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 Problems of labor and Industry in German 
 
 3 1924 013 854 876 
 
»1 
 
 Cornell University 
 Library 
 
 The original of tiiis bool< is in 
 tine Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924013854876 
 
National Industrial Conference Board 
 
 lO EAST 39TH STREET, NEW YORK 
 
 BRANCH OFFICE 
 SOUTHERN BUILDING, WASHINGTON, D. C. 
 
 THE National Industrial Conference Board is a co-operative 
 body composed of representatives of national and state in- 
 dustrial associations and closely allied engineering societies of a 
 national character, and is organized to provide a clearing house 
 of information, a forum for constructive discussion, and ma- 
 chinery for co-operative action on matters that vitally affect 
 the industrial development of the nation. 
 
 Frederick P. Fish Chairman 
 
 Magnus W. Alexander Managing Director 
 
 MEMBERSHIP 
 
 American Cotton Manufacturers' Association 
 
 American Electric Railway Association 
 
 American Hardware Manufacturers' Association 
 
 American Malleable Castings Association 
 
 American Paper and Pulp Association 
 
 Electrical Manufacturers' Club 
 
 Institute of Makers of Explosives 
 
 Manufacturing Chemists' Association of the U. S. 
 
 National Association of Cotton Manufacturers 
 
 National Association of Finishers of Cotton Fabrics 
 
 National Association of Manufacturers 
 
 National Association of Wool Manufacturers 
 
 National Automobile Chamber of Commerce 
 
 National Boot and Shoe Manufacturers' Association 
 
 National Electric Light Association 
 
 National Erectors' Association 
 
 National Founders' Association 
 
 National Implement and Vehicle Association 
 
 National Industrial Council 
 
 National Metal Trades Association 
 
 Rubber Association of America, Inc. 
 
 The American Pig Iron Association 
 
 The Railway Car Manufacturers' Association 
 
 The Silk Association of America 
 
 United Typothet^ of America 
 
 ASSOCIATE MEMBERSHIP 
 
 Associated Industries of Massachusetts 
 Associated Industries of New York State, Inc. 
 Illinois Manufacturers' Association 
 Manufacturers' Association of Connecticut, Inc. 
 
PROBLEMS OF LABOR AND 
 INDUSTRY IN GERMANY 
 
 Special Report Number 15 
 September, 1920 
 
 Copyright 19 20 
 
 National Industrial Conference Board 
 
 No. 10 East 39TH Street 
 New York 
 
CONTENTS 
 
 PAGE 
 
 I. Introduction 3 
 
 II. A General Survey of Labor Conditions in Germany 6 
 
 III. The Unemployment Problem in Germany 17 
 
 IV. The Works Councils Movement in Germany ... 25 
 V. The Works Councils Law 30 
 
 VI. The Provisional National Economic Council . . 38 
 
 VII. The Situation Following the Military Insurrec- 
 tion OF March 13, 1920 . 43 
 
 VIII. The Elections to the Works Councils and to the 
 
 Reichstag 49 
 
 IX. The Protection of Industries Essential to the 
 
 Public Welfare 53 
 
 X, The Economic Crisis in Germany 61 
 
Foreword 
 
 TN the spring of 1919, when the problems of industrial 
 ■'■ readjustment following the cessation of hostilities were 
 most pressing, the National Industrial Conference Board 
 sent a Special Commission of industrial executives and 
 economists abroad to study at first hand labor conditions 
 and industrial problems. The Commission visited various 
 parts of England, Scotland, and Wales, and also France 
 and Italy. It conferred with government officials, with 
 prominent employers and labor leaders. It visited many 
 plants and made its observations directly. Its report was 
 issued by the Board as Special Report No. 6, entitled, 
 "Problems of Labor and Industry in Great Britain, France 
 and Italy." The Commission did not, however, find it 
 possible to visit the territories of any of the Teutonic 
 allies. Of these, Germany is naturally the most important. 
 
 The Board, desirous of keeping American industrialists 
 informed on economic conditions in Germany, secured the 
 services of a competent German economist and writer to 
 act as correspondent. This correspondent has made a 
 series of studies on pressing problems and significant de- 
 velopments in German industry. These studies form the 
 basis of this report, but have been revised and amplified 
 from various printed sources by the Board's staff. 
 
 The Board believes that the information contained in 
 this report is substantially accurate and that it will be 
 found both interesting and instructive. The economic 
 situation in Germany is in a state of flux, but this report 
 presents conditions as they had developed up to 
 September, 1920. 
 
Problems of Labor and Industry 
 in Germany 
 
 I 
 
 INTRODUCTION 
 
 Authoritative information with regard to industrial 
 conditions in Germany is not generally available in the 
 United States. Events on the political stage have tended 
 to crowd out events of important economic significance. 
 Furthermore, much of the information regarding condi- 
 tions in Germany that has found its way into newspapers 
 and magazines has been colored, more or less, by prejudice 
 in favor of or opposed to Germany. 
 
 The economic phases of a nation's life are fundamental. 
 A nation's industries are its people's strength. During 
 the war, each of the belligerents recognized that its 
 factories constituted its second line of defense and that 
 the supremacy of the military arm rested largely on the 
 effectiveness of the industrial arm. Since the war, there 
 has been a growing appreciation among the nations that 
 their factories are the keystone of their economic and 
 social well-being. The eagerness with which the nations 
 in the invaded area have set about to rebuild the factories 
 destroyed is only proof of this. 
 
 The present industrial situation in Germany is therefore 
 of more than ordinary interest. At the outbreak of the 
 war, in 1914, Germany was generally regarded as one 
 of the leading industrial nations in Europe. Her 
 technical skill was admired the world over. As a producer 
 and trader, she was a nation to be reckoned with. 
 
 The loss of the war naturally affected Germany's 
 prestige. At the time of the signing of the armistice, the 
 Emperor had fled and the nation was politically and 
 economically confused. The factories stopped work 
 because the need for war materials, upon which almost all 
 were engaged, no longer existed. Besides, raw materials 
 were lacking. The returning soldiers from the battlefront 
 only swelled the tide of unemployment at home. Dis- 
 
 3 
 
content was everywhere. In the general confusion, to 
 which allusion has already been made, many agitators 
 and dreamers saw an opportunity to foist their particular 
 schemes on the people. Numerous demands for the social- 
 ization of all industry were made. The Government 
 itself was revolutionary and socialistic. It should be 
 remembered that Germany is the home of Karl Marx, 
 of Engels, and of Lassalle. It is the place where scientific 
 socialism has grown up. For sixty years socialization of 
 the means of production was talked of in Germany. 
 Bit by bit this program has been abandoned. In the recent 
 election to the Reichstag, the extreme radical socialists 
 have been returned in larger numbers than heretofore, 
 but whether extremely radical measures will be put into 
 effect is problematic. In any case, the action that Ger- 
 many will take will directly or indirectly influence other 
 countries. 
 
 Furthermore, labor has grown considerably in power 
 in Germany. Organization of workmen has proceeded 
 to such lengths that the unorganized worker is the excep- 
 tion rather than the rule. The labor unions, with their 
 newly won power, have striven to put into effect their 
 entire program. But again changes in their purposes are 
 to be noted. For example, the trade unions had first 
 insisted on the acceptance by employers of an 8-hour day; 
 subsequently the 8-hour day was made compulsory by 
 law. With the growing recognition of the importance of 
 increased production, labor has shown a willingness to 
 consider working longer hours. The great hindrance to 
 adoption of a longer workday is organized labor's fear 
 that if the 8-hour day principle is relinquished, even 
 temporarily, the struggle for it may have to be refought. 
 Again, the attitude toward piecework has been changing 
 from one of open opposition to one of tolerance. In other 
 directions important changes of attitude are to be noted. 
 Instead of hostility to the employing class, the trade 
 unions have shown a spirit of cooperation. All this 
 is significant. 
 
 Yet, while labor in Germany is almost completely 
 organized and the Government has been encouraging 
 organization among employers and employees, and has 
 practically forced collective dealing between them, it 
 should be noted that the open-shop principle has been 
 recognized as a basis for all relations between employer 
 and employee. Under the Works Councils Law, for 
 
example, it has been provided that "the employment of 
 any person must not be conditioned upon his political, 
 religious, or trade union activities," and that "beyond 
 this rule and so long as he abides within the rules fixed, 
 the employer is free to employ, or to refuse to employ, 
 any person as he will. The Works Council has no right 
 to interfere." The employee, if dismissed, has a right to 
 appeal to his Group Council if he believes that his dis- 
 charge was due to membership in a particular race or 
 family or on account of political, religious, military, or 
 trade union activities. Thus union influence, powerful 
 as it has been, has recognized the justice of the open-shop 
 principle and has acceded to its adoption as part of the 
 law. 
 
II 
 
 A GENERAL SURVEY OF LABOR CONDITIONS 
 IN GERMANY 
 
 In Germany, as in all the countries affected by the war, 
 the power of the working classes has increased consider- 
 ably. Wartime conditions forced Germany to depend 
 almost completely on her own resources. The war was 
 so severe, its duration so long, and its requirements so 
 great, that the securing of an uninterrupted supply of 
 war materials became the prime necessity. Every con- 
 cession that was conducive to this end had to be made. 
 Demands, whether justified economically or not, had to 
 be met, for only in that way could assurance be had that 
 the economic machinery of the entire nation would not 
 be brought to a standstill. 
 
 The greatly augmented power of the working classes, 
 which was acquired during the war, underwent an even 
 more extraordinary increase following the outbreak oi 
 the revolution in November, 1918. The most distin- 
 guishing feature of this vastly increased power of labor 
 is to be found in the development of the trade unions, 
 particularly of the so-called "Free" unions. 
 
 It should be noted that in Germany the trade union 
 movement dates from the end of the '60's of the last 
 century. It was then that Germany began to come 
 forward as an industrial power. It should be noted also 
 that in Germany, unlike the situation in other countries, 
 socialism and trade unionism have moved forward to- 
 gether. Their development has not been marked by the 
 same attitude of hostility which has characterized the 
 movement in other industrial nations. The reason for 
 this is that the socialist movement anteceded the trade 
 union movement. From the beginning the socialists 
 favored and encouraged the formation of trade unions. 
 The two movements have thus grown side by side, political 
 and industrial organization having been generally regarded 
 as parts of the same movement. Most of the German 
 trade unions are socialistic in their sympathies. There 
 are, however, some minor non-socialist unions which 
 
are called "Yellow" unions to distinguish them from the 
 "Red" unions, which support the Social Democrats. 
 The "Yellow" unions are, on the whole, less militant than 
 the others and for this reason have been more generally 
 favored by employers. 
 
 The German unions are divided into a number of im- 
 portant groups, namely: The "Free," the Hirsch- 
 Duncker, the Christian, and the Polish. The "Free" 
 unions are socialistic and believe in the socialism of 
 Karl Marx and in the class struggle; politically they are 
 allied with the Social Democrats. The Hirsch-Duncker 
 unions are modelled after the trade unions of England; 
 they believe in bridging the gulf between the classes 
 through peaceful evolution; politically they are not 
 allied with the Social Democrats. The Christian unions 
 decry the agnosticism of the others; politically they are 
 allied with the Center, or Roman Catholic, Party. The 
 Polish unions cater to those of Polish speech and nation- 
 ality; their strength is in the eastern provinces of Ger- 
 many. Of these, the "Free" trade unions are by virtue 
 of their membership the strongest. 
 
 Early in 1916 most of the trade unions showed a 
 sharply depressed membership as compared with pre-war 
 conditions. By the time of the signing of the armistice, 
 however, a comparatively high figure had been attained. 
 Because of the enormous number of persons called into 
 war service, this level was naturally not so high as in 
 the pre-war period. But in some cases — in the Metal 
 Workers' Federation, for example — it was at the pre-war 
 level. After the armistice, there took place an increase 
 in trade union membership which is without parallel 
 in trade union history. The changes in the membership 
 of the "Free" trade unions indicate the general trend 
 within the ranks of organized labor. For example, the 
 membership of the "Free" unions combined in the 
 General Federation of Trade Unions was 1,865,962 before 
 the war. In 1916 it stood at 715,058. At the time of 
 the armistice it was 1,203,453. In September, 1919, it 
 amounted to 5,327,600, and it reached a total of 7,000,000 
 by the end of that year. In March, 1920, it had risen to 
 7,500,000. The changes within the "Free" unions to 
 September, 1919, are indicated by the following table: 
 
CHANGES IN MEMBERSHIP OF FEDERATIONS OF THE GERMAN 
 "free" trade UNIONS, WITH MEMBERSHIP OF 100,000 
 OR OVER, IN SEPTEMBER, I919: 
 
 Federation 
 
 Before 
 the 
 War 
 
 1916 
 
 At signing 
 of the 
 
 Armistice 
 (1918) 
 
 September 
 1919 
 
 Metal Workers . . . 
 Factory Workers . . 
 Transport Workers . 
 Mine Workers . . . 
 Railroad Workers 
 
 631,991 
 207,330 
 228,207 
 101,956 
 
 247,360 
 80,545 
 58,597 
 53,404 
 (Founded) 
 72,948 
 6,249 
 56,747 
 
 24,271 
 68,249 
 
 25,390 
 21,298 
 
 447,197 
 119,820 
 
 74,443 
 138,470 
 
 55,653 
 
 82,311 
 8,936 
 
 74,056 
 
 36,427 
 99,021 
 
 39,574 
 27,545 
 
 1,350,000 
 505,000 
 450.000 
 422,600 
 420,000 
 
 Building Trades . . 
 Agricultural Workers 
 Textile Workers . . 
 Office and Clerical 
 
 Workers . . 
 Woodworkers . . . 
 Municipal and State 
 
 Employees .... 
 Garment Workers . . 
 
 309,562 
 
 22,531 
 
 133,034 
 
 35,219 
 192,465 
 
 54,522* 
 49,145 
 
 400,000 
 400,000 
 370,000 
 
 350,000 
 310,000 
 
 250,000 
 100,000 
 
 Total .... 
 
 1,865,962 
 
 715,058 
 
 1,203,453 
 
 5,327,600 
 
 * Members of societies. 
 
 :iQt trade unions 
 
 
 
 
 It may be noted, also, that before the war persons en- 
 gaged in public employment were not permitted to become 
 members of trade unions. During the war, however, 
 unions of public employees began to be formed, and 
 today they are organizations of great strength. Thus, 
 the "Free" Union of Railway Employees had about 
 55,000 members at the end of the war; at present it has 
 over 400,000. Similarly, there is a labor Union of Muni- 
 cipal and State Employees with a membership of over 
 250,000. Office and clerical employees, who were formerly 
 loath to unite in trade unions, have combined into a 
 strong organization, based on the socialistic principles 
 of the "Free" unions, and have affiliated themselves 
 with the General Federation of Trade Unions, which 
 formerly comprised manual workers only. Viewed in 
 the large, it may be said that the number of employees 
 in Germany, whether manual or clerical workers, who 
 are not organized is- small. Only here and there one 
 finds a workman who is not a member of a labor organiza- 
 tion. 
 
