 and the National Defence Law of March 19 1921. To these must be added the Pay Law and the Pensions Law. The estimates are fixed annually; for 1921 they were for 652,000,000 marks.

Reform Of The School System Under the Empire, education had been regulated by the separate states and was left outside the imperial jurisdiction. But the new republican constitution of the Reich laid down in its section on first principles those which should regulate education in the different territories. A positive step was thus taken in the direction of the movement first started about 1848, and supported by German educationists, particularly at the teachers' conference at Dortmund in 1908, by the Social Democrats at their party congress at Mannheim in 1906, and in the debates of the Reichstag from 1912 to 1914, for introducing imperial legislation based on one universal and secular school system. An Imperial Schools Commission or Board had been in existence since 1871, but its functions were of a very limited character.

During the discussions of the committee for drafting the new constitution it was especially the Social Democrats, the Independents and the Democrats, but also the Catholic Centre party and. the Volkspartei (formerly the National Liberals), who worked for a new organization of the schools system directly under the Reich. The movement encountered various hindrances": the signing of the treaty; the withdrawal of the Democrats from the Government; the first educational compromise between the Catholic Centre and the Social Democrats which gave local option to individual parishes to choose between denominational, bidenominational, and secular schools; and the final educational compromise of July 31 1919, whereby bidenominational (Catholic and Protestant) schools became the norm, purely denominational and secular schools being, however, expressly recognized by law as exceptions to the rule. But in spite of these hindrances a number of principles were accepted and laid down in section 4 (Arts. 142-50) of the constitution which came into force on Aug.

II 1919. These principles were that educational institutions should be public, that teachers should be uniformly trained, that there should be State inspection, and that there should be a standard type of school, the concessions for private schools being limited, while private schools for preparing pupils for the national schools should be abolished. It was also laid down that there should be instruction in citizenship, handicrafts and religion.

The application of these constitutional principles took place not through any grand general law of the Reich but by means of measures of a transitional character or measures dealing with parts of the subject, but all based upon the main plan. The first step was the law of the Reich dated April 28 1920, dealing with elementary schools and abolishing preparatory schools (Art. 146, I). The elementary school, which is compulsory for everyone, covers the first four years' work of the preparatory school (Vorschule). The date for the final abolition of public preparatory schools was fixed for the financial year 1924-5, that of private preparatory schools for the year 1929-30. The Ministry of the Interior explained that the passing of this measure before the expert opinion of the National Teachers' Conference had been heard was due to the pressing necessity for settling the question of the elementary schools with all speed. It was only in March 1921 that the Prussian Ministry of Education could issue instructions for the carrying-out of the law, and for the curriculum of the elementary schools in Prussia.

Further, in order to give effect to the educational compromise, a bill for carrying out Art. 146, 2, of the constitution was laid before the Reichstag. It sets up as the standard type a more comprehensive school than the bidenominational type (Simultanschule) hitherto recognized as the standard. It recognizes Protestant and Catholic schools, purely secular schools, and also schools based on some particular philosophic conception or doctrine (Weltanschauungsschule), such as positivism, in order to give every class of opinion its rights. There was sharp contention about the definition of this comprehensive standard school (Gemeinschaftsschule). The non-Socialist Democrats regarded it as a further development of the existing bidenominational school; the parties of the Right and the Catholic Centre as the continuation of the older bidenominational schools, which were on a Christian basis, and of former denominational schools; the Socialist parties of the Left conceived it as a frankly secular school.

Beyond the scope of these school laws is the law on the Religious Education of Children (July 4 1921), regulating the religious education of children of mixed marriages. It was voted unanimously. Finally, a bill was introduced to deal with special aspects of the welfare of the young and in particular with the education of abnormal children, of those who are subject to prejudicial moral surroundings, and of orphans, etc. Radical changes in the relations between parents and the school were effected by the Prussian ordinance of Nov. 5 1919 on the formation of Parents' Advisory Councils in connexion with schools.

(F. B.*) Social And Industrial Legislation I. The Pre-War Period, 1911 to 1914. - Workmen's insurance against sickness, old age and invalidity, which had been introduced by Prince Bismarck in the years 1884-9, and had been extended by repeated amendment laws, underwent, after lengthy preparation and debate, a reform which was finally completed in the system of insurance for the Reich of July 19 1911. Fundamentally the law remained the same, but the ranks of the insured were extended. The interrelation between the different forms of insurance and their administrations were more clearly defined, and in addition provision was made for the widows and orphans of insured persons. Miners were not included, as they retained their old insurance system under the mutual system of the Knappschaft (Miners' Association).

The law of Dec. 20 1911 introduced special insurance for salaried employees in commerce, industry and shipping; for persons employed in theatres and orchestras; for teachers, tutors and governesses; it gave medical treatment and an allowance during invalidity and also to all insured persons over 65 years of age. The means were supplied by contributions from employers and employed, without subvention from the State. The free mutualaid societies, which existed side by side with the legalized State insurance system, were placed under the control of the State department which supervised private insurance.

As regards the protection of workers, one of the darker sides of the economic life of the people was touched by an attempt to regulate home industries by the law of Dec. 20 1911, which came into force on April 1 1912. It included registration of workers employed in home crafts, the introduction of wages books, public exhibition of wages tables, regulations for the protection of children and young persons, prophylactic hygienic measures, and the establishment of committees with equal representation of employers and employed for the regulation of conditions of work, but without the right to fix a legally binding minimum wage.

A limitation and modification of the law, prohibiting assistants from taking employment in works of a similar character to those which they left, was brought about by the Act of July To 1914. The duration of this " prohibition of unfair competition," as the law was called, was limited to 2 years, an important matter for minors and for assistants receiving low salaries. During the period of the prohibition the employer had to pay compensation for unemployment.

In contrast to these advances in social insurance and the protection of workers, the legal rights of labour were not only neglected during these years but actually diminished. This was not the result of actual legislation, but was brought about through the administration of justice and by the police. The trade unions, contrary to the Associations Law of 1908, were treated as political unions, and this greatly hampered their activity. The cry for the limitation of the right of combination (the prohibition of picketing and protection of blacklegs) grew steadily louder. A legal regulation of the wages contracts and the methods of settling disputes was expressly rejected by the Government. A halt was called in the whole course of social political legislation. Slackness in matters of social policy was succeeded by frank reaction. The outbreak of the World War at once created a new atmosphere affecting opinion and practice rather than legislative activity.

II. The War Period, 1914 to Nov. 1918. - The necessities of war-time, which demanded that substitutes should be found for the workingmen who were called to the colours, entailed a temporary suspension (Aug. 4 1914) of the regulations for the protection of women and young workers (Io-hour day, night rest, prohibition of unsuitable employment); but official warnings to be careful in these matters were repeatedly issued (Dec. II 1916 and Aug. II 1917). The prohibition of night work in bakeries (Jan. 15 1915) and of the use of white lead for painting (Oct. 25 1915), as well as ordinances concerning 7-o'clock closing for shops and the raising of the amount of wages exempted from sequestration for debt (Dec. 13 1917), also remained in force throughout the period of the war. The policy adopted in regard to wages by the military authorities was of especial importance in that it insisted on sufficient payment for army contracts carried out by home industries, and in some districts even made a minimum wage legally obligatory.

In order to maintain workers' insurance during the war, the Federal Council decreed by an ordinance of Aug. 4 1914 that the necessary measures should be taken for this purpose especially in regard to the sickness-fund organization. In the course of the next few years several reforms of lasting value were carried out: - Maternity benefit (Wochenhilfe) was provided (Dec. 3 1914), giving monetary aid during and after childbirth, and while the child was being nursed by the mother; the age at which an old-age pension became payable was lowered from 70 to 65 (1916); illnesses commonly contracted in particular industries were included in the accidents insurance scheme (Oct. 12 1917); repeated increases were made in the benefits from sickness and disablement insurance and insurance in the interests of survivors, and the wages at which insurance became compulsory were scaled up.

The labour exchanges were made more uniform, and surveys of the whole labour market were published at short intervals, vacancies being grouped locally; but in spite of petitions from trade unions and resolutions of the Reichstag (1915) there was no thoroughgoing legislative systematization in the matter of unemployment.

In Feb. 1918 the Government laid a bill before the Reichstag, concerning the establishment of Labour Chambers (Arbeitskammern) in which employers and employed were to be associated on the basis of different trades for joint discussion of their affairs, but owing to sharp differences of opinion it was not passed.

On the other hand, the trade unions at last had their rights acknowledged. They were no longer persecuted by the police and the administration of justice on the plea that they were " political "; the authorities recognized their assistance in public work as indispensable, and the consequences of this acknowledgment found expression in legislation. The Associations Law was altered (Aug. 1916) in so far as trade unions were expressly exempted from the restrictions imposed upon political unions, and the prohibition of the use of foreign languages in meetings was abolished (April 1917). The law of May 22 1918 suspended Art. 153 of the body of regulations affecting industrial occupations (Gewerbeordnung), which had for 50 years placed under special and vindictive legal provisions workers who had been guilty of offences during strikes and lockouts.

The most important act of social legislation during the war was the law concerning war-work (Vaterleindischer Hilfsdienst) of Dec. 6 1916. It obliged every male between the ages of 17 and 60 - who was not serving in the army - to work at war industries, at agriculture, in hospitals or in the work of securing food supplies for the nation. In order to settle disputes arising from this compulsory labour - as, for instance, whether an industry fell under the head of war-work, whether the worker was capable of complying with the regulations, or whether he might change his place of work - conciliation boards were established, composed half of employers and half of employees, under official guidance. They had the right of giving arbitral decisions. With the object also of cultivating good relations between employers, workers and salaried employees, workers' boards were compulsorily established in the various industries. The execution of the law rested with the Minister of War, with whom a committee of the Reichstag was associated for this purpose. The last act of social legislation during the war was the establishment of a Ministry of Labour for the Empire, with a leading trade unionist as Minister (Oct. 4 1918). This dealt with matters of social policy which had previously appertained to the Department of the Secretary of State for the Interior, or the Department of National Economy.

III. After the Revolution. - After the Armistice supreme authority passed into the hands of the Commissaries of the People. One of their first edicts (Nov. 12 1918) contained important acts of industrial legislation; the right of forming associations and holding meetings was freed from all restriction; the law concerning war-work was suspended, except that the conciliation boards remained; the regulations concerning domestic servants were repealed, as were also the special laws which bore hardly upon agricultural labourers. The provisions for the protection of workers, which had been suspended at the outbreak of the war, were again put into force. Apart from these ordinances, which had the effect of laws, it was announced that the 8-hour day for workers would come into force by Jan. 1 1919, at the latest.

On Nov. 18 1918, the Commissaries of the People, by official decree, gave the status of law to an agreement which had been concluded by the great employers' unions and the trade unions. This agreement covered the following points: - Recognition of the trade unions as the elected representatives of the workers; free right of association; no support to " yellow " unions; reemployment of ex-service workers; supply of raw materials and placing of orders; equal distribution of work; regulation of terms of labour by collective agreements (wages contracts); establishment of workers' boards, conciliation boards and boards of arbitration; introduction of an 8-hour day; and the establishment of a central committee to carry out these measures.

On this basis the ordinance for the regulation of hours of work for industrial workers (Nov. 23 1918) was framed, which fixed the length of the working day in all industrial concerns. The same was done for the transport services by the ordinances for railways and the post (Nov. 24 1918), and for salaried employees (March 18 1919), as well as for bakeries (Nov. 23 1918), in the case of which night-work between the hours of 10 P.M. and 6 A.M. was forbidden. Finally a provisional ordinance of Jan. 24 1919 fixed the hours of work for agricultural labourers at 8, 10 and 11 hours during 3 periods of 4 months respectively, overtime being permissible. In April 1919 the miners in the Ruhr district were granted a 7-hour day, including the time spent in descent and ascent. The hours of Sunday rest in commercial establishments, shops and offices were extended (Feb. 5 1919). All these regulations, as was expressly stated, were only intended as provisional measures, especially for the period of demobilization.

Demobilization in its social, political and economic aspects, and the regulation of the labour market, demanded a special organization, in view of the vastness of the task of finding work for the millions who were returning from the fronts, and the change from the economics of war to those of peace-time. As early as Nov. 12 1918 a Government office for demobilization was established. Among its numerous ordinances and measures the following were of particular importance for the legal rights of labour: Regulation for the engagement and dismissal of workers and salaried employees (Feb. 12 1920); for making places free for workers (April 25 1920); for remedying the scarcity of labour in agriculture (March 16 1919); for the enforced employment of seriously injured ex-service men (April 4 1920); for the stricter regulation of distribution of work (Dec. 9 1918); for the carryingout of measures of relief for the unemployed, partly by means of monetary support, partly by finding work through the collective efforts of the Reich, the state and the commune. The Government office for demobilization was abolished on April 26 1919. Its duties were taken up by the respective ministries of the Reich; and the demobilization commissioners and committees were, for the most part, abolished in April 1921.

The legal position of labour underwent an important development in three directions during the period of transition, by means of the ordinance of Dec. 23 1919, which was subsequently endowed with the force of law. The wages contract was declared to be universally binding. All concerns with 50 or more employees must institute workers' committees for the safeguarding of workers' rights. The war-time conciliation boards were regularized and firmly established. The committees for the different occupations, which had been contemplated in the Home Employments Law of 1911, but had not yet been put in force, were called into being on Jan. 13 1919 and given extended powers. In the beginning of May 1919 an expert committee was formed in the Ministry of Labour in order to frame a uniform system of labour law. The decisive turn in labour legislation, however, was taken by the Factory Councils Law (Betriebsrategesetz) of Feb. 4 1920, which entrusted the representatives of the employees, who now replaced the former workers' committees, with the task of upholding the common economic interests of workers and salaried employees in their relations with the employers. This law is described fully in the separate section below.

IV. International Labour Laws. - Germany, which for 30 years had striven both officially and by the efforts of independent organizations after an international coordination of legislation in the matters of social policy, declared in the constitution of the Reich of Aug. 1 r 1919: " The Reich advocates a regulation by agreement between different states of the legal position of workers, so as to win, for working classes of mankind, a universal minimum of social rights." Without being a member of the League of Nations, Germany was admitted to the International Labour Organization by decision of the General Conference of Washington (Oct. 31 1919); she had two seats in the Administrative Council of the International Labour Office, and took part in the annual conferences.

The main principles for the development of German labour legislation are laid down in the constitution of the Reich. The economic life of the nation must be ordered in accordance with social justice and must aim at securing for all an existence worthy of human beings. Within these limits the economic liberty of the individual is to be assured (Art. 151). Labour is under the special protection of the State; the Reich will frame a uniform body of labour laws (Art. 1J7). The right of association for the purpose of guarding and improving the economic and industrial conditions of work is guaranteed to everyone and to all occupations. All agreements and measures which aim at restricting or diminishing these liberties are illegal (Art. 1J9). For the maintenance of health and ability to work, for the protection of motherhood and for securing provision for the economic consequences of old age, illhealth and the accidents of life, the Reich has created a comprehensive system of insurance, in which the insured persons play a decisive part (Art. 161). Without any infringement of his personal liberty, it is the moral duty of every German to employ his intellectual and physical powers in such a manner as is demanded by the welfare of the whole community. Every German shall be given the opportunity of earning his living by economically productive work (Art. 163). Workers and salaried employees have the right to cooperate on equal terms with the employers in regulating the conditions of wages and work, as well as in the entire economic development of the means of production. The organizations of both parties and the agreements effected by them are recognized (Art. 161, 1).

Besides the industrial councils, an Economic Council of the Reich was established in June 1920 as an advisory body; regional economic councils were in preparation in 1921, and a thorough going reform of the whole system of social insurance was being undertaken. A Government Labour Exchange Department for the Reich supervises and regulates the labour market. The Reichsarbeitsblatt (Labour Gazette of the Reich) reports all that goes on in connexion with labour legislation. (E. F.*).

THE Factory Councils Law The idea of securing representation for workers in the conduct of the establishments in which they work is not new. It was bound to arise from the special character of modern great industrial enterprises, in which the majority of the employees have a common interest in their position as regards their employer. The idea of such representation was confronted by obstacles such as a claim of the employer to authority and his determination to be " master in his own house," and; on the other hand, the legal conception that contract alone determined the relations between the two parties, so that the employer had only to do with the individual employee. The instances in which the employer voluntarily recognized the right of his workers as a body were rare; exceptions, such as were made by philanthropic employers like Abbe and Freese, - the former at the well-known Karl Zeiss works at Jena, - were very rarely imitated. There were extremely few cases before the World War in which a collective wages tariff was set up. It is true that wages-tariff contracts had succeeded in finding a foothold in workshops (Handwerksbetriebe) and industrial establishments of medium size, and that the extension of the principle of collective-wages contracts was being vigorously advocated among the working classes. The great German employers of industry, however, declined to have any dealing with the workmen's organizations. It was for this reason that the method of wages-tariff contracts was comparatively seldom the means of establishing representation of workers in the concerns in which they worked. Legislation continued to avoid the subject. It is true that the industrial regulations for the German Empire recognized committees of workers; but these were not obligatory and they had no decisive rights or functions. The one exception was the mining industry. In this instance, after fierce struggles, the introduction of obligatory committees of workers had been secured, particularly in Prussia. The rights of these committees were no doubt extremely limited. Nevertheless, an instrument for negotiations had been constructed for the miners, and With it at least opportunity for the regular exchange of views had been secured.

The war undermined in Germany the old conception of the position of the " masters." The desire to preserve social peace during the war became, as in all countries, a national anxiety. The employers were accordingly urged to conclude wages-tariff contracts. These contracts set up representation of the workers for the separate industrial establishments; a representation which, it is true, was invested with only limited rights. But more than anything else it was the War Emergency Law for securing Auxiliary Service (Hilfsdienstgesetz), imposing upon all able-bodied men the legal duty to work, which promoted the conception of the establishment by legislation of representative bodies of workers. The employee, according to the terms of the Hilfsdienstgesetz, could no longer exchange his employment for another without a special certificate (Abkehrschein). There had thus been instituted an obligation to continue to work in a particular establishment, or in other words a legal restriction of liberty for which some counterbalancing advantage had to be secured for the other party. If the employee was chained to the establishment in which he worked, it was only right that he should obtain influence upon the conduct of that establishment. The Hilfsdienstgesetz accordingly set up, in the form of obligatory workers' and salaried employees' committees, organs of the employees in each industrial establishment, and these representative bodies had above all the right, in disputes where all the workers were involved, to appeal to the services of a Board of Settlement, thus making the matters in dispute between the employers and employed more or less matters of public interest.

Such was the situation with which the so-called " Councils Movement," following upon the Revolution, was confronted.

There were several tendencies which converged in that movement. In the first stage, when in all the larger towns great placards were exhibited bearing the words " All power to the Workmen's and Soldiers' Councils," the Councils Movement appeared to be merely an imitation of what had taken place in Russia. But it was an elemental impulse which drove the masses into the streets. It was an instinctive revolt against the mechanical apparatus of the authority in control of industrial establishments. The old authority of the State had collapsed. The idea of liberty seemed to know no bounds. What could appear more natural to the masses, whose powers of endurance had been totally exhausted by war and privations, than to demand the control of the establishments in which they worked? This instinctive movement, regarded historically, was a relapse into the earliest stages of the development of socialism. Just as the masses had formerly attempted in blind despair to destroy the machines to which they attributed their distress, so now they directed their attacks against the great citadels of the factories, which they regarded as the source of the merciless exploitation of their minds and bodies. If it be further borne in mind that Germany at that time was in the trough of the sea and that there seemed no glimmer of hope that she could again recover in the ordinary way, it will be understood why this movement possessed such a mighty force and why it actually threatened to swallow Germany up. The newly established State was confronted with the task of adopting the legitimate and practical demands of the movement and giving them form and shape. The outcome of this policy is embodied in Art. 165 of the constitution of the Reich, which was framed after great strikes and as the issue of bitter conflicts and prolonged debates at the Congresses of the Councils in Berlin. The text of Art. 165 is as follows: " Workers and salaried employees are entitled to coOperate on equal terms with the employers in the settlement of the conditions of wages and work, and also in the whole economic development of the processes of production. The organizations of the parties on both sides and their mutual agreements shall be recognized.

