Meanwhile the relations with the National Liberals reached a crisis. Bismarck remained in retirement at Varzin for nearly a year; before he returned to Berlin, at the end of 1877, he was visited by Bennigsen, and the Liberal leader was offered the post of vice-president of the Prussian ministry and vice-president of the Bundesrat. The negotiations broke down, apparently because Bennigsen refused to accept office unless he received a guarantee that the constitutional rights of the Reichstag should be respected, and unless two other members of the party, Forckenbeck and Stauffenberg, were given office. Bismarck would not assent to these conditions, and, even if he had been willing to do so, could hardly have overcome the prejudices of the emperor. On the other hand, Bennigsen refused to accept Bismarck’s proposal for a state monopoly of tobacco. From the beginning the negotiations were indeed doomed to failure, for what Bismarck appears to have aimed at was to detach Bennigsen from the rest of his party and win his support for an anti-Liberal policy.
The session of 1878, therefore, opened with a feeling of great uncertainty. The Liberals were very suspicious of Bismarck’s intentions. Proposals for new taxes, especially one on tobacco, were not carried. Bismarck took the opportunity Period after 1878. of avowing that his ideal was a monopoly of tobacco, and this statement was followed by the resignation of Camphausen, minister of finance. It was apparent that there was no prospect of his being able to carry through the great financial reform which he contemplated. He was looking about for an opportunity of appealing to the country on some question which would enable him to free himself from the control of the Liberal majority. The popular expectations were expressed in the saying attributed to him, that he would “crush the Liberals against the wall.” The opportunity was given by the Social Democrats.
The constant increase of the Social Democrats had for some years caused much uneasiness not only to the government, but also among the middle classes. The attacks on national feeling, the protest against the war of 1870, Social democracy. the sympathy expressed for the Communards, had offended the strongest feelings of the nation, especially as the language used was often very violent; the soldiers were spoken of as murderers, the generals as cut-throats. Attacks on religion, though not an essential part of the party programme, were common, and practically all avowed Social Democrats were hostile to Christianity. These qualities, combined with the open criticism of the institutions of marriage, of monarchy, and of all forms of private property, joined to the deliberate attempt to stir up class hatred, which was indeed an essential part of their policy, caused a widespread feeling that the Social Democrats were a serious menace to civilization. They were looked upon even by many Liberals as an enemy to be crushed; much more was this the case with the government. Attempts had already been made to check the growth of the party. Charges of high treason were brought against some. In 1872 Bebel and Liebknecht were condemned to two years’ imprisonment. In 1876 Bismarck proposed to introduce into the Criminal Code a clause making it an offence punishable with two years’ imprisonment “to attack in print the family, property, universal military service, or other foundation of public order, in a manner which undermined morality, feeling for law, or the love of the Fatherland.” The opposition of the Liberals prevented this from being carried. Lasker objected to these “elastic paragraphs,” an expression for which in recent years there has been abundant use. The ordinary law was, however, sufficient greatly to harass the Socialists. In nearly every state there still existed, as survivals of the old days, laws forbidding the union of different political associations with one another, and all unions or associations of working men which followed political, socialistic or communistic ends. It was possible under these to procure decisions in courts of justice dissolving the General Union of Workers and the coalitions and unions of working men. The only result was, that the number of Socialists steadily increased. In 1874 they secured nine seats in the Reichstag, in 1877 twelve, and nearly 500,000 votes were given to Socialist candidates.
There was then no ground for surprise that, when in April 1878 an attempt was made on the life of the emperor, Bismarck used the excuse for again bringing in a law expressly directed against the Socialists. It was badly drawn up Legislation against the Socialists. and badly defended. The National Liberals refused to vote for it, and it was easily defeated. The Reichstag was prorogued; six days later a man named Nobiling again shot at the emperor, and this time inflicted dangerous injuries. It is only fair to say that no real proof was brought that the Socialists had anything to do with either of these crimes, or that either of the men was really a member of the Socialist party; nevertheless, a storm of indignation rose against them. The government seized the opportunity. So great was the popular feeling, that a repressive measure would easily have been carried; Bismarck, however, while the excitement was at its height, dissolved the Reichstag, and in the elections which took place immediately, the Liberal parties, who had refused to vote for the first law, lost a considerable number of seats, and with them their control over the Reichstag.
