No. 95.
Mr. Sargent to Mr. Frelinghuysen .

[Extract.]
No. 28.]

Sir: I have the honor to report that the Reichstag will to-day terminate its labors for the present, and will, with the concurrence of the government, adjourn until the 31st of November next this extra session, the second of the fifth legislative period. The season was so far advanced that it seemed quite improbable that the parliamentary work on hand could be disposed of without adjournment; so long an adjournment is unprecedented, the adjournment heretofore having been ordinary parliamentary ones, not exceeding thirty days; but the present course was adopted to save and utilize the laborious and important work already accomplished in the various committees, which it would have been necessary to begin afresh at a new session had the present one been formally closed.

The Reichstag was convened in extra session by the Emperor for the 27th of April last. In a speech delivered at that session (a copy and translation of which were at the time furnished to the Department by this legation) the same measures were submitted for consideration that had been recommended from the throne at the opening (on November 17 last) of the previous session. That previous session had proven barren of positive results. The part of the session which has closed to-day has accomplished little more in the direction desired by the government.

* * * * * * *

The principal government measures undisposed of, and remaining in the hands of the various committees for consideration and action at the next meeting of the Reichstag, are a measure proposed for the insurance of workingmen against accidents on the basis of a corporation and cooperative organization of the various industries, this measure having been intended to take the place of the “government insurance bill” (heretofore transmitted to the department with a translation), which was withdrawn on account of the violent opposition it provoked in parliamentary debates last winter. Again, a measure for “health insurance,” with compulsory participation of the industrial classes against the results of illness; and, finally, a measure revising the trade laws. Upon the fate of the bills above referred to I may have the honor to report hereafter.

The grand measure submitted for legislative action by the government, a measure which the prince chancellor has pronounced to be the corner-stone of his “tax reform policy,” and his “final ideal,” was the “tobacco monopoly bill,” which has just met with a final and overwhelming defeat; the vote standing 276 to 43, twelve members not voting.

After having been rejected by the advisory body, the “economic council” (described in Mr. White’s dispatch, No. 188), by the body of scientists and experts but recently instituted to pass upon the propriety [Page 162] and expediency, from a scientific point of view, of submitting for legislative action a contemplated measure, it had also been emphatically rejected by committee of the Reichstag, to whom it had been referred, to be finally defeated in its second reading in the Reichstag itself, in the conclusive manner above stated.

As announced at the opening of the Reichstag, this bill was designed to make possible an end much needed, viz, a tax reform that should enable the Imperial Government to dispense with the matricular contributions of the individual confederated states constituting the Empire, thus putting it in the power of those states to relieve their respective parishes, and other communal associations, from what is denounced as burdensome and unequal direct taxation.

In this connection it may be remarked that the Prussion legislature rejected, at its recent session, a bill disposing of the savings to accrue as Prussia’s share of the benefits to be derived from the proposed “tax reform,” on the ground, probably, that it would be safer to await the reform.

The “tobacco monopoly” is deemed by the government the one object of indirect taxation which will yield a sufficiency for the purpose in view. If the government estimates be reliable, a very rich harvest is to be expected from such a measure. The monopoly has, however, met with violent and persistent, and, as the sequel shows, effective opposition, not only on the ground of the socialistic principle it involves, and that its opponents consider it as being generally inexpedient, but also on the ground that it is a financial blunder, the correctness of the calculations on which the expected enormous yield was based having been pronounced by many of the ablest economists as erroneous to such a degree as to make the hoped-for result wholly illusory.

Institutions similar to the “tobacco monopoly” measure proposed for this Empire existing already in various states of continental Europe, and especially in the great states of France, Austro Hungary, and Italy, I shall not attempt to submit a detailed statement of the measure; but shall confine this paper to some comments of a general nature, and to a presentation of the statistics on the subject, inclosing for the files of the Department for future reference, if desired, the bill itself, embracing seventy-two paragraphs, together with the “motive and estimates,” as well as the very lengthy speeches, occupying several hours in the delivery, of the 12th and 14th instant, of the chancellor, as also the speech of Mr. Von Bennigsen against the bill. In view of the pressure of more urgent work at this legation at this time, it has not been found practicable to transmit translations of the voluminous printed matter inclosed.