" For the furtherance of their social and economic interests workers and salaried employees shall have legal representation by means of Industrial or Factory Workers' Councils (Betriebsarbeiterrcite), and also by District Industrial Councils (Bezirksarbeiterrdte) distributed according to industrial regions, and by an Industrial Council for the whole Reich (Reichsarbeiteramt). " With the object of fulfilling the whole of their economic tasks and of cooperating in the execution of the Socialization Laws, the District Workers' Councils and the Workers' Council of the Reich shall meet the representatives of the employers and of any other interested sections of the population through the medium of District Economic Councils and the Economic Council of the Reich. These District Economic Councils and the Economic Council of the Reich shall be so constituted that all the leading industrial occupations are represented in them in accordance with their respective economic and social importance.

" Social or economic bills of fundamental importance shall be laid by the Government before the Economic Council of the Reich for its opinion before being tabled in the Reichstag. The Economic Council of the Reich shall itself have the right to propose the introduction of bills of this nature. Should the Government not agree to a bill proposed by the Economic Council, the bill must nevertheless be submitted to the Reichstag. The Economic Council of the Reich may have the proposed bill submitted to the Reichstag by a member of the Council.

" Powers of control and administration may be conferred upon the Workers' and the Economic Councils in the spheres assigned to them.

" The development of the Workers' and Economic Councils and the functions to be assigned to them, as well as their relations with other self-administering bodies occupied with questions of social policy, fall exclusively within the province of the Reich." Article 165 of the constitution of the Reich, containing the general programme for prospective German legislation concerning the Councils, is based upon four main principles.

The first principle is the idea of a separate economic constitution within the State, side by side with the political constitution. Within the last 30 or 40 years the powers of the State have been enormously increased; it has been increasingly empowered to intervene in social and, more particularly, in economic matters and to regulate them. In the present generation this tendency will be strengthened, for the idea of " economic freedom " is receding and every kind of economic activity is being subjected more and more to the tendencies of organization. The idea is steadily gaining ground that the economic activities of a people form one great organism, and that for this reason a general economic administration is necessary in order to put production on a rational basis and to promote social justice. But how can the State perform the tasks of general industrial administration, seeing that it is overwhelmed by other duties? The methods of the State are political methods, but the management of economic enterprises requires special technical knowledge and business methods. The idea of a general management of economic enterprises is therefore inseparable from the idea of a special economic constitution with independent machinery to enable it, on behalf of the State, to fulfil these general economic functions. The machinery of a separate economic constitution of this nature is to consist of the Councils referred to in Art. 165 of the constitution of the Reich.

The second principle is the ideal of an economic democracy. Up to the present time economic enterprise has been the private affair of the persons engaged in it. They were the creators of the industries and to them alone the products of labour belonged. They alone were responsible for what took place in the economy of the enterprise; the employees were not regarded as cooperating with them, but merely as their assistants who could act only in accordance with the wishes of those conducting the business. They received their wages; the method of conducting the business was no concern of theirs. They had no voice in framing the regulations affecting relations between employer and employed; they had nothing to do with the way in which the enterprise was conducted. " Industry," " commerce," and " agriculture " were alike represented, not by employers and employees, but solely by employers. Economic democracy, however, calls upon the employee to join in determining not only the conditions on which labour is hired but also questions concerning the management of the business. Such questions are to be regarded as the concern both of employer and of employed. The employee must not only concern himself with his own particular task, but he must also consider the object of all labour, which is to provide the whole community with economic products. Hitherto Germans have been living in a period of economic autocracy; now a constitution had to be framed which should give the employee the right of cooperating in the sphere of business management and social welfare. This was implied in the first paragraph of Art. 165, by which the workers and salaried employees are entitled to " cooperate on equal terms with the employers in regulating conditions of work and wages and also in the whole economic development of productive capacity." The third principle is the construction of a system of representation of labour in accordance with the principles of association and of community of interests. Social life is comprised in two manifestations of the human will. In the one man is opposed to man, group to group, interest to interest. The struggle for existence is the essence of it. In the other, connexions are formed between individuals and between groups, which are subordinated to a higher unity in order to achieve a common object. In this manifestation the guiding principle is that of mutual aid. If this two-fold object of the forms of social life be applied to the organization of labour, the legislator finds himself confronted by two distinct tasks. On the one side he must institute organs of representation by means of which labour may look after its own special interests in the face of interests which conflict with them. On the other hand he must institute for labour such means of representation as may enable it to coOperate with, and to have a saying in, the decisions of other organizations for their mutual benefit. It will be seen, therefore, that, according to Art. 165 of the constitution of the Reich, two kinds of councils have to be instituted. In the one kind the workers and salaried employees obtain, " for the protection of their social and economic interests, legal representation on Industrial Factory Councils and also on Regional Workers' Councils and in a `'Workers' Council for the whole Reich." In the other kind the District 'Workers' Councils and the State Workers' Council, " in order to fulfil their economic tasks as a whole and to coOperate in the execution of socialization laws, shall meet the employers' representatives and delegates from other sections of the people concerned in District Economic Councils and in an Economic Council for the whole Reich. These District Economic Councils and the Economic Council for the Reich shall be so constituted that all the leading groups of trades are represented on them in accordance with their economic and social importance." The fourth principle is concerned with the future relations of these councils with other forms of organization by which employers and employed have hitherto managed their mutual affairs. Economic and social life is not organized by the State alone; it organizes itself in various forms. One of the most important is the collective-wages tariff. Since the end of the war another form of self-determination has arisen, that of joint labour organizations, in the shape of unions of employees' and employers' associations (Arbeitsgemeinschaften) for the purpose of dealing with questions connected with particular trades which affect both parties, more particularly economic questions. There are joint organizations of this kind for industry, commerce and agriculture. Collectivewages contracts and joint labour organizations constitute the voluntary bodies for self-administration in the constitution, which was the object of the legislation in regard to councils. The councils legislation does not aim at suppressing the activities of this social self-determination, but at maintaining it, and at linking it up with the economic structure as a whole. This is the meaning of the second sub-section in Sect. i of Art. 165 of the constitution of the Reich by which the organizations of both parties and the agreements between them are " recognized," and of the final sentence of this article in which the adjustment of the relations between the statutory councils and these social autonomous bodies is regarded as the business of the Reich.

Up to the autumn of 1921 the Factory Councils Law of Feb. 4 1920 (Reichsgesetzblatt, p. 147) had been the only piece of legislation enacted to carry out Art. 165 of the constitution; the Economic Council of the Reich had been instituted provisionally: its functions had not yet been defined in detail. Arrangements for the formation of the District Economic Councils were still proceeding; they were bound up with more extensive plans for administrative organizations, in particular with the question of the formation of so-called industrial provinces. The main lines of the Factory Councils Law are as follows: Factory councils are to be established in all factories employing as a rule a minimum of 20 workers. These councils deal with the conjoint economic interests of the employees (wage-earning workers and salaried employees) in their relations with the employer, and are to assist him in carrying out the objects of the industrial enterprise in which they are engaged. For the protection of the particular economic interests of the workers and salaried employees in their relations with the employer, separate workers' councils and salaried employees' councils shall be established in all factories where factory councils exist in which workers and salaried employees are represented. Public officials and candidates for official posts are not regarded as employees. Home workers who, in the main, work for the same factory and do not themselves employ others have a special council in those factories where a minimum of 20 home workers are employed. The establishment of special industrial councils for those who are employed in maritime and inland navigation is contemplated. By the term " factories " (Betriebe) is understood all factories, businesses, and managements both publicly and privately owned - that is to say, not households, but State and communal factories, in so far as workers and salaried employees not officials are employed. The factory council consists of at least 3 and at most of 30 members, according to the size of the factory. Those members of the factory council who, as workers and salaried employees, are also members of the workers' or the salaried employees' council are chosen by direct and secret vote on the system of proportional representation; they are elected for a period of one year, and are eligible for reelection.

All male and female workers over 18 years of age who enjoy full civil rights have the right to vote. Electors over 24 years of age who are citizens of the Reich, who have passed the stage of apprenticeship, and who on the day of election have been employed in the factory or business for at least 6 months, and have been engaged in that particular branch of industry or occupation for at least 3 years, are eligible for election. The members of the factory council and their representatives are to fulfil the duties of their office without payment and as honorary officials. In factories where, as a rule, less than 20, but more than 5, workers having the right to vote are employed, of whom at least 3 are eligible for election, a factory steward (Obmann) must be elected. Apart from a few details the factory steward has the same rights as the factory council or the workers' and salaried employees' councils.

The factory council is the organ of the whole of the workers in a factory, but it is also an official body (Amt). As an organ of the workers the factory council safeguards their collective interests and also the interests of individual workers. The interests of the workers collectively are concerned with matters connected with labour and factory management. These two subjects must be carefully distinguished. In so far as the factory council is concerned with matters affecting conditions of labour, it only represents a considerable advance along the lines on which the wageearners' and salaried employees' committees under the old legalized system had already started. In so far as it deals with questions affecting the business management of the factory it is taking the first step in a new development, the essential principle of which lies in the fact that the worker is henceforth to have a direct interest, not only in matters connected with his work but also in matters connected with the management of the factory, and that the workers collectively are to be entitled to exercise influence requisite for this purpose. The interests of individual members of the whole working staff are protected by the factory council more particularly in cases coming under Sect. 34 of the Statute, according to which, in the case of notice of dismissal being given on the part of the employer, the worker, within 5 days after such notice, may enter a protest by appealing to the workers' or salaried employees' council. This council, if there is reason to believe that the notice of dismissal was unwarranted, may then intervene with the employer on behalf of the worker, or, if an agreement is not reached within one week, it may appeal after a further interval of 5 days to the Conciliation Board.

The factory council exercises the functions of a department of the public service (Amt) in those cases in which duties appertaining to the State are assigned to it, the State having invoked its assistance. Such duties comprise, above all, the vindication of the legal rights and the protection of the interests of the workers. Thus, the factory council must see that, in matters concerning the work of the factory, the decisions of a Conciliation Board, or of any other body to which by consent differences have been submitted, are carried out, and that the statutory regulations and other measures which have been enacted for the benefit of the workers are observed. The council must also devote its attention to the prevention or removal of conditions in the factory which involve the danger of accident or are prejudicial to health. It must give its assistance to factory inspectors and other officials occupied with these matters, and must offer suggestion, advice, and information. It must also see to it that police regulations in regard to industrial occupations and regulations framed to prevent accidents are carried out; and it must appoint one of its members to be present at inquiries into accidents which may be instituted by the employer or by the. factory inspector or other competent authority.

In addition to the exercise of these statutory powers the factory council may, in particular cases, exercise special functions by virtue of a mandate conferred upon it by the persons concerned. Thus, individual workers in a factory may ask the council to act for them. In that case the council acts as the representative of the interested party in the ordinary legal sense of the term. A factory council may also have conferred upon it by a wages contract functions for which the Factory Councils Law did not provide. A way is thus left open for the adaptation of the council to special circumstances and needs. In no case may the statutory powers of this representative body in a factory be withdrawn from it by private agreement between the parties concerned.

The workers' demand for a voice in the management of factories arose in the first place from a vague but intense longing for emancipation from the lifeless mechanism of factory routine. The worker wanted to be in a position to shape the conditions of his or her occupation, a thing which had become impossible in the mechanized system and the division of labour which prevails in factories on a large scale. This longing soon took shape in the demand that the assent of a factory council invested with equal rights should be requisite for all dispositions made by the employers. The law as it now stands has accepted the fundamental idea of this councils movement, but has by no means met the demand in full.

A voice in shaping decisions is only possible where right of acting together with the employer is conferred upon the factory council. The council has this right in regard to the issue of regulations regarding the work, the framing of factory by-laws, the fixing of wages and other conditions of labour. It also has the right of cooperation in laying down the lines to be followed in regard to the engagement of workers, the fixing of penalties and the decisions of the Board of Supervision 1 (Aufsichtsrat) to which the factory council has the right to send delegates. It has further the same right to a voice in the case of the dismissal of a member of the representative body of the factory, which can only take place with the consent of the members of that body. The working regulations of the factory must be mutually agreed upon in all factories employing 20 or more workers, 1 Every limited-liability company in Germany has in addition to the directorate a smaller board of expert business men which exercises control or supervision over the directorate.

whereas formerly these regulations were issued by the authority of the employers alone. Should no agreement be arrived at the matter must be settled by the irrevocable decision of the Conciliation Board. The same applies to the fixing of penalties and the dismissal of members of the representative body of the factory. A voice in the decisions becomes illusory where the representative body of the factory is only able to exercise an influence upon the will of the employer. This influence may be exercised in two ways: in the first place by the workers' right to be heard (Audienzrecht), which means that, in certain cases, the representative body has the right to demand that the employer shall listen to what they have to say. In other cases this right may extend still further and enable the representative body to demand that the employer shall enter into negotiations with them, as, for instance, in the case of the engagement of workers and notices of dismissal. Finally, the right to be heard may take the more precise form of a claim to receive information from the employer, so that the latter is obliged to give particulars of anything that occurs which may affect the workers' contracts or their general activities. Similarly, the employer may be required to produce the wages books and the necessary proofs that existing wages contracts have been carried out. He may he required to furnish quarterly a report on the position and progress of the business and on the state of the industry in general; further, on the output of the factory and, more particularly, on the labour likely to be needed for it. The employer must likewise, on demand, produce for inspection a balance sheet and a statement of the profit and loss on the factory. The will of the employers can also be influenced by the right of the factory council to bring the employer before a court. The representative body may, in the case of differences, appeal to the Conciliation Board or to any conciliation or arbitration court which may be agreed upon. This right enjoyed by the representative body implies an obligation on the part of the employer to appear before the Conciliation Board. There is no obligation to negotiate, but a verdict may be pronounced, even if the other party has not appeared or has not negotiated. It is true that the verdict of the Conciliation Board, except in the cases mentioned above (working regulations, etc.), is not binding. The method of arbitration to be observed in the case of engagement of workers and notices of dismissal will be dealt with more particularly below, but it may be remarked here that, in accordance with a legal practice, generally adopted though not unchallenged, the demobilization commissioner is considered to be within his rights in declaring, by means of an administrative order, such arbitral decisions to be of binding force as would otherwise, according to law, not be obligatory.

The right to a voice in decisions affecting the engagement of workers a.nd notices of dismissal requires special consideration. Legislation on this point encountered peculiar difficulties. The working classes pressed for unrestricted cooperation in all decisions concerning engagements and notices of dismissal. Serious strikes, more particularly of salaried employees and above all of bank clerks, occurred in connexion with this question. The employers fought for the mai ti rtenance of their absolute freedom as regards the engagement and dismissal of their staffs. The law is based on a compromise between these two demands.

In the first place, as regards the engagement of workers, the employer remains, as hitherto, unrestricted in the choice of his employees. But the Factory Councils Law provides that, as mentioned above, certain main lines for the engagement of workers may be agreed upon and that the employer shall be bound by them. At the same time the employer is not under any obligation to agree to such lines of action; so that this provision of the law may be rendered nugatory by him, unless the balance of power is such as to compel him to agree to accept general guiding lines for his action. If certain lines have been agreed upon the employer must observe them. If he deviates from them the representative body of the factory may appeal to the Conciliation Board. The Conciliation Board may issue a binding order that, in case of a departure from the course of action agreed upon, the contract of the employee with the employer shall terminate as soon as the decision has come into force, subject to the observance of the legal term of notice.

Of greater and more far-reaching significance than this cooperation of the workers' representative body in regard to the engagement of workers is the cooperation of this body in cases of dismissal. Sect. 84 of the Factory Councils Law directs that in all industrial establishments having a factory council, the individual worker, in case of dismissal by the employer, has the right to enter a claim within 5 days of the notice of dismissal b y appealing to the workers' or salaried employees' council, " (I) if thereis ground for the suspicion that the dismissal is due to the worker's sex, to his or her political, military or (religious) denominational activities or to his or her activities as a trade unionist, or to the fact that he or she does not belong to some particular political, religious or industrial association, or to some military society; (2) if notice of dismissal has been given without any reasons being assigned; (3) if the notice has been given because the worker has refused to undertake permanently other work than that for which he or she was originally engaged; (4) if the dismissal appears to be an act of unwarrantable severity not justified by the behaviour of the worker or the conditions in the factory." When an employee has entered a protest with the workers' or employees' council against his dismissal, the council shall endeavour, if they consider the objection justified, to come to an agreement with the employer by negotiation. Should no agreement be arrived at within one week the council may appeal to the Conciliation Board after a further period of 5 days. The individual worker who has received notice of dismissal enjoys the same right of appeal. Should the Conciliation Board consider the appeal against dismissal to be justified, and should the employer nevertheless refuse to continue to employ the worker in question, the committee shall then impose on the employer the obligation to give him compensation. The compensation shall be proportionate to the total number of years during which the worker has been employed in the factory, and may be reckoned for each year up to a maximum of one-twelfth of the amount of wages earned during the last year of employment. The total, however, must not exceed six-twelfths of that amount. In making this calculation the economic position of the worker and also the financial capacity of the employer must be considered.

The principle of the factory council was not accepted forthwith by the socialist sections of the community and by the trade unions. It is intelligible that the employer, who had been accustomed to autocratic position, would not feel well-disposed towards the institution of factory councils from which he apprehended unwarrantable interference in his affairs. But the fact that the zealous advocacy of factory councils met with opposition from the advanced sections of the labouring classes calls for explanation. The idea of factory councils was connected in Germany, as in other countries, with a wave of syndicalism. At first it seemed as though, by means of the factory councils, industries would be brought under the control of the workers, so that, in this way, industrial property might be transformed into the property of labour. A demand of this sort has always been contrary to the fundamental principles of socialism, according to which the socialization of industry should be effected not by and for separate industrial establishments, but by means of an economic community of the entire nation, which should control all the separate industrial enterprises. The syndicalist demand, moreover, was really contrary to the fundamental principles for which the trade unions had fought. They had always been organized on the basis of whole trades. They were united in a central organization, and their whole system was based on the perception of the fact that the regulation of wages and of conditions of labour depended on the state of the labour market, and that the labour market could be regulated for the benefit of labour only through trades unions on a large scale. The trades unions could not but fear that, if the real representation of labour became concentrated in the factory councils, the methods hitherto employed by the unions would be altogether superseded. And, indeed, the tendencies of the councils movement were in direct conflict with those of the trades unions.

It may now (1921) be asserted that these conflicting tendencies in Germany have been reconciled, although under certain circumstances the old differences might be revived. The view has prevailed that it is the business of the factory councils not only to safeguard the interests of particular factories, but also to be responsible for safeguarding the interests of the whole industrial economy. ,Moreover, the factory councils, as things have actually developed, have more and more become instruments of the trades-unions movement in the factories, so that the great impulses of the social movement continue, as before, to emanate from the trades unions. They have, in particular, kept a firm control of regulation of conditions of labour. The Factory Councils Law paved the way for this development. The factory council, from its whole structure, is intended to be not merely a representative bod y for the workers in a particular industrial undertaking. This, it is true, would be the historical development of the factory council from the fundamental ideas of the councils movement as described above. The factory council, however, is also to be conceived as an official institution designed to safeguard the interests of the whole industrial economy. This is expressly laid down in Sect. 68 of the Factory Councils Law, which says: " The factory council in carrying out its functions must endeavour to see that neither party puts forward demands or adopts measures which would be prejudicial to the general interest." As regards the relative position of the trades unions, the Factory Councils Law is carefully framed so that in all cases of dispute the precedence of the trades unions shall be recognized. For this reason the wages contract takes priority of any other agreements between the factory council and the employer. For the same reason the representatives of the trades unions have the right to attend the meetings of the factory council and to take part in the general meetings of the factory workers. More especially, the right of the trades unions to represent the workers in negotiations with the employer is not affected by the right of representation enjoyed by the factory council. This point is determined by Sect. 8 of the Factory Councils Law, which says: " The right of economic associations of workers and salaried employees to represent the interests of their members is not affected by the provisions of this law." What is the significance of the German factory council in the social movement of labour? That the rights of labour have been extended by the factory council is beyond all doubt. Where factory councils are in existence arbitrary conduct on the part of the employer in regard to matters fundamentally affecting con ditions of labour is rendered impossible, and the legal position of the worker in the industry is firmly established. Rights hitherto exercised by the employer without any restriction - such as, for instance, the right to issue factory regulations, to fix penalties and to give notice of dismissal at will - have been limited. The worker's sense of his own personality has thus been raised. But, above all, the worker's sphere of influence has been extended to a province from which he was hitherto excluded. This province is the conduct of the business. It is true that the powers of the factory council in this sphere are not so far-reaching as in the sphere of the regulation of conditions of work. The actual right to a voice in business decisions has nowhere been conceded to the factory council. The employer, however, is obliged to answer questions put to him with regard to these matters; he must discuss them and must lay facts and figures before the council. Nevertheless, in forming an opinion on the right of the workers to a voice in the business conduct of an enterprise, it must be remembered that the precise limits within which the law permits such cooperation are of comparatively small significance. The manner in which the right is exercised by the workers is of far greater importance.