The first use which Bismarck made of the new parliament was to deal with the Social Democrats. A new law was introduced forbidding the spread of Socialistic opinions by books, newspapers or public meetings, empowering the police to break up meetings and to suppress newspapers. The Bundesrat could proclaim a state of siege in any town or district, and when this was done any individual who was considered dangerous by the police could be expelled. The law was carried by a large majority, being opposed only by the Progressives and the Centre. It was applied with great severity. The whole organization of newspapers, societies and trades unions was at once broken up. Almost every political newspaper supported by the party was suppressed; almost all the pamphlets and books issued by them were forbidden; they were thereby at once deprived of the only legitimate means which they had for spreading their opinions. In the autumn of 1878 the minor state of siege was proclaimed in Berlin, although no disorders had taken place and no resistance had been attempted, and sixty-seven members of the party were excluded from the city. Most of them were married and had families; money was collected in order to help those who were suddenly deprived of their means of subsistence. Even this was soon forbidden by the police. At elections every kind of agitation, whether by meetings of the party or by distribution of literature, was suppressed. The only place in Germany where Socialists could still proclaim their opinions was in the Reichstag. Bismarck attempted to exclude them from it also. In this, however, he failed. Two members who had been expelled from Berlin appeared in the city for the meeting of the Reichstag at the end of 1878. The government at once asked permission that they should be charged with breaking the law. The constitution provided that no member of the House might be brought before a court of justice without the permission of the House, a most necessary safeguard. In this case the permission was almost unanimously refused. Nor did they assent to Bismarck’s proposal that the Reichstag should assume power to exclude from the House members who were guilty of misusing the liberty of speech which they enjoyed there. Bismarck probably expected, and it is often said that he hoped, to drive the Socialists into some flagrant violation of the law, of such a kind that it would be possible for him completely to crush them. This did not happen. There were some members of the party who wished to turn to outrage and assassination. Most, a printer from Leipzig, who had been expelled from Berlin, went to London, where he founded the Freiheit, a weekly paper, in which he advocated a policy of violence. He was thereupon excluded from the party, and after the assassination of the emperor Alexander II. of Russia had to leave England for Chicago. A similar expulsion befell others who advocated union with the Anarchists. As a whole, however, the party remained firm in opposition to any action which would strengthen the hands of their opponents. They carried on the agitation as best they could, chiefly by distributing reports of speeches made in the Reichstag. A weekly paper, the Social-Democrat, was established at Zürich. Its introduction into Germany was of course forbidden, but it was soon found possible regularly to distribute thousands of copies every week in every part of the country, and it continued to exist till 1887 at Zürich, and till 1890 in London. In August of 1880 a congress of Socialists was held at the castle of Wyden, in Switzerland, at which about eighty members of the party met, discussed their policy, and separated before the police knew anything of it. Here it was determined that the members of the Reichstag, who were protected by their position, should henceforward be the managing committee of the party, and arrangements were made for contesting the elections of 1881. A similar meeting was held in 1883 at Copenhagen, and in 1887 at St Gallen, in Switzerland. Notwithstanding all the efforts of the government, though every kind of public agitation was forbidden, they succeeded in winning twelve seats in 1881. The law, which had obviously failed, was renewed in 1881; the state of siege was applied to Hamburg, Leipzig and Stettin, but all to no purpose; and though the law was twice more renewed, in 1886 and in 1888, the feeling began to grow that the Socialists were more dangerous under it than they had been before.
The elections of 1878, by weakening the Liberal parties, enabled Bismarck also to take in hand the great financial reform which he had long contemplated.
