SECTION II. Socialization

SOCIALIZATION

In order to reconstruct in Germany the public and private economy destroyed by the war and the revolution, it is not enough to give the producers a special right to co-operate in the regulation of economic questions; nor to recognize particularly for the working class the right of co-deliberation in the determination of these matters. It is hoped that such measures will increase production. But it is also necessary that no part of production be lost and that all of it be utilized to the utmost for the community. One is thus led to inquire whether the system of production and the distribution of wealth, such as prevails under a capitalist régime, is capable even if improved, of attaining such an end; whether it were not better to substitute a new system, socialist or not, giving the utmost guarantee that production will benefit the entire community.

We must inquire what attitude the Constituent Assembly took on this question and what solution it adopted.

1.--THE PROBLEM OF SOCIALIZATION.

On the morrow of the Revolution, power passed entirely into the hands of socialists, that is to say, by definition, men whose programme may be summed up in these words: the abolition of private property and the taking over by the state of all the means of capitalist production.

The Independents undoubtedly would have set about at once the task of realizing this programme. But we have seen that they had but a brief period of power; and the Social Democrats seemed less in a hurry to keep their promises.

For the moment the political revolution was enough to absorb all their activity, and they postponed the economic revolution. They declared that an industry cannot be socialized until it is “ripe” for such a measure. But, they further declared, this maturity cannot be suddenly effected by a vote of Parliament or even by the decision of the majority of the people. It is the product of a slow social development, which may find its expression in the vote of a majority, but which cannot be thereby hastened. To tell the truth, the Social Democrats, whom events had placed with their back to the wall, perceived how difficult it is to put into practice the vague theories with which they had heretofore contented themselves. Not only did they realize that the solution of economic questions raised by socialization is extremely difficult, but they became also convinced that it was necessary first to consolidate some of the elements of German economic life that had survived the war and its unhappy conclusion before proceeding to experiments which might accomplish their ruin. They resolved therefore to study the problems of socialization more deeply before passing to its realization. For this purpose they created, November, 1918, a “Committee on Socialization” which was not to be an official organ but a free scientific committee charged with the drawing up of reports and proposals on the question of socialization. It consisted of eleven members with Kautsky as chairman.

But the impatience of the masses did not give the Socialist Cabinet the respite they required. The people, who for years had been promised the abolition of private capitalist property, and who saw in the realization of the Socialist programme the end of the miserable situation into which the war and the revolution had plunged them, demanded immediate measures. The general strike which broke out in Berlin in March, 1919, and which, as we have seen, prompted the Cabinet to promise the “anchorage” of the Councils in the Constitution, also pushed it to prepare in haste two projects of law--one on socialization, the other on the regulation of the coal industry, the two projects being adopted within a few days by the National Assembly. The two laws carried the date of March 23, 1919. The first is what is called in Germany a “blanket law” or a “skeleton law.” It indicates the different forms according to which socialization of private enterprises may become operative, and the conditions in which these enterprises, once socialized, may be exploited. The second makes immediate application of these principles to the coal industry. In addition another law voted several days later, April 29, 1919, regulated according to the same principles the potash industry.

Whereupon the members of the Committee on Socialization, who complained of having their work constantly impeded by the Cabinet, and their recommendations remaining unheeded, handed in their resignations on April 7, 1919.

On the other hand, the Minister of Public Economy, the Social Democrat, Rudolph Wissel, finding the measures for socialization taken or proposed by the Cabinet too timid and insufficient addressed a memorandum to the Council of Ministers on May 7, which had great reverberation throughout Germany as soon as it became known.

The Cabinet, said Wissel, followed a policy inconsistent and without unity. Within the Council of Ministers a decision on fundamental questions was avoided in order not to put the coalition in danger; and the few measures taken were compromises dictated by necessity.

Meanwhile the economic situation of Germany was in an almost desperate state, and a menacing catastrophe could be avoided only by completely transforming the system of production that prevailed in peace times. Wissel declared that he was not speaking of expropriation, for that would do no more than substitute the state for private capitalism, that is to say, one exploiter for another. But what he referred to was the restriction of illegitimate profits, the regulation of prices and the control of the distribution of profits. Production and consumption must be organized according to a co-ordinated plan in such a way that enterprises may be exploited in the interest of all and not to the exclusive profit of some. It was imperative to proceed by some solution as a whole and not by incoherent and isolated attempts.

The principal measures for which Wissel demanded immediate adoption were the following:

(1) The organization of the system of Councils by a special law without waiting for the adoption of the Constitution. They must include organizations of workers and of employers, regional and vocational. These last, which would rest on the parity principle of the Arbeitsgemeinschaft, would have for their mission the direction of the economy in the vocation they represented, this direction to follow the principles decreed by the Cabinet. There must be in addition an Economic Council, which will be the supreme organ of the whole German collective economy.