 The result of this development in organization has 
 been twofold. In the first place, it has wrought changes 
 within the trade unions themselves which may prove 
 of importance. The membership is largely new and 
 is composed of younger persons who have neither the 
 
traditions nor the restraint of the older members. The 
 situation from the trade unions' point of view is clearly 
 depicted in an article in the Correspondenzblatt of 
 the General Commission of German Trade Unions under 
 date of September 20, 1919. The article, in commenting 
 on the rapid increase in membership of the "Free" 
 trade unions, states : 
 
 "German 'Free' trade union membership is making rapid 
 strides from the sixth into the seventh million. Considerably 
 more than half of the members are persons who have joined a 
 trade union for the first time. These must be trained to be 
 good trade unionists. This training has for many years been 
 the task of the trade unions, but it has never been so big and 
 difficult a task as it is now. Heretofore, the old members 
 were in the majority in the local unions, district councils, 
 federations and conferences. Now, the new members are in 
 the majority. The minority has to teach the majority. The 
 new members have been in the trenches for four years and 
 their experiences have left a mark. They are not shy and re- 
 tiring, as new members were in the old days. The characteristic 
 of the workers today is a deep-seated feeling of bitterness and 
 mistrust toward everything and everybody. All this must 
 be taken into consideration." 
 
 In the second place the increased membership has 
 vastly strengthened the power of the trade unions so that 
 working conditions are now fixed in form and in method 
 different from that prevailing before the war. Under 
 the monarchical rule, the large industrial employers 
 did not as a rule recognize the trade unions as the legiti- 
 mate representatives of labor, and invariably declined 
 to negotiate with them. Scarcely had a week elapsed 
 after the signing of the armistice and the overthrow 
 of the Imperial Government than it became clear that 
 trade union influence would be felt as neyer before in 
 the political and economic life of the nation. Under 
 the pressure of new conditions employers were forced 
 to alter their policy and to deal with the unions. Negotia- 
 tions between employers' associations and trade unions 
 in some industries (mining and metal trades, for example) 
 were in progress even before the revolution, but the 
 process of collective negotiation was hastened by the 
 revolution. On November 16, 1918, twenty-one of the 
 largest employers' associations, representing almost every 
 important industrial group, and seven trade union 
 federations entered into a joint agreement to govern their 
 
future industrial relations. By some of the German 
 newspapers this agreement has been termed the Magna 
 Charta of German labor. It was considered of such im- 
 portance that it was subsequently published in the 
 Reichsanzeiger, the official organ of the Government. 
 Its provisions were as follows : 
 
 "1. The trade unions shall be recognized as the legitimate 
 representatives of labor. 
 
 "2. The restriction of freedom of combination and associa- 
 tion of male and female workers shall not be permitted. 
 
 "3. Henceforth, employers and employers' associations shall 
 not concern themselves with the workmen's societies (the 
 so-called "Yellow" or non-militant trade unions) and 
 shall not support or subsidize them, either directly or 
 indirectly. 
 
 "4. All workmen returning from military service, on reporting 
 for work, shall be entitled to immediate reinstatement 
 into the position occupied by them before the war. The 
 employers' and workers' federations affected shall use all 
 possible efforts to provide raw materials and orders sp 
 that the above obligation may be complied with. 
 
 "5. Joint regulation and equipartisan administration of the 
 employment offices shall be in effect. 
 
 "6. The working conditions of all male and female employees 
 are to be determined in accordance with conditions in the 
 trade in question through collective agreements with the 
 trade organizations of workmen. Negotiations relating 
 thereto shall be immediately initiated and be concluded 
 as soon as possible. 
 
 "7. In each establishment employing at least fifty workers, a 
 workmen's committee shall be appointed which shall 
 represent the workers and, in cooperation with the em- 
 plpyers, shall see to it that the working conditions are 
 regulated in accordance with the collective agreement. 
 
 "8. The collective agreements shall provide for the establish- 
 ment of conciliation and arbitration boards composed of 
 an equal number of employers' and employees' repre- 
 sentatives. 
 
 "9. The maximum regular daily hoursof work shall befixed for 
 all establishments at eight hours; reduction of wages 
 owing to a shortening of the hours of work shall not take 
 place. 
 
 "10. For the enforcement of this agreement, as well as for the 
 regulation of further measures necessary during demobili- 
 zation to maintain economic life and to guarantee the very 
 existence of the working people, especially those seriously 
 10 
 
disabled in the war, the interested employers' and work- 
 men's organizations shall establish a joint central com- 
 mittee on an equipartisan basis and representing the 
 various trades. 
 
 "11. This central committee shall also decide all fundamental 
 problems, in so far as such arise, in the collective regula- 
 tion of wage and working conditions and shall mediate 
 disputes in which several occupational groups are 
 simultaneously interested. 
 
 "12. Its decisions shall be binding upon both employers and 
 employees unless they are contested within one week by 
 one of the trade organizations affected. 
 
 "13. This agreement shall be in force on the day of its signature 
 and shall, without prejudice to their local regulation, 
 remain in force indefinitely, with the mutual right of its 
 abrogation on three months' notice. This agreement, in 
 its intent, shall be alike applicable to the relations be- 
 tween employers' and salaried employees' organizations." 
 
 Instead of individual bargaining between management 
 and employee, trade unions and employers' associations 
 now jointly fix the conditions of work for the trade or the 
 industry. Individual contract has given way to collective 
 contract. It is, of course, recognized that in collective 
 dealing an individual employer is at a disadvantage in 
 dealing alone with a powerful, united labor organization. 
 The individual employer, however, finds protection in 
 the strength of the employers' organization to which 
 he finds it necessary to belong. The high degree of 
 organization among employees has thus been paralleled 
 by similar organization among employers. 
 
 A still further step has been taken in the organization 
 of fourteen National Labor Commissions with a Central 
 Labor Commission as a superstructure. The development 
 of these Labor Commissions is not to be directly ascribed 
 to the influence of the revolution. During the war 
 certain groups of employers — the metal trades employers 
 of Berlin, for example — became impressed with the 
 thought that, irrespective of the outcome of the war, the 
 welfare of German economic life required the closest 
 kind of cooperation with the representatives of labor. 
 In various localities during 1918 negotiations were begun, 
 having as their basis the recognition of the unions as 
 organizations with equal rights and privileges. By 
 December, 1918, this practice was recognized by statute. 
 Thus, the preamble of the Regulations Governing the 
 Central Labor Commission states : 
 
 11 
 
"Deeply impressed by the knowledge and responsibility 
 that the reconstruction of our economic life requires the 
 bringing together of all economic and intellectual forces and 
 requires also thorough cooperation of all parties, the organi- 
 zations of industrial and manufacturing employers and em- 
 ployees hereby unite in the establishment of a Central Labor 
 Commission." 
 
 The Central Labor Commission has for its purpose the 
 joint solution of all economic and socio-political problems 
 affecting the trade and industry of the entire country 
 as well as the labor laws and administrative measures 
 relating thereto. The functions of each of the fourteen 
 National Labor Commissions are simply the settlement 
 of labor questions affecting trades and industries with 
 which they are connected. 
 
 All this has been accomplished but not without the 
 sharpest friction. During 1919 violent and protracted 
 strike movements took place. The causes of these 
 conflicts are twofold. 
 
 In the first place, the revolution brought into the senti- 
 ments of men a great confusion and complexity. Honest- 
 minded dreamers of the agitator type promised the 
 workmen a heaven on earth. They led them to believe 
 that by sudden and violent overthrow of the whole 
 economic structure and through the "socialization" 
 of industry, the entire social question could be solved. 
 All that was needed to accomplish the miracle, 
 they urged, was the assumption of control by a united 
 proletariat. 
 
 The other cause was the real economic misery into which 
 all classes of employees were plunged as a result of the 
 war. Money depreciated to a figure that no one had 
 estimated. The people were hungry and raw materials 
 were lacking. The most essential articles, food and 
 clothing, for example, had to be imported at prices which 
 were continually rising. Again and again it was necessary 
 to alter the wages which were fixed for labor. There 
 was thus interjected into the normal living conditions 
 of the people an uninterrupted succession of disturbances. 
 Unfortunately, the peaceable method of regulating 
 wages by mutual understanding was pursued only rarely. 
 This was particularly true of the first six months of 1919. 
 
 Amidst such conditions, the leaders of the radical 
 groups of workers proceeded shrewdly to draw a purely 
 
 12 
 
economic conflict into the political arena, and in numerous 
 cases in which economic questions might have been 
 settled or had already been settled, the disturbance of 
 the economic life of the people was continued deliberately 
 in order that the social revolutionists might realize their 
 ideas. Every effort on the part of employers to arrive 
 at an amicable settlement of existing problems was 
 violently opposed by the more radical groups of workers. 
 But at last gradually, and then more widely, the know- 
 ledge began to grow among groups of workmen that 
 along these lines there could be no progress and that if 
 Germany were to rise again the economic structure 
 must be maintained and not destroyed. 
 
 The extreme socialist idea of workmen's councils, 
 after the Russian model, the realization of which was 
 sought in Germany for so long a time, has by the enact- 
 ment of the new Works Councils Law been largely 
 trimmed of its extremely radical tendencies. The aim of 
 the Works Councils Law is not to force out of exist- 
 ence the regular trade unions; the law rather clearly recog- 
 nizes the competence and jurisdiction of the regular trade 
 unions. Thus Section 8 of the law states : 
 
 "The right of economic associations of manual and clerical 
 employees to represent the interests of their members shall 
 not in any way be limited by the provisions of this law." 
 
 The purpose of the Works Councils is not the joint 
 adoption of wage agreements, but rather the supervision of 
 agreements which have been concluded by the central 
 organizations. 
 
 In Berlin, struggles for the leadership of the trade 
 unions have been fought with great vehemence and still 
 continue, with the Communist faction and more radical 
 groups steadily increasing. Dealing with the unions 
 has thus become very difficult; nevertheless, even among 
 this group there are a number of leaders who urge modera- 
 tion and who warn against shattering the economic 
 structure by political machinations. The increase in 
 power of the more moderate element of the working 
 classes depends chiefly on how far the rates of exchange 
 will improve and to what degree the price level may be 
 lowered so that the worker with his wages can be enabled 
 to obtain a sufficient quantity of food and the necessities 
 of life to cover his absolute requirements. As a rule, 
 
 13 
 
the German laborer is peaceful, and only when conditions 
 are so peculiar as to foster discontent do political agitators 
 have any effect on him. Nevertheless, the fact remains 
 that there are numerous difficulties to be overcome and 
 that on every side numerous "volcanoes" exist. 
 
 A wor(i remains to be said regarding the efficiency of 
 German labor. Due to the introduction of the 8-hour 
 day, due largely, also, to a general aversion to work ascrib- 
 able in part to malnutrition, but in part, however, to the 
 influence of the war and the revolution, production during 
 the year 1919 showed a serious decline. The German 
 Industrial and Trade Conference, composed of employers, 
 in a report which they submitted to the National Assembly 
 stated with regard to the limitation of the hours of work 
 that: 
 
 "The assurance given in the past by the workers' represen- 
 tatives when demanding a reduction of working hours, that 
 such reduction would in no case involve diminution of pro- 
 duction, has undoubtedly not been borne out. The reports 
 are almost unanimous that production has fallen off in most 
 cases, not only in proportion to the reduction in the hours of 
 labor, but even considerably beyond this, owing to less 
 intensity in work." 
 
 The Conference, however, recognized that: 
 
 "Among the reasons for the lessening of the intensity of 
 labor, chief place is given to the abolition of piecework wages, 
 also the excitement aroused by the political conditions, the 
 altered conception of the relation between employers and 
 workers, the insufficient nourishment, the long abstention 
 from regular employment, and the lessened apprehension of 
 dismissal due to the high unemployment benefits. As to the 
 extent of the diminution, the estimates vary considerably. 
 The most reliable figures come from the coal mining industry, 
 which puts the reduction in output at 40 per cent; other esti- 
 mates vary between 20 and 50 per cent." 
 
 Improvement in production has, however, been noted 
 since the beginning of the year (1920). Gradually it is 
 being recognized by the Germans that they must work 
 not less but more than they did before, so that while at 
 the time the 8-hour day was introduced it was regarded 
 as something holy and inviolate, lengthening of the hours 
 of work is now being seriously considered. As an indica- 
 tion of this trend, the coal miners, who had previously 
 agreed to demand a reduction of the present 7-hour day 
 
 14 
 
to six and to strike if this were refused, , have given up 
 their demand and have gone so far as to pledge themselves 
 to work an extra half shift each week. They have agreed 
 to do this in return for a 100 per cent increase in wages, with 
 special provision in regard to the cost of living. Since 
 January, 1920, it has been agreed in several other indus- 
 tries where the 8-hour day has been provided in the wage 
 contract, that wherever the 8-hour day included rest 
 periods these shall be omitted, and that the actual and 
 not the nominal 8-hour day is to be the standard. It is 
 significant, also, that the trade unions — the important 
 Metal Workers' Federation, for example — are urging 
 increased production. 
 
 The Metallarbeiter-Zeitung, the official organ of the 
 Germafi Metal Workers' Federation, which is one of the 
 largest and most influential of German trade-union 
 organizations, stated not long ago: 
 
 "The war has reduced the purchasing power of money and 
 it is still falling. The prices of all necessaries of life have risen 
 very seriously for various reasons; shortage and the fact 
 that the demand exceeds supply is a principal cause, but the 
 substitution of a paper for a gold currency and the loss of the 
 war itself are important factors. The result has been a 
 widespread demand for higher wages, and since November, 
 1918, the wages have risen considerably, but no one can 
 assert that the conditions of living have improved; it is Im- 
 possible that they should, because the prerequisites are 
 lacking. . . . 
 
 "Throughout the whole country there is only one-half of 
 the foodstuffs that it contained before the war. This con- 
 dition cannot be remedied by raising wages and salaries or 
 by the issue of paper money. Increase of production at home 
 and increase of import from abroad is the only cure. There 
 is food enough abroad if we can pay for it, but we have not 
 the means. Foreigners will have nothing to do with German 
 paper money, and we must pay either in gold or goods. 
 Since the revolution, the gold reserve of the national bank 
 has fallen from 2,500,000,000 to 1,000,000,000 marks, and 
 the difference has been used to purchase foodstuffs. This 
 high road to bankruptcy cannot be followed for long; we 
 must export goods, and to improve the conditions of life we 
 must produce. If goods produced in Germany are too dear — 
 and high wages and feeble effort may have this result — we 
 are at once faced by foreign competition; no one will buy our 
 goods; our conditions of living will be made worse; and any 
 person who advises the workers otherwise is only fooling them. 
 Socialization will not alter the state of affairs unless it affects 
 
 15 
 
the quantity and kind of goods produced. It will come, 
 however, and whether sooner or later depends on a variety 
 of circumstances, not the least of which will be the attitude 
 of the Entente toward us. But socialization will do no good 
 unless it brings with it a great increase in production of goods, 
 and the mere raising of wages and salaries is purely illusory. 
 Every increase of wages entails an equivalent rise in price; 
 for wages plus the employer's profit determine the price of 
 goods. At present, however, profits are not on the up grade. 
 Hence the mere rise of wages has effects analogous to the 
 injection of morphine. 
 
 "The need of the hour is a fall in prices and a rise in pro- 
 duction. The Government, by paying out 1,500,000,000 
 marks for foodstuffs, has undoubtedly taken a right step, but 
 the results of this step will be jeopardized if it is followed by 
 further demands for an increase in wages and if production is 
 checked by constant strikes. The strike today is a two-edged 
 weapon; the workers need not renounce it as a weapon, but 
 it should only be used after full and serious consideration of 
 the evil conditions under which we are living and in no case 
 without the fullest regard for trade-union principles." 
 