It is no mere coincidence that, since the institution of factory councils, a new educational movement on the part of the labouring classes has developed in Germany. This movement is connected with the fact that new functions have been assigned to the factory councils, functions which can only be performed by those who possess the necessary expert knowledge. So-called " courses of instruction for councils " (Ratekurse) are being instituted all over Germany with the object of enabling the working classes to acquire the knowledge and capacity requisite for the fulfilment of their new duties. This educational movement is becoming more and more systematic and conscious of its own significance. At the university of Frankfort-on-Main an " Academy of Labour " has been founded, to the support of which trades unions of all kinds are contributing large sums. The object of the " Academy of Labour " is to produce a new class of leaders for the new tasks of the labour movement by means of a comprehensive scheme of education.

In this intellectual side of social politics to which the Factory Councils Law has given birth there lie the seeds of a highly important development. For social questions are not merely questions of power. The supremacy of capital over labour has not been due solely to the ownership of the instruments of production; it was, above all, based on intellectual capacity for business management and leadership. The labour movement, by striving with purpose and system to obtain the intellectual equipment which is requisite, not only for acquiring the instruments of production, but also for managing them in the way that will be most beneficial to the entire community, is taking a step forward which may be of greater significance to the economic life of the nation than any laws and schemes for socialization. It is an undoubted fact that this intellectual movement, bound up as it is with the new rights of the factory councils and with the general and fundamental principles of the councils movement, is a preliminary step in the socialistic transformation of economic life which is taking place before our eyes, although many of us may not be aware of it, or may not wish to become aware of it.

Bibliography

Information on the general questions involved is given by Anschiitz in Die Reichsverfassung (zu Art. 165; 1921); by Sinzheimer in Das Rdtesystem. Eine Einfiihrung in den Rategedanken (1920); Proceedings of the Constitution Committee of the National Assembly (1919-20). For particular information concerning the Factory Councils Law the Commentaries on the law should be consulted, especially those of Dersch (1920), Flatow (1921), Feig and Sitzler (1921). (H. SI.) Political History From 1910 to Outbreak of World War. - The question of reform in imperial financial system, which in 1909 led to the resignation of Prince Billow and the appointment of Bethmann Hollweg as Chancellor, continued to exercise a predominant influence in German domestic politics until the Reichstag elections of Jan. 1912. Against the so-called " black and blue bloc " (the Catholic Centre and the Conservatives) which had carried the financial reforms through the Reichstag, and of which Bethmann Hollweg was considered to be the representative, the hitherto divided Liberal Left (Freisinnige Vereinigung, Freisinnige and Deutsche V olkspartei) at the beginning of 1910 united to form the Progressive People's party (Fortschrittliche Volkspartei), which held its first party congress in March of that year. In the electoral contest of 1912 the question of Prussian suffrage reform played an important part. It was a question which was really of the first importance for the policy of the Empire on account of the predominant position of Prussia. In accordance with an undertaking which had been given in Jan. 1908 by Prince Billow, as Prussian Minister-President, Bethmann Hollweg introduced a Government bill on Feb. 4 1910 in the Prussian Diet. This bill, however, did not provide, as had been desired in many quarters, for the application of the suffrage of the Reichstag to Prussia; on the contrary it retained the antiquated original electoral districts and the division of the electorate into three classes according to the amount of their income-tax assessments. Certain provisions of the bill were, it is true, intended to effect alterations in the distribution in the three classes of electors, and the direct method of election was to have been substituted for the system of choosing electoral colleges. After various vicissitudes, the bill was rejected by the Diet on May 27 1910. The question nevertheless continued to form a constant subject of public discussion during the ensuing years, and franchise reform constituted one of the chief demands of the parties of the Left, more especially the Social Democrats, after the World War started. The rejection of the suffrage bill led to a change of ministers in Prussia; the chief president of the province of Silesia, Dallwitz (afterwards Statthalter of Alsace-Lorraine), became Minister of the Interior, and Baron von SchorlemerLieser Minister of Agriculture, while the chief burgomaster of Magdeburg, Lenze, took over the Ministry of Finance. About the same time the Imperial Secretary for the Colonies, Dernburg, retired, and the under-secretary von Lindequist was appointed in his stead. Dernburg had been attacked for the favour he was alleged to have shown to the great capitalists in the exploitation of the S.W. African diamond fields, yet to him undoubtedly belongs the credit of having been the first to awaken the active interest of the nation in its colonial possessions. Shortly afterwards there was also a change in the secretaryship for Foreign Affairs, Kiderlen-Wachter having been appointed in succession to Baron von Schon, who was sent as ambassador to Paris. The St. Borromeo Encyclical of the Pope against the Reformation, which was felt in Protestant circles to involve great danger for the religious peace of Germany, threatened to cause difficulties in internal politics. A crisis was averted, however, by the Pope's disavowal of any thought of offending the non-Catholic population of Germany or the German Protestant sovereigns.

The person of the Emperor repeatedly became a central subject of discussion in the course of 1910. Excessive importance was attached to an incident of a not very serious character caused by the Conservative deputy Oldenburg-Januschau, in the Reichstag. That deputy declared in a debate on military discipline that the German Emperor must always be in a position to say to a lieutenant: " Take ten men and close the Reichstag." Although this unfortunate utterance did not deserve to be taken so seriously as it was in the press and in several of the German parliaments, it nevertheless showed the complete opposition which eight years before the revolution of 1918 existed in Germany between the different conceptions of the monarch's position. An extraordinary sensation was produced by a speech of the Emperor, who at Konigsberg claimed in the following words that he held his office by the grace of God: " Here in Konigsberg my grandfather set the crown of Prussia on his head in his own right,' distinctly asserting once more that it was 1 Only two of the Prussian Kings had been crowned: Frederick I., on Jan. 18 1701, and William I., on Oct. 18 1861. Both crowned themselves at Konigsberg, the first because, as Duke, and subsequently King, of Prussia, he could assert in his eastern possessions, which were outside the Holy Roman Empire, his absolute independence of the Emperor, from whom, nevertheless, he had received permission to assume the royal dignity.

bestowed upon him solely by the grace of God and not by parliaments, popular assemblies or popular resolutions, and that he thus regarded himself as a chosen instrument of Heaven and as such fulfilled his duties, first as Regent, and afterwards as Sovereign. Regarding myself as the instrument of the Lord, without paying attention to views and opinions of the hour, I go my own way, which is dedicated simply and solely to the well-being of the peaceful development of our country." The Emperor, it is true, modified this utterance in a speech delivered shortly afterwards at Marienburg, declaring that the cross on the robes of the Teutonic Order, which meant its subjection to the will of Heaven, illustrated what he had said at Konigsberg. " As my lamented grandfather and I," he continued. " both represented ourselves as working under the supreme protection and with the supreme permission of our Lord God, I assume the same to be true of every honest Christian whoever he be." Nevertheless an interpellation was moved in the Reichstag in Nov. on the subject of these speeches. There was also in this connexion the additional fact that the Social Democrats at their congress at Magdeburg had laid strong emphasis upon their republicanism. The Socialist party, moreover, succeeded at this congress in composing dissensions which had arisen among them on the question of voting the budget in Prussia, and they were able to maintain the unity of the party. While criticism of the Government on various matters that arose became more and more severe, an understanding with regard to the elections was effected between the National Liberals and the new Progressive People's party. It was about this time, too, that the catchword, " the bloc from Bassermann to. Bebel," was coined.

The Bethmann Hollweg Government had managed in spite of this opposition to carry two highly important measures. One was the law coordinating the social insurance system of the Empire passed by the Reichstag on May 3 1911. By this law a work of social policy was completed which became a model for many countries. The new law extended the system of sickness and accident insurance, and further developed the insurance of invalids and surviving dependents. It granted a subvention to widows and orphans (Reliktenversicherung), the annual amount of which was estimated at 60,000,000 marks. Among the insured were included some 7,000,000 additional workers employed in home industries, in agriculture and in domestic service. A proposed reduction of the pension age from 70 to 65 was not carried at this time on account of the cost, which would have meant a fresh expenditure of 9,000,000 marks per annum; this reform had to wait until after the revolution of Nov. 1918, when various other bills amending the national system of insurance were carried, and the contributions, pensions, etc., were increased in accordance with the depreciation of the currency. A fundamental reconstruction of the insurance laws was contemplated for the year 1922.

Another measure of great significance was the bill for giving a constitution to Alsace-Lorraine, introduced on Sept. 23 1910, and passed, together with a complementary Franchise bill, on May 26 1911. According to this measure, the Emperor had the right to nominate, without consulting the Federal Council, the Statthalter for the Reichsland and 19 members of the First Chamber. The other half of the members took their seats partly ex officio, partly as the representatives of the estates of the country. Alsace-Lorraine was given three votes in the Federal Council, and its representatives on that body received their instructions from the Statthalter. In order, however, to prevent a too great preponderance of Prussia in the Federal Council, the provision was added that the three Alsatian votes should not count in cases where a Prussian proposal could not be carried. without them. It was evident that, since the Emperor, who was also King of Prussia, appointed the Statthalter, and the Statthalter gave the Alsatian members their instructions, the Alsatian votes in the Federal Council in reality meant Prussian votes. For the Second Chamber of the Reichsland Parliament, universal, equal, direct and secret suffrage was granted, although it continued to be withheld from Prussia; and the anomaly was witnessed of the Prussian Minister-President, Bethmann Hollweg, advocating in the Reichstag, as Imperial Chancellor, this suffrage for Alsace-Lorraine. When the bill was being debated, there was a revival in Conservative circles of the old demand for the incorporation of Alsace-Lorraine with Prussia. The Chancellor met this demand by pointing out that the avowed object of Bismarck's policy was to give the people of Alsace-Lorraine a country of their own, as nearly as possible on an equal footing with the other German states and under the protection of the whole Empire. The constitution came into force on Sept. I 1911. The first and only elections to a German Parliament of the Reichsland took place on Oct. 22 1911 and resulted in a Clerical majority. There were, nevertheless, in the sequel repeated incidents in Alsace-Lorraine, some of them in the Parliament itself.

A good deal of excitement was caused in Nov. 1913 by the socalled Zabern affair, when young Lt. von Forstner - who afterwards fell in the war - employed a local term of abuse, " Wackes," to characterize the Alsatians. The consequence was that German officers were insulted by the population, and, as the civil authorities did not interfere, the regimental commander governing the garrison, Colonel von Reuter, had arrests made on his own responsibility. This incident made a very bad impression among the anti-militarist parties in the Reichstag, and led to excited debates, which were followed on April 1914 by the resignation of the Statthalter, Count Wedel. This had been preceded on Jan. 29 by the retirement of the Secretary of State of the Reichsland, Zorn von Bulach, and also of two undersecretaries. The Prussian Minister of the Interior, von Dallwitz, was appointed Statthalter. It is noteworthy that in the course of the Reichstag debates on this subject a vote of no confidence in the Chancellor was passed for the first time in German parliamentary history. The official view of parliamentary responsibility, which was strongly held by the Emperor, prevented the vote from having any further consequences.

On June 18 1911 the German nation celebrated the fortieth anniversary of the foundation of the Empire. In the course of the same year the despatch of the gunboat " Panther " to Agadir caused a highly strained European situation, attended by the greatest excitement in Germany. The so-called " geste of Agadir " was at first joyfully greeted by the whole of the parties of the Right, and more particularly by the Pan-German members, as a sign that Germany was determined to assert her position in the world. When, however, the Government appeared to be abandoning German interests in Morocco in exchange for compensations in the French Congo, the Secretary of State, KiderlenWachter, and the minister responsible for the conduct of German policy, the Chancellor Bethmann Hollweg, were subjected to very violent attacks, with which even some of the deputies of the Left associated themselves. In the midst of this excitement the speeches of Mr. Lloyd George and Mr. Asquith in England were regarded as wounding to Germany. When the details of the Franco-German Morocco-Congo Convention, signed on Nov. 4 1911, were published, they had a calming effect upon public sentiment. Only the Pan-German newspapers continued to speak of the " disgrace " of Agadir. The Secretary of State in the Colonial Office, von Lindequist, resigned because he could not approve of the agreement. He was succeeded by Dr. Solf, who had been governor of Samoa. There was a debate in the Reichstag, lasting several days, upon the Morocco negotiations, and the Imperial Chancellor took up an attitude of vigorous opposition to the ideas of the Conservative leader, von Heydebrand. A great sensation was caused by the action of the Crown Prince, who appeared in uniform in the Court Gallery and demonstratively applauded von Heydebrand. This incident led to further parliamentary discussion. In one of the speeches which the Chancellor delivered, he declared that Bismarck's principle never to wage a " preventive" war had continued to guide the Government in the Morocco crisis. For himself he had to bear the responsibility, and it was his duty so to conduct affairs that any war which was avoidable and was not necessitated by Germany's honour should be avoided. In another speech Bethmann Hollweg expressed his regret that von Heydebrand had used language with regard to German relations with Great Britain such as might be useful at an election meeting but was not customary in a Parliament alive to its responsibility. With these proceedings the legislative period of the Reichstag which had been elected in 1907 closed.

On Jan. 12 1912, the new Reichstag elections took place, and resulted, as had been expected, in showing that the " black and blue bloc " (Conservatives and Catholic Centre) no longer commanded an effective majority. Although most of the by-elections in the previous year had revealed a strong movement toward the Left, the extent of the success of the Social Democrats proved extraordinary. They were sent back to the Reichstag with i io deputies, which made them the strongest party in the House. The " black and blue bloc " lost 45 seats. This change in the parliamentary situation did not, under the German political system of those days, entail a reconstruction of the Government; its effects, however, were manifested at the election of the president and the vice-presidents of the Reichstag. These, according to parliamentary custom, had to be elected twice over. At the first election the veteran Socialist leader, Bebel, only missed being elected president by 11 votes, while for the first time in German political history a Socialist, Scheidemann, was elected vice-president. At the second election the Progressist (bourgeois Democrat) Kampf was elected president, while Scheidemann was defeated by the National Liberal, Dr. Paasche. The times were not ripe for placing Social Democrats in positions which entailed personal relations with the Court. The new Reichstag - the Reichstag which lasted throughout the war and proved to be the last under the old Imperial regime - was ultimately swept away together with the Bismarckian constitution by the revolution of Nov. 1918.

In Bavaria, the second largest German Federal state, elections had almost simultaneously taken place for the Diet. Their result was signalized by the appointment of the leader of the Catholic Centre in the Empire, Baron von Hertling (who afterwards became Imperial Chancellor), to the presidency of the Bavarian Ministry. An ordinance issued by this Government, permitting certain limited activities in Bavaria to the Jesuits, who had been expelled from Germany since 1872, led to much discussion, which was also taken up in the Reichstag. In consequence of the decision of the Federal Council, Bavaria withdrew this Jesuit ordinance in Nov., 1912. New army and navy bills, providing for the establishment of two new army corps at Allenstein and Saarbriicken and contemplating the completion of the third squadron of battleships for the fighting line, involved measures for meeting fresh expenditure, in connexion with which the Secretary of State of the Imperial Treasury, Wermuth, resigned. He was succeeded by the under-secretary Kiihn, and was elected a few months afterwards to the office of chief burgomaster of Berlin. As a presage of what was afterwards to take place it may be noted here that there was already a Social Democratic majority in the Diet of the smallest of the federated states, Schwarzburg-Rudolstadt.

On Dec. 12 1912, the Prince Regent Leopold of Bavaria died at the age of 92. He had governed in place of the incurably insane King Otto since 1886. He was succeeded as regent by his son Prince Louis (Ludwig), and in the following year (1913) the Hertling Ministry introduced an amendment to the constitution providing that if the king was unable, owing to bodily or mental infirmity, to exercise his office, and if, after a period of io years, there was no prospect of his recovery, the regent should declare the throne vacant. The Bavarian Diet agreed on Oct. 3 0 1913 to this alteration of the constitution, and the regent assumed the Bavarian crown as King Louis (Ludwig) III. In another state of the confederation, Brunswick, the regency which had lasted for many years was also terminated in 1913. The legitimate heir was the Duke of Cumberland, son of the King George of Hanover who had been deposed in consequence of the events of 1866. The Duke of Cumberland had expressly refused in 1884 to renounce his right to succession to the throne of Hanover. By decisions of the Federal Council in 1885 and 1907 he was accordingly debarred from taking up the succession to the ducal throne of Brunswick. It was only the marriage of his sole surviving son, Prince Ernest Augustus, with the daughter of the German Emperor, Princess Victoria Louise, that put an end to these difficulties. The marriage was celebrated at Berlin on May 24 1913 with great splendour, and a large number of European sovereigns and princes were present. Among them were the King and Queen of England and the Tsar of Russia. Prince Ernest Augustus, who had previously entered the Prussian army, had on April 20 addressed a letter to the Imperial Chancellor intimating that his father had transferred to him his rights to Brunswick; further, that his marriage with Princess Victoria Louise and his entrance into the Prussian army would, in his view, justify a reversal of the former decision of the Federal Council concerning the Brunswick succession. On the proposal of Prussia the Federal Council then declared (Oct. 27) that it agreed to the prince's accession to the throne of Brunswick. The young Duke and Duchess of Brunswick were, therefore, able to make their state entry into Brunswick on Nov. 3. The fact nevertheless had a sequel. Attacks were made in the Reichstag on the Federal Council because it had given its consent to the accession of Prince Ernest Augustus without the renunciation of the throne of Hanover by his father, the Duke of Cumberland, which it had demanded in the year 1907. The German Crown Prince in a correspondence with the Imperial Chancellor associated himself with this protest, a proceeding which caused some transient annoyance. Meanwhile, the Hanoverian Guelphs turned the settlement of the Brunswick succession to account by advancing in the most uncompromising manner demands, which since 1866 they had never abandoned, for the reestablishment of the Guelph kingdom of Hanover.