(2) Other branches of production must be regulated on the model of the regulation already in operation for coal and potash. The next to be thus regulated must be electricity and the cereals.

(3) The State must take a more and more important part in the functioning and in the profits of industrial enterprises. By an inheritance tax and by a tax on capital there must be put into the hands of the State a great part of the industrial fortunes. Instead of collecting these taxes in money or in war loans, the state must become the proprietor of part of the enterprises in the form of shares.

(4) The stocks and bonds of the industrial concerns of the State will be administered not by a Minister, but by a national bank which will conduct its business according to purely economic rules to the exclusion of all political considerations.

By these last two measures will be realized what the supporters of this system call a “progressive mediatization of capital.”

(5) There will be created funds of several billions of marks which will be administered by an office acting in close relation with the vocational economic organization and designed to procure employment for German workers.

(6) The cost of necessities which Germany must import exceeds greatly the cost of domestic commodities. This circumstance compels the increase of wages, which in turn causes the cost of living to rise and lowers the value of money. To counteract this part of all wages must be distributed hereafter in provisions, clothes, etc. Credits will be opened by financiers and by the State.

(7) Temporarily the right to strike in certain industries vital to the German economy will be restricted. The right to stop work will have to be voted by nine-tenths of those employed in that industry.

(8) To realize this programme the number of Ministers who will occupy themselves with economic questions will be reduced to three. They will constitute within the Cabinet an “Economic Committee,” whose directions will have to be followed absolutely by the political Ministers.

On the whole this project aimed at the realization of a state intermediate between capitalism and socialism.

Defended only among the socialists by a small group of doctrinaires, this project had against it at the same time the Independents, the bourgeois parties and the Social Democrats. The Independents opposed it because it permitted capital to survive. The bourgeois parties opposed it because the supervised economy prevented the free play of economic factors and paralyzed initiative. The Social Democrats opposed it for fear of dissatisfying the Centre and the Democrats, of whom they had need to maintain themselves in power. Particularly opposed to Wissel’s project were the Trade Union conceptions supported in the Cabinet by the Minister of Food Supply, Robert Schmidt. He presented a counter-project which embodied the argument which the Socialists of the government opposed to the theoreticians of socialism. The work of socialization, said they, must be undertaken but slowly and the socialization of an industry must wait until that industry is sufficiently matured. This last conception prevailed and in July, 1919, Wissel resigned. Thereupon the offices of the Minister of Public Economy and that of Food Supply were merged and Robert Schmidt given the unified post.

It was to be expected, therefore, that the process of socialization would be considerably slowed up. In fact, the Constitution of the month of August confined itself to specifying and enlarging in several respects the principles of the law of socialization of March 23; and for several months there was only one law enacted along these lines, that of December 31, 1919, on the socialization of electricity.

But once more the people intervened. It may be recalled that one of the “Eight Points” of the agreement imposed on the Cabinet by the Trade Unions after the coup d’état by Kapp, provided that the Committee on Socialization be at once reconvened, that representatives of vocational associations be added to it, that new industries be socialized and that the socialization of industries already decreed be enforced.

In conformity with these engagements, the Cabinet in the beginning of May, 1920, submitted to the Reichstag a project of law that provided for the municipalization of a certain number of industrial enterprises, and reconvened the Committee on Socialization. The members of this committee, who were authorized to add to their number new colleagues on the condition that the total number of the members should not exceed thirty, were given a double mission. First they were to study and clarify the fundamental principles of socialism, for the purpose of determining the general lines along which the capitalist system should be transformed. Then they were to submit concrete and immediate proposals, which, inspired by the laws of collective economy, would permit the commonwealth to utilize directly the natural resources and the sources of power. The committee had also to study how the industries already socialized were functioning, what results had been attained and to propose, if necessary, all needful changes.

2.--THE COLLECTIVE ECONOMY.

All these labours, all these investigations, all these discussions of the problem of socialization had one result. They have shown how confused, even among the socialists, is the concept of socialism; that behind the same word may hide two economic systems extremely different, and that a whole series of almost imperceptible gradations may exist between the capitalist system and complete socialism.

The Constitution raises the following principle: Economic organization must cease to be dominated by considerations of private interests in order that hereafter it may be inspired exclusively by considerations of public interests. Private interests must be subordinated to collective interests. The present economic régime, based on private ownership, must be substituted by a new régime based on collective ownership (Gemeinwirtschaft). What is understood by this?