 IC 
 
Ill 
 
 THE UNEMPLOYMENT PROBLEM IN GERMANY 
 
 The sudden termination of the war in November, 1918, 
 resulted in a necessary change from a war to a peace- 
 time economy. Factories employing hundreds to thou- 
 sands of persons were shut down as if overnight, the 
 articles which they were producing being no longer in 
 demand. Furthermore, the immediate return of those 
 participating in the war naturally created a great volume 
 of unemployment. The terms of the armistice agreement 
 required speedy demilitarization of Germany's armies; 
 consequently in the space of a few weeks a swelling 
 countercurrent of millions of soldiers made the unem- 
 ployment situation extremely acute. Furthermore, the 
 unsuccessful outcome of the war, and the grave political 
 crisis which followed in its course, accentuated the 
 unemployment situation. Thus there began to develop 
 a vast army of unemployed persons which at the end of 
 1918 and during the early part of 1919 aggregated several 
 million persons within the bounds of Germany. 
 
 To meet this situation the Government, on November 
 13, 1918, issued an Order Governing the Payment of 
 Unemployment Grants. Under this Order the authorities 
 of the municipalities were required to pay unemployment 
 benefits to unemployed residents in the municipality. 
 The country was divided into various districts based on 
 differences in the cost of living, and within these districts 
 the following rates of unemployment pay per day were 
 fixed: 
 
 For 
 
 e Persons 
 
 
 
 In Localities within District Groups 
 ABC D&E 
 
 (a) over 21 
 {b) 16 to 21 
 (c) 14 to 16 
 
 years 
 years 
 years 
 
 of 
 of 
 of 
 
 age 
 age 
 age 
 
 6.00 
 4.25 
 2.50 
 
 5.00 
 3.50 
 2.25 
 
 4.00 
 3.00 
 2.00 
 
 3.50 Ma 
 
 2.50 
 
 1.75 
 
 2. Female Persons 
 
 (a) over 21 years of age 3.50 3.00 2,50 2.25 " 
 
 (*) 16 to 21 years of age 2.50 2.25 2.00 1.75 
 
 (c) 14 to 16 years of age 2.00 1.75 1.75 1.60 
 
 Supplementary family allowances to married persons 
 were also fixed: 
 
 17 
 
For In Localities within District Groups 
 
 ABC D&E 
 
 (a) the wife 1.50 1.50 1.25 1.00 Marks 
 
 (i) the children and 
 other members en- 
 titled to assistance 1.00 1.00 1.00 0.75 " 
 
 Of these grants it was specified that the National 
 Government should pay one-half, the particular States 
 one-third, and the remainder, one-sixth, should be paid 
 by the Municipality. 
 
 Various difficulties, however, were soon encountered. 
 While the Order Governing Unemployment appeared 
 most necessary at the time of its promulgation, its effects 
 In many ways were very unsatisfactory. The rates of 
 allowance were so high in comparison with wages, which 
 at that time had not yet risen to excessive peaks, that 
 the incentive to work was frequently lost. 
 
 The Deutscher Reichsanzeiger of January 29, 1919, for 
 example, contains a statement prepared by the German 
 Department of Labor Statistics which says: 
 
 "In December (1918) the principal industries showed for 
 the most part an accentuated tendency towards reduced 
 activities as compared both with the preceding month and 
 with the corresponding month of 1917. Unemployment con- 
 tinued to increase in a marked degree. This was not alto- 
 gether due to the scarcity of work brought about in many 
 localities by the shortage of raw materials, but was to some 
 extent caused by disinclination for work. In many places 
 the principal cause of the scarcity of labor was stated to be the 
 high rate of unemployment pay. The many strike move- 
 ments and the political situation in Germany also had a very 
 adverse effect upon the labor market. Thus, for example, it 
 is reported from Frankfort-on-Main that many factories 
 could have taken on unemployed workers if the wages de- 
 manded had not been quite out of proportion to the present 
 earning power. As a result, employers were reluctant to 
 undertake fresh business, although in certain trades large 
 contracts were waiting to be signed." 
 
 Again on February 26, 1919, the Deutscher Reichs- 
 anzeiger contains the following, statement of the German 
 Department of Labor Statistics : 
 
 "Reports received by the German Department of Labor 
 Statistics indicate that the general industrial situation 
 underwent further deterioration during January (1919). 
 Violent disputes concerning wages, which extend to wider and 
 wider circles, often without any comprehension of the inter- 
 
 18 
 
dependence of economic interests, and which threaten ulti- 
 mately to become disastrous for the Nation, together with 
 wanton strikes, which are partly political in nature, menace 
 the economic foundation of the Empire. The various branches 
 of industry are most heavily burdened by these things, and 
 the very urgent economic reconstruction is more and more 
 delayed. Reorganization in industrial undertakings is 
 rendered impossible, and in this way the spirit of enterprise is 
 practically paralyzed. In addition, there are also difficulties 
 arising from the increasing unwillingness to work and the de- 
 cline in production among a large part of the industrial popu- 
 lation, which is to some extent due to insufficient nourishment 
 and partly to other causes, as, for example, the transition 
 from piece-wage to time-wage. ... In spite of the various 
 revisions of the Order of November 13th, governing assistance 
 to the unemployed, which was based on the principle of obli- 
 gation to work, the number of persons without employment 
 has largely augmented. In the whole of Germany it increased 
 from about 500,000 at the beginning of January to over 
 900,000 at the beginning of February." 
 
 According to the Frankfurter-Zeitung of October 12, 
 1919, there was expended in unemployment grants 
 throughout Germany from November 13, 1918, the date 
 when the initial Order Governing Unemployment was 
 issued, to October 4, 1919 — a period of less than 
 eleven months — a total of 4,500,000,000 marks. From 
 December, 1918, to September, 1919, according to the 
 Miinchner Neueste Nachrichten of October 30, 1919, the 
 city of Leipzig expended 42,500,000 marks for unemploy- 
 ment grants; the magnitude of this sum is apparent when 
 it is noted that during the three-year period, 1915-1917, 
 the city of Leipzig spent 3,000,000 marks for similar 
 purposes. 
 
 While the expenditure of these extraordinary sums 
 indicates the great volume of unemployment, it gives 
 evidence also of the serious abuses of the unemployment 
 grants. On the one hand there was lack of desire to work, 
 particularly so since the unemployment grants made it 
 possible for one to live without working. Frequently 
 those receiving unemployment allowances instead of 
 securing permanent work carried on a lively and very 
 profitable street peddling, and also by all sorts of odd jobs 
 earned considerable sums. On the other hand, the 
 authorities in charge of the unemployment grants func- 
 tioned very imperfectly. In the turbulent months from 
 the revolution until the middle of the year 1919, 
 
 19 
 
governmental administration was lax, and because of the 
 defective measures for control and supervision of the un- 
 employment allowance various serious abuses continued 
 to creep in. To remedy these the Order of November 13, 
 1918, was amended by another dated January 15, 1919, 
 and again amended on April 16, 1919, and February 1, 
 1920. 
 
 Under the terms of this last Order {Reichs-Gesetzblatt, 
 Jahrgang, 1920, Nr. 17, pp. 98-108) it was provided as 
 follows : 
 
 The Municipalities are required to establish a system of 
 unemployment benefits separate from Poor Relief. Con- 
 tributions to the unemployment fund shall be in the following 
 proportions: from the Municipal authorities two-twelfths; 
 from the State to which the Municipality belongs, four- 
 twelfths, and from the Federal Government six-twelfths. 
 The Federal Government's appropriation may be increased in 
 the case of Municipalities weak in resources. The cost of 
 administration shall be met by the Federal Government. 
 
 Authority to grant relief shall rest with the Municipality 
 in which the unemployed person maintains his residence. 
 Discharged soldiers in need of relief immediately after their 
 release from the army are to receive four weeks' benefit in 
 the place to which they are dismissed; thereafter they are to 
 receive relief on the same terms and conditions as civilians. 
 Except where this is impossible, or where a family has estab- 
 lished a new domicile, all persons are required to return to 
 the places in which they were resident prior to August 1, 
 1914, in order to be eligible for benefit. 
 
 Unemployment benefits are to be granted only to those over 
 sixteen who are able and willing to work but unable to secure 
 a position. Unemployment due to strikes or lockouts is not to 
 be regarded as cause for benefit. At least four weeks must 
 elapse after the termination of a labor dispute before un- 
 employment benefit may be drawn. Persons with incomes, 
 except where these are insufficient for subsistence, are in- 
 eligible for benefit. Dependents of a person receiving relief 
 are not entitled to individual benefit, but a supplementary 
 family payment may be made. The total allowance of any 
 family shall be limited to two and one-half times that of the 
 maximum benefit of any member thereof. Refusal of employ- 
 ment offered by the authorities shall be regarded as suffi- 
 cient ground for termination of benefit privileges. 
 
 Municipal Authorities are permitted to fix the kind and 
 amount of allowance, and a short waiting period, not to 
 exceed one week, as a condition determining unemployment. 
 In lieu of money benefit, the allowance may be paid in food 
 
 20 
 
or in other useful articles, in partial payment of rent, etc. In 
 no case is the allowance of a family to exceed one and one- 
 half times the prevailing wage in the locality and it is urged 
 that the allowance shall at least equal the prevailing local 
 wage. A maximum scale of benefits per day is fixed as follows: 
 
 For In Localities within District Groups 
 
 1. Male Persons A B C D & E 
 
 (a) over 21 years 6.00 5.00 4.00 3.50 Marks 
 
 (*) under 21 years 4.25 3.50 3.00 3.50 
 
 2. Female Persons 
 
 (a) Over 21 years when 
 they do not live in 
 the household of an- 
 other 5.00 4.50 3.50 3.00 " 
 
 (i) Over 21 years when 
 
 they live in the 
 
 household of another 4.25 3.50 3.00 2.50 
 (c) Under 21 years 3.00 2.50 2.25 2.00 
 
 Supplementary family allowances must not exceed the 
 following rates per day: 
 
 For In Localities within District Groups 
 
 A B 
 
 C 
 
 D&E 
 
 (a) the husband or wife 2.50 2.25 
 
 2.00 
 
 1.75 Marks 
 
 Q>) the children or other 
 dependents entitled 
 to out-of-work al- 
 lowances 1.75 1.75 
 
 1.50 
 
 1.25 
 
 Special winter allowances may also be granted and nationals 
 of other countries resident in Germany may, if their own 
 nation extends similar privileges to German citizens, receive 
 unemployment allowances. 
 
 Relief Committees are urged to cooperate with the authori- 
 ties in securing employment and to regard the system of un- 
 employment benefits as a temporary measure of relief. Loans 
 or grants of money from unemployment funds may be made 
 by the Ministry of Labor wherever they will be used for the 
 purpose of increasing opportunities for work. 
 
 The Order is not intended to interfere with unemployment 
 benefits paid by the trade union organizations. It is provided, 
 however, that the trade union may be made the agency of 
 payment of relief, if under its constitution and by-laws it 
 grants allowances to unemployed members, and if it furnishes 
 a guarantee that payments will be made in conformity with 
 the provisions of the Order. 
 
 The decree, with the exception of the paragraph covering 
 benefit of foreign citizens resident in Germany and unem- 
 ployed, is eflFective February 1, 1920. 
 
 21 
 
This last Order represents a substantial improvement 
 over the previous Orders. Thus, Section 2 of the New 
 Order contains the sentence: 
 
 "The purpose of these measures is in every single instance 
 to put an end to unemployment by the resumption of work. 
 Only in so far as it is impossible to accomplish this purpose 
 shall allowances in conformity with the following schedule be 
 granted." 
 
 Provision for the unemployed is thus definitely recog- 
 nized as a measure of relief, which without exception is to 
 be regarded as temporary in character. 
 
 Another new feature is that the allowance is to be paid 
 only to persons sixteen years of age and over, whereas under 
 the old Order all unemployed persons over fourteen years 
 were entitled to unemployment relief. 
 
 The following statement in Section 6 of the Order 
 is important: 
 
 "Unemployment is not to be regarded as a consequence 
 of the war when its predominant cause is a strike or a lockout. 
 A minimum of four weeks shall elapse after the outbreak of a 
 strike or lockout before the Municipalities may grant un- 
 employment benefits to employees under the terms of the 
 general provisions of this Order." 
 
 The employment exchanges have, it is true, already 
 refused the payment of unemployment benefits in cases 
 of unemployment consequent upon a strike, but in many 
 instances differences of opinion over the interpretation 
 of this section have arisen and it appears that some 
 more definite statement under this head will have to 
 be enunciated. 
 
 Further along in Section 6 of the Order is the following 
 statement, which is also important: 
 
 "Dependents of an unemployed person receiving relief 
 who would have a claim upon him for support based on legal 
 family relationship, or who would have such a claim were 
 he capable of working, and who up to the time of his need 
 of relief were supported by him wholly or mainly shall not 
 be granted any separate unemployment allowance. In such 
 cases the allowance shall be proportionately increased (sup- 
 plementary family allowance). 
 
 Further along in the same paragraph it is specified that: 
 
 " Separate allowances received by the several members of a 
 family living together in a common household shall, in their 
 
 22 
 
total amount, not exceed two and one-half times the maximum 
 allowance to which any member of the family is entitled. In 
 the interpretation of this rule the head of the family shall be 
 considered a member thereof." 
 
 These provisions have proved necessary in view of the 
 inordinate sums which many families would receive were 
 their unemployment allowance itemized according to the 
 individuals within the family group, and the sum totaled. 
 
 Significant, also, is the statement in Section 9, that the 
 supplementary family allowances which an unemployed 
 person may receive must in the aggregate not exceed one 
 and one-half times the allowance to which he is indi- 
 vidually entitled. Thus, an unemployed person receiving 
 an unemployment allowance of six marks cannot receive 
 more than fifteen marks inclusive of his supplementary 
 family allowance. 
 
 The relief allowances for male persons which are speci- 
 fied in the Order now in effect are the same as those fixed 
 in the previous Order. Considering the increase in wages 
 which has, however, taken place in the meanwhile, this is 
 practically equivalent to a reduction in unemployment 
 benefits. The present scale of allowances is, therefore, 
 proving a powerful stimulant to resumption of work. 
 The allowances for female persons have been slightly 
 increased over those formerly in effect. 
 
 Exceptionally important is the new statement in 
 Section 13: 
 
 "It is the duty of the relief allotment committees to work 
 in close harmony with the employment agencies to the end 
 that unemployed persons receiving benefit may secure satis- 
 factory employment with the greatest despatch. For this 
 purpose all persons who have drawn benefit for any consider- 
 able period in a particular district shall, after detailed refer- 
 ence to the Ministry of Labor, be reported to the Central 
 Clearing House or other proper authorities, together with a 
 statement of their fitness for work." 
 
 The relief committees are thus expressly directed not 
 only to grant relief, which is equivalent to paying alms, 
 bufto devote their utmost attention to placing persons 
 in employment. 
 
 The new wording of Section 15 operates in the same 
 direction, for according to it the Minister of Labor is 
 empowered to grant out of the unemployment benefit 
 
 23 
 
funds, loans or contributions for the support of measures 
 designed to terminate unemployment allowances and to 
 create opportunities for employment. 
 
 The special task of the Municipalities will, therefore, 
 be to foster on a greater scale than heretofore con- 
 structive measures for the care of the unemployed. Ut 
 particular importance is the allocation of the labor supply 
 so that workmen may be moved out of localities and occu- 
 pations in which an oversupply of labor exists to those 
 where labor is in demand, such as mining and farming. 
 The chief obstacles to this plan lie, however, in the housing 
 shortage. 
 
