policies of Friedrich Wilhelm I, and of Friedrich the Great of Prussia, possessed many of these features. The Prussian bureaucrats of that day lacked neither intelligence nor devotion to duty. But the fiasco for which they were so grotesquely responsible ought to prove to anyone how impossible it is to replace the instinct of private investors and employers, inspired by personal interest, by the sense of duty of an official class. We need only to recall the experiences we have had during the present war with the administration of business enterprises by officials, to become convinced that Walter Rathenau's theory, that in the future the sentiment of responsibility among managers of industry will make the present entrée preneur unnecessary, belongs to the realm of Utopian ideas. Wherever the character of a branch of production calls for new decisions and new dispositions adjusted to constantly changing situations, administration by salaried officials will not be as efficient as the control exercised by employers whose whole existence depends upon success. Socialization is likely to succeed only in case of undertakings that are of a more or less routine character.

Finally, the systematic regulation of production by a central office assumes the existence of a closed commercial state; that is, of a state in which all the products necessary to supply the demands of the people exist, or can be produced. The war has shown us by the bitterest possible experience, how illusory such an idea is in Germany. The German business world before the war had dealings with foreign countries amounting to 21,000,000,000 Marks a year. In 1913 we imported from abroad food and luxuries worth nearly 3,000,000,000 Marks, raw materials worth 5,000,000,000 Marks, half-manufactured goods worth 1,250,

000,000 and manufactured goods worth 1,500,000,000 and we paid for them with our own products. Our present privations are due to the fact that the war prevented this international exchange. If we are to satisfy all the requirements of our people by a systematic regulation of production in the hands of a central office, the authority of that office will have to extend over the whole earth and all the parts thereof, in order to assure us all the goods we need. Socialists like Lasalle and Rodbertus, who have thought out this system to its ultimate consequences, recognize this fact, and the only difference in their conclusions was that the first thought that 200 years and the second thought that 500 years would be required to reach this stage.

According to this view, we need not burden ourselves with concern over the universal socialization of means of production. We may leave confidently to the wisdom of our remote descendants the problem of dealing with the affairs of two centuries or five centuries later. Even our own present rulers, including those from the ranks of the Independents, have repeatedly stated that they are not planning a universal socialization of the means of production. Above all, it would be madness in a crisis such as we are now experiencing, to make that experiment. We have been impoverished by the war. We must have foreign credit to reconstruct our financial, commercial, and manufacturing edifice. The Americans, and possibly the Japanese, are the only nations in a position to lend us money. But our public credit is shattered. The security which our government offers is not highly rated. The only thing that we still possess is a certain credit which our private industrial undertakings even now enjoy abroad. But foreign capitalists would never

make loans to us if we were to transfer our means of production from the possession of private parties to common ownership. Such an action would abolish the security beneath our credit. Everything that the community owns or is likely to own, will be fully engaged as security for the public debt we have already incurred.

However, if a general socialization of the means of production is neither desirable nor possible, nevertheless, reforms are practicable which will remedy some of the evils of the present individualistic system and that will constitute concessions to socialization of production as far as the latter promises desirable results. One such measure would be the extension of the cooperative societies. We would have a starting point in the consumption societies, which order goods in quantities corresponding to the ascertained requirements of their members. Their main idea is to pay back to the purchasers all profits in excess of the actual cost of handling the business. The price thus established is approximately the price required by the Socialist theory. In applying this principle the adjustment of supply and demand is very accurate. Such consumption societies have not been favored by the public authorities in Germany hitherto, except where they have been organized by agriculturists. The policy has been to put obstacles in the way of consumers' unions serving the city population. Bavaria even managed to prevent the establishment of a consumers' union for officers and civil servants, although even Prussia favored such an institution. In the face of such government hostility, the consumers' unions have attained a great development. A coöperative wholesalers' association has been formed in Hamburg after the model of those established in England and Scotland. This associa

tion buys at wholesale for the local consumers' union. However, it is something more than a consumers' union. It is also a producers' union, engaged in manufacturing articles demanded by the members of its constituent societies. This is a transition from individualist to Socialist production. The new organization is capable of further development. We are injured as a nation by the extravagant number of retail stores we have to support. Every street contains numbers of little shops of the same kind, where one would be enough and would be able to satisfy the needs of its customers more cheaply and completely than a larger number. To be sure, great difficulties stand in the way of transition from the present individualistic to even a modified Socialist sales organization. A great number of retailers would be put out of business. However, the ablest among them would find more satisfactory employment as managers of the consumers' union. Above all, our impoverishment by the war makes it the first commandment of economic life to attain the greatest possible results with the least possible expenditure. This overpowering necessity will compel us to reorganize our economic system on a coöperative basis, in spite of the difficulties which present themselves, and we shall do this whether we like it or not.