The Secretary of State for Foreign Affairs, von KiderlenWachter, suddenly died on Jan. 2 1913. He was succeeded by the ambassador in Rome, Gottlieb von Jagow. On Jan. 29 the chief in command of the High Seas Fleet, Adml. von Holtzendorff, was placed on the retired list and was succeeded by Adml. von Ingenohl. The danger of war, which had again overshadowed Europe, and more especially Germany's ally, Austria, in consequence of the Balkan War and the Russo-Austrian tension, caused the German Government to introduce the great Army Bill of 1913, to meet the cost of which a non-recurring war contribution (Wehrbeitrag) was to be levied upon the well-to-do sections of the nation. The Imperial Chancellor introduced the bill on April 7 in a great speech, in which he referred to the change in the military and political situation resulting from the issue of the Balkan War. " If ever," he said, " there should be a European conflagration in which Sla y s and Germans were opposed, a disadvantage for the Germans would lie in the fact that the place in the balance of power hitherto occupied by European Turkey would now to some extent be occupied by the South Slav states." After alluding to the growth of Pan-Slavic tendencies, to the literature of Chauvinism in France, and to the fact that in Germany, as contrasted with France, the idea of universal service was no longer completely carried out, the Chancellor declared: - " We are not bringing in this bill because we want war, but because we want peace, and because, if war comes, we desire to be the victors." The bill raised the strength of the German army, as from Oct. I 1913, from 544,271 men to 661,176. It passed the third reading in the Reichstag on June 30 1913. The financial measure accompanying it, defraying the proposed expenditure to the amount of more than one milliard marks by a non-recurring war contribution levied upon personal fortunes, was passed at the same time. The bill for this impost, which in the ensuing years - indeed for the most part in the first year - was paid up without any disturbance of the economic life of Germany, was the work of the Secretary of State for the Treasury, Kiihn. The sovereigns of the German Confederation renounced their privilege of exemption from taxation and paid their share of this contribution on behalf of the national defences. As regards the construction of warships, the Secretary of State for the Navy, von Tirpitz, had stated in the Reichstag on Feb. 7 that he had no objection to the proportion of io to 16 between the numbers of the German and the English battleships, as proposed by the British First Lord of the Admiralty.

The remarkable progress of the German nation up to 1913-4 was advertised in a striking way by the great celebrations of 1913, the centenary of the War of Liberation, and the twentyfifth anniversary of the accession of William II. All the German sovereigns assembled to take part in a ceremony in the hall built at Kehlheim to commemorate the national liberation, and in the dedication of the monument erected at Leipzig in memory of the " Battle of the Nations " (Viilkerschlacht). On the occasion of the fetes celebrating the Kaiser's accession, there were many references to the industrial, economic and financial prosperity which had been achieved. Dr. Helfferich calculated that the national wealth of Germany amounted at that date to something like 300 milliard marks (about r 5,000,000,000). The population, according to the census of 1910, was 64,896,881. Nevertheless, Germany had one constitutional weakness which was a flaw in its prosperity. The World War came upon it at a stage of its internal political development when it had not yet succeeded in readjusting the rights and duties of the various factors in the life of the state, in the sense of a compromise, such as the times demanded, between monarchy and parliamentary democracy. In the very centre of this political struggle, which had been going on for many years, stood the question of the suffrage for the Prussian Diet. The Social Democrats, almost exactly one year before the outbreak of the World War, lost on Aug. 13 1913 by the death of August Bebel their veteran leader in the struggle for the democratization of Germany. His successor in the presidency of the party organization was the man who was destined subsequently to be the first president of the Republican Reich, Ebert. (0. B.) The War Period. - The prosperous development which Germany had experienced for more than 40 years of peace had been both politically and economically a mighty one; and there had arisen in the German people a profound sense of their strength, based in great part upon the absolute confidence which they felt in their military power. This confidence continued to influence popular feeling during the first years of the war. The events which led up to it, the crime of Sarajevo, the Austrian ultimatum to Serbia, the preparations for war in Russia, were followed throughout the country with earnest attention, but until the end of July 1914 there was scarcely any sign of satisfaction among the German people at large at the prospect of war. It was only when it became known that there was no hope of avoiding the conflict that any national enthusiasm for war suddenl y broke out and communicated itself to all sections of the people. It found expression in lively demonstrations. Characteristic of the state of public feeling were the words which the Emperor addressed from the balcony of Berlin Castle to the assembled masses below: - " I no longer know any parties among my people; there are only Germans." The necessity of setting aside all party strife was felt from the extreme Right far into those working-class circles which, as belonging to the Social Democratic party, had hitherto been opposed on principle to war. On Aug. 1 1914 the Socialist leaders had issued a manifesto exhorting their followers to persist in their confidence that the future, in spite of everything, belonged to Socialism as the great bond between the nations. Indeed, if the Social Democrats had frankly taken up an attitude of opposition to the war, the masses, even those who belonged to the party, would in their patriotic enthusiasm have declined to follow their lead. The appeal by the Kaiser to his people on Aug. 6, the manifestos of the different German sovereigns, the Emperor's speech from the throne on Aug. 4, and the speech of the Imperial Chancellor BethmannHollweg on the same day, awakened an accordant response from the nation. On Aug. 4 the Social Democrats joined with the rest of the parties in the Reichstag in voting the first war credit of io milliard marks. A united front of all parties was established.

And now the events of the war followed each other in rapid succession. The overrunning of Belgium by the German troops and the victory of Hindenburg over the Russians at Allenstein produced a whirlwind of victorious exultation. On Sept. 9 the Socialist leaders published a protest against the anti-German. attitude of the International Socialist Bureau, and thus drew a clear line of cleavage between the German Social Democracy and that of enemy countries. On Dec. 2 a second war credit was voted by the Reichstag. In this instance the express assent of the Social Democrats was given, and their then leader, Haase, explained in a long speech the reasons for their attitude. The feeling in Germany was everywhere the same; victory was believed to be certain; even the unfavourable issue of the battle of the Marne, the fall of Tsing-tau and the destruction of the German cruiser flotilla off the Falkland Is. did nothing to impair this conviction. Although the participation of England in the war was keenly felt, the unquestionably great military successes of Germany in 1914 dispelled any apprehensions that the nation might not be strong enough to face its enemies.

The beginning of 1915 brought no alteration in this respect. In March the Social Democrats, by the mouth of their leader, Haase, expressed in the Reichstag the gratitude of the country to the German troops for their valour. At the same time the Government did its best to meet the Social Democrats halfway by fulfilling demands which that party had hitherto preferred in vain. The Secretary of State for the Interior, Dr. Klemens Delbriick, indicated in the Reichstag that new lines of policy were to be adopted; the question must be considered to what extent the great events which were taking place confronted the Empire with the necessity of meeting legitimate desires of the Left. In Aug. the president of the Reichstag, Dr. Kampf, intimated that the Government had abandoned its opposition to the proposal to place the inscription " To the German People " on the place long reserved for it on the Reichstag building.

In May Italy entered the war, an event which had long been foreseen and therefore did not exercise any very depressing influence. In certain circles a feeling nevertheless began to gain ground that, in view of the steady increase in the number of Germany's foes, the prospect of victory was becoming more doubtful. The Government did its best to repress this feeling. On Aug. 19 1915, the Chancellor, Bethmann Hollweg, delivered a speech in the Reichstag directed chiefly against England, and culminating in the prediction that the numbers, the powers, the wealth and the malice of Germany's enemies would be shattered against the iron determination of the German race. Once more the Reichstag, including the Social Democrats, voted a war credit, but this time one Socialist vote, that of Dr. Liebknecht, was recorded against it. Gradually, however, the Social Democrats began to give expression to aspirations for peace. As early as Nov. 1915 the Social Democratic leader, Scheidemann, addressed a question to the Government regarding the possibility of concluding peace. And now for the first time a Socialist group of 18 deputies, under the leadership of the deputy for Leipzig, Geyer, voted against a fresh war credit, although the Socialist Dr. Landsberg still protested in the most emphatic manner against any surrender of German territory. A division in the ranks of Social Democracy began. A sensation was caused by the publication of a peace manifesto issued by the German Social Democratic minority in the Paris newspaper Hunnanite. This was vigorously repudiated by the Socialist. majority. On July 19 Haase, Bernstein and Kautsky published in the Leipziger Volkszeitung, under the title " A Necessity of the Hour," a declaration in favour of the early conclusion of peace. The official leaders of the Social Democratic party issued, it is true, a counter-declaration, but in this document it was acknowledged for the first time that the Government must be ready for peace negotiations if a suitable opportunity offered. The chief party organ, Vorwarts, which published this counter-declaration, was temporarily suppressed by the Government. Thus there arose between the Social Democrats and the Government a discordancy which gradually extended among the masses. All the non-Socialist parties identified themselves in this instance with the attitude of the Government. Another element in the situation was that in Prussia there was a campaign going on for the reform of the suffrage, demanded by the Social Democrats but somewhat peremptorily refused by the Prussian Ministry. The bombing of Freiburg in Baden by enemy airmen, causing the death of eight persons, and the similar fate of Karlsruhe, where 27 persons were killed and 57 wounded, helped, no doubt, to revive popular feeling against the Entente and against the idea of peace. Nevertheless, a sense of war-weariness became more and more apparent and began to spread even in non-Socialist circles.

This change of feeling was above all due to the increasing difficulties in providing the masses with food. The severance of all communications between Germany and foreign countries prevented the importation of raw materials and foodstuffs of every kind. Although, at first, raw materials, sometimes in large quantities, could be imported through Holland, Switzerland and Sweden, these supplies gradually diminished as scarcity began to be felt in those countries. As far back as the beginning of 1915 the German Government was compelled to adopt measures for securing a supply of food for the whole population. All grain and flour were sequestrated on Feb. I 1915. A system of bread cards was introduced for a ration of 200 grammes of bread per head of the population. It was further decreed that the bread should be baked with an admixture of substances like potato-flour. On June 29 1915 a Grain Office for the Empire was instituted and took over the whole traffic in grain; and on July 23 a similar department was set up for providing fodder for animals. A prohibition was issued against feeding cattle with rye or wheat. As it was at first impossible to enforce this prohibition by a system of minute surveillance, an order was issued that one-third of all the swine should be slaughtered. The lack of petroleum made itself felt, especially in the rural districts which had no other means of lighting. Illicit traffic in the kinds of goods that were under Government control began to spread, and profiteers raised prices far above real values. The Government was, therefore, compelled to adopt measures for preventing profiteering on the necessities of life. Maximum prices for petroleum were fixed in July 1916, and in Oct. of the same year for butter and potatoes. On May 22 1916 a War Food Office was established, with the former chief president of E. Prussia, von Batocki, at its head. The bread card was supplemented on Oct. 2 by a meat card allowing 250 grammes of meat weekly per head of population.

From Nov. I 1916 onwards meat might be obtained only on Tuesdays and Fridays. Milk was also rationed, in order to assure a supply for infants and young children. The municipalities and communes made arrangements for supplying food to indigent persons; in the large towns popular kitchens were established which provided a meal at a low cost. The pupils in the schools were instructed to collect remnants of food and kitchen-refuse to supplement the fodder for cattle. The older pupils volunteered to go into the country and bear a hand in the harvest. Materials for clothing gradually began to be scarce. In July 1916 a Clothing Office for the Empire was instituted, and everyone who wanted to buy an article of wearing apparel had to apply to it for a permit; without the production of this purchase certificate no article of wearing apparel could be sold. German scientific experts were meanwhile doing their best to devise substitutes for articles of which there was a scarcity, and these efforts led to many new inventions.

The provision of financial resources for the prosecution of the war and for other public requirements presented a special problem. While Great Britain met her war expenditure in the main by increasing the tax revenue and issuing short-dated loans, Germany adopted from the first the method of issuing longdated war loans. At the beginning of the war the Secretary of State Kuhn was in charge of the finances of the Empire; he resigned in Jan. 191 5 and was succeeded by Dr. Helfferich, who at a later date became the leader of the German National party (the Conservative Right). In May 1916 Dr. Helfferich succeeded Dr. Klemens Delbruck as Secretary of State for the Interior, and was himself succeeded in the Department of Finance by Count Rodern, hitherto Secretary of State in Alsace-Lorraine. The method of providing money remained the same throughout the war. The loans were employed not merely for meeting expenditure but also for meeting interest due upon previous loans. The result was a very rapid increase of the public debt, which by 1918 had reached the amount of nearly 102 milliard marks.

Altogether nine war loans were issued. The first (Sept. 1914, issue price 97.5%) produced 4,491,861,000 marks; the second (March 1915, issue price 98.5%) 9,106,394,700; the third (Sept. 1915, issue price 99%) 12,161,630,100 marks; the fourth (March 1916, issue price 95%) 10,767,598,000 marks; the fifth (Oct. 1916, issue price 95%) 10,651,726,200 marks; the sixth (April 1917, issue price 95%) 13,122,000,000 marks; the seventh (Sept. 1917, issue price 95%) 12,626,000,000 marks; the eighth (April 1918, issue price 95%) 15,001,000,000 marks; the ninth (Nov. 1918, issue price 95%) 10,443,000,000 marks. Beginning with the sixth war loan a system of periodical drawings was introduced in order to attract subscriptions. This method of meeting financial necessities was maintained until almost the end of the war, when it became manifest that the increased burden of interest was becoming gigantic. It is true that in 1916 and 1917 new measures of taxation were passed by the Reichstag, but the yield of this taxation was inconsiderable. By 1918 the estimates had grown to over 74 milliard marks, or almost 3 milliards more than in the previous year. The necessity of imposing fresh taxation was manifest, and the Reichstag adopted measures for this purpose in April 1916. The new taxes were estimated to produce a revenue of 3,179,000,000 marks. They were as follows: - a monopoly in spirits, to be administered by a Central Spirit Office, to which all the spirit manufactured by the distillers was to be delivered; an increase in the duty on beer; an increase in the duty on wine, amounting to an additional 20% of its value; an increase in the duty on sparkling wine of three marks per bottle; a duty on mineral waters and manufactured nonalcoholic drinks; a duty on coffee of 1 3 o marks per too kgm.; a duty on tea of 230 marks, and on cacao and chocolate of 140 marks per too kgm.; an increase in the postal and telegraph tariffs; a war duty ranging from to % to 5e/ 0 on increased profits of companies; a stamp duty of four-tenths per thousand for ordinary stock, two-tenths on war loan and seven-tenths on foreign stock; further an increase of the duty on bills of exchange and money transactions (Geldumsatzen); a duty of 5 per mille on sales; a luxury tax on precious metals, jewels, works of art, antiquities, carpets, furs, pianos, fire-arms and motor vehicles. Simultaneously a law dealing with the evasion of these as well as previous forms of taxation, and imposing severe penalties, was passed. Further, a tax upon excess of income beyond the amount of the last pre-war assessment was enacted, with the object of confiscating a considerable part of war profits. These new measures of taxation did not succeed in putting the finances of the Empire upon a sound basis, as they could no longer be properly administered. After the close of the war, in consequence of the Revolution and the reparation payments imposed upon Germany, the national finances fell more and more into a state of complete disorder.

From the beginning of the year 1916 war-weariness was becoming more and more prevalent among the people, and the attempts of the Government and the press of the Right to fight it were unsuccessful.

A conflict arose between the navy administration and the Government of the Empire regarding the adoption of an intensified form of the U-boat warfare, and this conflict cast its shadow upon the whole of political life and formed the subject of violent debate in the press. In March 1916 the two conservative parties in the Reichstag tabled a resolution to the effect that complete freedom in the use of the U-boat weapon should be reserved in any negotiations with other Powers. Ultimately a compromise was effected in favour of another resolution, which declared:- " Seeing that the U-boat has proved an effective weapon against the British method of waging war with the object of reducing Germany to starvation, the Reichstag expresses its conviction that it is imperative to make such use of the U-boats as will assure the achievement of a peace giving security for the future of Germany." The Social Democrats voted in favour of this resolution with the exception of the Minority group of 18 deputies, to whom it gave the signal for separating themselves from the Social Democratic party in Parliament and forming a separate party under the name of Sozia.ldemokratische Arbeitsge7nein- schaft. It was out of this group that at a later date the party of the Independent Socialists sprang.

On April 5 1916 the Imperial Chancellor delivered a speech in the Reichstag describing peace negotiations as out of the question so long as on the British side the object of the war continued to be the destruction of Germany. In describing the objects of Germany the Chancellor said that peace could only be concluded on the basis of the results of the war. Poland therefore could not be handed over again to Russia; the Polish question must be solved conjointly by Germany and Austria. On the German eastern frontier securities must be demanded against any repetition of the Russian attack. Belgium must not become a British vassal state, and must be economically joined up with Germany. In the Reichstag the speech was received with strong demonstrations of approval. It did not, however, succeed in uniting. the nation afresh in a vigorous determination to prosecute the war to a successful conclusion. A similar fate attended later speeches which the Chancellor delivered in the Reichstag in Sept. and Nov., and in which, among other things, he said: " A statesman who hesitated to employ against the enemy any effective instrument of warfare which is really calculated to shorten the war would deserve to be hanged." The dissensions between the Right and Bethmann-Hollweg became more and more acute. He was reproached with watering down the war aims and of having too little backbone when confronted with the pressure of the Left for a democratization of the Government. The Social Democrats on the other hand, and gradually also the bourgeois Democrats and the Catholic Centre, demanded from the Chancellor unequivocal assurances that the Imperial Government was prepared to conclude peace on an acceptable basis, and in particular to renounce all annexations and war indemnities. The Chancellor himself was inclined to yield to this pressure, but he encountered vigorous opposition from the Chief Command of the army, where General Ludendorff in particular advocated the principle that Germany could not conclude a peace which did not compensate her in the fullest degree by annexations and indemnities for the sacrifices she had made, in the war. The Chief Command even went so far as to try to influence the policy of the Government, and Bethmann-Hollweg was not the kind of man resolutely to repel these endeavours. There gradually arose a situation in which the Chief Command actually acquired a real influence on the policy of the Empire. The result was that the Chancellor found himself in an ambiguous position in dealing with the demand of the Majority of the Reichstag for an unequivocal demonstration of the German desire to make peace. At this stage the Catholic Centre deputy Erzberger became more and more prominent as the champion of the views of the Majority, so that ultimately two strongly contrasted groups were formed, the Minority on the Right which represented the views of the Chief Command, and the Majority, composed of the Catholic Centre, the bourgeois Democrats and the Social Democrats, who pressed for an acceptable peace. In addition to these there arose on the extreme Left a small but very active group which put itself in the most uncompromising opposition to the Imperial Government and from 1916 onwards voted against all war credit. The leaders. were the .deputies Haase (the former president of the Social Democratic party), Dittmann, Geyer and Ledebour. As already mentioned, 18 deputies of this colour seceded on Jan. 12 1916 from the Social Democratic party. The deputies Liebknecht and Ruhle, who were still further to the Left, did not join this new extremist group, because it did not go far enough for them. In Sept. 1916 the Congress of the Social Democratic party of the whole Empire adopted a resolution which, while laying stress on the duty of defence, rejected the idea of a war of conquest and advocated reestablishment of international relations.

The position of the Chancellor was rendered still more difficult by fresh and much .more violent attacks upon him from the Right. He found it necessary to repel these attacks in very strong language in a speech which he delivered in the Reichstag. The worst of these attacks was a pamphlet directed against the Chancellor, which was published under the nom de guerre of Junius Alter " and had a large circulation. About the same time the director of the E. Prussian Credit Institute, Kapp (destined in 1920 to become celebrated as the perpetrator of the " Kapp Putsch"), published a denunciation of Bethmann Hollweg under the title of Die Nationalen Kreise and der Reichskanzler. The Chancellor's language in the Reichstag was so vigorous and contemptuous that Kapp sent him a challenge to a duel, which the Chancellor did not accept. There were a number of other similar incidents. Prof. Cossmann of Munich published violent attacks against Prof. Valentin of Freiburg, whom he charged with having obtained by theft material which he had used for an article on the number of vessels which had been sunk by the U-boats. Grand Adml. von Tirpitz intervened in this controversy. On June 28 1916 the Reichstag deputy Liebknecht was condemned to two-and-a-half years' penal servitude for having caused a popular demonstration in the Potsdamerplatz in Berlin, by a violent speech against the prolongation of the war. The constantly increasing influence which the Social Democrats were acquiring was shown by the action of the Government in conceding two of their demands: the prohibition of the use of foreign languages at political meetings was abolished, and the participation of young persons in assemblies arranged by the trade unions was now permitted.