 Unemployment has, since February, 1920, shown a dis- 
 tinct decline. The following table is indicative of the 
 situation in Berlin: 
 
 Number of Persons Unemployed 
 
 Date Berlin Greater Berlin 
 
 December 19, 1918 . . . 62,069 93,569 
 
 January 10, 1919 102,735 135,135 
 
 January 26,1919 . . 147,148 199,148 
 
 February 21, 1919 ... . ... 187,288 276,288 
 
 April, 1919 179,727 258,327 
 
 July, 1919 140,485 189,485 
 
 August, 1919 . . . . 100,054 141,854 
 
 October, 1919 78,395 113,395 
 
 January, 1920 59,103 93,303 
 
 As will be seen, the high point was reached in February, 
 1919; since then a steady decline is apparent. 
 
 The immediate task in the efforts to cope with the 
 unemployment problem in Germany seems to be to 
 substitute for an outright and unrestricted allowance 
 granted by the State, an unemployment insurance plan 
 to which employer, employee, and the State shall con- 
 tribute. A law having such an object in view was pre- 
 pared a few months ago by the Ministry of Labor but 
 has not yet been promulgated. Again efforts to effect 
 immediate improvement have been interrupted by 
 political events. 
 
 24 
 
IV 
 THE WORKS COUNCILS MOVEMENT IN GERMANY 
 
 When the revolution of November 9, 1918, broke out 
 there were Immediately set up in all parts of the country- 
 Councils of WorTimen and Soldiers. These were modeled 
 after the Russian Councils, and they were to be found in 
 the field of industry, in commerce, in the administrative 
 service of the Nation, the States, and the Municipalities, 
 and in almost every type of enterprise. These Councils 
 took over to themselves all powers and privileges that they 
 could, depending largely on the amount of interference 
 which they encountered. In many cases the powers which 
 they assumed were little less than seizure of authority by a 
 few aggressive and energetic persons. In December, 1918, 
 all of these Councils were brought together into a vast 
 General Congress of Councils which met in Berlin from 
 December 16 to December 20, 1918. This Congress of 
 Councils was declared to be the single dominant power 
 existing in Germany. From the Congress, the six "dele- 
 gates of the people" who, in the absence of a constitutional 
 government, attended to the business formerly entrusted 
 to the ministers, held their authority. 
 
 For a while it seemed as if the trend of affairs would be 
 the same as that in Russia, but through the efforts of the 
 middle-class elements and of the Majority Socialists it was 
 finally provided that a National Assembly be elected by 
 the people. It should be remembered that following the 
 revolution there was no central legislative or adminis- 
 trative authority in Germany. The system of Soldiers' 
 and Workmen's Councils was in itself a mass of confusion. 
 The National Assembly was, therefore, suggested as a 
 means of putting the young republic on its feet and also 
 of presenting a means for adopting a constitution as a 
 basis for orderly government and providing also such 
 legislative measures as were required. The extreme 
 radicals and Communists naturally favored the Councils 
 after the Russian model, but, notwithstanding their 
 vigorous opposition, the elections to the National As- 
 sembly were held on January 16, 1919, and on February 
 6th following, the National Assembly began its sessions 
 at Weimar. 
 
 25 
 
From this date on the General Congress of Councils, 
 which had derived its powers solely out of the so-called 
 "right to revolt," was no longer to be regarded as the 
 rightful representative of the German people. In the 
 National Assembly the people had by an orderly, equal, 
 and secret vote elected a body which was in a position and 
 was empowered to give expression to their will. Never- 
 theless the power of the Councils was still great, so great, 
 in fact, that in spite of their assumptions of authority 
 without legal sanction and their extraordinary squander- 
 ing of public money, they were for a time tolerated by 
 the Government. A second General Congress of Coun- 
 cils was held from April 8 to April 15, 1919. This Con- 
 gress gave its particular attention to the problem of 
 evolving a systematic plan for creating an organization 
 of Councils. Meanwhile the Government, which after 
 the setting up of the National Assembly had taken an 
 attitude of opposition to the organizations of Councils 
 and urged that the structure of Councils should be de- 
 molished and that all constitutional power should be 
 vested in the National Assembly, had modified its stand- 
 point. In response to general public insistence, the 
 Government promised to develop within the German 
 system of democratic government a body of Works Coun- 
 cils that would have legal standing. 
 
 At the second General Congress of Councils four dif- 
 ferent plans were presented. First, there was the method 
 of organization urged by the Independent Socialists. 
 Under the slogan "AH Power to the Workers' Councils," 
 they sought to establish a Congress of Councils as the 
 highest power in the land and urged that manual workers 
 only should be eligible for election on the Councils. The 
 second plan of organization, fathered by the Majority 
 Socialists, aimed to create Production Councils to be 
 composed of employers and employees which would 
 ultimately become "Chambers' of Labor" in the Nation, 
 the State, and the Municipality. The third plan was one 
 favored by the Government and was in many features like 
 that of the Majority Socialists except that it proposed 
 some different functions for the Councils. The fourth 
 plan proposed by the Democratic Party was not very 
 clearly defined. 
 
 The Congress of Councils came to no conclusion on this 
 question, because the proposals made were in such direct 
 
 26 
 
conflict with one another and no basis for agreement 
 existed. It did, however, result in the splitting up of the 
 Councils, which had so far existed without a legal basis, 
 and a so-called "Central Council of Workmen's Councils 
 of Germany" was created as a central organization of the 
 numerous Councils in Germany. In the elections to this 
 Central Council the Independent Socialists and the Com- 
 munists (Spartacists) took no part. Instead of that, they 
 brought together the Workmen's Councils of Greater 
 Berlin and formed a so-called Executive Council as an 
 organ of their own. While this Executive Council at first 
 included all the Workmen's Councils in Berlin, it was 
 split up by the withdrawal of the Democratic and Ma- 
 jority Socialist Workmen's Councils and also of the so- 
 called "Yellow" or conservative Councils. Thereafter, 
 the Executive Council was composed of the "Red," or 
 extreme socialist, organizations and was to be regarded 
 as the chief organ of those Workmen's Councils in Ger- 
 many which were revolutionary in character and were 
 opposed to the National Assembly and to the con- 
 stitution. 
 
 Meanwhile the National Assembly devoted its main 
 attention to framing a new Constitution for Germany. 
 One of the major features in this task was to determine 
 the organization which should be specified and the 
 authority which should be accorded the Councils in the 
 constitution. Article 165 of the Constitution, as finally 
 framed, provides as follows : 
 
 ARTICLE 165 
 
 "The workers and office employees are qualified to take 
 part with equal rights and in co-operation with the employers 
 in the regulation of wage and labor conditions, as well as in the 
 entire economic development of the productive forces. The 
 organizations on both sides and their unions are recognized. 
 
 "The workers and office employees shall receive legal 
 representation in the Factory Workers' Councils as well as in 
 the District Workers' Councils grouped according to economic 
 districts, and in a National Workers' Council, for the purpose 
 of looking after their social and economic interests. 
 
 "The District Workers' Councils and the National Workers' 
 Council shall meet together with the representatives of the 
 employers and of other interested circles of people in District 
 Economic Councils and a National Economic Council for the 
 purpose of carrying out the joint economic tasks and for co- 
 
 27 
 
operating in the putting into effect of the laws of socialization. 
 The District Economic Councils and the National Economic 
 Council shall be formed so as to provide for the proper repre- 
 sentation therein of all the important trade groups according 
 to their economic and social importance. 
 
 "Social-political and economic-political drafts of laws of 
 fundamental importance are to be submitted by the National 
 Government to the National Economic Council for its opinion 
 before presentation. The National Economic Council shall 
 have the right itself to propose such plans of laws. If the 
 National Government does not agree with it, it shall have the 
 right, nevertheless, to present the proposal to the Reichstag 
 with an exposition of its standpoint. The National Economic 
 Council may have its proposal represented by one of its 
 members before the Reichstag. 
 
 "The Workers' and Economic Councils may have conferred 
 upon them the powers of control and administration in the 
 fields turned over to them. 
 
 "The building up of the Workers' and Economic Councils 
 and the defining of their duties, as well as their relation to 
 other social self-administrative bodies, shall be exclusively 
 matters of the Nation." 
 
 In carrying out this Article 165, the Government in 
 August, 1919, presented a proposed law governing Works 
 Councils. In connection with this proposal, which was in 
 itself of no small significance, there developed among the 
 public and within the National Assembly a discussion of 
 great intensity such as is rarely met with in connection 
 with proposed legislation. The representatives of in- 
 dustry opposed the extensive authority accorded to em- 
 ployees and particularly the right of labor to participate 
 with the employer in the selection and dismissal of workers 
 and also the obligation of industrial establishments to 
 exhibit their books and balances to the Works Councils 
 from time to time. On the other hand, the represen- 
 tatives of the Executive Council previously referred to, 
 and the representatives of those workers who were ex- 
 tremely radical in their tendencies, did not consider that 
 the proposed law went far enough or that it gave to 
 the working classes the power in the management of 
 plants to which they were entitled. They called the pro- 
 posed law "capitalistic" and suggested the establishment 
 of a new revolutionary system of Councils. They set out 
 to defeat the bill by various means but, partly on account 
 of the energetic intervention of the Government, and 
 partly also because the working classes themselves did not 
 
 28 
 
present a compact unit behind their radical leaders, their 
 attempt failed. Nevertheless, although this opposition 
 ended in failure, it was not possible for the Government to 
 make any headway or to reach an agreement on this new 
 legislation. Not until January, 1920, after endless diffi- 
 culties which for a time threatened to bring about a crisis 
 in the Government, and after numerous compromises and 
 modifications in the law, was its final passage possible. 
 
 The Works Councils Law has been in force since 
 February 9, 1920, and is the first and only law governing 
 Works Councils that has legal validity in Germany. In 
 the last paragraph of this law it is expressly provided that 
 all previous forms of Works Representations and Councils, 
 including the Manual Workers' and Clerical Employees' 
 Committees which had legal standing, should cease to 
 exist. The radical workers subsequently gave up their 
 attempts to undo the working of the law and, contrary to 
 their original intentions, determined to participate in the 
 elections to the Works Councils provided for in the law. 
 
 An interesting situation has already arisen. The 
 Independent Socialists have announced that they will put 
 up candidates and by securing control of the Works 
 Councils make these agencies of its own political power. 
 On the other hand, the Executive Committee of the 
 General Federation of Trade Unions which, next to the 
 General Congress of Trade Unions, is the highest authority 
 in the trade union movement in Germany, has determined 
 that the elections to the Works Councils must not be 
 reduced to a test of political power and that trade union 
 lists of candidates shall be set up, the trade union and 
 occupational affiliations of the candidates and not their 
 political attitude to be the sole considerations in the 
 elections to the Works Councils. While the elections to 
 the Councils will undoubtedly be accompanied by a 
 certain amount of excitement, there is general gratification 
 that they will at least take place on the basis of legality 
 and in an orderly manner. 
 
 29 
 
THE WORKS COUNCILS LAW 
 
 Among the important laws governing the_ relations of 
 employers and employees, one of the most important is 
 the Works Councils Law, which went into effect on Feb- 
 ruary 9, 1920. Provision was made for such a law in 
 Article 165 of the National Constitution, adopted in 
 August, 1919. The law stipulates that Works Councils 
 shall be formed in all establishments having twenty or 
 more employees. The law provides that in determining 
 the number of employees both manual and clerical 
 workers shall be counted. In other words, both the wage- 
 earners and the salaried employees are taken account of. 
 Each group, however, has the right to choose its own 
 representatives on the Works Councils. It is provided, 
 also, that in establishments with less than twenty but 
 more than five employees, there shall be elected a Shop 
 Leader. If the wage-earners and salaried employees 
 within an establishment cannot agree on a single person as 
 their Shop Leader, each group has a right to elect a 
 Leader of its own, provided that at least five persons are 
 comprised within the group. Where at least twenty home 
 wbrkers are employed in an establishment these, too, have 
 a right to elect a Works Council to represent their 
 interests. Farm laborers must be at least ten in number 
 and these ten must be permanent employees, to come 
 under the law. 
 
 Apart from the Works Councils, whose chief function 
 shall be to represent all employees. Councils to represent 
 special groups of wage-earners and salaried employees 
 may be elected. It is provided, also, that the Works 
 Councils shall consist of at least three but not more than 
 thirty members, who shall be elected by secret ballot, 
 proportional representation to be given to wage-earners 
 and salaried employees. 
 
 The law specifies that the size of the Works Councils 
 shall be in proportion to the number of employees within 
 an establishment as follows : 
 
 30 
 
Site of Works Councils In Establishments of 
 
 3 members 20— 49 employees 
 
 5 " 50— 99 " 
 
 6 " 100— 199 " 
 
 7 " 200— 399 " 
 
 8 " 400— 599 " 
 
 9 " 600— 799 
 
 10 " 800— 999 " 
 
 11 " 1,000—1,499 " 
 
 12 " 1,500—1,999 " 
 
 13 " 2,000—2,499 
 
 14 " 2,500—2,999 " 
 
 - 15 " 3,000—3,499 " 
 
 16 " 3,500—3,999 " 
 
 17 " 4,000-^,499 
 
 18 " 4,500—4,999 " 
 
 19 " 5,000—5,499 " 
 
 20 " 5,500—5,999 " 
 
 Beyond 6,000 employees it is provided that there shall 
 be one additional member on the Works Council for 
 every 1,000 employees, until in the case of establish- 
 ments of 15,000 or more employees a maximum of 30 
 members on the Works Council has been reached. 
 
 Both wage-earners and salaried employees must be 
 represented in the Works Council in proportion to their 
 numbers in the above ratio, but inasmuch as provision 
 is also made for minority representation of special groups, 
 it is provided that these groups must number and be 
 represented as follows: 
 
 Number of Representatives Number of Members in the Group 
 
 2 50-299 
 
 3 300—599 
 
 4 600—999 
 
 5 1,000—2,999 
 
 6 3,000—5,999 
 
 8 6,000 and over 
 
 Above the separate Works Councils in individual estab- 
 lishments there are to be Workers' and Salaried Em- 
 ployees' Councils, which are in essence Group Councils. 
 These are to be composed of the members of the Individual 
 Works Councils, with supplementary members to be added 
 by vote. 
 
 Both wage-earners and salaried employees must be 
 represented in the Group Councils by the same propor- 
 tionate number of representatives as is specified in the 
 table given above. It will be seen, therefore, that all 
 members of the individual Works Councils are also mem- 
 bers of the Group Councils, but that all members of the 
 Group Councils are not necessarily members of the 
 
 31 
 
Works Councils. Where in a given community the same 
 manufacturer maintains several plants, a general Works 
 Council may be farmed from those members of the 
 separate Works Councils. Wherever such a general 
 Works Council is formed it shall deal only with matters 
 that relate to the particular enterprise as a whole, and it 
 shall not be divided into separate councils of wage- 
 earners and salaried employees. 
 
 Both male and female persons at least eighteen years of 
 age, who are in possession of full civic rights, are entitled to 
 vote for members of the Works Councils. A person to be 
 eligible to election as a member of the Works Council 
 must, however, be at least twenty-four years old, a citizen 
 of Germany, in possession of full civic rights, must have 
 completed his trade training, and have been employed for 
 at least six months in the particular establishment and 
 for at least three years in the same branch of industry. 
 Works Councils having nine or more persons are to elect a 
 Works or Business Committee of five persons, which shall 
 choose a first and second chairman from within its mem- 
 bership. Works Councils with less than nine members 
 shall elect simply a first and second chairman. 
 
 As far as possible, meetings of Works Councils are to 
 be held outside of working hours and are not to be public. 
 Besides attending those meetings of which he shall have 
 been notified, the employer must attend all those meet- 
 ings called at his suggestion. The chairmanship 
 may be entrusted to him in meetings of the latter 
 character. 
 