In its largest sense the expression “collective economy” may be defined as an organization, following a certain predetermined plan, of the economic system of a country for the purpose, on the one hand, of obtaining as large an increase as possible in production by the union of all forces affecting economy; and, on the other hand, for the purpose of devoting a proper part of the product to the community or to its productive members. Thus a system of collective economy is any system that increases public influence in private enterprise, on the condition that it results in a more just administration and distribution, particularly in the cases of monopolized industries already organized into trusts or cartels.

In practice, the principle of collective economy may be applied under three different forms:

(1) The State may take over immediately and entirely the ownership of the industries it wishes to subject to the new régime, and direct by itself and alone, with the aid of its civil servants, the industries which it has seized. This is complete socialization.

(2) The State may content itself with participating in the ownership of certain private enterprises. It owns, for example, a certain number of shares in a corporation. In such a case, it does not manage the enterprise wholly, but it has the right of codecision in the general direction of affairs. This is partial socialization.

(3) Finally, the State may leave in the hands of individuals the ownership of enterprises which it wishes to subject to the principles of collective economy; but it unites, if necessary by constraint, all those that belong in one industry or in the same category of industries, such as chemistry, coal, metallurgy, etc. Thus united the enterprises are administered by means of organs in which are represented all the categories of the population interested in it, such as owners, workers, trade unionists, consumers, etc. These organs must be guided, in the direction they give to this management, above all by a concern for the general interests of the commonwealth. This is collective economy properly so-called or nationalization.

This last form of collective economy is particularly interesting, be it said. For, on the one hand, it avoids the just criticisms of bureaucracy and exaction generally directed against socialism properly so-called. On the other hand, it takes into account the principal demands of the working class at the present time in recognizing for the workers the right to participate in the direction of business enterprises.

The Constitution does not clearly choose between these three different methods of applying the principles of collective economy in the large sense of the word. It declares all three possible and leaves to the ordinary legislature, whenever it is desirable to regulate an industry in the general interest, the task of choosing the bearing it wishes to give such regulations and the régime to which it wishes to subject the industry in question.

(1) In effect, according to the terms of Article 156 of the Constitution, the Reich may transfer private business enterprises to public ownership, that is to say, take over the property for the Reich, the States, or for the municipalities.

(2) The Reich may participate itself or have the States or the municipalities participate in the administration of these enterprises, or may secure for itself in some other manner a decisive influence in these enterprises.

(3) Or, finally, without taking to itself all or part of these enterprises the Reich may regulate, on the basis of autonomy and according to the principles of collective economy, the production and the distribution of wealth.

In this last case the Constitution specifies that the business enterprises which are made subject to a nationalization measure, shall form “an autonomous body” (Selbstverwaltungskörper). This is a new form in public law. The “autonomous body” is somewhat analogous to ordinary public corporations. It administers itself with the organs necessary for it. It enjoys great independence, but it is nevertheless subject to supervision by the State. Article 156, par. 2, of the Constitution specifies that when legislation subjects a given industry to the system of nationalization and organizes the autonomous body it must constitute the administrative organs of this body in such a way that there shall be insured the co-operation of all the producing elements of the people, and that the salaried employés and wage-earners participate in administration and that the production and distribution satisfy first of all the interests of the commonwealth.

These organs form the Industrial Economic Councils which we have already examined. An example will illustrate this hypothesis. Legislature decides, for instance, to subject the chemical industry to the régime of the collective economy. It combines, therefore, all the manufactories of chemical products into a sort of obligatory cartel, the bond uniting the different manufactories being more or less close according to circumstances. The system of administration by “autonomous bodies” will consist of the institution of one or more organisms, such as Economic Councils of the Chemical Industry, in which will be represented all the individuals, associations and Councils interested, and which will manage together the German chemical industry. The chemical industry will thus form an autonomous body, that is to say, a sort of public corporation under the supervision of the State. Further than this, however, it is not possible at the present time to specify the distinctive traits of this new legal category. We must wait until legislation has organized a number of autonomous bodies before we can state precisely their general characteristics and give them a place in the collective institutions of public law. Still less possible, naturally, is it to forecast the economic consequences to which they may give rise.

* * * * *

However, the Constitution has not felt that it should give the ordinary legislator absolute freedom to proceed according to his fancy to the enactment of measures for socialization more or less complete. It has therefore provided certain limits on the exercise of the rights it confers on the legislature.

(1) Only the legislature of the Reich may enact socialization measures.

(2) No industry may be socialized except when it is “ripe for this socialization.” This is the so-called maturity clause.

(3) Enterprises which the legislator wishes to organize as “autonomous bodies” may not be so proceeded against except “in case of urgent necessity.”

These last two restrictions may seem very important. In reality, however, they constitute a purely fictitious restraint; for the legislature is the sole judge, at any time that it wishes to socialize an industry, as to whether that industry is “ripe” or not, and whether or not the case is one of urgent necessity.

