Dawson says (p. 29) that the production of pig-iron was 905,000 tons in 1864, and had risen in 1869 to 1,413,000 tons; while the deposits in Prussian savings-banks, which were 5,400,000 thalers in 1835, became 12,500,000 in 1845; 32,200,000 in 1855; 143,500,000 in 1868; 172,000,000 in 1871, and 217,000,000 in 1872. In reverting to Protection Bismarck was influenced not so much by fiscal as by political considerations. The empire was young,

and each state included within it had to contribute its quota of any deficit in the revenue that might remain after the imperial taxes had been applied to imperial expenditure. Bismarck dreaded the political effect of these matricular contributions on the solidarity of the empire, and wished to make the tax-revenue meet the whole expenditure, if not also to leave a balance for distribution amongst the several states. In opening the debate on the Tariff Bill on May 2, 1879, he declared that the condition of imperial finance imperatively called for reform; that the constitution presumed that 'the condition of matricular contributions should be a transitional one'; and that it was undesirable that the empire should be a burdensome boarder or a dunning creditor, while it might be a liberal provider for the individual states if only proper use were made of the revenues which the constitution put in the empire's way, but which hitherto had been disregarded.

To effect this transformation was Prince Bismarck's 'first motive'; but the matricular contributions still exist. At the present time they amount to 1,187,5007. ; and there is some controversy as to the proportion in which they should be borne by the several states. Protection in Germany, therefore, has failed in its first object. Bismarck's second object was to substitute indirect for direct taxation. According to the euphemism employed by fiscal reformers, this is to broaden the basis of taxation'; it is so with the coal tax, the sugar tax, the corn tax, and similar imposts. Bismarck had a strong bias against direct and towards indirect taxation. 'I declare myself,' he said in the Reichstag on November 2, 1875, to be essentially favourable to the raising of all possible revenue by indirect taxes, and I hold direct taxes to be an onerous and awkward makeshift.' Has this policy succeeded? At the present time, as in former

years, Germany is face to face with a heavy deficit, but cannot venture upon increased internal taxation; and the tariff has been raised to the highest possible limit. The deficit is therefore being met by borrowing. Before the Boer war began, the United Kingdom had been steadily paying off the national debt by large annual instalments. Germany, under its protectionist system, has been as steadily building up a national debt in a time of peace. Herr Bebel remarked in the Reichstag on December 5, 1904, that since 1888 the imperial debt had increased fourfold; and he added that the great evil of the present system of finance is the practice of voting loans in aid of ordinary estimates. The Finance Minister, Baron von Stengal, had already, on December 4, warned the Reichstag that their system could not be continued indefinitely, and that the empire must be prepared for new taxes. This is not success. The Prussian tariff has failed in its second object.

Bismarck's third object was Protection. He said :

'We ask for a moderate protection of national labour. We are far removed from any system of prohibition such as exists in most neighbouring countries, as, for example, in America.' What was the underlying principle of the American system that Bismarck would not follow? Dr Cunningham, in his history of 'the Free-trade Movement,' shows (p. 59) that England's exclusion of foreign wheat caused other nations, 'in self-defence, to try to supply themselves with hardware and textiles as best they could.' America was in this way impelled to set up home industries, and very naturally determined to protect them. Mr McKinley, in The Tariff, 1812-1896,' quotes (p. 5) from Mr Clay's speech of March 31, 1824, the following passage, which, he says, 'is to this day a strong and effective argument for the protective policy' :

"The creation of a home market is not only necessary to produce for our agriculture a just reward for its labors, but it is indispensable to obtain a supply of our necessary wants. If we cannot sell we cannot buy. The sole object of the tariff is to tax the produce of foreign industry with a view to promoting American industry.'

This was not Bismarck's object. It is Mr Chamberlain's.

But, like Mr Chamberlain, Bismarck's intention was to keep the tariff low. It is not necessary to review German economic history since the revival of Protection to show that the moderate' tariff of 1879 caused Germany's continental neighbours to raise their tariffs also; that it brought on tariff wars; that, after the tariff was carried higher in 1885, there was a reaction towards lighter duties in the Caprivi tariff of 1892; and that the expiration of the Caprivi tariff at the close of the year 1902 has been followed by a fighting and a conventional tariff, both of which are highly protectionist. It is, however, worth while to remember that, in supporting the high tariff of 1885, Bismarck said :

'I hope that the price of corn may increase. I hold its increase to be necessary. There must be a limit beyond which the State must try to raise the price of corn.'

