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cariousness of the workingman's life. With the develop-
ment and perfection of machinery and the growing in-
tensity of work and competition, the "reserve army of the
unemployed" is constantly on the increase, industrial
accidents are more common, the worker is exhausted and
enfeebled earlier in life, and the aged mechanic is rendered
more useless.

The problem of providing against these contingencies
has, therefore, naturally engaged the attention of the
workingmen ever since the rise of the wage system, and
it has become a matter of ever greater concern to them
as that system has developed.

The first practical efforts for the relief of workingmen
in cases of unemployment, sickness, accidents and old age,
assumed the form of private and voluntary enterprises,
undertaken by workingmen, and sometimes by employers
of labor. To the former class belong the trade unions and
other labor organizations which furnish relief to their
members out of work from funds raised among themselves
by means of regular periodical contributions or assess-
ments, and the numerous fraternal and mutual societies
which insure their members in cases of sickness and acci-

* "The Case for State Pensions in Old Age," Fabian Society, London,


dents, and sometimes even provide for annuities in old
age. Among the latter class must be counted the special
funds of large employers of labor, notably the mining and
railroad companies, established for the purpose of aiding
their employees in cases of sickness and accidents or of
providing them with pensions after a continuous employ-
ment of specified duration. These funds are as a rule
created with a view of attracting a better grade of work-
ers to the more dangerous and strenuous trades and insur-
ing their steadiness of work. In the United States they
have gained but little extension. In some countries of
Europe, notably in France, Belgium and England, they
play a much more important role, but on the whole the
practice is so rare, and the benefits of the system are so
restricted and insignificant, that they can hardly be con-
sidered a serious factor in the movement for the relief of
the workingmen against the uncertainties of their existence.

Of much greater value than the employers' funds, are
the cooperative societies of workingmen, such as the
various Benefit Orders of the United States, the Friendly
Societies of Great Britain, the Societes de Secours Mutuels
of France, Belgium and Switzerland, the Kranken-Kassen
of Germany and Austria, and the mutual aid associations
of almost all other countries.

Beginning on a modest scale in the early part of the last
century, these societies soon proved themselves so essential
to large masses of the working population, and spread with
such rapidity that they almost attained the importance of
a social institution. Towards the middle of last century
the governments of the most advanced countries of Europe
found themselves impelled to take official cognizance of
their existence and activity.


In England the first legislative act affecting the friendly
societies dates back to 1793, but that act and the amend-
atory legislation following it during more than half a cen-
tury, did not materially advance the standing or powers
of these societies, and left the application of such laws
optional with the societies. The first laws which under-
took not only to regulate but also in some degree to aid
and strengthen the mutual insurance societies of working-
men, were the laws passed in Prussia in 1849 ^^^ ^^ France
and Belgium in 1850. And similar laws have since been
adopted by almost every country of Europe and by most
of the states in the United States.

From government regulation to government manage-
ment is but one step, and in the matter of workingmen's
insurance this step was readily taken in several countries
of Europe. In France a state department for old-age in-
surance — the Caisse Nationale des Retraites pour la
Vieillesse — was established in 1850, and it was followed
in 1868 by a similar state institution for accident insur-
ance — the Caisse Nationale d* Assurance en cas (T Ac-

In Belgium a National Old Age Pension Bank was
established by the government in 1850. In Italy a semi-
governmental Bank for the Insurance of Workingmen
Against Accidents — the Cassa Nazionale di Assicura-
zione per gli infortuni degli operai, was created by the law
of July 8, 1883.

All these instances of workingmen's insurance institu-
tions managed by the government are those of voluntary
state insurance, i.e., institutions conducted by the state as
a branch of the government for the benefit of those of its
citizens who may desire to take advantage of them. The


state does not contribute to the insurance funds, and the
amount of insurance is determined on the basis of pre-
mium payments. The superiority of such state insurance
over that of the ordinary insurance companies lies in the
greater safety of the investment and in the fact that it
excludes the element of profit.

The institutions of voluntary state insurance have no-
where become very effective or popular for the reason that
they leave the entire burden of financing them on the class
least capable of carrying it — the working class. Volun-
tary state insurance is, after all, but another form of self-
help in insurance, and such insurance has, on the whole,
proved entirely inadequate to relieve the needs of the
vast masses of wage earners of our day . Comparing the net
results of the various forms of workingmen's insurance,
voluntary and involuntary, at the close of the nineteenth
century, M. Maurice Bellom remarks : " It is impossible
to refrain from an exclamation of astonishment and ad-
miration in reviewing the social results of compulsory in-
surance. . . . The diffusion of insurance which the
compulsory organization has caused, the pecuniary ad-
vantages which it has secured for the workers, the ease
with which it has enabled employers of labor to discharge
their liability, and finally the benefits of a better hygiene
which it has conferred on the entire community, have won
for the system of compulsory insurance the general recog-
nition of the numerous beneficiaries of that system." ^
Within the last few decades the conviction has grown in
some of the most advanced countries that the provision of
workingmen's insurance against unemployment, sickness,

* Journal de la Societe de Siatisiique de Paris, 1901, for June, July and


accidents and old age, is not a matter to be left to the in-
clinations or abilities of individuals, but a task to be
assumed by organized society as such; that it is the duty
of the state to guarantee the existence of the invalids and
veterans of its industrial army at least as much as the
existence of the invalids and veterans of its military army
is now guaranteed.