(4) There remains finally the question of indemnity. As may well be imagined, during the discussion of the project of the socialization law as well as during the deliberations on the project of the Constitution, this question was very vigorously discussed. The Socialist parties wanted no allusion made to this question in the text of the law or that of the Constitution. The bourgeois parties demanded that at least in the case of complete socialization the state should be absolutely obliged to accord an indemnity. It was impossible to arrive at agreement. So that although the principle of indemnity was incorporated, it was left to the legislature, whenever it enacts a special law decreeing a socialization measure, to decide whether or not indemnity shall be accorded and to what extent.

* * * * *

In accordance with the above provisions a certain number of industries have been placed under the régime of collective ownership, where they are about to be transformed.

For the coal, potash and iron industries the laws of March 23, of April 29, 1919, and the regulation of April 1, 1920, have chosen the system of collective ownership, properly so-called. That is to say, the industries of coal, potash and metallurgy, although to a very limited extent, have been organized into autonomous bodies, self-administering under the supervision of the Reich.

As to electricity, the law of December 31, 1919, provides that electrical plants that have acquired a certain importance will become the property of the Reich, the latter, however, providing a suitable indemnity.

The project of the law relative to municipalization, finally, provides that municipalities may, with the authorization of the Reich, transfer to the régime of collective ownership private industries that serve principally common local needs. Full authority is given the municipalities over all that concerns transportation, water, gas, cinematographs, theatres, burial, baths, etc. These enterprises may be either taken over entirely as the property of the municipalities, or be organized into autonomous bodies. In principle the municipality is required to indemnify in all such cases.

It is impossible to examine here in full detail these or later laws. It is interesting, however, to devote several pages in describing in a very general way, in view of the great importance of the coal industry at the present time, the system into which it has been transformed.

3.--THE REGULATION OF THE COAL INDUSTRY.

The crisis in coal which to-day exists in almost every country in the world has led the different governments to take various measures either to avert it or to diminish it. In general, coal mining has remained in the domain of private economy. Distribution, however, has passed more or less completely into the domain of collective economy. The systems of distribution to which the different countries have resorted are various. According to the given circumstances they adopt one or another of three possible modes of public economy. In France, the distribution of mined or imported coal is carried on by the state itself. In Germany it is done by a group of organisms in which are represented the various interested elements of the population, but in which provisionally the mine owners predominate.

It is advisable to study first the existing system in the coal industry in order to understand better the changes we are examining.

* * * * *

I.--As regulated by the law of March 23, 1919, and the decree of August 21, of the same year, the mechanism of the coal industry consists of three organs: the Colliers Association, the National Association, and the National Coal Council.

The German Reich is divided into a certain number of coal mining districts. In each district all the mine owners associations must form a Colliers Association. If this cannot be accomplished voluntarily the Minister of Public Economy promulgates the organization by means of a decree. Each Colliers Association must have a Council of Administration, in which it is obligatory that the workers be allowed representation. In addition, in the Councils of Administration of the five biggest associations there must be admitted a representative of the salaried employés. The Council of Administration has the authority commonly accorded to the councils of administration of stock companies by the Commercial Code; it appoints its own president. In the same way all the owners of gasworks that produce coke are united for the whole territory of the Reich into an Association of Coal-gas Manufacturers, formed on the same model as the Colliers’ Associations.

The Colliers Associations, the association of Coal-gas Manufacturers and the German states that belong, by virtue of ownership of mines, in the Colliers Associations, are united into a National Coal Association. This has a Council of Administration in which must be included three wage-earners and salaried employés and one representative of the consumers.

The National Coal Council is composed of sixty members--representatives of the states, of mine owners organizations, wage-earners, office workers, consumers, etc. It is convened as often as conditions demand and at least once every six months. It must in addition be convened if at least ten of its members or the Minister of Public Economy of the Reich demand it. It decides by majority vote. It creates three technical committees, The Economic Committee on Mining Construction, The Economic Committee for the Utilization of Combustibles and The Social Committee of the Mines. Each member of the National Coal Council must belong to a committee. The cost of the administration of the National Coal Council and of its committees is borne by the National Colliers Associations.

* * * * *

Each of these organs has its own special powers.

The National Coal Council directs the economy of combustibles, in which is included importation and exportation, according to the principles of collective economy under the supervision of the Reich. It must approve the charters according to which the Colliers Associations and the National Coal Association are organized. The National Coal Council may decree general policies for the administration of combustibles, in particular for the abolition of unproductive enterprises and for the protection of consumers. It sees to it that the National Coal Association and the technical committees of the Coal Council work according to the same principles and in a coherent system. It may demand information from any of the organs that participate in the fuel industry; and the authorities and committees are obliged to give it any assistance it demands. The technical committee collect all important data based on practice and experience, study all matters that enter within their domain and prepare decisions for the National Coal Council.