The coöperative principle has already found a wide application in agriculture. I have already mentioned the agricultural consumers' union. The development of the coöperative system, in connection with the granting of credit to small land owners, has been extraordinary. Our credit unions have become the backbone of a new form of economic life in the country. If we are to break up our great estates into small allotments, as is now generally thought best, this will make even

policies of Friedrich Wilhelm I, and of Friedrich the Great of Prussia, possessed many of these features. The Prussian bureaucrats of that day lacked neither intelligence nor devotion to duty. But the fiasco for which they were so grotesquely responsible ought to prove to anyone how impossible it is to replace the instinct of private investors and employers, inspired by personal interest, by the sense of duty of an official class. We need only to recall the experiences we have had during the present war with the administration of business enterprises by officials, to become convinced that Walter Rathenau's theory, that in the future the sentiment of responsibility among managers of industry will make the present entrée preneur unnecessary, belongs to the realm of Utopian ideas. Wherever the character of a branch of production calls for new decisions and new dispositions adjusted to constantly changing situations, administration by salaried officials will not be as efficient as the control exercised by employers whose whole existence depends upon success. Socialization is likely to succeed only in case of undertakings that are of a more or less routine character.

Finally, the systematic regulation of production by a central office assumes the existence of a closed commercial state; that is, of a state in which all the products necessary to supply the demands of the people exist, or can be produced. The war has shown us by the bitterest possible experience, how illusory such an idea is in Germany. The German business world before the war had dealings with foreign countries amounting to 21,000,000,000 Marks a year. In 1913 we imported from abroad food and luxuries worth nearly 3,000,000,000 Marks, raw materials worth 5,000,000,000 Marks, half-manufactured goods worth 1,250,

000,000 and manufactured goods worth 1,500,000,000 and we paid for them with our own products. Our present privations are due to the fact that the war prevented this international exchange. If we are to satisfy all the requirements of our people by a systematic regulation of production in the hands of a central office, the authority of that office will have to extend over the whole earth and all the parts thereof, in order to assure us all the goods we need. Socialists like Lasalle and Rodbertus, who have thought out this system to its ultimate consequences, recognize this fact, and the only difference in their conclusions was that the first thought that 200 years and the second thought that 500 years would be required to reach this stage.

According to this view, we need not burden ourselves with concern over the universal socialization of means of production. We may leave confidently to the wisdom of our remote descendants the problem of dealing with the affairs of two centuries or five centuries later. Even our own present rulers, including those from the ranks of the Independents, have repeatedly stated that they are not planning a universal socialization of the means of production. Above all, it would be madness in a crisis such as we are now experiencing, to make that experiment. We have been impoverished by the war. We must have foreign credit to reconstruct our financial, commercial, and manufacturing edifice. The Americans, and possibly the Japanese, are the only nations in a position to lend us money. But our public credit is shattered. The security which our government offers is not highly rated. The only thing that we still possess is a certain credit which our private industrial undertakings even now enjoy abroad. But foreign capitalists would never

make loans to us if we were to transfer our means of production from the possession of private parties to common ownership. Such an action would abolish the security beneath our credit. Everything that the community owns or is likely to own, will be fully engaged as security for the public debt we have already incurred.