The first official proclamation of this principle is prob-
ably that contained in the French constitution of 1848,
which declared "that the Republic should by fraternal
assistance assure the existence of its needy citizens."
"But," observes Edouard Vaillant,* "the victorious reac-
tion knew how to guard itself against all practical conse-
quences of its republican affirmations and declarations."

It was left to the imperial government of Germany to
inaugurate and enforce a general system of compulsory
state insurance with direct state aid. This revolutionary
measure in the domain of workingmen's insurance was
first announced in a famous message of Wilhelm I to the
German Diet, on November 17, 1881, and we quote from
it the following passage bearing on the subject : —

" Already in February of this year we expressed our con-
viction that the cure of our social maladies is not to be
found in the repression of the social democratic excesses
alone, but also in the promotion of the welfare of the work-
ing class. We consider it our Imperial duty once more to
urge the accomplishment of this task on the Diet. . . .

"In this sense the united governments will first re-
submit to the Diet the bill for insurance of workingmen
against accidents with such amendments as have been
suggested in the discussions on the subject at your last
' ^'Assurance Sociale," Paris, 1901, p. 7.


session. Supplementary thereto a bill will be introduced
which has for its object the uniform organization of in-
dustrial insurance institutions in cases of sickness. But
also those who are incapacitated for work by reason of
old age or invalidity, have a well-founded claim on the
community to a higher degree of state aid than has here-
tofore been accorded them."

The first institution of compulsory state insurance of
workingmen established in Germany in pursuance of the
imperial message, was the insurance against sickness
created by the law of 1883 and repeatedly amended since.
Almost all industrial workers whose yearly earnings do
not exceed 2000 marks, and certain classes of commercial
and agricultural workers are brought under the provisions
of this law. The institution operates through the agency
of local sick benefit societies. The employers contribute
one third of the insurance funds and pay the expense of
administration, the employees pay the remaining two
thirds, the contributions in each case being proportionate
to the wages paid or earned.

The minimum aid fixed by law includes free medicine
and medical attendance; a money indemnity equal to
three fourths of the daily wage, or half of the wage and
free hospital treatment; in case of death a cash benefit to
the widow or family of the deceased equal to twenty times
his daily wage ; and sick relief to working women during
six weeks after confinement.

The German system of state insurance against accidents
was initiated by the law of 1884. That act is a radical
advance over the sick insurance law in that it specifically
recognizes the loss occasioned by accidents in the indus-
trial process as a legitimate part of the employer's operating


expenses, and places the entire burden of the insurance
against accidents on the employing class. The affairs of
the institution are administered by the joint representatives
of the employers and employees, and the rates of insurance
are fixed with reference to the degree of the danger of the
several trades, and the efficiency of the safeguards adopted
by each particular employer. One of the most substantial
benefits of this system has been the greater care developed
by the employers of labor and the general decrease of acci-
dents to workingmen.

The system of accident insurance embraces practically
all wage workers whose yearly earnings do not exceed 3000
marks. The compensation includes free medical attend-
ance and a fixed allowance during the period of disability.
In cases of total disability the injured man receives an
armuity equal to two thirds of his w^ages, and in cases of
death an indemnity is paid to the surviving family.

The third measure of workingmen's insurance mentioned
in the imperial message, that of insurance against old age
and invalidity, was not realized till 1889. The system dif-
fers from the two other forms of workingmen's insurance
in that it has been made a more distinct function of the
state as such. The old-age pension fund is administered
directly by the government, and the latter contributes 50
marks per year for each insured entitled to an annuity.
The remaining funds are contributed in equal portions
by the employers and employees. This form of insurance
is compulsory on every wage earner, sixteen years of age
and over, whose annual wages do not exceed 2000 marks.
The fund insures an annuity to each workingman after
he has become incapacitated for work, or has reached the
age of seventy years. The amount of the pension is de-


termined with reference to the average wages of the in-
sured, the minimum being 115 marks, and the maximum
about 450 marks per year.

All the three forms of workingmen's insurance are oper-
ated in conjunction with each other, and the main object
of the copious amendatory legislation on the subject has
been to combine them all into a harmonious and com-
plete system.