The National Coal Association controls the application of the general policies and decisions decreed by the National Coal Council and regulates the details of the execution of these decrees. It must approve the general conditions of the coal deliveries of the Colliers Association. It establishes and publishes the selling prices of fuel, taking into account proposals made by unions and the interests of the consumers. On this point it must insure the same treatment for the consumers’ societies as for the wholesalers, and see to it that each consumer, who takes at least a full carload of coal at the mine or at the point of delivery, shall obtain fuel under predetermined conditions for cash payment. Finally, the National Coal Association has authority in questions of import and export.

The Colliers Associations supervise the application of the decrees issued by the National Coal Council and by the National Coal Association, and, within the framework of these decrees, regulate the production, utilization and consumption on the part of their members. They, themselves, sell the fuel which should be put at their disposal by their members, on the account of the latter. The powers of the Association of Coal-gas Manufacturers are similar.

The mining companies may raise claims and protests against the regulations of the Associations of which they are members, appealing to the National Coal Association and beyond that to the National Coal Council.

If any measure on the part of the National Coal Council, the National Coal Association, or of the Colliers Associations violates any vested right, the individual or the association injured is entitled to suitable indemnity. This indemnity may be sued for before ordinary tribunals.

The powers of the Reich, the States, and the municipalities are fixed by the decree of August, 1919, as follows:

The Reich, through the intermediacy of the Minister of Public Economy, exercises general control over the fuel economy. The Minister may in particular lower the price of coal fixed by the National Coal Association. He may also organize a representation of fuel consumers, a representation with authority to fix the retail price of coal. The cost incurred by the Reich in the execution of the law on the regulation of coal, up to a minimum of 200,000 marks per year, must be borne by the National Coal Association.

The States represented by the Committee on Commerce and Industry in the Reichsrat are authorized to participate in the deliberations of the National Coal Council and its committees, but only with consultative powers. Fiscal authorities are authorized to demand information of the National Coal Council of the Reich and of its committees as well as of the National Coal Associations and of the Colliers Associations.

Municipalities of at least 10,000 inhabitants and groups and Unions of Municipalities, after having heard the claims of dealers and consumers, and guided by the wholesale price of coal fixed by the National Coal Association, are themselves empowered to fix the retail price within their territories.

* * * * *

II.--The regulation above described was far from giving complete satisfaction. It has been attacked both by the consumers and the socialists. The latter criticize it as not having gone far enough along the road of nationalization. The former, on the other hand, complain that prices are fixed by an Assembly in which coal owners form a very great majority (The National Coal Association), and that the other interests are not able to make themselves sufficiently heard. The result of this system is that the coal producers always come to agreement to the detriment of the consumers and constantly increase the price of coal.

It must be conceded to the socialists that in the system established by the law of March 23, 1919, the principles of collective economy are applied in the most parsimonious manner possible. The only Council in which there is parity between employers and workers is the National Coal Council, but the rôle of this Council is reduced to a minimum. The real directors and administrators of the coal industry are the Colliers Associations and the National Coal Association. The National Coal Council has hardly any effective power. As for the Cabinet, the right of the Minister of Public Economy to oppose his veto to measures taken by the National Coal Association and in particular to lower by law the prices fixed by the latter, is considered by the Socialists entirely insufficient in view of the close co-operation of the coal mine owners and the dealers in league against him.

In May, 1920, a bill was elaborated by the Cabinet. It provided for the abolition of the National Coal Association and for the transfer of its powers to the National Coal Councils; in addition the influence of the consumers was to be considerably increased within the National Coal Council. But the Constituent Assembly adjourned before this project could be examined by them.

Meanwhile a change was effected. It was agreed at the end of May, 1920, that decisions of the National Coal Association would thereafter not be operative unless they were made in agreement with a “Great Commission” of the National Coal Council. If agreement is not arrived at the matter must be brought before the National Coal Council itself which thereupon decides, its decision becoming binding upon the Association.

* * * * *

III.--But this reform did not suffice, and the question of a complete transformation of the regulation of the coal industry was submitted to a searching examination by the Committee on Socialization. One thing was unanimously agreed upon--the existing régime could not continue. The Provisional Economic Council, in its meeting on July 24, the Cabinet of the Reich in the meeting of the Reichstag on August 5, and the Committee on Socialization declared that the coal industry must thereafter be completely subjected to the principles of collective economy; that the wage-earners and salaried employés in this industry must be included in the number of responsible directors of the industry; and that the profits obtained from the exploitation of the mines by private capital must be considerably decreased.