At the foundation of the North German Confederation it had been arranged that the imperial exchequer should receive the produce of all customs duties and also of excise. It depended chiefly on the taxes on salt, tobacco, brandy, Financial reform. beer and sugar. So far as the imperial expenses were not covered by these sources of revenue, until imperial taxes were introduced, the deficit had to be covered by “matricular” contributions paid by the individual states in proportion to their population. All attempts to introduce fresh imperial taxes had failed. Direct taxation was opposed by the governments of the states, which did not desire to see the imperial authorities interfering in those sources of revenue over which they had hitherto had sole control; moreover, the whole organization for collecting direct taxes would have had to be created. At the same time, owing to the adoption of free trade, the income from customs was continually diminishing. The result was that the sum to be contributed by the individual states constantly increased, and the amount to be raised by direct taxation, including local rates, threatened to become greater than could conveniently be borne. Bismarck had always regarded this system with disapproval, but during the first four or five years he had left the care of the finances entirely to the special officials, and had always been thwarted in his occasional attempts to introduce a change. His most cherished project was a large increase in the tax on tobacco, which at this time paid, for homegrown tobacco, the nominal duty of four marks per hundred kilo. (about a farthing a pound), and on imported tobacco twenty-four marks. Proposals to increase it had been made in 1869 and in 1878, and on the latter occasion Bismarck for the first time publicly announced his desire for a state monopoly, a project which he never gave up, but for which he never was able to win any support. Now, however, he was able to take up the work. At his invitation a conference of the finance ministers met in July at Heidelberg; they agreed to a great increase in the indirect taxes, but refused to accept the monopoly on tobacco. At the beginning of the autumn session a union of 204 members of the Reichstag was formed for the discussion of economic questions, and they accepted Bismarck’s reforms. In December he was therefore able to issue a memorandum explaining his policy; it included a moderate duty, about 5%, on all imported goods, with the exception of raw material required for German manufactures (this was a return to the old Prussian principle); high finance duties on tobacco, beer, brandy and petroleum; and protective duties on iron, corn, cattle, wood, wine and sugar. The whole of the session of 1879 was occupied with the great struggle between Free Trade and Protection, and it ended with Protection. a decisive victory for the latter. On the one side were the seaports, the chambers of commerce, and the city of Berlin, the town council of which made itself the centre of the opposition. The victory was secured by a coalition between the agricultural interests and the manufacturers; the latter promised to vote for duties on corn if the landlords would support the duties on iron. In the decisive vote the duty on iron was carried by 218 to 88, on corn by 226 to 109. The principle of protection was thus definitely adopted, though considerable alterations have been made from time to time in the tariff. The result was that the income from customs and excise rose from about 230 million marks in 1878-1879 to about 700 millions in 1898-1899, and Bismarck’s object in removing a great burden from the states was attained.
The natural course when the new source of income had been obtained would have been simply to relieve the states of part or all of their contribution. This, however, was not done. The Reichstag raised difficulties on the constitutional State contributions. question. The Liberals feared that if the government received so large a permanent source of revenue it would be independent of parliament; the Centre, that if the contributions of the states to the imperial exchequer ceased, the central government would be completely independent of the states. Bismarck had to come to an agreement with one party or the other; he chose the Centre, probably for the reason that the National Liberals were themselves divided on the policy to be pursued, and therefore their support would be uncertain; and he accepted an amendment, the celebrated Franckenstein Clause, proposed by Georg Arbogast Freiherr von Franckenstein (1825-1890), one of the leaders of the Centre, by which all proceeds of customs and the tax on tobacco above 130 million marks should be paid over to the individual states in proportion to their population. Each year a large sum would be paid to the states from the imperial treasury, and another sum as before paid back to meet the deficit in the form of state contributions. From 1871 to 1879 the contribution of the states had varied from 94 to 67 million marks; under the new system the surplus of the contributions made by the states over the grant by the imperial treasury was soon reduced to a very small sum, and in 1884-1885 payments of the empire to the states exceeded the contributions of the states to the empire by 20 million marks, and this excess continued for many years; so that there was, as it were, an actual grant in relief of direct taxation. In Prussia, by the Lex Huene, from 1885 to 1895, all that sum paid to Prussia, so far as it exceeded 15 million marks, was handed over to the local authorities in relief of rates. The increased expenditure on the navy after 1897 again caused the contributions required from the states to exceed the grants to them from the imperial exchequer. In 1903 Baron von Stengel, who succeeded Baron von Thielmann as finance minister in this year, proposed that the matricular contributions of the several states, instead of varying as heretofore with the exigencies of the annual budget, should be fixed by law. This plan, originally suggested by Dr von Miquel, was adopted by the Reichstag in May 1904. The deficits in the imperial budget, however, continued. In 1909 the whole system of German imperial finance was once more in the melting-pot, and, in spite of the undoubted wealth of the country, the conflict of state and party interests seemed to make it practically impossible to remould it on a satisfactory basis.