In comparison with the crude methods of voluntary in-
surance, the compulsory state insurance of Germany,
insufficient as it is, has proved a decided success.

In 1904 the number of German workingmen insured
against sickness was 11,418,446, and relief in that branch
of insurance was given in 4,642,679 cases, involving a total
expenditure of about 240,000,000 marks.

No less than 20,000,000 German workers were insured
against accidents in 1906, and about 14,000,000 persons
were insured against invalidity and old age in 1905.
The total amount of accident indemnity paid in the year
mentioned was 142,436,844 marks, while almost 160,000,-
000 marks were paid out in workingmen's pensions.
On January i, 1906, 934,983 invalid and aged working-
men were drawing pensions, and the receipts for that
year and purpose exceeded 210,000,000 marks, of which
the government had contributed about 38,000,000 marks.

In all, the German empire has spent in the twenty-year
period, 1885-1905, the sum of about 5,000,000,000 marks
on workingmen's insurance.

The example of Germany has been partly followed by
Austria, which enacted laws for the insurance of its work-
ingmen against sickness in 1888, and against accidents in
1887. In Hungary the system of compulsory insurance


against sickness was introduced in 1891. In Switzerland
the principle of compulsory state insurance of workingmen
was adopted in the form of an amendment to the federal
constitution. That amendment was adopted in 1890 on a
popular referendum, and read as follows: —

"The Confederation shall provide, by legislative en-
actment, for insurance against sickness and accidents,
account being taken of existing aid societies. It may
declare participation in insurance compulsory on all or on
certain specified categories of citizens."

When, however, a concrete legislative bill on compulsory
sick insurance was submitted to the referendum of the
people, it was rejected by a vote of 330,000 against 143,000,
on account of certain unpopular provisions, principally
with respect to the proportion of the contributions of the

In Norway a system of compulsory state insurance
against accidents was inaugurated in 1894, in Finland in
1895, in Italy in 1898, and in Holland and Sweden in 1901.
France has had a system of accident insurance since 1898,
and has very recently adopted a law providing for the
compulsory insurance of workingmen against invalidity
and old age. Similar institutions are in force in the colo-
nies of New Zealand, New South Wales and Victoria, In
Great Britain Parliament has recently established a gov-
ernment system of old-age pensions.

The main principles and methods of operation of these
institutions in the countries enumerated are substantially
similar to those of Germany, but some of them, notably
that of Austria, are more liberal in the amounts of the

Denmark has the distinction of having the only national


system which somewhat approaches the ideal of state in-
surance against unemployment. It has recently adopted
a law regulating the methods of trade unions in the manage-
ment of funds for the relief of their members out of work,
and providing for regular state contributions toward such
funds. In Belgium, Switzerland and France, several mu-
nicipalities have introduced similar measures for the as-
sistance of unemployed workingmen.

In Belgium and Denmark, the subject of compulsory
state insurance of workingmen in one form or another is
of late being very strongly agitated, and the indications
are that these countries will soon fall into line with the
general progress of "social legislation."

The practical plan of workingmen's insurance was first
formulated by the well-known Austrian statesman and
sociologist, Dr. Schaeffle, in 1867,^ and was elaborated by
Professors Wagner, SchmoUer and the other representa-
tives of the school of social science known in Germany by
the general designation of "socialism of the chair" {Kathe-
dersozialismus). But its practical realization and the
steady extension of its application is distinctly due to the
propaganda of modern socialism. The message of Em-
peror Wilhelm I quoted above, plainly admits that the
fear of the socialist movement was one of the government's
motives in inaugurating the era of social legislation, and
Prince Bismarck, the prime mover of the measure, was even
franker in his public utterances on the subject, as shown in
a previous chapter (Socialism and Law).

Factory legislation involves merely reforms in the rela-
tions between the individual employers and employees, but
social insurance is based on the recognition of the duties of

' Adolph Schaeffle, " Kapitalismus und Sozialismus."


the state as such towards its working-class citizens, and is
distinctly a socialistic idea. Factory legislation, there-
fore, may be forced from the government by a strong labor
movement, even if that movement has not reached the
consciousness of socialism ; but social insurance can be
achieved, directly or indirectly, only through the presence of
a well-defined and aggressive socialist movement. Ger-
many, the classical country of modern socialism, is also
the home of social insurance; in the United States, where
the trade-union movement is old and strong and the socialist
movement is new and comparatively weak, we have a con-
siderable number of factory laws, but not even the first
rudiments of social legislation. England was in this
respect similarly situated with the United States, until its
workingmen turned to socialism and socialist politics.
The English old-age pension system has been among the
first results of the change.