As for the practical means of realizing these recommendations the Committee on Socialization was not able to come to an agreement and submitted two different proposals.

The first, that of Lederer, signed by ten out of twenty-one members, demanded immediate expropriation and nationalization of all the mines. The owners of the mines would receive an indemnity in the form of bonds bearing a fixed interest, and the ownership of these mines would be transferred to an autonomous body, called “The German Coal Corporation.” This corporation is to be governed by the National Coal Council, which appoints a “directorate” to administer affairs. The right to appoint industrial heads, as well as the responsibility for the technical exploitation, passes to the National Coal Council and to the Directorate. Bonuses for production are to be given to directors, salaried employés and workers.

The authors of this proposition insist on the fact that they are not instituting state socialism for mines with all its attendant fiscal and bureaucratic dangers; and to emphasize what it is they are aiming at, they propose that the mines now owned by the Reich and by the States be taken away from them and transferred to the German Commonwealth of Coal.

Prices will be fixed by the Reich, to whose budgets will be accounted the profits of the exploitation--and undoubtedly the losses.

The second proposition, that of Rathenau and signed by eleven members out of twenty-one, does not go as far along the road of nationalization. The present owners of mines, according to this plan, provisionally retain their property, but their rights therein are strikingly reduced. The distribution and the sale of products cease to be guaranteed by the National Coal Association--which is, in fact, done away with--and are given over to the National Coal Council and to a Directorate, four out of five of whose members are elected by the Council; the fifth, the President, is appointed by the Minister of Public Economy.

The principal innovation consists in this. Whereas formerly the sale of coal was made on the basis of the individual exploitations, according to this project every mine transfers to the National Coal Council its whole output, and the net price is averaged according to the books. The National Council, therefore, has a monopoly on the wholesale trade and it fixes the selling prices. In addition to the net cost the Council credits to the mine (1) the cost of delivery and the interest and amortization of bonds of the enterprises; (2) the interest and amortization of new investments; (3) the normal fixed interest on the operating capital employed in the exploitations; (4) bonuses, fixed according to a schedule, for the increase of output of each exploitation; or deductions in case of decrease of output.

The National Council may demand the inauguration of new projects, or exploitations may propose improvements with the approval of the Council, provided that either the Council or the entrepreneur furnishes the necessary funds. Finally, in order to retain the free play of private initiative, an entrepreneur may, even in spite of the National Council, make investment but at his own risk and peril.

By these provisions the entrepreneur loses all interest in the increase of the price of coal, for commerce in it and commercial profits are denied to him. Also the fixing of high net prices does not serve him in any way, since his books are supervised by the properly empowered auditors of the National Council. The only way left him to make big profits is to improve his exploitation in its economic and social aspects. The interest or the profit which has hitherto ruled economy is retained in form, but it can no longer work except in the common interest. The situation of the manager will depend as to-day on an objective economic success.

The Cabinet of the Reich announced its intention of soon submitting a project of law which will adopt in outline the Rathenau proposition. Already the mine owners are discussing in the press the question of the “maturity” of the mines and the mode of calculating the cost of production. But above private interest there is a collective interest and the question will come up whether the system proposed by the Committee on Socialization and the Cabinet does not incur the risk of becoming more troublesome than profitable to the community itself.

CONCLUSION

We have analyzed in the preceding pages the principal provisions of the German Constitution. There are in it a great number of other provisions, which had to be omitted from this analysis deliberately, either because they also occur in all the other Constitutions of the world, such as the principle stated by Article 102, that judges are independent--provisions which do not at all serve in characterizing the work of Weimar; or, on the other hand, because they were dictated exclusively by the necessity of solving problems created by the particular circumstances in the midst of which the Reich found itself; such as the provisions of Article 88 and those following, dealing with the post, railroads, and navigable waterways. These provisions present only a slight interest from the general constitutional point of view.

In its final draft the Constitution of 1919 bears throughout the stamp of compromises, which had to be effected between the parties represented in the Assembly, on practically every problem attacked. On nearly every question which the Constituent Assembly had to solve, bargains were negotiated between the conflicting interests and theories of the parties opposed. If one takes these articles of the Constitution one after another, one can draw up the balance sheet of every party, and note the points on which it has won its cause and those on which it had to compromise. The Social Democrats wanted to substitute for the federal Empire a unitary State; whereas the Centre, whose co-operation was needed for the Social Democrats to remain in power, defended the federalist idea. The final result constitutes a marked victory for the Social Democrats. But on the question of the relation of Church and State, the Centre obtained a solution that is much nearer their desires than those of the Social Democrats. Sometimes problems of a non-constitutional nature were mixed into negotiations on the Constitution. It is known, for example, that the Social Democrats secured the signature of the Centre to the Treaty of Versailles only in exchange for Social Democratic consent to the compromise clauses on education.