Prince Bismarck had the courage of his convictions, and did not pin himself to a 2s. duty on corn. The 1885 duties, however, did not keep up the prices of agricultural products; these steadily declined until the lowest point was reached in 1887. In Austria, Hungary, and Holland it was not reached until a year later, and in England, Denmark, and Russia not until 1889. In 1887, therefore, the agricultural tariff was further increased; state-railway rates were revised; and veterinary regulations were introduced, aiming at the exclusion of foreign live-stock. The general results, Mr Dawson finds (p. 97), were that 'dearer food, rising rents, and heavier taxation, combined to nullify the advantage of freer earnings; and the actual condition of labour was no better. In 1891 and 1892 the cost of living was higher in Germany than ever since Protection was reintroduced.'

'It is important to observe also' (Mr Percy Ashley remarks, p. 102) that the industrialisation of Germany is marked by the same general features as the economic history of England after the industrial revolution. There is the same rapid growth of the towns (an increase as astonishing as that of the American cities), and the same decline in the agricultural population, which in 1870 was about one half, and in 1900 about one third of the whole, having fallen both relatively and actually.'

Even under a protectionist system, therefore, Mr Chamber

lain would have had to deplore a migration of the rural population to the towns. In spite of Professor Ashley's evidence of the increase in the number of peasant proprietors, agriculture in Germany is not in a happy condition. The landowners, Mr Dawson says (p. 233), after a quarter of a century's protection,' plead perpetual impoverishment'; and the housing of the rural labourer 'is for the most part, not merely inadequate and primitive, but unworthy of human beings, while the poverty of the people makes domestic comfort out of the question,' (p. 231). It was by the power of the discontented agrarians that the excessively high tariff of 1902 was forced upon Count von Bülow; and it was pushed through the Reichstag against commercial and industrial opposition by a combination of clerical, Conservative, and National Liberal groups. Summing up the results of the economic policy of Germany during the last quarter of a century, Mr Dawson writes (p. 181):

'A fair verdict upon Protection from the purely economic standpoint would be that, while it has undoubtedly preserved the home market for the home producers to a far larger extent than formerly, it has done this at the cost of the consumers. The manufacturing classes have greatly benefited; but their gain has been the loss of the rest of society. But an economy which does not promote the interests of society as a whole cannot by any right use of the term be called a national economy; it is a class economy, pure and simple. And this is what the policy of Protection has gradually become in Germany.'

This too, it may be remarked, is the accusation brought by Democrats against Protection in America. Mr McKinley, in 'The Tariff,' quotes (p. 49) the following Democratic 'declaration of principles' in the presidential campaign of 1876 :

'We denounce the present tariff, levied upon nearly four thousand articles, as a masterpiece of injustice, inequality, and false pretence. It yields a dwindling, not a yearly rising revenue. It has impoverished many industries to subsidise a few. It prohibits imports that might purchase the products of American labour. It has degraded American commerce from the first to an inferior rank on the high seas. It has cut down the sales of American manufactures at home and

abroad, and depleted the returns of American agriculturean industry followed by half our people. It costs the people five times more than it produces to the Treasury, obstructs the processes of production, and wastes the fruits of labor. It promotes fraud, fosters smuggling, enriches dishonest officials, and bankrupts honest merchants.'

There is all the vigour of American phraseology in the denunciation; but the natural resources of the States and the opportunities of the home market are so great that the ill effects of Protection have not yet been realised by the American people, and even the Democrats are only free-traders of the Balfourian type.

To suppose that Protection is generally favoured in Germany would be a complete misapprehension. Mr Dawson remarks (p. 183) that the manufacturing and merchant classes are no more protectionist in a body than are the same classes in England,' and

'many of the most sagacious spokesmen of industry contend that a return to Free Trade would equip Germany far more efficiently than in the past to compete for trade on a large and imposing scale in the markets of the world.'

That is to say, these enlightened advocates of Free Trade are the true followers of List. They feel themselves handicapped by Protection. They believe that Germany has reached the highest stage of industrial development, and can now venture upon a contest with England on equal terms in the neutral markets of the world with better hope of success than is possible while they have to fight behind a high tariff that protects them at home but is a barrier to their progress elsewhere. Professor Ashley, strangely enough, concludes his review of the Progress of the German Working Classes in the last quarter of a century' with evidence in support of this opinion. He shows (p. 152) that German workmen are beginning to crave 'the English working time,' and that (p. 153)' it looks as if the German working men were not likely to need our compassion much longer.' But his contention, of course, is that, though the conditions of life are better here, as Germany is coming up to the English level under Protection, she will soon leave England behind. If this were so, Germany would need no protection against England. Neither Germans, Frenchmen, nor Americans share