The food situation had become considerably worse in the course of 1916. In Jan. of that year further restrictions had to be imposed upon traffic in winter corn and in groats for fodder. Maximum prices were fixed for artificial manures. Restrictions were placed upon the use of barley for brewing. In the following April the State took possession of coffee, tea and the substitutes (Ersatz) for them. Soap was rationed-600 grammes monthly per person. The consumption of meat in restaurants was restricted. In Feb. all materials for clothing and all ready-made clothes were seized by the Government. In Dec. the boot and shoe trade was subjected to the authority of the Department for Wearing Apparel. In April 1917 an order of the Federal Council limited the supply of paper for printing. In consequence of the bad harvest a great part of the milch-cows had to be slaughtered by order. The employment of substitutes (Ersa.tzmittel), the artificial production of albuminous foods, the manufacture of textile fabrics from nettle fibre and so forth, failed to make up for the deficiency in the real articles. On Nov. 25 Gen. Groener was entrusted with the charge of a department for providing for the efficiency of the economic and industrial equipment of Germany. A special law (das Hilfsdienstgesetz) enacted that all males between the ages of 17 and 60 should be compelled to work. Field-Marshal von Hindenburg issued an appeal for providing the munition workers with a better supply of food fats, whereupon the agricultural interest started a " Hindenburg Donation " movement for the purpose.

The opposition, which had gradually been gathering strength during 1916, was intensified early in 1917. On Feb. 1, Bethmann Hollweg announced to the Central Committee of the Reichstag the intention to prosecute the unrestricted submarine offensive, and, in view of the attitude of the United States of America, he defended this policy in a further detailed statement at a full session of the Reichstag on Feb. 27. The naval administration laid before the Reichstag certain calculations on the strength of which it was asserted that England would only be able to hold out against the submarine warfare for a few months. The Reichstag did not take up any definite standpoint in regard to the question, although the members of the different parties who spoke did not oppose the submarine warfare. Among the Social Democrats, the Democrats and the Catholic Centre party, however, a feeling was gradually gaining ground that tended more and more to emphasize the necessity for peace, and Bethmann Hollweg was reproached with being under the influence of the Supreme Military Command and with cooperating in the Tatter's war policy. On May 15 this feeling culminated in an important debate in the Reichstag on the subject of Germany's war aims. In a speech which gave rise to lengthy discussions, the Chancellor summarized these to the effect that a binding statement in detail of Germany's war aims would be injurious to the interests of the nation at that moment; that he would not permit himself to be influenced by any party, but would be guided solely by the consideration of the interests of the whole nation; that if Russia - the Tsar's Government having been overthrown on March 16 by the Russian Revolution - wished to conclude peace with Germany, Germany would make no demands incompatible with the liberty and welfare of the nations. In the course of the debate which followed, Scheidemann, the leader of the Social Democrats, vigorously attacked the war aims of the Pan-Germans, and said that if the Government continued to pursue such aims Germany itself would soon be faced by revolution. The speaker on behalf of the Central party, Dr. Spahn, also voiced the longing of the German people for peace, and emphasized the necessity of sincere cooperation between the Kaiser and his people. The Reichstag was then adjourned until July 6. When it reassembled on that day the strength of the feeling against Bethmann Hollweg had become more ominous than ever. The predictions in regard to the submarine warfare had not been fulfilled. America had entered the war, and the prospects for Germany were constantly becoming more and more gloomy. Deputy Erzberger had constituted himself leader of the opposition against the Chancellor, and on July 6, at a meeting of the Central Committee of the Reichstag, he disputed the possibility of bringing the enemy to terms by means of submarine warfare. Erzberger demanded the immediate initiation of negotiations for peace, on the ground that Germany's military situation would not be so favourable a a later date and that it was still possible to make an offer for peace which would have the prospect of obtaining a result favourable to Germany. The Social Democrats and the Democrats supported Erzberger, the former mainly with the object of demanding guarantees that would safeguard the influence of Parliament on the development of the political situation. Long and continuous conferences between the Chancellor and the party leaders ensued. Hindenburg and Ludendorff came to Berlin in order to intervene, but Bethmann Hollweg succeeded in preventing their being received by the Kaiser. The Crown Prince also came to Berlin and had consultations with members of the Reichstag. The Conservatives declared that they did not consider Bethmann Hollweg to be the right man to conduct German policy at this crisis. The Catholic Centre, the Democrats and the Social Democrats were united in working for his fall; and finally, Dr. Stresemann, who, owing to the severe illness of the leader of the National Liberals, Bassermann, was at the head of that party, declared that the National Liberals also had no further interest in his continuance in office. Bethmann Hollweg, however, did everything in his power to retain his position. He even persuaded the Kaiser to issue a declaration on July 11 in which a promise was made to carry out the franchise reform in Prussia which had long been demanded by the Left, and to conduct the next Prussian general election on the basis of this reform; the declaration entrusted the execution of these measures to the Chancellor.

But this final attempt to regain the support of the Left also failed. On the same day, July 11, the Bavarian minister-president, Count Hertling, was summoned to Berlin, and negotiations were conducted with him regarding his succession to the Chancellorship. Hertling, it is true, declined. Nevertheless, Bethmann Hollweg's day was over. On July 14 he tendered to the Kaiser the resignation of the Cabinet, and that resignation was accepted. Dr. Michaelis, who was at that time commissioner of state at the Food Department of the Empire, and who was regarded as an extremely capable official but had hitherto played no part in political life, was appointed as his successor. Michaelis was in general sympathy with the Conservative party. The press received the news of his appointment with marked reserve, as did also the Reichstag.

The new Chancellor was at once confronted with a difficult situation. The Catholic Centre party, the People's party and the Social Democratic party had agreed among themselves on a resolution in favour of peace, which they brought before the Reichstag on July 19 1917. This resolution proposed that a declaration be issued by the Reichstag to the effect that it desired to bring about a peace by agreement, which should be incompatible with acquisition of territory by force and with political, economic or financial measures of coercion. The declaration further condemned economic blockades and the creation of enmity between nations, and demanded that the " freedom of the seas " should be secured, and that the readiness of Germany to promote the organization of international law should be manifested. So long as the enemy Governments refused to entertain a peace of this kind the German people would resolutely stand together like one man and fight for their right of existence and development. The new Chancellor, Dr. Michaelis, declared, on the subject of this peace resolution, that Germany had only gone to war under compulsion, and that she would not continue to fight a day longer merely for the sake of making conquests by force of arms. He hoped to be able to achieve the aims of Germany within the four corners of the Peace Resolution " as he understood it." The Chancellor further expressed his readiness to appoint men who enjoyed the confidence of the principal parties to leading positions in the Government. His words, " As I understand the resolution," gave rise to lively discussions in the press and contributed to the immediate creation of a hostile feeling against Dr. Michaelis among the parties of the Left. The Chancellor himself modified the effect of his saving clause by stating that, in using it, he had had no intention of putting himself in opposition to the Peace Resolution of the Reichstag. The Resolution was passed by 216 votes against the 126 votes of the Right and the Independent Socialists, who were joined by a few members of the Catholic Centre party. Michaelis arranged for the Kaiser to meet a number of members of the Reichstag. This meeting took place at a social gathering at the official residence of the Secretary of State Helfferich, at which the Kaiser was present. This was doubtless the first occasion on which the Emperor William came into personal contact with the leaders of the Social Democratic party; among those present were Ebert, David and Scheidemann.

On August 5th Michaelis's new Cabinet was formed. Dr. Helfferich became Vice-Chancellor, vacating the Secretaryship of the Interior. A new economic department was detached from the Department of the Interior and entrusted to the burgomaster of Strassburg, Schwander. The chief burgomaster of Cologne, Wallraf, became Secretary of State for the Interior. The chief government president of Pomerania, von Waldow, was placed at the head of the War Food Department, with the Social Democratic trades union leader, August Muller of Hamburg, as his under-secretary. Von Krause became Secretary of State for the Department of Justice, and von Kuhlmann, at that time ambassador at Constantinople, became Secretary for Foreign Affairs. The National Liberal deputy Schiffer, was appointed under-secretary of state to the Treasury. Maj.-Gen. Scheuch was made head of the War Ministry in the place of Groner. Simultaneously with the reconstitution of the Cabinet of the Empire, that of the Prussian Government took place, from which the Ministers von Lobell, Beseler, von Trott zu Solz, von Schorlemer and Lentze, who were opposed to the introduction of universal suffrage, had resigned. The leader of the Catholic Centre, Dr. Spahn, was appointed Minister of Justice; Dr. Schmidt, up to that time ministerial director in the Ministry of Public Worship and Education, became Minister; the Minister of Agriculture was Landeshauptmann von Eisenhart-Rothe; Minister of Finance, Government President Dr. Hergt.

From the first the parties of the Left severely criticized these appointments on the ground that the desired parliamentarization of the Government had not been sufficiently carried out by them. The Social Democrats in particular immediately dissociated themselves in the most vigorous terms from Dr. Michaelis, and he found but few supporters either in the Progressist or the Catholic Centre parties. The adjournment of the Reichstag, however, gave Dr. Michaelis some respite. No actual crisis occurred until Oct. when the Reichstag reassembled. Early in 1917 there had been a case of mutiny in the navy. In the course of an inquiry into this case it had transpired that the mutineers had, previously, had dealings with the deputies Haase and Dittmann, members of the Independent Socialist party, and that these politicians had advised them " to be extremely prudent." Michaelis mentioned the matter in his speech in the Reichstag on Oct. 9, making it the text for a bitter attack on the Independents in the Reichstag, who, he said, had overstepped all permissible bounds because their aims were such as to endanger the existence of the Empire. The Secretary of State for the Navy, von Capelle, seconded the Chancellor's attacks. This parliamentary action against the Independent Socialists, which had not been very skilfully managed by Michaelis, as there existed no definite material for the prosecution of the deputies Haase and Dittmann, created an unfavourable impression among the Right also, as deputies on that side of the House considered that the disclosure of the fact of the mutiny had seriously damaged the prestige of the German navy. Michaelis himself ultimately realized that, under such circumstances as these, he could no longer remain in office, and he resigned.

On Nov. 2 the President of the Bavarian Ministry, Count Hertling, for many years leader of the Catholic Centre in the Reichstag, was appointed as successor. Hertling, who was over 70 years of age, was regarded as a man of diplomatic talent; his long parliamentary experience was in his favour, so that he entered upon his new duties with good prospects of success. He at once discussed the Government programme in detail with the different political parties and agreed to undertake the further development of the parliamentary system. He immediately confirmed this promise by appointing the leader of the Progressist People's party, von Payer, to replace Dr. Helfferich, who had retired as Vice-Chancellor. The leader of the National Liberal party in the Prussian Diet, Professor Dr. Friedberg, was similarly appointed vice-president of the Prussian Ministry. At the end of Nov. the Secretary of State of the Economic Department, Schwander, retired, and the under-secretary, Stein, was appointed in his stead. Hertling further made a number of concessions to the Social Democrats, such as the institution of Chambers of Labour and an extension of the trade-union right of combination to political associations. On Nov. 29 Hertling laid his programme before the Reichstag. He emphasized the fact that Germany's war aims were confined to defending the Fatherland, preserving her territories intact, and maintaining the freedom and independence of her economic existence. He gave proof of his endeavours to obtain peace by referring to the answer given to the Pope on November r9th in reply to his transmission of an alleged overture for peace, a reply in which Germany's readiness to enter upon peace negotiations was expressed. Hertling closed with the exhortation: " Wait, endure and persevere." He managed to avoid any collision with the various political parties, so that he soon gained their confidence, and by the end of 1917 stable conditions had once more been established in the Government of the Empire.

On July 24 1917 there died Ernst Bassermann, for many years the leader of the National Liberal party. On Sept. 2 a number of leading personalities founded the German Vaterlandspartei, with Duke Johann Albrecht of Mecklenburg as hon. president and Adml. von Tirpitz in charge of the practical conduct of the party. The programme of this party was to stand above all parties and to unite within itself members of any of them. Its purpose was to strengthen the resolution of the people and to leave nothing undone in order to create the conditions necessary for perseverance to the bitter end. Internal politics were not to be its business: nevertheless it was precisely in this sphere that it was destined soon to exercise a determining influence. It became the centre of all those who attempted to infuse into the people a spirit of victory and to oppose in the most resolute manner all thoughts of a disadvantageous peace. At first certain members of the Social Democratic party had joined the Vaterlandspartei; but soon the Social Democrat press opened the most vigorous campaign against it, charging it with wrecking every chance of peace. Then developed a bitter struggle which soon played a large part in the various German Parliaments and in the widest public circles. The Vaterlandspartei had large funds at its disposal, conducted far-reaching propaganda, and soon had vast numbers of members. Its activities produced no solid results in political life, but rather had the effect of further embittering internal struggles.

During 1917 food difficulties increased to an almost incalculable extent. Even rye for making bread became scarce. War bread steadily deteriorated in quality through the admixture of substitutes. Gradually a state of insufficient nutrition became prevalent among the entire populace and caused particular suffering to children and the aged. The winter of 1917-8 was popularly called the " swede winter," for lack of potatoes and meat made swedes a chief article of diet. In all the great cities soup-kitchens were established, partly from communal and partly from charitable funds, in order to offer to the poorer classes at least the possibility of obtaining meals which were at all adequate. Popular anger was directed especially against food profiteering, which assumed great dimensions. All legislative attempts to remedy this evil failed, because the cunning of the profiteer found ever new ways and means of evading the meshes of the law. In many places there were food riots, which were also directed against certain parts of the agricultural population, who tried to sell food at the highest possible prices. Regular centres of the profiteering trade arose, in which everything that was wanted could be obtained, though at enormously high prices; while trainloads of food and other necessaries were diverted or even stolen in transit in order to find the articles for this illegal traffic. It was in vain that specially instituted warprofiteering offices strove everywhere to put a stop to this trade; it remained impossible to eradicate it. The whole community of swindlers, too, profited by this state of affairs. The prosecution of a certain Frau Meta Kupfer, which came before the courts at Berlin in July, was a characteristic example. This woman had obtained loans all over the town, for which she often paid 100 per cent or more, alleging that she made enormous profits with these sums in the (illegal) food traffic. In reality she spent the money on a life of luxury, and paid interest out of fresh loans which she raised. She accumulated many millions of marks before the edifice of fraud which she had erected collapsed. The lack of food caused particular suffering to the labouring classes. Following an appeal by Field-Marshal Hindenburg in Sept. for a new economic and military armament of Germany, a " Hindenburg dole " was created in Oct. which was primarily intended for the benefit of soldiers disabled in the war. Maximum prices were fixed for a fresh series of commodities. In the spring of 1 9 17 the consumption of bread had to be reduced to 170 grammes per head per diem, and even this quantity could not in some instances be supplied. All these circumstances materially contributed to create a feeling of longing for the end of the war; and this feeling, at the same time, was directed against the Government, which was considered responsible for such conditions. Strikes also began even among the munition workers. In order to make possible the continued production of munitions, great increases of wages had to be conceded.

At the very beginning of 1918, the fight for peace began with fresh violence. The main question was whether Pres. Wilson's Fourteen Points could form the basis for a peace. On Jan. 25, the Chancellor Count von Hertling announced his attitude to the Fourteen Points in the Main Committee of the Reichstag. He declared himself satisfied with them on the whole, with this restriction, that the peace must satisfy the rightful claims of Austria-Hungary, and secure the inviolability of Turkey. The nation began gradually to split into two parties, of which one rejected any disadvantageous peace, while the other conducted vigorous propaganda for peace even with concessions on the part of Germany. The deputy Erzberger became more and more prominent as the champion of this latter view. He entered into relations with Vienna, where the need for peace was even more urgent. In his endeavours Erzberger worked hand in glove with the Social Democratic party. The conclusion of peace with Russia furnished fresh material for the agitation of the advocates of peace. It was objected that this peace was not of such a nature as to enable Germany to hope for any conciliatory response from her enemies in the West. On Oct. 8, Erzberger laid down, in the Main Committee of the Reichstag, principles for Germany's Eastern policy, which could only betoken a declaration of war against the Hertling Cabinet. The Centre party, far from siding with Erzberger, actually published a declaration to the effect that the Government enjoyed the full confidence of the party; but the difference between Erzberger and Count Hertling was not thereby removed; and Hertling declined to receive Erzberger any longer.

In the spring of 1918, great attention was also aroused by a document published the previous year by the former German ambassador in London, Count Lichnowsky, who asserted in it that the German Government was responsible for the outbreak of war, while Sir Edward Grey on his side had done everything to prevent it. Lichnowsky in this connexion referred to a meeting of the Crown Council at Potsdam on July 5 1914, which was alleged to have been held with the Kaiser presiding, and which, according to Lichnowsky, adopted at that early date the decisions regarding the commencement of the war. The Vice-Chancellor, von Payer, declared on March io 1918, in the Main Committee of the Reichstag, that these assertions were not in accordance with the facts, and denied that the alleged meeting of the Crown Council referred to had ever taken place. The controversy about this Crown Council was continued after the war. It was asserted again and again that it had taken place, as for instance after the Revolution by the then Bavarian Minister-President Eisner. Persons who were supposed to have been present at the Council, such as the Secretary of State von Jagow, repeatedly asserted, however, that the story of a meeting of the Crown Council on J uly 5 1914 was a fable (see Europe, section War Period). As regards internal policy the Hertling Cabinet was the author of a number of new laws complying with some of the Social Democratic demands. Thus on June 8 the Reichstag passed a law for broadening the basis of the Reichstag. By this law the larger municipal and rural constituencies having more than 300,000 electors had larger number of deputies assigned to them, and these were to be elected on the principle of proportional representation and scrutin de liste. On June 6 the salaries of members of the Reichstag were raised from 3,000 marks to 5,000.

In May the president of the Reichstag, Kampf, a member of the Progressive People's party, died. Fehrenbach, a member of the Catholic Centre party, succeeded him. Dr. Scheidemann and Dr. Paasche - Progressist Social Democrat and National Liberal respectively - became vice-presidents. Although the relations between the Chancellor Hertling and the Reichstag remained tolerable, dissatisfaction with several of the members of the Cabinet began to arise in the Reichstag. This applied especially to Kuhlmann, the Secretary of State for Foreign Affairs, who was accused by the Left of having made a policy of annexation the guiding principle in concluding peace with Russia. Further, the Deutsche Tageszeitung, an organ of the Extreme Right, raised charges regarding Kuhlmann's personal conduct during his stay at Bucharest. On June 21 Kuhlmann made a very remarkable speech in the Reichstag, in which he stated among other things that an end of the war could no longer be reached by purely military decisions. The Chancellor, Count Hertling, considered it necessary in the next sitting to contradict this assertion by pointing out that there could actually be no question of any diminution of German confidence in victory. Herr von Kuhlmann thereupon resigned, July 9. Adml. von Hintze, hitherto German minister at Christiania, was appointed his successor.

Meanwhile the Social Democrats clamoured for further progress in the direction of parliamentary Government. In Sept. they presented a series of minimum demands as the price of their continued support of the Government (demands which were very far-reaching) in internal affairs, and at the same time asked for the restitution of Belgium, liberation of all territories still under occupation, and the abandonment of the treaties of BrestLitovsk and Bucharest. On Sept. 21 it was reported that Bulgaria had asked for an armistice. The Social Democrats now adopted a still firmer tone against the Government, demanding a true parliamentarism as the condition of their further collaboration.

Count Hertling did not see his way to complying. But the Catholic Centre and the Democrats adopted a similar basis for their demands in the Main Committee of the Reichstag, and on Sept. 30 Count Hertling asked to be relieved of his office.

The parties had already selected his successor, this being the first time a purely parliamentary choice had been made. They chose Prince Max of Baden, heir-apparent to the grand ducal throne of that state, who was considered to be a man of thoroughly democratic principle. His programme was the introduction of a radical parliamentary system, the restriction of the Kaiser's powers, and the acceptance of President Wilson's Fourteen Points. As Prince Max subsequently stated in the Preussische Jahrbitcher, he did not intend to ask for an armistice, but merely wished to make an appeal to President Wilson in order to explain to him that he accepted his war aims and that Germany was ready to make heavy sacrifices in order to get peace. But Prince Max did not get the chance of putting his aims into practice. He succeeded indeed in making a few alterations, chiefly in regard to the appointment of Secretaries of State taken from the ranks of Parliament and invested with far-reaching powers. The opportunity for any further activities was denied to Prince Max of Baden's Cabinet. At the beginning of Oct. General Headquarters had already demanded that an immediate application should be made for an armistice. Meanwhile naval mutinies began in Kiel and Wilhelmshaven. In Munich the Republic was proclaimed, and the Social Democrats threatened the Imperial Government with action of a very thoroughgoing character. Accordingly Prince Max retired on Nov. 9 1918, having first appointed the Social Democrat Ebert to be his successor, and now the period of revolution began for Germany.