Nevertheless the product of these negotiations and these transactions constitutes a work whose essential characteristics are clearly enough indicated, and whose bold outline seems to respond to the demands which all constitutions of this kind make.

From the point of view of legal technique the Constitution of Weimar is, on the whole, well made. Conscientiously, scientifically, the men who drew it up studied foreign Constitutions, subjected them to the most stringent criticism, tested them by the particular exigencies of the Reich and by the special character of its people. Here they imitated, there they initiated. Naturally, they were not wholly able to detach themselves from the judgments, preferences and prejudices that prevail in their country. Perhaps from the strictly German point of view it is better that it should be so. The work is strongly marked with their traits. It is logical and fine-spun, audacious, complicated and sometimes obscure, painstakingly conceived and solidly constructed.

But whatever technical merit a legal document may present, it is worth little unless it accommodates itself to the realities for which it is created, unless, too, it is strong enough to resist the thrusts directed against it and to master them. Has the Constitution of Weimar resistance enough to withstand all the inevitable assaults which will be aimed at it, and can it guarantee to the German people a well-ordered public life and a stable government?

We know the bases on which it is constructed; politically--unitarism, parliamentary democracy, the republic; economically--the participation of the working class in the management of industry, evolution toward the nationalization of the industries most important in the national life. The political institutions, under more or less different forms, have been tested by other peoples, who have not complained of them. Will these institutions, adapted as they have been, succeed equally for the German people? The economic institutions are new. What will be their worth?

The question is serious; for in this edifice so logically constructed all parts are mutually interdependent, and the whole will not endure unless the parts are solid. The downfall of any of them will drag down the others. Political institutions will not function unless economic provisions assure industry and commerce sufficient prosperity. But economic institutions will be swept away if the government is overwhelmed and ceases to fulfil its mission.

* * * * *

The Constitution begins with making the Reich a state as unitary as possible without completely suppressing every trace of the federal régime. But there are strong centrifugal tendencies. In Prussia there are several provinces that demand to be formed into distinct states. Throughout the Reich there are several states that demand the return to a purely federal régime, if not actually the complete separation from the German Reich. Will these tendencies be strong enough to bring about a relaxation of the unitary bond, if not actually the disintegration of the Reich? We have already pointed out the difference, for example, separating Catholic, peasant and conservative Bavaria from Protestant, industrial and socialist Prussia. The States were able to endure without much difficulty the hegemony of a victorious, powerful, prosperous Prussia, a hegemony by which they profited. But the same States resent the thought that a Prussia, which they hold responsible for the defeat and which they now see much weakened, should want to keep them still under its yoke and to attempt, under the pretext of unity, to absorb the Reich. They feel this all the more strongly since the future is dark. Prussia has been dangerously stricken and it may appear more advantageous not to tie up too intimately their own interests with those of such a state.

Once more Prussia holds the fate of Germany in its hands. If, renouncing the attitude which it has maintained since the Revolution, Prussia permits a transformation of some of its provinces into states, or if it accords them an autonomy so great that they will be in effect assimilated into states, then the federalist or separatist tendencies will probably lose much of their strength, and the unitarism desired by the Constitution will be able to maintain itself and even to develop. But if Prussia, relying on its strength and prestige, diminished though they be, insists on keeping the other German states, willing or not, in a Reich dominated by it, then it may be that the federalist or separatist tendencies will prevail.

The political institutions of Germany are as strongly impregnated with the democratic idea as possible. The majority is sovereign. But there are minorities, to the right and to the left, that aspire to dictatorship. It seems little likely that another attempt like that of Kapp and Lüttwitz will succeed any better than the last attempt--at least unless a sudden and complete change in the political orientation of the people takes place. On the other side, the Independents, for whom even in Berlin a coup d’état may be perhaps easy enough, know that they would have against them the great majority of the German people, and their leaders openly declare that their hour has not yet come. If in the domain of democratic doctrine a change seems likely to come, it is probable that it will appear in the form of a right expressly accorded to economic associations or, in a still more general manner, to producers, to exercise a special and direct influence on the government. If the Provisional Economic Council succeeds, it is possible that Germany will broaden the experiment and attempt a true Economic Parliament.

Parliamentary government has been accepted but it is mistrusted. There have also been introduced a whole series of measures such as the referendum, initiative, the nomination and the impeachment of the President by the people, which are not only logical applications of the democratic principle, but which are also assurances against any possible misdeeds of parliamentarism. This is a splendid proof of trust in democracy. It is for the future to say whether it is justified.