As to the estimates on which the bill, is based:

The entire quantity of tobacco to be manufactured is estimated at 1,505,720 cwt. (the pound being about one-tenth heavier than the English pound), of which 587,528 cwt. are for cigars; 74,985,680 cwt. for smoking; 12,242,560 cwt. for snuff, and 4,590,960 cwt. for chewing tobacco; viz, about 828,146 tons (English) in all. It is estimated that-over three-fifths of this amount, owing to the increased encouragement to be given to planting in Germany, would be of domestic growth; whereas domestic tobacco has hitherto only figured to the extent of only one-third of the quantity manufactured. This, of course, presupposes a falling off in the demand for American and other foreign tobacco.

The total cost of purchase is estimated at 82,599,210 marks; the cost of the foreign tobacco being 60,686,270 marks; that of domestic, 21,912,940 marks. The total wages to be paid are estimated at 47,996,795 [Page 163] marks, the calculation being based on the average wages paid at the imperial tobacco factory at Strasburg, as is also the estimate of 18,890,638 marks for cans, bottles, paper wraps, &c., and the estimate of 16,379,565 marks for ingredients used other than tobacco.

The estimated receipts from the sale of the entire manufactured article are 347,770,442 marks, viz: From cigars, 280,413,947; from smoking tobacco, 67,187,169; from snuff, 15,548,051; from chewing tobacco, 8,378,502; from cigarettes, 1,011,780; from imported cigars, 16,030,875 marks. The entire expenses of manufacture being estimated at 173,174,775 marks, a profit of 174,595,667 marks results, which, after deducting the interest, 10,922,500 marks, being 4¼ per cent of 257,000,000 marks—the estimated amount of the indemnities to be paid under the bill to persons engaged in the tobacco business—there remains the net annual profit of 163,673,167 marks, or, in round numbers, about $89000,000.

It is argued with great force by excellent authority that many of the data furnished by the government are highly fallacious. For instance, that its promise to employ in the service of the monopoly 80,000 persons, and to grant indemnities to 8,000 persons would be quite impracticable and inconsistent with the end in view—that of obtaining the large hoped-for revenue. This promise, it is urged, must necessarily be based on the assumption that there are just 88,000 persons engaged in the tobacco industry—an assumption not borne out by facts, since the tobacco investigating committee found in 1877 that 99,714 were employed in the factories alone, and the additional number of 22,301 persons engaged in working on the article at home, making a total of 122,015. What is to become of the remaining 32,000 persons? They would be without bread from the outset. Nor could the government hope to employ anything like the number proposed. The monopoly in France employs only some 18,000 persons. Ultimately the monopoly must render useless to many thousands of Germans their only weapons in the struggle of life—their knowledge of their business; while the pitiful indemnity awarded would soon be consumed in enforced idleness or, worse still, lost in enterprises of which they knew nothing.

Just calculations, contended the opponents of the measure, would show the estimated consumption of 388,000,000 to be excessive by 128,000,000 at least. The expenditure to be incurred was, on the other hand, under-estimated. Operatives, according to the bill, were to receive an average weekly remuneration of eleven marks (about $2.60), the licensed sellers an annual income of 646 marks (about $150.) The administration would soon find that it would have to reckon with very different figures for wages and salaries. In connection with the prophecy that the monopoly would soon find itself working with a deficit; violent political opponents of the chancellor also contended that the host of workmen and licensed vendors to be employed, some 140,000 persons, would nevertheless be retained in service to swell, as employés of the government, its already vast army of dependents, and to furnish convenient material with which to fill at elections the seats of the Reich tag with conservative members, in order that the evils of the monopoly might be perpetuated and other government measures be carried.

I will state, in conclusion, that the Reichtag followed the rejection of the “monopoly bill” by the adoption of a resolution declaring that the tobacco interest should be let alone, and that an increase of taxation on that article is called for.

I have, &c.,

A. A. SARGENT.