(C. K.*) The Revolution. - The official birthday of the German Revolution is Nov. 9 1918. Its real beginning lay much further back. The war-years, with the burdens and the hardships which they imposed upon the people, had aroused feelings and had created conditions which in the political as in other spheres were big with the elements of a volcanic outbreak. A wise and skilful government might perhaps have been able to control the whole movement and to divert it into calmer channels, either by meeting the demands of the masses and effecting reforms of the constitution in time, or by fighting the movement with ruthless determination by every means at its command. The Government had neither the resolution nor the strength to adopt either of these courses. It vacillated between concession and resistance, and it drifted with the stream of circumstance into a situation where events simply crushed it out of existence. The last Imperial Chancellor of the old regime, Prince Max of Baden, had attempted at the last moment to stem the course of events by concessions. But he only did so when it was too late, and did it in a way which exhibited the characteristics of weakness too patently to have any real influence upon the course of events. It has already been mentioned that Prince Max desired to carry out a programme which would have placed the constitution of the Empire upon a new and far more liberal basis, and which in its broad lines would have embodied the principle of an Imperial Democracy (Volkskaisertum). The authoritative posts in his Cabinet were entrusted by Prince Max to Secretaries of State taken from the ranks of Parliament. The appointments were Grdber and Erzberger of the Catholic Centre party, Haussmann of the Progressive party (corresponding to the post-Revolution bourgeois Democrats) and Scheidemann of the Social Democracy. The Imperial Home Office was also given to a member of Parliament, the Catholic Centre deputy Trimborn, while the Department of Public Economics (Wirtschaftsamt) was given to the Social Democrat Bauer, with the Catholic Centre deputy and prominent trade unionist Giesberts as under-secretary. At the head of the Foreign Office was placed the former Colonial Secretary, Dr. Solf, with the Social Democrat David as under-secretary. The Prussian War Minister, von Stein, was replaced by General Scheuch, who was reputed to have Liberal views. In the speech which Prince Max delivered in the Reichstag on Oct. 5 1918, he set forth a government programme containing a decisive profession of democracy, and other points asserting as an article of faith the right of nationalities to determine their own political destinies. He likewise declared himself in favour of the evacuation of Belgium, and even offered compensation. This declaration of policy was immediately followed, on Oct. 28 1918, by a number of measures intended to make the constitution democratic and curtailing the prerogative of the Emperor. The Secretaries of State, who were members of Parliament, were accorded far-reaching powers. The military authorities were in future to issue instructions only with the assent of the civil administration. For the Imperial Chancellor in the exercise of his office the confidence of the Reichstag was to be requisite. Appointments, transfers, promotions and dismissals of officers could take place only with the counter-signature of the Imperial Chancellor or of the War Minister, whereas they had hitherto been effected by Imperial Cabinet order.' The Emperor issued an edict, published on Nov. 2, referring to this democratization of the constitution, and containing the sentence " the office of Kaiser is service for the people." But, as has been pointed out, all these measures were useless, because, before effect could be given to them, they were anticipated by the Revolution and all that it entailed.

The Revolution started in Kiel. A rumour had spread among the sailors that the fleet was at last going to be staked in battle. The result was that the crews hoisted the red flag on the ships and arrested the officers, or even, when they resisted, murdered them. The mutiny spread from Kiel to Travemiinde, Hamburg and Wilhelmshaven. On Nov. 8 the Republic was likewise proclaimed at Munich. The Imperial Chancellor, Prince Max, did not know what to do when confronted by these events; his attitude was one of helplessness. The Social Democrats urged him to compel the Emperor to abdicate. Prince Max considered that he must yield to this demand, so he sent plenipotentiaries to Grand Headquarters at Spa, who pressed the Emperor to renounce the throne. The Emperor at first refused; and it has never been definitely ascertained how far there was a misunderstanding about this. What is certain is that, at the moment when Prince Max announced on the morning of Nov. 9 that the Emperor had resolved to renounce the throne and that there had been a corresponding renunciation on the part of the German Crown Prince, no renunciation either by the Emperor or by the Crown Prince was actually in his possession. He may have hoped by proclaiming such a renunciation to be able at least to save the throne for the House of Hohenzollern. But in that case he entirely failed to realize how far matters had already gone. On Nov. 9 the Revolution had already commenced in Berlin. For Prince Max no other course was now open but to retire at once together with his Cabinet. He vanished from Berlin and betook himself to his home in Baden.

Meanwhile the final events were taking place on the western front - the German request for an armistice, the negotiations with Foch, and the agreements which were concluded with him. The Emperor William left the front on Nov. 10 on the advice of those about him, because they believed that they could no more guarantee his personal safety. He betook himself to Holland, where, to begin with, he claimed the hospitality of Count Bentinck at Amerongen Castle. He was followed by the German Crown Prince, who was interned on the island of Wieringen in the Zuyder Zee. On Nov. 28 the Empress left Germany and joined her husband in Holland. The actual abdication of the Emperor did not take place till Nov. 28, the day of the Empress's arrival at Amerongen Castle. The Emperor signed on that day the abdication document which was laid before him by a deputation sent to Amerongen by the new Revolutionary Government. The Crown Prince renounced the succession on Dec. 5.

In the Republican Reich (formerly the German Empire) mat The Emperor had three " Cabinets " or offices of his household - a civil, a military and a naval Cabinet, through which and occasionally on whose advice he had directly exercised his military and civil prerogatives. (Ed. E.B.) ters were now en train. In all the states of the Confederation the sovereigns had been compelled to abdicate; nowhere had there been any fighting or bloodshed in connexion with these particular events. In Berlin the Revolution wore a theatrical rather than a dramatic aspect. The bourgeoisie there as elsewhere had been systematically kept by the Imperial Government in ignorance of ominous symptoms and incidents. The press had not been allowed to make the slightest disclosure of these things. Thus the citizens of Berlin - and the same holds true of the whole Reich - were absolutely taken by surprise when on the afternoon of Nov. 9 motor-lorries suddenly appeared in the streets all over the city, full of armed workmen, mostly youths, carrying red flags. They delivered speeches from the lorries and asserted that the Government had fallen. The only other thing that they did was to tear the black-white-and-red cockades from the caps of officers and soldiers whom they met in the streets, and to cut the epaulettes from the officers' coats. The outward beginning of the Revolution in Berlin was a procession of workmen which made its way into the city from the working-class quarter in the north and started by attempting to storm the barracks situated at the north end of the Friedrichstrasse. The guard fired upon them. Then the command arrived not to fire upon masses of workmen. This command was issued to all the military posts. From whom it came was never definitely ascertained. In these circumstances the only thing that the military could do was to surrender to the insurgents without a blow. In a number of instances sections of the troops joined the insurgents. There was therefore no bloodshed on the day of the Revolution or on the succeeding days. In fact one or two battalions would have sufficed to nip the whole business in the bud. Here and there shooting occurred - at the Castle, for example, where a search was being made for officers reported to be armed, and in the neighbourhood of the Castle; but these incidents rather provided amusement for the revolutionary bands, largely composed of youths.

The Revolution had been systematically prepared by members of the Independent Socialist party. The deputy Ledebour afterwards publicly boasted that he had been working at these preparations since 1916. Barth and Daumig made similar statements. The Independent Socialist Cohn is understood - indeed he subsequently admitted it - to have received large sums of money from Russia for the purposes of the Revolution; they were said to have amounted to about 121 million marks. Bands of picked men (Stosstruppen), lavishly provided with rifles and machine-guns, had everywhere been formed. The " majority " (or governmental) Social Democratic party did not officially participate in these schemes. But when the Revolution began on Nov. 9, they associated themselves with the revolutionaries, and it was perhaps due to them that the Revolution did not take the course which it took in Russia, and that by persistent efforts order was gradually restored. The bourgeoisie was absolutely helpless in the days of the Revolution. It took things as they came and did not lift a finger to prevent them. Many sections of this class even thought that the time had come to go over with flying colours into the revolutionary camp of the Social Democracy, in order to participate in the advantages which the Revolution promised to secure for those who professed extreme opinions.

The Social Democrat Scheidemann, who had been in the Cabinet of Prince Max of Baden as a Parliamentary Secretary of State, had announced his resignation on Nov. 8. Prince Max, when he withdrew on Nov. 9, installed the Socialist leader Ebert as Imperial Chancellor. Ebert issued on the same day an appeal " to German citizens," inviting them to cooperate in the new order of things, even if they felt difficulty in doing so; on no account must there be any breakdown in that hour of trial. The Social Democrats then opened negotiations with the Independent Socialists, and a Council of Commissioners of the People (Volksbeauftragten) was set up as the supreme revolutionary authority, the two parties each being represented on it by three of their leading men. Ebert, Scheidemann and Landsberg were the three Social Democratic commissioners; Haase, Dittmann and Barth were the three Independents. The bureaucracy, with few exceptions, declared its readiness to continue its work provisionally under the new revolutionary regime. All the officials of the ministries, for example, remained at their posts, and tried their best, amid the confusion which at first reigned, to go on with their work upon the old lines.

The Council of Commissioners of the People had first of all to form a new Cabinet. It is noteworthy that this Cabinet consisted almost entirely of non-Socialists (Biirgerliche). The Prussian War Minister, Scheuch, and the Secretary of State for the Navy, von Mann, remained at their posts, and so did Dr. Solf at the Foreign Office, and Erzberger as a Parliamentary Secretary of State. The National Liberal deputy, Schiffer, became Finance Secretary, and the Progressist (non-Socialist Democrat) Professor Preuss was made Secretary of State for the Interior. It was only at the Food Department of the Reich that a Social Democrat, the deputy Wurm, was appointed. The first legislative order, which was issued in the form of an " ordinance having the force of law," swept away a number of pre-revolution enactments. Thus it raised the state of siege, abolished the restrictions upon the right of association and public meeting, decreed freedom of the press, proclaimed an amnesty for political offenders, repealed the wartime law which made patriotic auxiliary service obligatory, abrogated the regulations applying to domestic service and the special provisions regarding the obligation of agricultural labourers to work, while it enacted that private property should be protected. Further, it was at this early stage announced that elections would be held for a Constituent National Assembly, and that all men and women who had attained the age of 20 should be entitled to vote. At first, it is true, the new revolutionary Government was unable to evolve order out of the turbulent situation which had arisen with the Revolution. In all the towns and the larger villages Workmen's and Soldiers' Councils were formed and took over the administration, doing as they pleased with the money that was at their disposal, and in many instances issuing absolutely ridiculous and absurd orders. A central authority that could in any way intervene did not exist, so that each Workmen's and Soldiers' Council did as it pleased. Gradually the Berlin Workmen's and Soldiers' Council attempted to introduce a certain degree of order into the situation by assuming the part of the authoritative and supreme body placed over all the Workmen's and Soldiers' Councils of Germany, although it by no means succeeded in getting itself recognized by all the rest of the Councils. There was even a movement in the Berlin Workmen's and Soldiers' Council to get the powers of the Government permanently into its hands and to prevent the elections for a National Assembly. In the other parts of Germany, especially in the south, the most violent opposition arose against this arbitrary action of the Berlin Workmen's and Soldiers' Council. The Social Democratic party likewise published a declaration of its fundamental conviction that a reign of terror by an arbitrary Parliament of Councils was not in accordance with democratic principles such as it considered to be authoritative for the construction of the new Republic. The Soldiers' Councils now dissociated themselves from the Workmen's Councils and turned against them, accusing them of gross mismanagement of the finances and of squandering war material and food. Meanwhile the Berlin Workmen's Council had elected an Executive Board as its supreme authority, and this new body was claiming for itself the management of the whole business of the Reich and representing itself as the body which was entitled to exercise supreme authority and surveillance over the Government.

The constant attacks which were being made by the various Workmen's and Soldiers' Councils upon officers caused the War Minister, Scheuch, to resign office on Dec. 15. Colonel Reinhardt was appointed his successor. The Government now convoked for Dec. 16 a congress of delegates of all the Workmen's and Soldiers' Councils of Germany to meet in Berlin. At this congress there were wild scenes of conflict between the Extremists and the Moderates. The latter, however, were throughout in the majority, so that the Congress conferred executive and legislative powers upon the six Commissioners of the People, fixing the date of the elections for the National Assembly for Jan. 19 1919. The Berlin Executive Board was thus put out of action. It continued, indeed, to make attempts to get into power again, but without success.

Meanwhile the Extremist group on the left wing of the Independent Socialists had seceded and had formed a party of their own called the Spartacus League, the more prominent leaders of which were Dr. Liebknecht, Rosa Luxemburg, and Daumig. This Spartacus League rejected the principle of democracy, and advocated a " dictatorship of the proletariat " in the form of a Soviet Republic on the Russian model. The Russian Bolshevik, Radek, was present at the meeting at which the League was founded, and was welcomed as the representative of Bolshevik Russia. The League at once organized a violent campaign conducted by every conceivable method against the Council of Commissioners of the People, preaching a second revolution against them. Already on Dec. 5 there had been collisions between a mass demonstration of the Spartacists and some military detachments. On Dec. 24 a regular battle began for the possession of the imperial castle, occupied by the Spartacists, and for the neighbouring imperial stables, which they also held. The Government sent troops against the insurgents, who chiefly consisted of former members of the Sailors' Division, formed during the first days of the Revolution in Berlin. The castle and the stables were stormed by the troops after a sanguinary struggle; there were heavy losses on both sides. The sailors were finally compelled to lay down their arms on a promise of immunity from punishment.

The Independent Socialist members of the Council of Commissioners of the People, Barth, Dittmann and Haase, had during the fighting adopted a very ambiguous attitude. After the capitulation of the insurgents they resigned office on the ground that the revolutionary Government ought not to have employed troops against the rebels. Their places in the Council of Commissioners were taken by the Majority Socialists Noske and Wissel, the first-mentioned of whom had done very good service in putting a stop to the naval mutiny at Piel at the beginning of the Revolution. On Dec. 20 Dr. Solf resigned his post as Secretary of State at the Foreign Office, and was replaced by the minister at Copenhagen, Count von Brockdorff-Rantzau.

In Prussia, too, the Revolution had resulted in upsetting the central organization of that state. On Nov. 12 a Prussian Ministry, composed of Social Democrats and Independent Socialists, was formed. It took the curious form of a kind of dyarchy running through the whole of the departments, one minister being presumably appointed to watch and check the other. The presidency was held conjointly by the Social Democrat Hirsch and the Independent Socialist Strobel, with equal rights. The Upper House and the Chamber of Deputies were dissolved. The only minister of the old regime who remained in office was the Minister for Railways, Breitenbach, but he retired on Nov. 26 and was succeeded by the ministerial director of that department. The Minister of Justice, Spahn, was replaced by a couple of Socialist lawyers, Rosenfeld and the highly cultured and gifted Wolfgang Heine; the Majority Socialist Dr. Sudekum was made Minister of Finance. The maddest appointment was that which was made to the Ministry of Public Worship and Education, where, alongside of the moderate Majority Socialist Haenisch, the Independent Socialist Adolf Hoffmann was installed, a man known by the nickname " Ten Commandments Hoffmann," because he was fond of introducing in his speeches passages from the Bible, although he had left the Church and did not profess any religion. Hoffmann was not proficient either in speaking or in writing the German language; he could neither open his lips nor take up his pen without perpetrating solecisms and grammatical blunders, to say nothing of the fact that he had not the slightest idea of the administration of schools or churches. His action was in keeping with his qualifications and was absolutely reckless; he never even informed his Majority Socialist colleague Haenisch of the autocratic ordinances which he issued. He straightway abolished the contribution of the State to the expenditure of the Church, and decreed that instruction in history should henceforth only be given from Social Democratic text books. He likewise abolished all religious instruction. There was soon a storm of indignation against Hoffmann in all scholastic circles, so that his colleague Haenisch had to revoke all Hoffmann's decrees. Irritated at this, Hoffmann resigned, after having taken care to draw his salary from the funds of the Ministry for several months in advance. There was a still worse state of things in the former duchy of Brunswick, where the president of the state was a tailor named Merges, while the Minister of Public Worship was a washerwoman.

The year 1919 opened with sanguinary disturbances. The Spartacus League under the leadership of Dr. Liebknecht had made elaborate preparations for a fresh insurrection. In the first days of January, mass demonstrations of the Spartacus League began in Berlin with the participation of large numbers of the Independent Socialists. The Majority Socialists called upon their adherents to assemble for counter-demonstrations in the Wilhelmstrasse and the Wilhelmsplatz, the quarter in which the Government offices were situated. Collisions at once took place in this district, but there was no bloodshed. It was not till Jan. S that the real rising commenced. The adherents of the Spartacus League, who were amply provided with rifles and machine-guns, first occupied the so-called " newspaper quarter " of Berlin, in particular the offices of the great non-Socialist journals, and also the great building of the Majority Socialist organ Vorwdrts. They then tried to force their way into the Wilhelmstrasse. The Government had at its disposal only a small and diminishing number of troops. If the Spartacists had pressed their attack home with greater energy, it would have been easy for them to occupy the Government offices and to expel the Government. They were, however, intimidated by the sight of a handful of soldiers, who had occupied the approaches to the Wilhelmstrasse with machine-guns, and although there were various shooting affrays they did not venture upon any real assault. The Cabinet now entrusted one of its members, Noske, who had taken over the Ministry of National Defence (Reichswehrministerium), with the task of procuring troops. Noske, with the assistance of Gen. von Liittwitz, collected in the western suburbs of Berlin all the troops that were available in the neighbourhood of the capital. Some new formations were also organized; they were mostly recruited from officers of the former German army. With these troops Gen. von Liittwitz marched into Berlin, and a bloody struggle began, which lasted several days and finally resulted in the defeat of the Spartacists. Some of the newspaper offices had to be besieged for days and even bombarded with artillery, before the Spartacists who were holding them would surrender. There was a great deal of isolated fighting, and frequently there was firing from the roofs of the houses. A warrant for the arrest of Liebknecht and Rosa Luxemburg, who were at the head of the insurrection, was issued. Liebknecht was arrested on Jan. 16 in a Berlin suburb where he was in hiding, and was taken to the Eden hotel, where Gen. von Liittwitz had established his headquarters. When the prisoner was being transported from the hotel to Moabit prison, he was shot by his military guards as he was making an attempt to escape.1 His associate, Rosa Luxemburg, had a similar fate. She, too, was arrested, and was conducted to the Eden hotel. When she was about to be transported thence to prison, she was felled by a soldier with the butt end of his rifle. Seriously injured and unconscious, she was placed in a motor-car, where another soldier shot her through the head. The motor-car rapidly conveyed her body to the neighbouring Landwehr Canal, into which it was flung. Several weeks elapsed before the body was found. Her funeral, like Liebknecht's, was attended by large crowds of their Spartacist followers. The murderer of Rosa Luxemburg was subsequently brought to trial, and was condemned and sentenced to a term of imprisonment. Altogether there were 1 The Independent Socialists and the Communists afterwards persisted in maintaining, on the ground of some contradictory medical evidence, that Liebknecht was shot in cold blood.

several hundred lives lost in the Spartacist rising of Jan. 1919. In Stuttgart, as also in Bremen, Munich and other towns, there were sanguinary struggles, until the insurrection could be regarded as having been everywhere suppressed.

The elections for the National Assembly had taken place on Jan. 19. They resulted in a Socialist majority. The Majority Socialists won 163 seats, the Independents 22. As against these 185 Socialists there was a non-Socialist (burgerlich) majority of 236, of whom 42 belonged to the German National People's party (the former Conservatives), 21 to the German People's party (formerly the National Liberals), 88 to the Christian People's party (formerly known as the Centre) and 75 to the Democratic party (formerly the Progressists); while 10 nonSocialist deputies did not adhere to any party. The total numbers of the votes recorded for the different parties were 11,509,- 048 for the Social Democrats, 2,317,290 for the Independent Socialists, 5,980,216 for the Christian People's party, 5,641,825 for the Democrats, 3,121,479 for the German National People's party, and 1,345,838 for the German People's party. It is noteworthy that the non-Socialist parties had all assumed new popular designations. In course of time, however, their old names came again into use, except in the case of the Democrats, whose new designation was more generally convenient.