However, if a general socialization of the means of production is neither desirable nor possible, nevertheless, reforms are practicable which will remedy some of the evils of the present individualistic system and that will constitute concessions to socialization of production as far as the latter promises desirable results. One such measure would be the extension of the cooperative societies. We would have a starting point in the consumption societies, which order goods in quantities corresponding to the ascertained requirements of their members. Their main idea is to pay back to the purchasers all profits in excess of the actual cost of handling the business. The price thus established is approximately the price required by the Socialist theory. In applying this principle the adjustment of supply and demand is very accurate. Such consumption societies have not been favored by the public authorities in Germany hitherto, except where they have been organized by agriculturists. The policy has been to put obstacles in the way of consumers' unions serving the city population. Bavaria even managed to prevent the establishment of a consumers' union for officers and civil servants, although even Prussia favored such an institution. In the face of such government hostility, the consumers' unions have attained a great development. A coöperative wholesalers' association has been formed in Hamburg after the model of those established in England and Scotland. This associa

tion buys at wholesale for the local consumers' union. However, it is something more than a consumers' union. It is also a producers' union, engaged in manufacturing articles demanded by the members of its constituent societies. This is a transition from individualist to Socialist production. The new organization is capable of further development. We are injured as a nation by the extravagant number of retail stores we have to support. Every street contains numbers of little shops of the same kind, where one would be enough and would be able to satisfy the needs of its customers more cheaply and completely than a larger number. To be sure, great difficulties stand in the way of transition from the present individualistic to even a modified Socialist sales organization. A great number of retailers would be put out of business. However, the ablest among them would find more satisfactory employment as managers of the consumers' union. Above all, our impoverishment by the war makes it the first commandment of economic life to attain the greatest possible results with the least possible expenditure. This overpowering necessity will compel us to reorganize our economic system on a coöperative basis, in spite of the difficulties which present themselves, and we shall do this whether we like it or not.

The coöperative principle has already found a wide application in agriculture. I have already mentioned the agricultural consumers' union. The development of the coöperative system, in connection with the granting of credit to small land owners, has been extraordinary. Our credit unions have become the backbone of a new form of economic life in the country. If we are to break up our great estates into small allotments, as is now generally thought best, this will make even

the more urgent, further progress in the same direction. The first effect of the further extension of small farming is to fortify the position of individualist production. This proves an advantageous system where dairying and intensive cultivation are pursued. The situation is rather different in case of grain farming, where the small farmer is at an economic disadvantage compared with the large farmer, who can employ machinery in cultivation. The small farmer cannot procure this machinery with his modest means. In order to remedy this disadvantage, we might have compulsory coöperation. Through such a system the small farmer might enjoy the advantage even of the motor plough. In order to prevent our poverty from becoming greater, we shall have to apply such improvements to the fullest possible extent in every field of production.

Complete socialization is possible in all these great undertakings which are conducted by stock companies, and that from their nature can be run by the government or the local community as well as by the corporation. To this class belong, first of all, monopolistic industries. Some of these have already been socialized in Germany. For instance, we have the government post office, telegraphs, and railways, our city traction systems, water systems, and gas systems. Some of our electric light and power are produced directly by public departments. Several other industries should have been socialized long ago. Among these are the munitions industry and mining. Furthermore, important branches of insurance and banking, if not all of them, might be socialized. In carrying out this reform, it is not necessary by any means that the socialization should occur in such a form as to make the State the sole owner of the means of production in place of private parties.

That is neither desirable nor possible. It is better to assure Socialist undertakings the advantage which private undertakings have hitherto enjoyed from the initiative of the people who controlled them. If we socialize these industries in such a way as to make the community merely a partner in their ownership and control, while leaving private enterprise a share in the undertaking, we shall retain the advantages of private initiative.

The prospective levy on property affords a method for socializing all monopolistic enterprises without laying a greater burden upon the owners of that property than upon the owners of property in general. Assuming the law to provide that each person must surrender a third of his property to the government, one third of every share of stock in the Empire would become the property of the State. This government share in every undertaking might be indicated by stamping the fact upon the stock certificates and one third of the dividends upon such stock would immediately become payable to the government. In this manner the government would become a partner in every joint stock enterprise in the Empire, without levying more heavily upon this form of property than upon other forms of property. It is understood naturally that the shareholders who are forced to sacrifice one third of their shares in the general property levy will be credited with this amount upon their obligations under the levy. At the same time it would be practicable to institute additional provisions, which would guarantee to the wage earners as a group a share of the profits made by monopolistic enterprises.

The situation is quite different when we come to the import and export trade. The principal function of that trade before the war was to serve the demands of our secondary industries.