 On motion of one-fourth of the members of a Works 
 Council, one delegate of each trade union or economic 
 organization of workmen represented in the Works 
 Council may come to and participate in the meeting, but 
 his functions in such cases shall be advisory in character. 
 Similarly the employer may require that one delegate 
 from each employers' association or economic organization 
 to which he belongs shall attend the meeting which the 
 employer is himself entitled to attend, but again the 
 delegate's powers shall be advisory. 
 
 Members of Works Councils are to serve without pay, 
 their offices being regarded as positions of honor. Ex- 
 penditures incidental to the holding of the meetings 
 must be paid by the employer, whose duty it is also to 
 provide suitable rooms and facilities for the meeting. 
 
office-hour schedules, and other requirements, so that the 
 Council may properly transact its business. Membership 
 in the Works Council is to cease by resignation, by the 
 termination of the employment contract, or by loss of 
 eligibility of the member. In cases of gross violation of 
 duty the Committee on Arbitration and Adjustment (Sec- 
 tion 3, below) may terminate the membership of the guilty 
 person, and if the matter concerns the entire Works 
 Council the Committee on Arbitration and Adjustment is 
 empowered to order the dissolution of the Works Council. 
 
 Meetings of the employees within an establishment 
 should, as a matter of principle, take place outside of 
 working periods. Only in urgent cases and with the con- 
 sent of the employer shall this rule be disregarded. 
 Whenever the employer calls a meeting of his employees 
 he must give proper notice thereof. At all such meetings 
 he has a right to appear in person or to appoint a represen- 
 tative. 
 
 The functions of a Works Council shall be: 
 
 1. By advice and counsel to support the management of the 
 works, in order thereby to best further the condition of the 
 plant and its most efficient economic operation. 
 
 2. To cooperate with the management in the introduction and 
 application of new methods of work. 
 
 3. To defend the plant against disturbance, but without 
 thereby encroaching upon the powers of the labor organiza- 
 tions of manual and clerical employees. When conflicts 
 in the Works Council or of all or part of the employees 
 arise, and an agreement cannot be reached, appeal shall be 
 made to the Adjustment Committee or to the joint Con- 
 ciliation and Arbitration Committee. 
 
 4. To secure the enforcement of decisions and awards of the 
 Board of Conciliation or of a joint Conciliation and Arbi- 
 tration Court, whenever such decisions and awards have 
 been accepted and recognized, and affect the whole estab- 
 lishment. 
 
 5. To fix for the employees, and within the scope of the 
 existing wage agreement, general working rules. 
 
 6. To effect understanding within the ranks of the employees, 
 and between the employees and the employer; and to 
 foster, defend, and promote the right of the working classes 
 to organize. 
 
 7. To receive and consider complaints of the wage-earners and 
 salaried employees, and in cooperation with the employer 
 
 33 
 
to supervise the enforcement in the establishment of the 
 collective agreements affecting it. 
 
 8. To combat dangers to health or to life of workmen, and 
 support the factory inspection service in combating such 
 dangers. 
 
 9. To cooperate in the administration of pension funds, in- 
 dustrial housing schemes, as well as in other efforts to 
 improve the condition of those within the establishment. 
 
 Upon the management rests the responsibility of carry- 
 ing out conclusions reached within the Works Council 
 with its consent. The Works Council has no right to 
 interfere in the management of a plant by adopting 
 separate and independent rules which do not have the 
 approval of the management. The Works Council has 
 the right, however, in so far as no business secrets are 
 thereby exposed, to request and be given information 
 governing all the activities of a plant which may affect 
 the working agreement and shop rules. Furthermore, the 
 employer is required to make a report quarterly regarding 
 the conditions and progress of the enterprise, and of the 
 trade or industry in general, concerning also the yield 
 of the plant and conditions of employment that must be 
 anticipated. In plants having 300 wage-earners or 50 
 salaried employees the Works Council may require 
 annually a financial statement indicating also the profit 
 and loss within the establishment. 
 
 In enterprises where there is a Group Council the 
 Works Council shall be represented therein by one or 
 two of its members. These representatives shall have 
 a right to be present at all meetings, to participate and 
 vote therein, but shall receive no compensation therefor. 
 They are pledged to maintain complete silence with 
 respect to confidential statements imparted to them. 
 Whenever, as a result of extension, reduction, or stoppage 
 of a plant, or as a result of the introduction of new tech- 
 nical methods or new arrangements or methods of work 
 the lay-off or discharge of a considerable number of em- 
 ployees is necessitated, the employer is required to place 
 such matters before the Works Council. 
 
 In plants having more than 100 employees the Works 
 Council may set aside a regular time for consultations 
 on a certain day or on several days of each week. During 
 these office hours the employees shall be permitted to 
 present their wishes and complaints. Whether the hours 
 
 34 
 
of consultation shall take place during the working period 
 is a matter for arrangement with the employer. 
 
 The Group Councils have the following functions : 
 
 1. To make regulations for and to supervise the enforcement 
 within the plant of all labor legislation, of collective agree- 
 ments, and of awards and decisions of the Courts of Arbi- 
 tration and Conciliation. 
 
 2. In so far as the working conditions are not regulated by- 
 collective agreements, the Group Council shall, in agree- 
 ment with the interested economic organizations of wage- 
 earners and salaried employees, take part in the regulation 
 of wages and working conditions, such as the fixing of time, 
 piece, and job rates; the introduction of new methods of 
 wage payments; the determination of hours of work; the 
 prolongation or curtailment of the regular working period; 
 the granting of leaves of absence and vacations to em- 
 ployees, and the settlement of complaints relating to the 
 training and treatment of the apprentices in the particular 
 establishment. 
 
 3. To assist in the drafting of working rules. 
 
 4. To investigate complaints and obtain their settlement by 
 mutual arrangement with the employer. 
 
 5. In cases of conflict where the Works Council has refused 
 to consider an appeal, to make such an appeal to the Board 
 of Conciliation or to a Conciliation and Arbitration Com- 
 mittee agreed upon. 
 
 6. To provide against danger from accident or disease and to 
 assist in the prevention of accidents. 
 
 7. To aid in finding suitable employment for persons injured 
 either in the war or in industry; by means of counsel, 
 stimulation, protection, and intervention with the em- 
 ployer and fellow workers of an injured employee, to do 
 everything possible for him. 
 
 8. Unless provision is made therefor in the collective agree- 
 ment, to reach an understanding with the employer with 
 reference to the introduction of new workers in the estab- 
 lishment. 
 
 9. To make provision for employees dismissed in the par- 
 ticular establishments. 
 
 It is important to note that the rules worked out under 
 Section 8 above contain clauses which provide that the 
 employment of any person must not be conditioned upon 
 his political, religious, or trade union activities. Beyond 
 this rule, and so long as he abides within the rules fixed, 
 the employer is free to employ or to refuse to employ 
 
 35 
 
any person as he will. The Works Council has no right 
 to Interfere. Wherever Infringements of the conditions 
 of work occur protest can be made within five days. 
 
 With regard to dismissal of employees, the employee 
 has the right in cases of discharge to call upon his Group 
 Council for assistance when: 
 
 (a) There is a well-founded suspicion that discharge was due 
 to membership in a particular race or family, or on account 
 of political, military, religious, or trade union activities. 
 
 {b) When dismissal has taken place without any reason there- 
 for. 
 
 (f) When dismissal has resulted from the employee's refusal to 
 perform for any lengthy period work other than that which 
 he was originally hired to perform. 
 
 (d) When the dismissal does not seem to be merited by the 
 conduct of the worker or appears as a punishment which 
 is unjustifiably severe. 
 
 If the Wage-earners' Council or the Salaried Employees' 
 Council finds that the appeal is well founded, it is its 
 duty to effect an understanding with the employer. 
 Should Its attempt to do so within a week fail, It may call 
 upon the Arbitration Committee. If the Arbitration 
 Committee decides that the complaint against the 
 dismissal Is justified, the employer has a right to choose 
 whether he will reemploy the worker or whether he will 
 pay him an indemnity. This Indemnity Is to be computed 
 according to the number of years during which the em- 
 ployee has been in the particular establishment. The 
 employee, on the other hand, has the right to refuse to 
 be reemployed. 
 
 Members of a Works Council or of a Wage-earners' 
 or Salaried Employees' Council may be dismissed or 
 transferred to another plant only when the organization 
 of which they are members agrees to It. Such an agree- 
 ment is not, however, required In the following cases; 
 
 (a) When the dismissal is based on obligations imposed bylaw, 
 or when it rests on provision in a collective agreement, or on 
 a decision or award of an Arbitration Committee or of a 
 Joint Board of Conciliation and Arbitration. 
 
 (b) Where the dismissal is incidental to the closing down of the 
 plant. 
 
 (c) Where under the law regulating conditions of employment 
 prior notice of dismissal is not required. 
 
 36 
 
When the dismissal, without notice, of a member of a 
 Council is declared to be unjustified by a Court having 
 legal powers, or as a result of a decision or verdict of a 
 Board of Conciliation, the dismissal shall be withdrawn 
 by the employer. In such cases the employer has no 
 choice as to whether he will reemploy or pay an in- 
 demnity. When the consent of a Council to the discharge 
 of one of its members is required and is refused, the 
 employer may call upon the Board of Conciliation, 
 which may in its judgment grant the relief which the 
 Council has refused. Until the Board of Conciliation 
 decides, however, the employer must continue to give 
 employment to the employee. 
 
 Employers who deliberately interfere with the right 
 of their employees to vote for representatives on the 
 Councils, or in any way restrict or hinder members of 
 the Councils in the performance of their duties, are 
 subject to penalty of arrest or fine up to 2,000 marks. 
 The same penalty may be invoked against an employer 
 who deliberately interferes in the selection of a chairman, 
 or in any other way violates the Works Councils Law. 
 
 Infringements of the law with intent to deceive may be 
 punished by imprisonment not exceeding one year, or 
 by fine not exceeding 10,000 marks. Employees who 
 without authorization reveal confidential information 
 given to them may be punished by arrest or imprison- 
 ment, or by a fine not exceeding 5,000 marks. If it 
 appears that the intent of the employee is to achieve 
 financial gain from the disclosure of such information, 
 the penalty may be imprisonment not to exceed one year. 
 
 It is provided, also, that as soon as the first election to 
 the Works Councils takes place, all existing Works 
 Councils and Councils of Wage-earners and Salaried 
 Employees shall go out of existence. 
 
 37 
 
VI 
 
 THE PROVISIONAL NATIONAL ECONOMIC 
 COUNCIL 
 
 Article 165 of the National Constitution of Germany 
 provides for the creation of a National Economic Council, 
 which is to serve as a keystone to the Works Councils 
 organizations specified in the Constitution. The National 
 Economic Council will have the right to approve legis- 
 lative bills of fundamental, social, and economic signifi- 
 cance before these are introduced in the Reichstag. It 
 will also have the right itself to formulate such legislative 
 measures. Under the Constitution the Council will 
 also have power to submit to the Reichstag a statement 
 of its own views on legislative measures which are defi- 
 nitely opposed by the Government. The Constitution 
 also specifies that the Council shall have the right to 
 have any legislative proposal initiated by it presented 
 by one of its members to the Reichstag. It will be seen, 
 therefore, that the National Economic Council will 
 supplement the democratic form of government, and 
 by its creation Germany will have a special economic 
 deliberative body, whose task it will be to supplement 
 and support the popularly elected Reichstag in economic 
 matters. 
 
 In compliance with the provision in the Constitution, 
 the Government recently made public the draft of an 
 Order the object of which is to establish a Provisional 
 National Economic Council. In view of the fact that 
 the other Councils organizations for which provision 
 is made in Section 165 of the Constitution, such as the 
 National Labor Council and the corresponding employers' 
 and employees' organizations, which are regarded as 
 fundamental to the system of Works Councils, do not 
 yet exist, no attempt has been made to set up the perma- 
 nent National Economic Council, which is supposed to 
 be the capstone of the entire Works Councils structure. 
 Nevertheless, because of the importance which at present 
 is attached to economic legislation, it was generally 
 believed that the creation of a non-political Parliament 
 of economic experts to be supplementary to the Reich- 
 
 38 
 
stag or to the National Assembly would not be so long 
 delayed. It was for this reason that the proposal was 
 made for the establishment of a Provisional National 
 Economic Council, one of the principal objects of which 
 will be to prepare the way for the permanent National 
 Economic Council. 
 
 The Provisional National Economic Council will have 
 its headquarters in Berlin and will consist of 200 members. 
 These are to be chosen from nine broad occupational 
 groups, which are further subdivided into other groups 
 classified by occupation and locality. In the first occu- 
 pational group — the subdivisions of which are agricul- 
 ture, forestry, and fisheries — there are to be 46 repre- 
 sentatives of the Agricultural interests. The second 
 group is to be composed of 46 representatives of Industry. 
 The third group is to consist of 30 representatives of 
 Commerce, Banking, and Insurance. In the fourth group 
 are comprised Communication (water transportation, 
 postal service, and railway transport) and Municipally 
 Owned Industries; these are to be represented by 14 
 delegates. The fifth group is to be composed of 10 repre- 
 sentatives of Handicrafts, the sixth of 20 representatives 
 of Consumers, the seventh of 12 representatives of 
 Government Officials and of the Professional and Artistic 
 callings. The eighth group is to consist of 10 persons 
 especially familiar with the economic life of the different 
 regions of the country; these 10 persons are to be named 
 by the Privy Council. The ninth and last group is to 
 consist of 12 persons to be chosen without restriction by 
 the National Government from among persons who, 
 through specially meritorious service, have to a notable 
 degree improved or are aiming to improve the economic 
 condition of the German people. It is definitely provided 
 that of the representatives of groups one to seven, an 
 equal number are to be nominated as representatives of 
 employers and of employees, and that nominations shall 
 be made through the proper occupational organizations 
 which are specifically mentioned in the legislative draft. 
 
 It is provided that the delegation from Industry (group 
 2) shall be built up in the following manner: 
 
 A. According to Trades 
 I. 14 representatives of employers and 
 14 representatives of employees. 
 To be named by the Central Labor Commission of 
 
 39 
 
Industrial Employers and Employees, due regard 
 being had for the occupational groups. No repre- 
 sentatives of Mining are to be selected. Of the repre- 
 sentatives of Labor, at least two shall be delegates of 
 salaried employees in technological industries. 
 11. 2 representatives of employers and 
 
 2 representatives of employees. * 
 
 To be named by the National Coal Council. 
 III. 1 representative of employers and 
 1 representative of employees. 
 To be named by the National Potash Office. 
 
 B. According to Geographical Location 
 I. 6 representatives of employers. 
 
 To be named by the German Chamber of Industry 
 and Commerce from among those Chambers of Com- 
 merce in regions not sufficiently covered by the 
 occupational representation. 
 6 representatives of employees. 
 To be named by the Central Council of German 
 Works Councils from those regions not sufficiently 
 covered by the occupational representation. Of 
 these, at least one representative shall be a salaried 
 employee in technological industry. 
 
 As in the case of Industry, so the other occupational 
 groups must be composed of an equal number of repre- 
 sentatives of employers and employees. Another funda- 
 mental provision of importance is that the votes of the 
 producers and distributors of goods shall bear a propor- 
 tional relationship to the votes of the groups of ultimate 
 consumers. 
 