The National Assembly was convoked to meet, not in Berlin, where constant disturbances were probable, but in Weimar in Thuringia, where it assembled on Feb. 6 1919. The Berlin Spartacists - the party afterwards known under the more comprehensive designation of Communists - made a fresh attempt at the beginning of March to abolish the National Assembly and to set up a Dictatorship of the Councils. It decreed a general strike for the whole of Germany, but the strike attained considerable dimensions only in Berlin.. Once more it was the Marine Division which had recourse to acts of violence. It occupied the suburb of Lichtenberg, whence it attempted to force its way into the centre of Berlin. There were again sanguinary struggles in which more than i,000 persons were killed. Among these were 29 members of the Sailors' Division, whom First Lieut. Marloh caused to be shot, after they had been arrested by the troops, when they had unsuspectingly come to fetch their pay. Proceedings were instituted against Marloh, but he was acquitted. The March rising of the Spartacists was completely quelled. Local risings in different places had the same fate, - at Halle, for example; at Stuttgart and at various other places in Wurttemberg; at Munich (where on April 7 a Soviet Republic was proclaimed); at Dresden (where on April 12 the Saxon War Minister Neuring, a Social Democrat, was thrown into the Elbe by the mob and perished); at Leipzig, at Hamburg, and so forth. In many of these local risings hundreds of people lost their lives.

The Constituent National Assembly sat at Weimar from Feb. 1919 onwards, meeting in the Weimar theatre, which was specially reconstructed. The Majority Socialist David was almost unanimously elected President. A matter of first concern was to get together a majority upon which a responsible Government could be based. Negotiations between the Majority Socialists and the Independents failed, because the two parties together were not sufficiently numerous to form a majority in the House, while the Independents refused to enter a coalition with any of the non-Socialist parties. The Catholic Centre and the Democrats, on the other hand, were prepared to renew the connexion which had united them with the Social Democrats in the old Reichstag since the date of the " Peace Resolution." Thus there arose a coalition of the Catholic Centre, the Democrats and the Social Democrats, who undertook to form a Cabinet. On Feb. 11 the National Assembly elected the Social Democrat Ebert to the presidency of the Reich by 277 votes against 102. Ebert entrusted the formation of a Cabinet to the Social Democrat Scheidemann, who assumed the office of Minister-President. The Democrat Schiffer was appointed VicePresident of the Ministry. The other members of the Cabinet were Count Brockdorff-Rantzau (Foreign Affairs), Preuss (Interior), Schiffer (Finance) - all these three belonged to the Democratic party - Giesberts (Post Office), Bell (Colonies) - both members of the Catholic Centre - Landsberg (Justice), Noske (National Defence), Bauer (Labour), Wissel (Ministry of Economics), Robert Schmidt (Ministry of Food), all these being Social Democrats. Erzberger, of the Catholic Centre, the Democrat Gothein and the Social Democrat David were members of the Cabinet but without portfolio. Fehrenbach replaced David as President of the National Assembly. The Right, i.e. the German National party and the German People's party (formerly Conservatives and National Liberals respectively), at once placed themselves in the most pronounced opposition to the new Cabinet, and on the extreme Left the Independent Socialists did the same. The whole session of the National Assembly at Weimar was characterized by controversies on these lines, which frequently assumed an extremely violent character. This was particularly the case during the debates on the new Constitution, for which Prof. Dr. Preuss had drafted a scheme. There were particularly stormy scenes when the questions of the socialization of industries and the new colours of the Reich were being discussed. A compromise on the second of these questions was proposed by the Catholic Centre and the Social Democrats, and it was finally agreed that the colours of the Reich should be black, red and gold, while the flag of the mercantile marine should be black, white and red, the colours of Imperial Germany, with black, red and gold in the upper canton next the staff. This was carried by 211 votes against 89.

The first grave ordeal which the new Coalition had to undergo was the ratification of the Treaty of Versailles. Up to the end of June the House, with the exception, perhaps, of the extreme Left, was unanimously of the opinion that a peace such as that which had been dictated by Germany's adversaries could not in any circumstances be accepted. The Minister-President Scheidemann declared in the House, amid tremendous applause: " Let the hand which signs this peace wither!" On June 22 the debates on the question of accepting or rejecting the Treaty of Versailles began. Scheidemann's Cabinet, which had committed itself to rejection, had resigned on June 21; it wished to leave the National Assembly perfectly free in its decision. The formation of the new Cabinet was effected under the greatest difficulties; it was finally undertaken by Bauer, who had hitherto been Minister of Labour. The Democratic party, the majority of whom were against signing the Treaty, declined to enter the new Cabinet. The Catholic Centre, too, was at first against accepting the Treaty, and it required great efforts and all the parliamentary diplomacy of Erzberger to bring about a change of opinion in the majority of his party. Finally the Bauer Ministry was formed for the purpose of signing the Treaty; the only parties represented in it were the Social Democrats and the Catholic Centre. Members of it who may be mentioned here were Muller (Foreign Affairs), Noske (National Defence), Erzberger (Finance) and Bell (Colonies) - the last-mentioned being, so to speak, a minister in partibus, as Germany no longer had any colonies. Each of the parties in the Assembly made only a short formal statement; the vote resulted in the acceptance of the Treaty of Peace by 237 against 138, while 5 deputies refrained from voting. The majority consisted of the Catholic Centre with the exception of its 13 Bavarian members, the Social Democrats and the Independent Socialists, together with 7 of the Democrats. The resolution adopted was in the following terms: " The National Assembly approves of the attitude of the Government in the question of the signature of the Treaty of Peace." The Government now sent word to Paris that it was prepared to sign the Peace, but that it rejected the passage in the preamble which dictated a confession of Germany's guilty responsibility for starting the war, and further, that it rejected the extradition of the army leaders and of those who were characterized by Germany's enemies as war criminals. The reply having come from Paris that the Peace must be signed unconditionally, the National Assembly gave the Government, on June 23, by the same majority as before, full power to sign even in these circumstances. The signature accordingly took place at Versailles on June 28 by the hands of the German Minister for Foreign Affairs, Hermann Muller, and the Minister for the Colonies, Bell. On July 9 the National Assembly, by 208 votes to i 15, gave its assent to the signature.

The most active member of the Bauer Ministry turned out to be the representative of the Catholic Centre, Erzberger, who gradually gave the whole Ministry its characteristic colour. He was always in the forefront when the Opposition had to be met. He replied to the attacks of the Right with still sharper counter-attacks. The question of responsibility for the war took a leading place in these encounters. Erzberger charged the Right and those who had been behind it with having destroyed all chance of concluding peace before it was too late. The Right, on the other hand, reproached Erzberger with having prematurely published the news of the Pope's attempt at mediation in Aug. 1917, with the result that the Vatican was compelled to abandon its efforts, so that the effect of Erzberger's action had really been to prevent peace. Erzberger's chief opponent in these controversies was the former Secretary of State for the Imperial Finances, Dr. Helfferich, who was now a deputy belonging to the German National (Conservative) party. A newspaper feud between Erzberger and Helfferich ensued, and led to an action for libel by Erzberger against Helfferich, the issue of which was delayed until March 1920. These controversies were again and again fought out on every possible occasion in Parliament, and filled columns of the press for many months.

The deliberations on the new Constitution were concluded on July 31 1919, and the final vote was taken upon the project as a whole. The Constitution was carried by 262 votes against 75, the minority consisting of the German National (Conservative) and the German People's (National Liberal) parties. On Aug. 11 the formal signature of the Constitution took place, and on Aug. 21 the Provisional President of the Reich, Ebert, solemnly took the oath of fidelity to the Constitution. According to the terms of the new Constitution (Art. 41) the President of the republican Reich must be elected by the whole of the Germans who possess the franchise; but, as the future extent of German territory had not yet been settled in accordance with the Treaty of Versailles, seeing that plebiscites had still to be taken in various regions, the first President, Ebert, was elected provisionally. The Minister-President Bauer now assumed the title of Chancellor of the Reich in accordance with Art. 52 of the Constitution. The National Assembly then adjourned till Sept., and decided to return to Berlin, where the situation had meanwhile become calmer, so that there was no longer believed to be any danger of interruption by demonstrations.

When Parliament resumed its session in Berlin at the end of Sept. negotiations were at once opened by the Government parties - the Catholic Centre and the Social Democrats - with the non-Socialist Democrats, with a view to the reentry of the latter into the Coalition. The result was that the Democrats Schiffer and Koch became members of the Cabinet, Schiffer at the Ministry of Justice and Koch at the Ministry of the Interior. Shortly afterwards the Bavarian Democrat Gessler, chief burgomaster of Nurnberg, was appointed to a new office, that of Ministry of Reconstruction. On Oct. i 1 the Ministry for the Colonies was abolished, as there were no longer any colonies to administer. The Right now started a campaign in favour of having a general election at an early date for the Reichstag, on the ground that the National Assembly had finished its task by passing the Constitution. This demand was extremely unwelcome to the Left, which did not expect to be successful in new elections and wanted to carry with the existing majority a number of laws in fulfilment of its own legislative programme. Perhaps the most important of these measures was the Factory (or Industrial Councils) bill, which contemplated the formation of councils in factories and other industrial and commercial establishments, giving the workers and salaried employees representative boards as well as a certain influence upon the management of the business in which they were engaged. Another important bill which was ultimately passed was the Socialization Law, laying down in general terms the principle that the whole mining industry should be transferred to the ownership of the State. The controversies on these matters were conducted by the interested parties throughout the country as well as in Parliament. The Factory Bill was not passed until 1920. Particular difficulties were caused by the necessity of opening up new sources of revenue for the State. The public debt had increased to about 220 milliards of marks; the budget had reached the figure of 15 milliard marks of ordinary expenditure and 41 milliard marks of extraordinary expenditure. On June 28 the Minister of Finance, Erzberger, submitted to the National Assembly a number of minor taxation proposals, the most important of which was the War Contribution bill, which contemplated a levy rising to 50% upon the excess of incomes during the war over peace incomes. Similarly the greater part of capital increases during the war was to be appropriated by taxation, and the taxation of tobacco, sugar, matches, etc., was to be raised. On July 8 Erzberger developed a detailed financial programme in which he announced proposals for the so-called Emergency Contribution for the Reich (Reichsnotopfer), contemplating the sequestration of a considerable percentage of all personal fortunes. He advocated at the same time the transference of the administration of all state taxation from the territories (states) to the Reich. On Nov. 27 the National Assembly accepted this principle by passing a bill for regulating contributions by the states to the finances of the Reich. On Nov. 17 1919 the law enacting the Emergency Contribution to the Reich was carried by 238 votes against a minority of 43. On Nov. 7 the leader of the Independent Socialists, Haase, died from wounds which had been inflicted upon him by an insane assassin some days earlier as he was entering the Reichstag building. Other noted parliamentarians who died in the second half of 1919 were the leader of the Catholic Centre Grober (Sept. 19) and Friedrich Naumann, leader of the Democratic party and author of the celebrated book Mitteleuropa (1915).

(C. K.*) After the Revolution. - On Jan. 10 1920 the Treaty of Versailles came into force. On that day the representatives of Germany, von Simson and Lersner, signed the protocol of ratification at the French Ministry for Foreign Affairs in presence of representatives of the principal Allied Powers. America was not represented. From this date the time-limits for the fulfilment of the obligations contemplated by the Treaty and for the plebiscites began to run; and the whole course of German politics in 1920 was dominated by the anxieties over these problems. In a New Year's message the President of the Reich, Ebert, said: " Under the pressure of ruthless coercion a Peace Treaty had to be concluded which threatened to place the honour of our nation, its prosperity and the fruits of its past and future toil, at the mercy of foreigners." On the day of the ratification of the Peace, the Government of the Reich addressed a message of farewell to the " hundreds and thousands of members of the German nation " who were being separated under the Treaty from the Reich. In the occupied Rhineland, at Flensburg, at Malmedy, in the Saar region, in Upper Silesia, in the Memel district, at Bromberg, a foreign sway, which was in some cases to be temporary and in others permanent, came into force in accordance with the terms of the Treaty. In Jan. and Feb. the German prisoners-of-war in France were at last sent home. On Feb. io 1920 the first of the plebiscites took place, and resulted in the transfer of a strip of territory in northern Schleswig, including Hadersleben, Apenrade and Tondern, to Denmark. The vote in the second Schleswig zone took place on March 14 and resulted in a German majority. A serious economic consequence of the conclusion of peace was that an even greater quantity of luxuries flooded Germany through the customs " gap in the west " (Loch i y than had been the case in 1919. The consequence was that the exchange value of the mark continued to fall, so that it constantly became more difficult to import the food-stuffs, textile fabrics and raw materials that were urgently needed. Not until March or April was it possible to get the " gap in the west " partially closed by agreements with the Allied Powers.

The German National Assembly resumed its session on June 30 1920. On the orders of the day was the third reading of the Factory Councils bill, the provisions of which did not go far enough to satisfy the extreme Left, the Independent Socialists. In consequence of the agitation conducted by that party, a crowd numbering close upon ioo,000 persons assembled in the vast square in front of the Reichstag building and ultimately attempted to force their way into the National Assembly. The armed police were compelled to fire upon them, 40 persons being killed and over 100 wounded. The bill was finally passed on Jan. 18. The Taxation bill was then discussed - the income tax for the Reich, a special tax of 10% on incomes from invested capital (Kapitalertragsteuer) and the taxation of companies. Erzberger continued to be the leading spokesman of the Government in the advocacy of these proposals. He was at the same time occupying public attention in consequence of the action for libel which he had brought against the Conservative leader and former Secretary of State, Helfferich, who had accused Erzberger of combining with his political activity the advocacy of private commercial interests, and had also charged him with untruthfulness. The trial lasted seven weeks and resulted in the condemnation of Helfferich to a fine of 300 marks for libel or insult (Beleidigung), although the court animadverted upon Erzberger's conduct in terms which led his party, the Catholic Centre, to recommend his withdrawal for a time from public life. He had previously resigned the Ministry of Finance. During the trial an attempt had been made on Erzberger's life by a young officer named von Hirschfeld, who succeeded in wounding him.

Immediately after the conclusion of peace the Allied Powers demanded from Holland the extradition of the German Emperor. Holland persisted in declining to comply with this demand, but undertook to subject the ex-Kaiser to strict surveillance. Although the ex-Kaiser now enjoyed little popularity in Germany, the demand for his extradition was regarded as a national humiliation, and this feeling was intensified in the highest degree by the subsequent demand for the extradition of the so-called war criminals, seeing that the original French list contained the names of almost all the military leaders, including Hindenburg, Ludendorff and Tirpitz, and further the former Imperial Chancellor Bethmann Hollweg, several German sovereigns and heirs to German thrones, as well as 895 persons of different military ranks belonging to all classes of the German people. The list, moreover, was very imperfect and inaccurate in its designation of the persons whose extradition was demanded. Some of them were dead. The president of the German Peace Commission in Paris, Baron von Lersner, accordingly declined to receive the list which Millerand handed to him on Feb. 4 1920. The list was then presented in Berlin, and was followed by an exchange of notes and finally by a decision of the Supreme Council on Feb. 14 to the effect that certain alleged war criminals should be tried by the German Supreme Court at Leipzig. A list containing the names of 45 persons was presented to the German Government on May 7 1920. The trials were delayed by the fact that the Allied Powers took a long time to furnish the German public prosecutor with the names and the evidence of the witnesses for which he had asked. Some 15 cases were tried in the summer of 1921, some of them ending with a verdict of guilty and a sentence, others with an acquittal. In the army the excitement over the demand for the extradition of the military leaders was especially strong. Among the soldiers, as among the police, there was a determination to refuse to cooperate in any way in fulfilling this demand. Another cause of discontent was that the members of the small new army remained in complete uncertainty regarding their personal future. According to the Treaty, the German army, which in peace times had numbered about 700,000 men and during war had risen to 12,000,000, had now to be reduced to ioo,000. This reduction had to take place within three months of the ratification of the Treaty. At Germany's request, however, the Supreme Council agreed on Feb. 18 1920 to extend the period for reduction to July Ia. Until April Io a strength of 200,000 men was to be permitted. In Spa, in July 1920, it was decided that the new army (Wehrmacht) should have a strength of 150,000 until the following Oct., but should be reduced to 100,000 by Jan. r 1921. This decision was carried out by Germany.

The army reduction originally determined for April Io was one of the direct causes of the military Putsch on March 13. There were two bodies of troops, the Ehrhardt Marine Brigade and the Lowenfeld Brigade, which refused to be disbanded. The political grounds for the insurrection, known as the " Kapp Putsch," may be explained as follows. In Jan. 1920 the text of the electoral bill for the first republican Reichstag and for the election of the President of the Reich had been published. It seemed that the date for the general election could not be long delayed. Yet the National Assembly rejected on March 9 a Conservative proposal for the dissolution of the National Assembly on May 1. On the Right the view was held that the mandate of the National Assembly had been fulfilled when it had constructed a new Constitution and concluded peace. It presently became known that the Social Democrats intended to propose that the President of the Reich should be elected by the Reichstag instead of, as the bill provided, by the whole nation. The feeling against the Government and Parliament created by this prospect was utilized by Kapp (see Kapp, Wolfgang) of Konigsberg and by Gen. von Liittwitz, and on the morning of March 13 1920 they seized power in Berlin with the aid of the marine brigades quartered at DOberitz. The Government offices in the Wilhelmstrasse were occupied. Kapp assumed the Chancellorship and Liittwitz the office of Minister of National Defence, and the constitutional Government was declared to be deposed. A new Government of " order, liberty and action " was described in a proclamation as having been instituted. The National Assembly and the Prussian Constituent Assembly were declared to have been dissolved. A Committee of the Social Democratic party replied by the proclamation of a general strike, an appeal to which the names of the President of the Reich and the Socialist ministers were attached. The Government and the President of the Reich fled to Dresden to prevent civil war and bloodshed. The Kapp movement was, however, confined to parts of north Germany and collapsed in a few days. Kapp and Liittwitz threw up the game on March 17 and fled. Warrants for their arrest and for that of their leading accomplices on the charge of high treason were issued. Among these accomplices were Col. Bauer (a right-hand man of Ludendorff), Capt. Ehrhardt and the former Berlin prefect of police, von Jagow, who for a few days during the Putsch had played the part of Minister of the Interior. The National Assembly met on March 18 in Stuttgart, whither the Government had removed, and denounced the Putsch as a monstrous crime against the German nation. In the sequel disciplinary measures were taken, and a number of officers and officials were dismissed. The rank and file of the participators in the movement, however, were let alone. The prosecution of the chief conspirators was ultimately fixed to take place at the end of 1921.