As a matter of fact the referendum and initiative await the law which is to organize them. What will these institutions produce in a country as vast as Germany? It is easy to see that they will strikingly increase the burden of governmental machinery, and one asks oneself whether they will not incur the risk of completely impeding its functioning. For the success of these institutions, we must suppose a sufficiently firm political education and intelligence, a public that knows its wishes and how to make them prevail, a Parliament and a Cabinet skilled in recognizing the wishes of the nation and ready to submit to them. Because of the mistrust of parliamentarism, it has been decided that the President shall be elected directly by the people. He is endowed with power by the nation and placed near to the Reichstag in order to control it. But may he not become too strong, and is there not a danger that he will abuse his powers to the great injury of liberty and democracy itself? The present President has been elected by the National Assembly. Considerable as are the powers which the Constitution gives him, he is actually one of the least powerful chiefs of state in the world. Will matters be different when he is elected by the whole people? Will he be strong enough, or too strong?

This democracy which does not fear the plebiscite, has expressly excluded the monarchical form for the Reich and for the States. There are, nevertheless, here and there, particularly in Bavaria, monarchical plots. Will the Constitution have here, too, enough force to command obedience? It does not seem for the moment that a monarchical restoration, no matter of what dynasty its pretender, would have any serious chance of succeeding. For, until some new state of affairs, the working class, which would permit a dictatorship exercised by itself, will probably oppose every attempt at a return to the abolished personal régime.

* * * * *

The Economic Constitution departs much more from old customs than the political Constitution.

The idea of the Councils is probably the only really new idea that has appeared in the public law of modern states since the war. German law has given this idea solemn consecration and has embodied it in the Constitution. But up to now it has given it only the most restricted application. The Factory Workers Councils have hardly begun to function, and the working class has not yet any clear notion of the manner in which it will use the power given by the law to these new organisms.

The doctrine of the Councils leads naturally to nationalization. For to confide the administration of the whole of an industry to Economic Councils, in which the workers are represented by the side of the employers and consumers, is to make a direct application of the Mitbestimmungsrecht. But other considerations are also tending to give this system a place of increasing importance. “The free play of economic forces” is no longer being upheld. It is affirmed everywhere that classic liberalism has had its day, and that in order to improve the economic situation so extremely unfavourable in all the modern states, it is not enough that things be allowed freely to take their course. It is now thought that “let alone” leads to bankruptcy. One no longer believes in the former principles that held as absolute the right to private property, the right of work, liberty of commerce, and freedom of contract. To-day these rights are held to be limited by the general good and must be exercised by the individual in the interest of all.

As the question of principle seems to be settled the problem becomes almost exclusively a practical one. A certain number of industries have become more or less nationalized or even socialized and will become still more so, their number also probably growing. The discussion now seems to be only on the modes of application, on the degree of “maturity” necessary; on whether this or that industry is or is not ripe; on the mode of calculating the cost of exploitation; on bonuses for output, etc., etc.

Like the idea of the Councils, this doctrine of nationalization seems to gain more and more. What will come of it for Germany and for the States that will follow this road? Are not these new formulas the ephemeral result of the upheaval due to the war? Or will they, improved and tested by practice, be definitely installed in the economic organization of all modern peoples? To the countries that adopt them, will they bring ruin or economic prosperity and social peace? On these matters, one can only write interrogation marks. In any event, however, it is important to follow the German experiment with the greatest possible interest.

GLOSSARY

German Translation

REICH Commonwealth

REICHS- of the Commonwealth, national

REICHSARBEITERRAT National Workers’ Council

REICHSGERICHT National Judicial Court

REICHSKANZLER National Chancellor

REICHSMINISTER National Minister

REICHSMINISTERIUM, pl., -IEN National Department

REICHSPRÄSIDENT President of the Commonwealth, National President

REICHSRAT National Council

REICHSREGIERUNG National Cabinet

REICHSTAG National Assembly

REICHSVERWALTUNGSGERICHT National Administrative Court

REICHSWIRTSCHAFTSRAT National Economic Council

LAND State (an integral part of the Commonwealth)

LANDES- of the State, State

LANDESREGIERUNG State Cabinet

LANDTAG State Assembly

WAHLPRÜFUNGSGERICHT Electoral Commission

STAAT country, state (one of the family of nations); referring to Germany, it designates the Commonwealth and separate States as a single political entity.

STAATSGERICHTSHOF Supreme Judicial Court

STAATLICH political

FREISTAATLICH republican

APPENDIX

THE CONSTITUTION OF THE GERMAN COMMONWEALTH

PREAMBLE

The German People, united in all their branches, and inspired by the determination to renew and strengthen their Commonwealth in liberty and justice, to preserve peace both at home and abroad, and to foster social progress, have adopted the following Constitution.