 In Article 5 of the proposed Order, the members of 
 the Provisional National Economic Council are designated 
 as representatives of the economic interests of the entire 
 nation. They are not bound by specific instructions and 
 are not liable in the courts or to those who appoint them 
 because of their votes or expressions of opinion growing out 
 of their membership or activity in the Council, and cannot 
 be called to account for their acts outside its meetings. 
 They thus enjoy the same immunity from prosecution 
 as do members of the Reichstag. The sessions of the 
 Council are to be open to the public, although it is provided 
 that at the discretion of the Council the public may be ex- 
 cluded. The members of the National Government will 
 at all times have free access to the sessions of the Council, 
 and will also have a right to be heard on all occasions. 
 
 40 
 
As to the powers and duties of the National Economic 
 Council, it is provided that social and economic legislative 
 measures of fundamental importance must, before their 
 introduction, be submitted by the National Government 
 to the Provisional National Economic Council for its 
 approval. The Council has the right, also, to suggest 
 legislative measures. It is its duty, further, to cooperate 
 in the upbuilding of the Works Councils, Employers' 
 delegations, and Economic Councils provided for in the 
 National Constitution. It may, in order' to deal with 
 economic questions of a political character, even appoint 
 a permanent committee which must be heard by the 
 Ministry competent to do so. 
 
 The Provisional National Economic Council and its 
 committees may, in seeking to clarify economic and socio- 
 political problems, properly demand that the National 
 Government, or one of its Bureaus, shall make inquiries 
 into economic conditions. It may make use of these 
 investigations and, except where forbidden by law, may 
 demand that the results of these be submitted to it. 
 
 As soon as the bodies are created which will make 
 possible the election of the permanent National Economic 
 Council, the Government will order an election and fix 
 the date of the first meeting of the permanent Council. 
 When the latter has been convened the Government is 
 empowered to order the dissolution of the Provisional 
 National Economic Council. 
 
 These are the essential fundamental provisions of the 
 proposed law. Whether the Provisional Council will be 
 created in the manner in which it was intended is a prob- 
 lem which, in view of recent events, is difficult to deter- 
 mine. It should be noted, also, that a wide divergence of 
 opinion exists among employers as to what bodies shall 
 be empowered by law to name their representatives on 
 the National Economic Council. On this issue the 
 special branches of the Industrial groups who are united 
 in the National Labor Commissions stand on one side, 
 and the German Chamber of Industry and Commerce, 
 as official spokesman of the local Chambers of Commerce, 
 on the other. It may be noted that the latter regards 
 as unjust the provisions of the proposed law for the elec- 
 tion of 23 representatives of Industry, 17 by Labor Com- 
 missions, and only 6 by the Chambers of Commerce. 
 
 It will be interesting to watch this experiment in gov- 
 
 41 
 
ernment with the assistance of an assembly of economic 
 experts and industrialists whose competence will extend 
 over every branch of finance, industry, commerce, com- 
 munication, and other activities, and over all social and 
 labor questions related thereto. 
 
 Since the information on which this report is based 
 was received from its correspondent in Germany, the 
 Conference Board learns that the Provisional National 
 Economic Council met in Berlin on June 30, 1920. At 
 this meeting there were present as representatives of 
 Agriculture and Forestry, 68 persons; of Horticulture 
 and Fishing, 6; of Industry, 68; of Commerce, Banking, 
 and Insurance, 44; Communication and Transporta- 
 tion, 34; Handicrafts, 36; Consumers, 30; Officials and 
 Professions, 16. In addition, 12 persons named by the 
 Privy Council and 12 by the Government complete the 
 Council, which thus has a membership of 326. — 
 National Industrial Conference Board. 
 
 42 
 
VII 
 
 THE SITUATION FOLLOWING THE MILITARY 
 INSURRECTION OF MARCH 13, 1920 
 
 On March 13, 1920, a number of persons of monarchic 
 tendencies succeeded, through an uprising of the military 
 forces, in obtaining control of the National Government 
 situated at Berlin. The leaders of this revolt were 
 General Provincial Director Wolfgang von Kapp and 
 Major General Baron von Liittwitz. Prior to the war 
 Dr. von Kapp had been a member of the Reichstag, 
 belonging to the Conservative, or reactionary. Party. 
 He became President of the German Fatherland Party, 
 was a leading proponent of ruthless U-boat warfare from 
 the beginning, and at the time of the armistice stood 
 out as one of those who favored continuance of the war 
 by Germany. When the armistice was signed the In- 
 dependent Socialists in the Reichstag demanded his 
 arrest,with that of Admiral von Tirpitz and other military 
 leaders. His co-partner. Baron von Liittwitz, had been 
 Military Governor of Belgium in the early days of the 
 war. Later he was a commander on the Verdun front. 
 A Prussian of noble parentage, his leanings were reaction- 
 ary and monarchic. 
 
 As soon as they had secured control of the National 
 Government, Von Kapp was appointed Chancellor. 
 The old Government, completely surprised by the sudden- 
 ness of the events and deprived of the support of the 
 troops upon whom they had counted, immediately took 
 to flight. The insurrection had the support of only a 
 small fraction of the people and could never have succeeded 
 except for the treasonable support of a large part of the 
 troops who were charged with the maintenance of law 
 and order. 
 
 As a counter to the insurrection, the Government which 
 had been displaced, in cooperation with the working 
 class and that element of the citizenship opposed to a 
 reactionary policy, issued a call for a general strike as 
 the only means of preventing the return of the former 
 Emperor Wilhelm H. The draft of the proclamation 
 which they issued follows : 
 
 43 
 
"Workmen, Comrades: The military revolt has come. 
 Erhardt's naval division is marching on Berlin to enforce the 
 reorganization of the Imperial Government. The mercenary 
 troops who were afraid of the disbandment which had been 
 ordered desire to put the reactionaries into the Ministerial 
 posts. 
 
 "We refuse to bow to this military constraint. We did not 
 make the revolution in order to recognize again today the 
 bloody government of mercenaries. We enter into no cove- 
 nant with the Baltic criminals. Workers, comrades, we 
 should be ashamed to look you in the face if we were capable 
 of acting otherwise. 
 
 "We say 'No!' And again 'No!' You must indorse what 
 we have done. We carried out your views. Now use every 
 means to destroy this return of bloody reaction. 
 
 "Strike. Cease to work. Throttle this military dictator- 
 ship. Fight with all your means for the preservation of the 
 republic. Put aside all division. There is only one means 
 against the return of Wilhelm II. Paralyze all economic life. 
 Not a hand must move. No proletariat shall help the military 
 dictatorship. 
 
 "Let there be a general strike along the entire line. Let the 
 proletariat act as a unit." 
 
 This proclamation was signed by President Ebert, 
 Chancellor Bauer, and the Ministers in the Cabinet in 
 charge of Defense, Labor, Food, and Foreign Affairs, 
 and also by members of the political parties supporting 
 the former Government. 
 
 The extreme radical elements of the working class, 
 that is those comprised in the ranks of the Independent 
 Socialist Party and the Communists, although they had 
 always opposed the previous Government, nevertheless 
 took part in the general strike. They let it be understood, 
 however, that the sole purpose of their action was opposi- 
 tion to the reactionary elements who had obtained 
 control and that they were not in any way in sympathy 
 with the former Government, which was composed of 
 Majority Socialists, Democrats, and followers of the 
 Center Party. 
 
 The effect of this joint action on the insurrectionary 
 Government was that after a comparatively short period 
 of control it was forced, on March 17, 1920, to capitulate 
 unconditionally and to withdraw. But with this triumph 
 of the former Government, law and order were not com- 
 pletely restored. 
 
 44 
 
The radical groups, recognizing the unexpected oppor- 
 tunities which the military insurrection of the reaction- 
 aries had opened to them, for example, attempted to 
 overthrow even the former constitutional government 
 and tried to set up in its place a republic of Workmen's 
 Councils which they urged was the only method of 
 securing a genuine Labor Government. 
 
 The danger of a military counter-revolution having 
 passed, there appeared a growing movement towards Bol- 
 shevism. Governments modeled after the Soviet type 
 were set up in a number of communities, but were quickly 
 suppressed. Much bloodshed, however, took place as a 
 result of these attempts. An indescribable chaos pre- 
 vailed. This manifested itself in street brawls and 
 appeals for the creation of a "Red" army and in other 
 clamors, and was rendered the more acute because of the 
 failure of the newspapers to appear and the fact that 
 the great majority of the people throughout the city were 
 more or less in the dark regarding the events which had 
 transpired. By order of the Imperial Chancellor the 
 publication of newspapers was prohibited and none were 
 issued from March 13th, the day of the outbreak of the 
 insurrection, until March 23d. It was explained that 
 this action was taken because important negotiations 
 with labor representatives were in progress and that 
 these negotiations might be disturbed by premature 
 publication. After interminable difficulties and pro- 
 tracted negotiations it became possible finally to effect 
 an understanding between the trade unions and the 
 representatives of the parties in control of the Government 
 under the terms of which they bound themselves to re- 
 commend to their constituencies the following: 
 
 "1. That in the approaching creation of new Governments in 
 the nation and in Prussia, the question of personnel be 
 solved by the several parties after agreement with those 
 trade union organizations of manual workers, clerical 
 employees, and officials who had taken part in the general 
 strike; and that these organizations, with due regard for 
 the rights of the representatives of the people, be accorded 
 a decisive voice in the formulation of economic and socio- 
 political legislation. 
 
 "2. Immediate disarmament and punishment of all those who 
 • had participated in the overthrow of the Constitutional 
 Government and also of all those officeholders who had 
 placed themselves at the disposal of the unlawful Gov- 
 ernment. 
 
 45 
 
"3. Thorough house-cleaning of all public administrative 
 offices and of the managements in industrial establish- 
 ments of all persons who had taken part in the counter- 
 revolution, particularly of those who had held leading 
 positions and the substitution for them of trustworthy 
 leaders; reinstatement of all representatives of organi- 
 zations who have been disciplined for industrial or 
 political reasons. 
 
 "4. The promptest carrying out of administrative reform on a 
 democratic basis with the approval of the trade union 
 organizations of manual workers, clerical employees, and 
 officials. 
 
 "5. Immediate extension of existing social legislation and the 
 enactment of new laws which would guarantee complete 
 economic and social equality to manual workers, clerical 
 employees, and officials; immediate enactment of a 
 liberal civil service law. 
 
 "6. Immediate beginning of the socialization of those 
 branches of economic activity which are ripe for it on a 
 basis of the recommendations of the Commission on 
 Socialization; convening of the Commission on Socializa- 
 tion; Government ownership of the Coal Syndicate and 
 the Potash Syndicate. 
 
 "7. Effective control and, if necessary, seizure of available 
 articles of food and the severest repression of extortionate 
 charges and profiteering in cities and in rural regions; 
 assurance of the fulfilment of promises of delivery through 
 the establishment of delivery organizations and penalty 
 of severe punishment for malicious violation of these 
 promises. 
 
 "8. Disbandment of all associations of counter-revolu- 
 tionary troops that were unfaithful to the Constitution 
 and the substitution for them of military organizations 
 formed from among that body of trustworthy Repub- 
 lican population, particularly from organized manual 
 workers, clerical employees, and officials without dis- 
 crimination against any class. In this reorganization, 
 the well-earned legal claims of those troops and Security 
 Guards who remained loyal shall not be disturbed. 
 
 "9. Withdrawal from the Government of Noske, Minister of 
 Defense, and of Heine, who have already handed in their 
 resignations." 
 
 In connection with this agreement, the German General 
 Federation of Trade Unions, the Industrial League of 
 Free Unions of Clerical Employees, and the Federation 
 of Government Employees issued the following proclama- 
 tion: 
 
 46 
 
"The Conference of representatives of those organizations 
 of manual workers, clerical employees, and employees in the 
 public service, who participated in the general strike, an- 
 nounces that although it is not entirely satisfied with the 
 terms of the agreement arrived at in its negotiations 
 with the representatives of the political parties in the Gov- 
 ernment, it nevertheless approves these and hereby 
 declares the general strike terminated as of this day. — ■ 
 Berlin, March 20, 1920 — 7.05 a.m." 
 
 It should be noted that as a result of their participation 
 in the general strike and the dominant hand which the 
 unions obtained in the course of it, they were able to 
 establish their new claim to dictate what the composi- 
 tion of future cabinets and what the programs of these 
 should be and that they were further able to establish 
 their right to enforce this dictation by general strikes. 
 The formal agreement which the unions were able to 
 force from the Government gave them, as indicated by 
 the terms above, " a decisive voice in the formulation of 
 economic and socio-political legislation." It also gave 
 them the right to influence ministerial appointments 
 since it was provided "that the question of personnel 
 be solved by the several parties after agreement with those 
 trade union organizations of manual workers, clerical 
 employees, and officials who had taken part in the general 
 strike." 
 
 It also gave them the right, under Section 4 of the 
 agreement cited above, to participate in the proposed 
 democratic reform of the administration. The granting 
 of certain definite powers to such class organizations as 
 had taken part in a specific strike was a marked departure 
 from Constitutional Government. The unions were, 
 however, masters of the situation and the Government 
 had no choice but to yield. 
 
 It should be noted, however, that after this agreement 
 with representatives of the manual and clerical employees 
 and the officials had been effected, work was not im- 
 mediately resumed nor could complete reestablishment 
 of order be attained at once. The Berlin trade unions, 
 for example, refused to recognize the agreement in spite 
 of the fact that it had been signed by their representatives 
 and other delegates from central strike headquarters, 
 and so the general strike continued. Not until March 
 22d, and only through renewed conferences with the 
 
 47 
 
Independent Socialist Party, which is composed of extreme 
 Socialists, was it possible to effect a new agreement. 
 As a result of this, the following statement was issued: 
 
 "After the representatives of the political parties in the 
 Government had pledged themselves to advocate to their 
 respective constituencies approval of the nine trade 
 union demands, which together comprise the results of the 
 general strike, and the group of delegates of the National 
 Social Democratic Conference had determined not to budge 
 from these demands, the presiding officer of the Independent 
 Socialist Party recognized these as minimum demands, after 
 the National Government had given binding and further 
 assurance: 
 "1. That the troops in Berlin would be withdrawn to the 
 
 line of the Spree River; 
 "2. That the very strict condition of martial law would 
 
 be immediately relieved; 
 "3. That the armed workingmen, particularly in the Ruhr 
 
 section, would not be molested; 
 "4. That the inclusion of workmen in the Security Guards 
 in Prussia would be discussed with the trade union 
 organizations; 
 "That in view of the recognition of the trade union program 
 and the special concessions of the Government, 
 
 "All manual workers, clerical employees, and officials through- 
 . out the nation, particularly in Berlin and its environs, are 
 requested to terminate the general strike beginning as of March 
 S3d and to resume work everywhere. 
 
 "The undersigned trade unions and political parties pledge 
 themselves in the event of failure to fulfil the trade union 
 demands and of the breach of the Government's promise, to 
 meet together anew and to decide the question of the further 
 resumption of the general strike. 
 
 Berlin, March 22, 1920. 
 
 The German General Federation of Trade Unions. 
 
 (Signed) Legien. 
 The Committee of the Trade Union Commission of 
 
 Berlin and Vicinity. (Signed) Rusch. 
 
 The League of Free Unions of Clerical Employees. 
 
 (Signed) AuFHAUSER. 
 The Central Committee of the Independent Social 
 Democratic Party of Germany. 
 
 (Signed) Crispien." 
 
 Thus the general strike came to an end and in the course 
 of March 23d and 24th work was everywhere resumed. 
 