The Kapp enterprise had been started with an incredible degree of political ignorance, and must be regarded as having amounted to an attempt at a monarchist revolution. It may be asserted, however, that none of the parties represented in the Parliament, including the Deutschnationalen (Conservative) party, participated in the movement. During the Putsch days there were sanguinary collisions in various towns between workmen and those bodies of troops which had declared for Kapp. Nine officers were murdered at SchOneberg, a suburb of Berlin, and a number of persons were shot on the departure of the so-called Baltic Corps at the Brandenburg Gate. In consequence of these events there was a new outbreak of the extreme revolutionary movement. In the Ruhr region in particular there were regular warlike operations by the Red Army, while at the same time the Communist free-lance, Max Holz, overran the Saxon Vogtland and burned and plundered. A Bolshevist " terror " reigned for some days in the Ruhr region, where the extremists considered the moment to have arrived for setting up a Soviet republic, for which they had long been making preparations. There was a good deal of intimidation and raiding of banks and other commercial establishments, and Government troops were being attacked and surrounded. The Government, however, hesitated for a time to intervene. In Berlin the general strike was with difficulty brought to a close. After negotiations with the trade unions, which demanded greater influence upon the formation of the Government and the conduct of affairs, a new Cabinet was formed under the presidency of the Social Democratic Minister for Foreign Affairs, Hermann Muller. The Minister of National Defence, Noske, whom the Independent Socialists and also a section of the Majority Socialists made responsible for the revival of the " militarist reaction," had previously resigned and was replaced by the Bavarian Democrat Gessler. Dr. Wirth of the Catholic Centre was appointed Minister of Finance. There were also ministerial changes in Prussia, the Social Democrat Braun becoming Minister-President, and Severing, also a Social Democrat, being appointed to the Ministry of the Interior - a post of the first importance in times of internal disturbance. Severing had come to terms with the Ruhr insurgents on March 25 at Bielefeld, and the Government had undertaken that if the conditions were fulfilled the regular troops (Reichswehr) would not be sent into the region. The truce was not maintained, and on April 3 troops marched into the Ruhr region from the north and the east. This action had an unfortunate effect upon the policy of France. The French seized the occasion to occupy Frankforton-Main and the Maingau. The Ruhr district formed part of a neutral zone, 50 km. broad, which was to have been denuded of all German troops in accordance with Art. 43 of the Treaty of Versailles. By a special agreement of Aug. 8 1919, however, Germany was permitted to keep a small garrison of regulars within the region. This garrison proved too weak to suppress the insurrection, and the Minister for Foreign Affairs, Hermann Muller, asked for permission to reinforce these troops. France refused. When German troops were nevertheless sent into the Ruhr region in consequence of desperate appeals from part of the population, and when Hermann DfUller asked the Allied Powers to give their retrospective assent to these measures, the French Government gave orders to its troops to occupy the Maingau on April 6 as a guarantee. Germany appealed to the League of Nations without result. At a conference of the Supreme Council at San Remo (in April 1920) it was decided - as appeared from a subsequent declaration of Millerand in the French Chamber - that the evacuation of the Maingau should take place so soon as the numbers of the German troops in the Ruhr region were reduced to the figure permitted in the special agreement of 1919. The French evacuation accordingly took place on May 17, but not before six Germans had been killed and over 30 wounded in a collision with a detachment of black troops who were occupying the chief guardhouse at Frankfort.

The Social Democrat Dr. Adolf Koster, a journalist, succeeded Hermann Muller as Minister for Foreign Affairs on April 14. The National Assembly, after voting a bill for transferring to the Reich those railways which had hitherto been the property of the separate German states, and after having voted the sum of one milliard marks as compensation for damage caused during the civil disturbances, closed its session on May 21 1920. On June 6 the elections for the first German republican Reichstag were held and resulted in a distinct disavowal of the Coalition Ministry. The Democratic party suffered most seriously of all, while a great increase of seats was achieved by the Independent Socialists and by the two parties of the Right (the Conservatives and the National Liberals, to call them by their old names). The Democrats were reduced from 74 to 45, the Social Democrats from 163 to 112. On the other hand the Deutsche Volkspartei (National Liberals) were increased from 22 to 62, the Deutschnationale Volkspartei (Conservative Right) from 42 to 66, and the Independent Socialists (extreme Left) from 22 to 81. In view of these changes, the formation of a new Government presented the greatest difficulty. The President of the Reich had ultimately to entrust the task to the Catholic Centre deputy Fehrenbach, who succeeded in forming a Cabinet on June 26. This Cabinet no longer contained any Social Democrats, but, for the first time since the revolution, representatives of the Deutsche Volkspartei (National Liberals) were in the Government. Dr. Simons, who had been director of the legal department of the German Foreign Office but had resigned in 1919 with other members of the German delegation at Versailles, was appointed Minister for Foreign Affairs. He was soon the leading spirit in the new Cabinet, which to some extent fulfilled the demand of the Deutsche Volkspartei (National Liberals) for experts in ministerial posts. After the first republican German Reichstag had elected its presidential bureau from the different sections of the House, the Social Democrat Lobe being chosen president, the provisional President of the Reich, Ebert, addressed a communication to the Chancellor on June 25 asking the Reichstag to fix the date for the presidential election. The Cabinet, however, decided that the definitive election of the President of the Reich should not take place until after the plebiscite in Upper Silesia.

The formation of this Government took place under political pressure from abroad. The Supreme Council had determined at San Remo on April 18 1920 to discuss, in immediate conference with the German Government, certain outstanding questions arising out of the Treaty of Peace. At Hythe Mr. Lloyd George and M. Millerand had agreed that this conference was to be postponed until the new German Government had been formed. After a further conference at Boulogne on June 23 had produced three Notes complaining of the lack of goodwill on Germany's part to carry out the Treaty, German ministers sat for the first time at the same table with leading representatives of the Allies at Spa from July 5-16, in order to discuss with them questions connected with the execution of the Treaty. On the German side these negotiations were conducted by Dr. Simons and the Chancellor Fehrenbach, but there were moments when almost the whole Cabinet was at Spa. Under threat of the occupation of the Ruhr district the following points were arranged: (1) the disarmament of the German army and its reduction to the strength of 150,000 men by Oct. 1 and to the strength of Ioo,000 men by Jan. 1920; (2) the reduction of the monthly deliveries of coal from 2,400,000 to 2,000,000 tons, with a reservation on behalf of the German share of Upper Silesian coal. In the negotiations on this point considerable impression was created by the appearance of the German coal and iron magnate Hugo Stinnes, accompanied by the miners' leader, Hue, both advocating the same view. The final arrangements for the payment of all the reparations due by Germany were adjourned, pending a further conference at Geneva.

While the Spa conference was still sitting a disagreeable incident took place in Berlin. On July 14, the day of the French national fete, a German workman hauled down the French flag on the embassy in Berlin. On Aug. 26 there was a further incident at Breslau, where a crowd of people who had been excited by the arrival of German fugitives from Upper Silesia forced their way into the Polish and French consulates. The satisfaction which was demanded was given by saluting the French flag and by an apology conveyed by the Minister for Foreign Affairs to the French ambassador.

On July I 1 the second of the plebiscites was held on the borders of East and West Prussia and resulted in a distinct German success, some 95% of the inhabitants having voted for remaining German. Soon afterwards East Prussia was threatened by the backwash of the Russo-Polish war, and Germany asked to be permitted to send troops into the region which was still under the administration of the Plebiscite Commission. Both Poles and Bolsheviks were crossing the frontier into East Prussia at this time and were being disarmed and interned. In accordance with the German declaration of neutrality the transit of arms and munitions to Poland was being prevented, and this led in some cases to an excessive display of zeal by the German railway men, some of whom were in sympathy with Soviet Russia, so that regular Allied transports, e.g. the troops in Upper Silesia, were here and there held up.

The decision of the Ambassadors' Conference on the East Prussian plebiscite gave Poland only a narrow strip of territory on the right bank of the Vistula. Eupen and Mal xnedy went by the plebiscite of July 24 to Belgium. In the summer of 1920 ambassadors from the Powers which had been at war with Germany were once more sent to Berlin, the business of their embassies having meanwhile been conducted by charges d'afaires. On July r the French Ambassador Laurent, on July 2 the British Ambassador Lord d'Abernon, and on July 31 the Italian Ambassador Martino presented their credentials to the President of the Reich. Germany had, for her part, sent in Jan. 1920 the Catholic Centre deputy, Dr. Mayer, to Paris, the Hamburg senator, Dr. Sthamer, to London, and the former Minister for Foreign Affairs, Dr. Solf, to Tokyo. The newly instituted Papal nunciature to the Reich was taken over by the Papal Nuncio at Munich, Mgr. Pacelli.

The next business of the Reichstag was to give effect to the Spa decisions. On July 3 o universal and compulsory military service, which had existed for more than 100 years, was abolished, and also military jurisdiction. On July 3 1 the law on the disarmament of the civil population was passed. It was carried out in the autumn by Secretary of State Peters, a process which included the surrender and destruction of over 2,000,000 rifles. In this connexion the much-canvassed " Orgesch " (Organization Escherich) instituted by the Bavarian Director of Woods and Forests, Escherich, for the protection of the citizens in the event of a renewal of Bolshevist disturbances - an organization characterized by certain extreme reactionary tendencies - was forbidden in Prussia. After the London Conference of May 1921 it had to be dissolved, together with the Bavarian Einwohnerwehr (voluntary military organization for citizens' defence).

The movement for the socialization of industry, which had reached its zenith during the period of the revolution, had in course of time become concentrated upon schemes for the socialization of the mining industry. A Socialization Commission had been appointed, and in Sept. 1920 it presented two alternative schemes. The one scheme was for the immediate and complete socialization of the mining industry, with compensation for the mine-owners. The other, of which Walther Rathenau, afterwards Minister for Reconstruction, was the author, contemplated a State monopoly of the wholesale coal trade, with still more ample compensation for the mine-owners. Meanwhile a new and novel kind of parliament had been established (June 30). This was the so-called provisional Economic Council of the Reich (Reichswirtschaftsrat), a non-political, purely economic parliament with 3 26 members. A joint committee of this Economic Council and the Coal Council of the Reich (Reichskohlenra.t) discussed the two socialization schemes. Its verdict, of which Hugo Stinnes was doubtless the father, was in favour of a proposal that the coal-miners and workmen should participate in the capital and the profits of the industry by means of small shares. The miners, however, rejected this proposal, and in the course of a debate in the Reichstag the Minister for Economics, Dr. Scholz, declared that the question was not yet ripe and could be decided only on economic grounds.

About this time fundamental changes took place in the grouping of the Socialist parties. The Independent Socialists had applied at Moscow to be received into the fold of the Third International, whereupon the Third International had set up 21 conditions of admission, among them the exclusion from the party of all leading members who professed any kind of democracy or were infected with any kind of " social patriotism." At the Independent Socialist party congress held at Halle these conditions were accepted, after a speech by the Russian Bolshevik Zinoviev, on Oct. 16 1920, against a strong minority vote. The minority, the right wing of the Independents under the leadership of Crispien, thereupon separated from the New Communists, whose leaders were Daumig and Stocker. The latter united in Berlin on Nov. r with the Communist party (led by Dr. Levi) and formed the " United Communist party of Germany, Section of the Third International." In the preceding spring a still more extreme group, the Communist Workers' party, had seceded from Dr. Levi's organization.' This group eschewed all 1 In German books and newspapers the first of these groups was frequently designated by the letters K. P. D. (Kommunistische participation in elections or parliamentary work. The Majority Socialists (i.e. the governmental or moderate Socialist party) renewed in Aug. 1920 at Geneva their adhesion to the Second (the Amsterdam-London) International, and, in the presence of their foreign associates, made confession of their own and Germany's responsibility for the German war policy.

The United Communist party instigated in March 1921 in central Germany, in the region between Halle and Eisleben, an insurrection, the chief object of which doubtless was to demonstrate their revolutionary character to their masters at Moscow. The Chief President of the Prussian province of Saxony, Horsing, had had recourse to the services of the armed police (Schutzpolizei) in consequence of the intolerable situation in several great factories, where thefts, intimidation and strikes were the order of the day. The Rote Fahne, the organ of the K.P.D. (the Communist party of Germany), thereupon called a general strike and exhorted the whole of the workmen to take up arms. Many of the workmen of central Germany accordingly rose. What might be called the military conduct of the insurrection was assumed by the locksmith Max Holz, who extorted money from " the bourgeoisie " for his Red Army and set their houses on fire. Attempts were made to wreck railway bridges and stations, post-offices and banks. In the great Leuna nitrogen works near Merseburg, the centre of the movement, all authority was for some weeks, on the Russian model, in the hands of the workmen. The Prussian Government, which at that time was predominantly Socialist, considered it politically expedient not to employ the regular army (Reichswehr) against the insurgent workmen, but to use only the armed police (Schutzpolizei). This police liberated the central region of Germany after hard fighting. The violent agitation conducted by the central committee of the K.P.D. in Berlin had meanwhile succeeded in causing the insurrection to spread to other towns, particularly Hamburg. The movement altogether cost the lives of several thousands of workmen and armed police. Dr. Levi and Klara Zetkin had shortly before this Putsch been compelled to retire from the leadership of the central committee of the Communists, in order to make room for people who would blindly obey the orders of Noske. The failure of the insurrection led to further disciplinary measures and splits within the Communist party in the Reichstag and also at the Communist party congress. Holz was tried and condemned to penal servitude for life. The insurrection had nevertheless proved that by far the greater part of the Socialist working classes were no longer inclined to be driven into hopeless enterprises by irresponsible agitators.

In Prussia the elections for the Diet took place in Feb. 1921. Their result, like that of the elections for the Reichstag six months earlier, was that the old coalition was weakened and that the Social Democrats left the Government. A new Government was formed, after difficult negotiations, by the leader of the Christian trade unions, Stegerwald, a member of the Catholic Centre party; it was composed of Catholic Centre men and Democrats. The Fehrenbach-Simons Government fell in May over the Reparations question. The Allies, after a number of preliminary meetings, had settled at their Paris Conference in Jan. 1921 that the total amount to be paid by Germany should be 226 milliards of gold marks and an ad valorem tax of 12% on German exports. The German Minister for Foreign Affairs, Dr. Simons, stated on Feb. r in the Reichstag that these proposals did not give the German Government any possible basis for an arrangement. At the Reparations Conference in London (March 1-7) he submitted a German counter-proposal which was summarily rejected by the Allies. A memorandum, which was submitted by German experts, pointed out that the result of accepting the Paris decisions would be to compel the German workman to work 14 hours a day, and German industry and commerce to dump German goods on the markets of the world. The negotiations were finally broken off, and Dr. Simons left with the German delegation. The Allied Powers now imposed their so-called " sanctions." Dusseldorf, Duisburg and Ruhrort Partei Deutschlands), the second by the letters K. A. P. D. (Kommunistische Arbeiter-Partei Deutschlands). were occupied, a customs frontier was set up on the Rhine, and German exports were penalized by a 50% duty. On April 24 1921 Germany, after the President of the United States of America had declined to act as. arbitrator, addressed a fresh request to America asking her to mediate in the Reparations question. At the third and last conference in London (May 1-5) the Allies addressed to Germany, in the form of an ultimatum which had to be accepted by May 12, the following demands: - The whole indebtedness of Germany for Reparations was to be 132 milliards of gold marks (£6,600,000,000), of which so milliards were to be rapidly paid off; a fixed annual payment of not less than three milliards of gold marks was to be made, consisting of a direct fixed payment of two milliards and a varying impost of 25% or 26% on German exports. The Reichstag accepted the ultimatum on May to after debates characterized by exceptional violence. A new Government, composed of Social Democrats, members of the Catholic Centre and Democrats, with Dr. Wirth (hitherto Finance Minister) as Chancellor, was formed, and was prepared to hazard the attempt to fulfil these colossal demands. Dr. Bauer (a former republican Chancellor) took the office of Vice-Chancellor; the Social Democrat Dr. Gradnauer was the new Minister of the Interior; while Dr. Walther Rathenau, managing director of the Allgemeine Elektrizitatsgesellschaft, took the Ministry of Reconstruction. Dr. Rosen, an experienced diplomatist, hitherto German Minister at The Hague, became Minister for Foreign Affairs. The first milliard of gold marks for the year 1921 was punctually paid by Germany by Aug. 31. On Oct. 6 and 7 the Minister for Reconstruction, Rathenau, concluded at Wiesbaden a convention with the French Minister for Reconstruction, Loucheur, regarding German payments in kind for restoring the devastated regions of northern France. The value of the contemplated deliveries of material was not to exceed seven milliards of gold marks up to May I 1926. Associations of German industrial contractors were to be formed to carry out the deliveries.

The effect of the gigantic Government purchases of foreign bills for the Reparations payments was a heavy fall in the mark, which assumed a disastrous character in Oct. 1921 in consequence of the recommendations of the Council of the League of Nations regarding the partition of Upper Silesia. Upper Silesia had voted in the plebiscite of March 20 by a two-thirds majority for remaining German. At innumerable public meetings and demonstrations the German people had urged that the region ought to remain in the Reich; the Reichstag had voted a bill at the close of 1920 giving it autonomy. Another Polish insurrection instigated by Korfanty in the spring of 1921 had caused great suffering and damage. In spite of the protests of the whole German nation and of the great majority of Upper Silesians, including a good number of Poles, the portions of the region which were the most important for German commerce and industry, and therefore for the payment of the Reparations, were assigned to Poland in Oct. 1921 by the Allied Council of A mbassadors in accordance with the decision of the Council of the League of Nations. The result was a political crisis in Berlin and the resignation of the Wirth Ministry. But Dr. Wirth was indispensable at this stage, and in a few days he resumed office.

The negotiations between the Government of the Reich and Bavaria regarding the disarmament and the disbandment of the Bavarian Einwohnerwehr entailed difficult discussions. Both demands were, however, finally fulfilled by Bavaria. The Bavarian Minister-President, von Kahr, resigned in Sept. 1921 because he found himself unable to agree to the demand of the Government of the Reich that the state of siege in Bavaria should be raised. In Oct. the ex-kings of Wurttemberg and Bavaria died within a very short time of each other. The assassination of Erzberger on Aug. 26 1q21 had caused great indignation and excitement among the parties of the Left and the Catholic Centre, and led to measures being taken by the Government of the Reich against press organs of the Right. The Reichstag after the autumn recess was engaged through the party leaders in negotiations that lasted for weeks in an endeavour to broaden the basis of the Coalition by making it include all the parties from the Deutsche Volkspartei (the old National Liberals) on the Right to the Social Democrats on the Left, with a view to securing a more stable basis for the economic life of the country and also in the interest of the Reparations payments, as the National Liberals largely represent industrial capitalism.

While, during the first years of the Revolution, all attempts to introduce any degree of order into the confusion which reigned in Germany seemed almost hopeless,. it was nevertheless found possible, in course of time, to bring about a more tolerable state of things in both political and economic life. Until well into the year 1920 insurrections and disturbances, sometimes of a very ominous character, were constantly recurring in different parts of Germany. The insurrectionary movement then began to subside, and unrest became confined to a strike movement, which was, no doubt, very extensive and successively affected all kinds of workers and salaried employees. This movement, however, although it partially undermined the economic life of the country, ceased to constitute a real danger for the State. Events like the rising in central Germany and the earlier sanguinary disturbance in Berlin, in which the then prefect of police, Eichhorn, an Independent Socialist, played a very dubious part, and other dangerous incidents of the kind, were scarcely to be apprehended at the end of 1921. One great reason was that Communism, which was transplanted from Russia at the time of the Revolution, became more and more weakened in Germany. While in the year immediately following the Revolution strike movements bore a thoroughly political character, this was no more the case after the middle of 1920. In 1921 the whole nation was again systematically at work; it was only the constant rise in prices of the necessaries of life that exercised a powerful pressure upon the poorer sections of the population and incited them to frequent demands for higher wages and consequently to strikes. It was found impossible to maintain State control of traffic in the necessities of life. In particular the State could not permanently burden its finances by a standing subvention for the purpose of reducing the retail cost of articles of food. The system of control was therefore gradually replaced by internal free trade. This, it is true, was attended by an increase in food prices, which were further sent up by constant deterioration of the mark exchange to Germany's disadvantage. Not only the working classes, but also, in an especial degree, the officials suffered, and the latter class was reduced to a condition which more and more tended to herd them socially into the ranks of the proletariat. The same applied to intellectual workers and salaried employees. The constant recurrence of strikes with the object of maintaining the standard of living constituted a danger for the economic future of the country, especially as every increase of wages automatically led to an increase in the price of commodities. In the financial situation in which Germany found herself at the end of 1921, and in view of the vast payments which she had to make in consequence of the Reparations imposed upon her, the end of these unsound conditions was not yet in view. The financial demands of the State, too, were constantly increasing taxation. Germany was willing to work, but it was considered that the possibility of economically fruitful work could be secured only if Germany's creditors did not make excessive demands upon her and if they gave her time and means for carrying out those obligations of labour and payment which she had undertaken. (0. B.)

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