The socialists do not overrate the value of workingmen's
insurance. They do not consider it as a solution of the
social problem, nor even as a measure of adequate relief of
the more pressing needs of the working class. But they
see in it a potent lever for the elevation of the physical and
moral standard of the masses.

The uncertainty of the workingmen's life has probably a
more deteriorating effect on the morale of their class than
any other feature of their existence; it tends to make
them timid and conservative and inaccessible to the
movement for the elevation of their class on a broad and
bold plane.

The effect of a comprehensive system of state insurance
is to remove from the minds of the workingmen the haunt-
ing dread born of uncertainty, and to develop in them a


certain sense of material security and intellectual independ-

The socialists, moreover, regard the system of compul-
sory state insurance as a large step in the direction of the
social transformation of the modern individualistic state.

"In a socialist society," Edouard Vaillant predicts,
"social insurance will in its turn disappear in the higher
forms of the social institutions based on equality and
solidarity, as they are to-day absorbing and transforming
the old institutions of public assistance and the partial
and incomplete experiments of private insurance. Charity,
public assistance and social insurance are the three suc-
cessive stages through which we have to pass before the
emancipation of the working class and the social republic
will render them useless.

" Under the capitalist regime it is only through social
insurance that the dignity of the workingman and the poor
can be safeguarded, and his legal rights, his guaranty
against all social risks and all misery, can be established
and maintained. And it is because of this, because the
time for the complete realization of the plan has arrived,
that we must concentrate all our efforts on its establish-
ment." ^

And the socialists have never relaxed their efforts to

* "Assurance Sociale."

For detailed descriptions of the kinds, methods and results of Work-
iagmen's Insurance, consult : —

William Franklin Willoughby, " Workingmen's Insurance," New
York, 1898.

John Graham Brooks, "Compulsory Insurance in Germany," Special
Report of United States Commissioner of Labor, Washington, 1895.

Dr. Heinrich Herkner, "Die Arbeiterfrage," 4th revised and enlarged
edition, Berlin, 1905.


improve and extend the existing system of state insurance.
In Germany and other countries in which the system has
been wholly or partly established, they work for the elimina-
tion of the workingmen's contributions to the insurance
funds on the theory that it is the duty of the state to insure
the life and existence of the worker, without curtailing his
wages for that purpose; they demand the raising of the
benefits to an extent sufficient to meet the actual needs of
the sick, disabled and aged workers, and they urge the
extension of the system to cover the entire wage-earning


In countries in which the system of compulsory state in-
surance for workingmen has not yet been introduced, the
socialists are its most ardent, often its sole advocates.



Political Reform

In theory representative government is government
"of, for and by the people," and the modern political
machinery is an instrument for the expression and en-
forcement of the popular will.

But in most of the advanced modern countries the po-
litical actualities accord but poorly with these theoretical
ideals of democracy. As a rule it is not the great masses,
but the small privileged groups who dominate the govern-
ment. A large portion of the people are openly excluded
from all direct participation in politics, and for many of
those who nominally enjoy political rights, the exercise of
those rights is a mere illusion. The elected or appointed
public officials are but rarely the disinterested "servants"
of their constituents. More often they are the rulers of the
nation, exercising the functions of office for the promotion
of their own interests or those of their special class and in
hostility to the people. The constituents have but little
control over their "representatives," and the general
tendency of modern political development has been to
alienate the government from the people,

Mr. M. Ostrogorski, who has probably made the most
searching and exhaustive investigation of political institu-
tions and conditions in the two greatest democracies of our



day, England and the United States/ makes the alarming
but well-substantiated statement that in both countries the
political parties, which were originally devised for the reali-
zation of the will of the voting masses, have turned into ef-
fective instruments for the defeat of that very will. Politi-
cal parties have become political machines run by political
"bosses" on the principle early announced by a prominent
American politician, "To the victors belong the spoils."
The "victors," within the meaning of that maxim of
modern political ethics, are always the party bosses and
their henchmen, and the "spoils" are the public offices of
trust and confidence, the powers of popular government
and all its departments.

The professional politicians in the United States, in-
cluding officeholders and party bosses of all grades, have
developed into a distinct class. Mr. Ostrogorski estimates
their number at about 900,000 — i.e., about 6.5 per cent
of the voting population, and that class practically controls
the politics of the country and constitutes its government.
Only from one to ten per cent of the voters take part in the
primaries, and the large bulk of the votes in popular
elections is manipulated by the professional politicians,
either by means of the stultifying clap-trap methods of
modern American campaigning, or by direct personal
promises and influence, or by the still more direct method
of purchase. Mr. Ostrogorski makes the startling asser-
tion that more than 11 per cent of the American voters
sell their votes.

It is this perversion of popular government that has
given rise to the many modern movements of political re-

" M. Ostrogorski, "Democracy and Political Parties," New York,


form, and as the vices of prevailing political conditions and

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