 48 
 
VIII 
 
 THE ELECTIONS TO THE WORKS COUNCILS AND 
 TO THE REICHSTAG 
 
 The elections to the Works Councils for which arrange- 
 ments were made in March, 1920, and which were in- 
 terrupted by the military coup d'etat of Von Kapp and 
 the general strike which followed as a result of it, took 
 place in April and May, 1920, and were carried out 
 without appreciable excitement or incident. The political 
 parties, recognizing the importance of the Works Councils, 
 made an effort to secure control of them. In spite of the 
 cooperation of the conservative and less radical parties 
 to prevent the extreme radical Independent Socialists 
 from securing control, an overwhelming number of 
 Independent Socialists were elected to the Works Councils. 
 
 Whether the factory managements and the newly 
 elected Works Councils will be able to work together in 
 harmony is yet problematic. The initial meetings which 
 have taken place between the newly constituted Works 
 Councils and employers have been characterized by the 
 utmost friendliness, and were not essentially different 
 from previous meetings with committees of manual and 
 clerical workers within the establishment. What the 
 ultimate outcome will be cannot possibly be determined 
 until a number of months have elapsed and until the 
 final organization of the Works Councils has been con- 
 cluded, and more experience with them has been had. 
 The trade unions have, so far, undertaken to organize a 
 Central Works Council. The more radical labor groups 
 say that the purpose of this step is to build up battle 
 formations to aid in the class struggle, and to further 
 the social revolution to which all the extreme Socialists, 
 of course, look as a means of placing the proletariat in 
 supreme control. The more moderate labor groups, 
 however, state that the aim of this Central organization 
 is to educate the Works Councils so that they may be 
 best fitted to carry out their legitimate functions. 
 
 It is generally felt that the coalition of the Works 
 Councils within the trade union ranks is preferable to 
 such a coalition within the ranks of the political parties. 
 
 49 
 
The Independent Socialists, to be sure, worked with 
 great energy to effect a coalition of the Works Councils 
 within their party ranks; it did not, however, take place. 
 This is regarded as fortunate for Germany since, as a 
 choice, the trade unions offer greater assurance of respon- 
 sible dealings between employer and employee than 
 do political parties. Much will, of course, depend on 
 which trade unions have the upper hand and can make 
 their influence felt. 
 
 Much greater excitement than that incidental to the 
 Works Councils elections was aroused by the elections 
 to the Reichstag, which took place on June 6, 1920. 
 Incidents of an extreme character were feared in many 
 quarters. None, however, occurred. Nevertheless, the 
 elections were contested with extraordinary bitterness 
 and frequently in violent and vindictive manner. 
 
 These were the first elections to the Reichstag held in 
 Republican Germany. In general the results of the elec- 
 tions conformed to what had been expected. The 
 elections dealt a severe blow to governmental stability 
 by dissolving the coalition of the Majority Socialists, 
 the Democrats and the Centrists under which different 
 Chancellors and mostly with different departmental 
 chiefs had endured since the revolution. No one party 
 commanded a constitutional majority in the National 
 Assembly, and in order to form a government a coalition 
 of three parties was necessary. The Conservatives were 
 opposed to working with any of the socialist groups; the 
 Independent Socialists, on the other hand, would not 
 work with any other party. A coalition of the three 
 parties mentioned was thus forced. 
 
 Republican Germany, it should be noted, has six leading 
 and a number of minor political parties. The leading 
 parties are the Independent Socialists, the Majority 
 Socialists, the Democrats, the Center Party, the German 
 People's Party, and the German National Party. In addi- 
 tion there are the Communists, the Christian Federalists, 
 the Bavarian Peasants' League, and the German 
 Hanoverian Party. 
 
 In the Reichstag the parties are seated together, the 
 radicals being on the left of the Chancellor, who is the 
 presiding officer, and the Conservatives on the right. 
 The words "Right" and "Left" are thus used not only 
 to designate the factions within the Reichstag, but also 
 to indicate the character of one's political leanings. In 
 
 50 
 
the Reichstag the seating is as follows: Communists, 
 Independent Socialists, Majority Socialists, Democrats, 
 Centrists, Christian Federalists, followers of the Bavarian 
 Peasants' League, German Hanoverian Party, the Ger- 
 man People's Party and German National Party; this is 
 the order from the extreme "Left" to the extreme 
 "Right." 
 
 The steadily increasing opposition in the National 
 Assembly to the coalition of the Centrists, Democrats, and 
 Majority Socialists, who together controlled three-fourths 
 of the votes, indicated that the coalition would probably 
 suffer some loss in the elections. This anticipation was 
 generally borne out, the Opposition, which occupied a 
 position on the "Right" of the Coalition, making con- 
 siderable gain in the elections. The Communists and Inde- 
 pendent Socialists, who are both radical in character, 
 gained in strength, but not nearly so much as had been 
 generally expected. 
 
 The results of the elections to the Reichstag, with com- 
 parison to the party representation in the former National 
 Assembly, are indicated below: 
 
 PARTY REPRESENTATION 
 
 Communists 
 
 Independent Socialists . . 
 Majority Socialists . . . . 
 
 Democrats 
 
 The Center Party . . . . 
 Christian Federalists 
 Bavarian Peasants' League 
 German Hanoverian Party 
 German People's Party . . 
 German National Party 
 
 Thus the Majority Socialists are again the most power- 
 ful organization in the National legislature, although their 
 total representation has declined from 163 to IIL Their 
 loss corresponds approximately to the gain of the Inde- 
 pendent Socialists, who had 22 votes in the National 
 Assembly but have 80 now. Among the parties occupying 
 a middle ground, the Democrats in particular suffered 
 severe loss. In the National Assembly they had 73 votes; 
 now they have 45. Altogether the elections represent an 
 
 51 
 
improvement in the position of the parties favoring mod- 
 eration. The Communist participation in the elections was 
 a complete failure. In the previous election to the National 
 Assembly, the Communists, being opposed to political 
 methods, had refused to take part. In the recent elections, 
 however, they participated under the slogan: "In Par- 
 liament, but opposed to the Parliament." 
 
 Reference to the figures of the popular vote shows that 
 in the election district of Berlin 444,000 votes were cast 
 for the Independent Socialists and only 190,000 for the 
 Majority Socialists. The Independent Socialists had, 
 however, a similar triumph only in the election districts 
 of Potsdam II (consisting mainly of the large Berlin 
 suburbs), Potsdaiyi I, Leipzig, and Dusseldorf. In all of 
 the other election districts, which are overwhelmingly 
 industrial in character, the Majority Socialists retained 
 the upper hand over the Independent Socialists, a proof 
 of the fact that the radical state of opinion of the working 
 classes of Greater Berlin does not correspond with con- 
 ditions throughout Germany. 
 
 62 
 
IX 
 
 THE PROTECTION OF INDUSTRIES ESSENTIAL 
 TO THE PUBLIC WELFARE 
 
 Have employees in the public service a right to strike? 
 How shall the rights of the public be protected in a con- 
 troversy between a private employer and employee in 
 an industry essential to the public welfare ? The problem 
 involved in these questions is of outstanding importance 
 and has played a most significant part in the labor disputes 
 that have taken place in Germany since the revolution. 
 
 Prior to and during the war this problem may be 
 said to have hardly existed in Germany, since all manual 
 and clerical workers engaged in the public service were 
 forbidden by law to unite in trade unions, and an 
 organized strike of these workers could not, therefore, 
 take place. A fundamental change in this respect has 
 occurred since the revolution in November, 1918. Today 
 all types of manual and clerical employees in Germany, 
 among them those engaged in the railroad and postal 
 service, both of which are operated by the Government, 
 are organized. Their organization in trade unions, by 
 enabling them to cripple an industry, even one essential 
 to the public welfare, has placed in their hands a most 
 significant weapon for exerting pressure to force compli- 
 ance with labor demands. 
 
 That such a condition is bound to result in difficulty 
 must be apparent to every one. Nevertheless no legal 
 means has yet been found in Germany whereby assurance 
 can be had that, in the event of serious wage disputes, 
 the operation of industries absolutely essential to the 
 public welfare will remain undisturbed. For a time 
 relief was secured through the establishment of the so- 
 called "Emergency Engineer Corps." Although this 
 body was brought into being through the assistance 
 and under the protection of the Government, it did not 
 have official standing and was, in general, in the nature of 
 a private undertaking. 
 
 The Emergency Engineer Corps was formed in the 
 autumn of 1919 and was largely an outgrowth of the 
 general reaction against strikes which set in even among 
 
 53 
 
the workers themselves. Strikes were very prolific 
 during the first six months of 1919. Some of these strikes, 
 such as the miners' strike, the strike in the steel industry, 
 and the strike among employees in water and electrical 
 works, directly affected the public. The Government 
 made a number of efforts to cope with the situation, 
 but without apparent success. Toward the end of June, 
 1919, for example, as a result of an impending strike 
 among railroad employees, the Minister of National 
 Defense issued an order forbidding railroad employees 
 to strike under penalty of arrest and imprisonment. 
 The attitude of the trade unions may be indicated from 
 their action taken at the Tenth German Trade Union 
 Congress held at Nuremberg from June 30 to July 5, 1919. 
 Here the following resolution was adopted : 
 
 "In view of an impending railroad strike the Minister of 
 National Defense on June 26th issued an order which, until 
 further notice, deprives part of the railroad workers of the 
 right to strike. 
 
 "The Tenth Congress of the German Trade Unions admits 
 that at the present time a strike of the German railroad 
 workers would cause immeasurable injury to our languishing 
 economic life and aggravate the sufferings of the working 
 classes by bringing on general disorganization. Like the 
 competent trade-union organization of the railroad workers, 
 the Congress disclaims any community with the unauthorized 
 strikes already in progress which have been called by irre- 
 sponsible persons. 
 
 "Nevertheless the Trade-Union Congress protests against 
 any abrogation of the right of the railroad workers to strike, 
 even if such abrogation is only temporary, for the right to 
 strike belongs to all German workers aiid salaried employees 
 as an achievement of the revolution. The present prohibition 
 is, moreover, inexpedient, because strikes cannot be prevented 
 by prohibitions but only by agreement with the trade-union 
 organizations of the workers. 
 
 "The Trade-Union Congress urgently appeals to the rail- 
 road workers and to the entire working population to leave 
 the representation of their interests to their trade-union 
 organizations exclusively and in view of the wretched situa- 
 tion of Germany and of her working-people to refrain from 
 all unauthorized strikes." 
 
 The text of this resolution was in general the same as 
 that of one adopted several days before by the Conference 
 of Trade-Union Executives held in Berlin. As a result 
 of these resolutions the ministerial order prohibiting 
 
 54 
 
railroad strikes was rescinded. Nevertheless it was 
 recognized that some measures must be taken to protect 
 the public against serious inconvenience. 
 
 The Emergency Engineer Corps presented itself as a 
 means for giving such relief. It was formed from the 
 engineer battalion of the former Berlin guard regiments. 
 Its headquarters were in Berlin, but It maintained district 
 offices in various parts of Germany, which for this purpose 
 was divided into nineteen districts. In each district a 
 voluntary engineer corps was maintained. The organiza- 
 tion was based on voluntary service, and its members 
 were divided into three groups: (a) those volunteers 
 ready for service throughout Germany; {b) those willing 
 to serve in their own districts, and (c) those ready to 
 serve in their own place of residence should the occasion 
 demand it. The Corps was composed mostly of engineers 
 and technical experts and also of skilled and unskilled 
 workers in various occupations. Its main task was to 
 see that in cases of strike, industries essential to the 
 public well-being — such as those supplying gas, electric- 
 ity, or water — remained in active operation and also to 
 prevent the destruction of important means of production 
 such as that incidental to flooding of mines, blowing up of 
 blast furnaces, etc. Protective measures were adopted 
 in advance so that each volunteer's duties were specifically 
 outlined and his definite place assigned. For the purpose 
 of carrying out its plans the Emergency Engineer Corps 
 was provided with accurate working plans, description 
 of machinery, boilers, and plants, and lists of volunteer 
 workers in the different establishments who might be 
 relied upon. 
 
 The Emergency Engineer Corps regarded its work as 
 one of non-political character. Interference in labor 
 disputes and limitations of the right of workmen to 
 strike were accepted as outside its scope. It took into 
 account only the fact that the right of labor to strike must 
 be limited where the welfare of the community is im- 
 periled. The work which the Corps performed was 
 therefore not one of protection but rather one of pre- 
 servation. Its sole airri was to prevent injury to the public. 
 Its uppermost thought was that with the stoppage of 
 essential industry and the resultant limitation of the 
 supply of necessary articles of life, the lives of persons, 
 particularly of the children and of the sick, are endangered, 
 
 55 
 
and that the great mass of the people Is affected to a much 
 greater degree than the employing class against which 
 the strike may be directed. 
 
 In spite of its non-political character the Emergency 
 Engineer Corps was bitterly opposed from its very incep- 
 tion. The opposition was particularly bitter from the 
 radical groups of workers. From the beginning Frei- 
 heit, the leading mouthpiece of the Independent 
 Socialist Party, objected most violently. It attacked the 
 Corps as a strike-breaking organization of national 
 proportions whose principal duty it would be to attack 
 the working class in the rear whenever it made an effort 
 to secure a share in the product of industry. On the other 
 hand, Forzvdrts, the official organ of the Majority 
 Socialists, and the newspaper standing closest to the 
 Socialist Ministers in the Government, at once came out 
 definitely in favor of the Emergency Engineer Corps 
 and in a series of detailed articles set forth its neutral 
 character and the exclusive public service which it would 
 be in a position to render. Thus a most heated discussion 
 over the Emergency Engineer Corps arose among the 
 working classes. This discussion manifested itself in 
 excited meetings of workmen who favored or who opposed 
 the Corps, and on repeated occasions degenerated into 
 actual assaults. 
 
 The Emergency Engineer Corps was in active service 
 for a brief two months, its existence being terminated 
 in October, 1919. It rendered particularly important 
 service in the great strike of the metal workers in Berlin. 
 Here following the strike of the Berlin metal workers 
 the electricians struck in sympathy. The intervention 
 of the Corps in this strike aroused much attention as well 
 as violent feeling, and during this time it was frequently 
 necessary to protect its members by means of patrols 
 of the Security Guards. 
 
 The division of opinion over the activities of the Corps 
 may be indicated from a resolution adopted by the 
 Majority Socialist Party on October 20, ,1919, in which 
 the party declared its sympathy with the metal workers 
 in Berlin, but expressed regret over the contemplated 
 crippling of the electrical works whereby, it was stated, 
 the life and health of thousands of persons would be 
 seriously imperilled. The resolution further stated that 
 the promise to carry on the necessary work would have 
 
 56 
 
practically no value, since technically it would be im- 
 possible to convey electrical current only to hospitals 
 and similar institutions. The party stated that it there- 
 fore regarded the assistance of the Emergency Engineer 
 Corps as a necessity, and uttered a vigorous protest 
 against the effort to exclude members of the Corps from 
 membership in the trade unions. 
 
 In the National Assembly the Corps was most severely 
 attacked. On October 17, 1919, the Minister of National 
 Defense, replying to a criticism of the Corps by the 
 Independent Socialists, declared that any man who 
 would again attempt to cripple establishments vital 
 to the public welfare would shortly find himself under 
 lock and key, and that the Government owed at least 
 this protection to the people. 
 
 Among those opposed to the Emergency Engineer 
 Corps should be mentioned also the "Free" trade unions, 
 who were socialistic in their sympathies and who were 
 continually becoming more radical. In October, 1919, 
 the General Federation of Trade Unions, which is com- 
 posed of the "Free" unions, decided to exclude from the 
 trade unions all those workmen who might place them- 
 selves at the disposal of the Emergency Engineer Corps. 
 It issued a long statement, however, in which it took the 
 stand that essential industries must not be endangered, 
 but in which it demanded that the trade unions in- 
 volved in a strike should look after the protection of the 
 industries thereby affected, and for this purpose should 
 leave behind in the establishments affected an Emergency 
 Trade Union Corps. 
 