The acceptance by Bismarck of the principle of Protection and his alliance with the Catholic Centre were followed by the disruption of the National Liberal party and a complete Party changes. change in the parliamentary situation. Already the Liberal ministers, Falk and Hobrecht, had resigned, as well as Max von Forckenbeck the president, and Stauffenberg the vice-president of the Reichstag; in their place there were chosen a Conservative, and the Catholic Baron von Franckenstein. The whole party had voted against the Franckenstein Clause, but a few days later fifteen of the right wing left the party and transferred their support to the government. For another year the remainder kept together, but there was no longer any real harmony or co-operation; in 1880 nineteen, including most of the ablest leaders, Lasker, Forckenbeck, Bamberger and Bunsen, left the party altogether. The avowed cause of difference was commercial policy; they were the Free Traders, but they also justly foresaw that the reaction would extend to other Secessionists. matters. They took the name of the Liberale Vereinigung, but were generally known as the Sezessionisten; they hoped to become the nucleus of a united Liberal party in which all sections should join together on the principles of Free Trade and constitutional development. At the elections of 1881 they secured forty-seven seats, but they were not strong enough to maintain themselves, and with great reluctance in 1884 formed a coalition with the Progressives (Freisinnigen), who had gained greatly in strength owing to the breach among the government parties. They did so reluctantly, because they would thereby condemn themselves to assume that attitude of purely negative criticism which, during the great days of their prosperity, they had looked down upon with contempt, and were putting themselves under the leadership of Eugen Richter, whom they had long opposed. The new party, the Deutschfreisinnige, Freisinnige. had no success; at the election of 1884 they secured only sixty-seven seats, a loss of thirty-nine; they were subjected to all inconveniences which belonged to opposition; socially, they were boycotted by all who were connected with the court or government; they were cut off from all hope of public activity, and were subjected to constant accusations for Bismarck Beleidigung. Their only hope was in the time when the crown prince, who had shown great sympathy with them, should succeed. They were popularly known as the crown prince’s party. Lasker soon died; others, such as Forckenbeck and Bunsen, retired from public life, unable to maintain their position at a time when the struggle of class interests had superseded the old conflicts of principle. At the election of 1887 they lost more than half their seats, and in 1893 the party again broke up.
The remainder of the National Liberals only won forty-five seats in 1881, and during the next three years they were without influence on the government; and even Bennigsen, unable to follow Bismarck in his new policy, disgusted at the proposals for biennial budgets and the misuse of government influence at the elections, retired from political life. In 1884 a new development took place: under the influence of Miquel a meeting was held at Heidelberg of the South German members of the party, who accepted the commercial and social policy of the government, including the Socialist law; their programme received Bismarck’s approval, and was accepted by the rest of the party, so that they henceforward were taken into favour by the government; but they had won the position by sacrificing almost all the characteristics of the older Liberalism; the hope of a reunion for all the different sections which had hitherto kept the name of Liberal was at an end.