 In answer to this statement an article in Forwarts 
 pointed out that since the revolution, when complete 
 democracy had been won for Germany, a host of definite 
 but aimless experiments had been made by the working 
 classes without any regard whatever for the welfare of the 
 community, and that the means chosen were those of an 
 era long superseded, namely, those of the "Dictatorship." 
 Furthermore, it was pointed out that if at the critical 
 stage of the metal workers' strike the executive officers of 
 the Berlin Trade Union Federation had had due regard 
 for the laws of humanity it would not have been necessary 
 to even propose an interference by the Emergency Engi- 
 neer Corps. The article argued further that the General 
 Federation of Trade Unions, in determining what tasks 
 
 57 
 
were essential to the public welfare, had confined itself to 
 supplying light and power in sufficient quantities only for 
 institutions caring for the sick, whereas, irrespective oi 
 what actions a trade union finds it necessary to take in its 
 efforts to improve economic conditions, the general public 
 has under all circumstances and conditions a right to 
 demand that light and power be secured to all. Because 
 of this the writer concluded it would be impossible to 
 entrust to the executive officers of the Berlin Trade 
 Union Federation the exclusive right to determine what 
 the minimum essential requirements of the public were. 
 
 Since this controversy took place in the fall of 1919, 
 opposition to the Emergency Engineer Corps has in- 
 creased considerably among the working classes. The 
 attempted military insurrection of Von Kapp in March, 
 1920, and the general strike which continued even after 
 his downfall, resulted in a closer union of both socialist 
 groups, as a result of which an overwhelming majority of 
 the working classes are now to be regarded as opposed to 
 the Emergency Engineer Corps. In March, 1920, the 
 Executive Committee of the General Federation of Trade 
 Unions approved a resolution in which it characterized 
 the Emergency Engineer Corps as a serious menace to 
 the trade union struggle. The resolution also states that 
 in case of strikes and lockouts the protection of industries 
 of special economic significance should be undertaken ex- 
 clusively by the working classes and their duly authorized 
 agents. Furthermore, the Forwarts, which had previ- 
 ously opposed this viewpoint in most hectic fashion, now 
 as a result of the closeness of both socialist groups had 
 not had a single word to say against the resolution men- 
 tioned. 
 
 As a result of this state of opinion no further progress 
 whatever has been made in Germany with regard to the 
 problem of protection of industries essential to the public 
 welfare. It is generally expected that the new Concilia- 
 tion Order which has already been prepared by the 
 Ministry of Labor, but which will probably not be pro- 
 mulgated until after the new Reichstag has been convened, 
 will include regulations for the protection of industries of 
 economic importance. Until then the Emergency Engi- 
 neer Corps, although opposed by labor, presents the only 
 means of warding off serious dangers to the public in labor 
 disputes. 
 
 58 
 
Of interest in this connection are the proposals of a 
 former National Minister of Economic Affairs whose 
 "Economic Plan" made provisions for meeting this 
 very problem. This plan contained a proposal for a 
 "Law Governing Industrial Peace," according to which 
 industries imperatively required for the maintenance of 
 German economic life, such as those having to do with 
 food, fuel, light, electricity, clothing, the transportation of 
 persons, goods, or news, should be placed under "Order 
 of Peace." Provision was made that other industries be- 
 sides those enumerated might be placed under such an 
 order if joint approval of employer and employee were 
 given. The plan provided also for the appointment of 
 District Committees to work in harmony with the District 
 Economic Councils. 
 
 The vital points governing the operation of an "Order 
 of Peace" were outlined as follows: 
 
 "While the Order of Peace is in effect, every lockout in 
 industries covered under the Order is forbidden. The right 
 to strike in the industries specified may be exercised only in 
 conformity with the following provisions: 
 
 "1. The strike must be announced. The strike notification 
 must be handed in writing to the District Committee. 
 It must be signed by at least one-tenth of the total number 
 of the employees engaged in the establishment. The 
 notification must specifically state the objects which the 
 strike hopes to achieve. Strike notifications which do not 
 comply with these conditions shall be disallowed by the 
 District Committees as inadmissible. 
 
 "2. Wherever the strike announcement is admissible the 
 District Committee must take immediate conciliatory 
 steps for the prevention of the strike. ' 
 
 "3. Should no agreement be reached within two weeks after 
 the issuance of the strike notification, the District Com- 
 mittee shall introduce a resolution which must be sub- 
 mitted to all of the workers in the establishment. The 
 vote shall be secret. A strike shall be declared if nine- 
 tenths of the total number of persons engaged in the 
 establishment have voted in favor thereof. 
 
 "4. Should a strike be declared, no stoppage of work shall 
 take place until a week has elapsed after the submission 
 of the resolution to the workers by the District Com- 
 mittee." 
 
 59 
 
This "Economic Plan" was never put into effect, the 
 Minister of Economic Affairs having been removed from 
 office in the fall of 1919. Nevertheless, the question of 
 what measures shall be taken to protect the public against 
 such serious inconvenience as may result from industrial 
 disputes leading to the tying up or crippling of certain 
 industries, like those in the field of transportation and 
 communication and those supplying food, fuel, and light, 
 still remains a major problem. These industries are of a 
 public or quasi-public nature in which the public interest 
 and well-being must be the paramount consideration. 
 While the proper interests of employees in these industries 
 should be protected, assurance must be had that the 
 operation of these industries essential to the public welfare 
 will be adequate, continuous, and unimpaired. That some 
 action will be taken is certain, and it is generally expected 
 that the provisions outlined in the "Economic Plan" 
 above will in one form or another be brought forward one 
 of these days and put into effect. 
 
 60 
 
X 
 
 THE ECONOMIC CRISIS IN GERMANY 
 
 At the present moment (August, 1920) Germany is 
 in the midst of a most serious economic crisis, the out- 
 come of which it is difficult to foresee. In order to 
 appreciate its significance it is imperative to review 
 some of the significant factors underlying the economic 
 life of Germany, particularly those prevailing in the spring 
 of 1920. 
 
 As has already been indicated, the shortage of raw 
 materials and the abandonment of all except essential 
 production during the war resulted in a serious shortage 
 of goods essential alike to life and to production. After 
 Germany had, however, passed through the initial terrors 
 of the revolution, and the immediate essential steps in 
 reconstruction from a war to a peace-time economy 
 had also been made, the German people took immediate 
 courage. A movement set in which can only be described 
 as one of intensive economic activity and prosperity. 
 To be sure, the difficult and, in most instances, bloody 
 political struggles of the year 1919 threatened and to a 
 degree impaired the normal functioning of German 
 industry, but it was finally possible to overcome these 
 dangers, which were largely radical in character. There- 
 after there set in, with only occasional interruptions, a 
 steady advance in productivity which was the marvel of 
 all foreign visitors in Germany. 
 
 Costs of production had of course risen in an extraor- 
 dinary manner; prices of raw materials and wages and 
 salaries had advanced to an extent that no one could 
 have anticipated, but the great and insistent demand 
 for goods of all kinds which arose in German markets 
 forced into the background the question of marketing of 
 the goods and made it possible to cover abundantly the in- 
 creased costs of production. The producer controlled 
 the field. Because of the intense competition for goods, 
 he could not only dictate the prices which he demanded 
 but also the conditions of delivery. The purchaser was 
 
 61 
 
forced completely to the background. Whether he liked 
 it or not, he had to pay in advance, and fixed prices were 
 hardly ever specified. "Terms to be fixed later" became a 
 stereotyped expression with regard to all goods offered for 
 sale. 
 
 Furthermore, definite time of delivery was fixed only in 
 rare cases, and even then was more rarely complied with. 
 This condition was due largely to the frequent stoppages 
 of work incidental to labor disputes and demands for 
 wage increase which were being made continually. 
 Especially characteristic of this period of industrial 
 prosperity was the condition of the labor market which, 
 from the viewpoint of labor, was particularly favorable. 
 As has already been indicated, following the war and 
 revolution there was a critical period of unemploy- 
 ment. In February, 1919, 1,100,000 unemployed persons 
 in Germany were receiving unemployment grants. This 
 number, however, declined considerably, and in August, 
 1919, there were only 650,000; on December 1, 1919, 
 there were 388,000 and on April 15, 1920, there were 
 only 295,000 unemployed. This last number was equiva- 
 lent to about the number of unemployed persons in 
 Germany in normal times before the war. Labor was in 
 demand and the employer had to pay the wages and 
 meet the conditions of the labor market. 
 
 This favorable industrial situation has in the last few 
 months of this year (1920) suffered a sudden and complete 
 reversal. In place of an unlimited demand for goods, 
 which may be characterized as a mania, sales have stopped 
 with startling abruptness. The whole condition of things 
 has suffered an overturn. Whereas before every one 
 competed in the effort to "corner" and to acquire goods, 
 there has recently set in a sudden strike of consumers. 
 Only here and there has this strike been organized; 
 nevertheless it has been widespread in proportion. The 
 result has been a cessation of production all along the 
 line and a state of uncertainty, under which no one 
 seems to know what to do, has set in. Stocks of goods 
 manufactured and purchased at extraordinary prices 
 no longer find the ready market which formerly was 
 assumed as a matter of fact. 
 
 A general question has arisen as to whether these 
 goods should be held until market conditions have 
 improved or whether they should be sold at less than 
 
 62 
 
cost. The latter alternative, it is felt, would of course 
 further depress the market. The situation is most difficult 
 for those industries that require a great stock of various 
 raw materials, as is the case in the electrical manufacturing 
 industry. Here large stocks of merchandise have had 
 to be acquired in order to guard against the risks of 
 interrupted production. Much time passes in this 
 industry between the purchase of each raw material and 
 the time when the finished article is available. Some- 
 times several months — often a year or more — pass before 
 a machine or an appliance can be completed. The condi- 
 tion of other industries is similar to that of the electrical 
 manufacturing industry. 
 
 Almost all of the larger factories now find themselves 
 with an enormous stock of accumulated raw material 
 and half-finished products which were acquired and 
 made up at excessive costs and must go into the make-up 
 of appliances which subsequently will be sold at prices 
 far below those at which the materials were purchased. 
 It appears now that the large gains made before were 
 only "paper" profits, since the money acquired was 
 expended in the purchase of dearer raw materials, which 
 now as a result of the altered economic conditions have 
 fallen in price. What are the causes of this sudden 
 transformation ? 
 
 First, is the improved condition In the rate of German 
 exchange. In January and February, 1920, the mark 
 (the normal value of which Is 24 cents) was worth not more 
 than 1 cent. Its value has fluctuated, ranging from less 
 than 2 cents to over 3 cents. The price level has thus 
 undergone a great change, since, while excessively low, 
 the value of German currency has doubled. This has 
 naturally affected prices of goods and of wages which tend 
 to approach a so-called "world market price." 
 
 The possibilities for export of goods from Germany, 
 which looked very hopeful, now have taken a sudden 
 turn for the worse. In the past Germany of course was 
 known for its exports — so much so that the charge of 
 "dumping" goods into the market was frequently made 
 against the country. 
 
 Another reason for the changed economic condition 
 lies In the fact that even in the face of greatest hunger 
 for goods, prices, in the long run, cannot continue to rise 
 interminably. It is difiicult to determine whether the 
 
 63 
 
scarcity of goods which was apparent after the war was 
 not perhaps overestimated. This much, however, is 
 certain: the demand for goods is not in every instance 
 an unconditionally fixed quantity. In its very nature 
 it is dependent on individual choice and upon speculative 
 movements. At a certain point even the most intense 
 demand stops abruptly and limitations in buying are 
 evident when the purchasing power can no longer keep 
 pace with mounting prices. In other words, there is a 
 maximum price which "the traffic will bear" and beyond 
 this a continually diminishing demand is experienced. 
 
 It Is clearly evident that such a depression as now 
 prevails in Germany had to come sometime and that the 
 improvement in foreign exchange and the possibility 
 of obtaining from abroad cheaper raw materials and 
 other essential articles has influenced the decline in the 
 price level. Thus, strangely enough, the rise in the 
 foreign exchange rate, which every one In Germany 
 desired, has come, but has led to immediate disastrous 
 economic consequences. 
 
 Meanwhile middlemen and jobbers, so-called "Schie- 
 ber" or petty speculators, who, frequently with great 
 profit, dispose of their purchases without ever having 
 seen or received the goods in which they deal, have 
 pocketed their gains, while the actual manufacturers and 
 merchants are In a most difficult situation. As yet 
 no serious failures have taken place. Nevertheless a 
 large number of sound enterprises exist regarding which 
 it cannot be said with certainty whether they will be 
 able to surmount the period of stress resulting from the 
 abrupt cessation in buying. The situation is particularly 
 serious with regard to the manufacturing Industries. 
 In the textile and In the automobile manufacturing 
 Industries comparatively extensive discharges of employees 
 have taken place or are in prospect. 
 
 Hopes that Germany will surmount the crisis without 
 serious disturbance rest upon the following three grounds : 
 
 1. The belief that through forced disposal of goods 
 the price level will decline gradually and not suddenly, 
 and that it will affect those articles which can be most 
 easily dispensed with. Further, that the cost of living 
 will decline. So far this has not yet shown any marked 
 change. It is generally believed that only when the cost 
 of living has fallen will It be possible to reduce the level 
 
 64 
 
of wages and salaries. At present, with some good reason, 
 there is opposition to such a course. It may safely be 
 said that in view of present political conditions in Ger- 
 many, reduction in wages and salaries will not be brought 
 about without serious difficulty. The economic crisis and 
 threatened curtailment of productive activity may, how- 
 ever, facilitate the reductions which are inevitable. 
 
 2. That a better planned and better organized 
 economy than that existing until now can be effected. 
 A free laissez-faire economic system, under which every 
 manufacturer and merchant may buy and sell without 
 let or hindrance and do as he will, may work well when 
 the economic organism is healthy, but it may not suit a 
 country which, having lost a war, is struggling with 
 all its might for its bare economic existence. Viewed 
 objectively, it cannot be gainsaid that German industrial- 
 ists are themselves to blame for the reaction which has 
 set in as a result of the artificial boosting of prices. A 
 healthy economic organism might have made impossible 
 the inordinate profiteering and thereby also prevented 
 the economic crisis resulting from it. Fortunately, the 
 National Economic Council (see Chapter VI), referred 
 to as an Industrial Parliament of Representatives of 
 Employers and Employees, has at last been established 
 and has already begun its work. One of the first tasks 
 which it has undertaken is to see that the crisis does not 
 lead to a diminishing in productive activity with a 
 resultant dismissal of employees and that through proper 
 measures a healthy tendency in Germany's economic 
 development may be assured. 
 
 3. That the foreign exchange situation (the im- 
 provement of which it is hoped rests not on speculative 
 manipulations but on a favorable judgment of Germany's 
 economic status) may be stabilized. As far as Germany 
 is concerned, the course of foreign exchange does not 
 matter so long as it is free from violent fluctuation. If 
 the latter condition holds, transactions may be carried 
 on with more or less security. Both the manufacturer 
 and the consumer are protected by a stable exchange, 
 since neither is forced into extreme courses by exaggerated 
 fears. Consumers' strikes and widely competitive buying 
 with resultant decline or rise in price are avoided. Specu- 
 lation is also decreased. Wages, salaries, and prices can 
 remain fairly stable only if the exchange rate remains 
 stable. 
 
 65 
 
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 Research Report No. S. Strikes in American Industry in Wartime. 20 pages. March, 
 
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 SPECIAL REPORTS 
 
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