254 ANNUAL REPORT SMITHSONIAN" INSTITUTION, 1918. 



cartel came into being as the inevitable outcome of the period of 

 overproduction, under consumption, and lowering of price that 

 accompanied and followed the financial depression of 1873. At that 

 time competition was so intense as to be well nigh the extermination 

 of many industries and the cartel, which was instituted more or less 

 as a self-protective measure, has later by its introduction of " dump- 

 ing" on foreign markets been enabled to control and correct the 

 conditions in the home market that have always been both a stimulus 

 to German industry and a menace to foreign competition, namely, 

 the ability of the German factory to overproduce. By " dumping," 

 the German manufacturer gets rid of his surplus production on 

 the foreign market at a price that would be disastrous were it not 

 for his ability to rehabilitate himself by means of the higher do- 

 mestic price set and maintained by the cartel. Through the cartel 

 he is also enabled to acquire an export bonus on the price of raw 

 materials destined for ultimate export in the form of finished product. 



Transport. — Additional facilities are furnished to the export trade 

 by the special transport rates on both railway and steamship lines 

 which not only enable the manufacturer to get his goods to foreign 

 destinations at sometimes only one-quarter more than he would pay 

 to ship the same commodity between Breslau and Hamburg, but also 

 offer an attraction to foreign shippers to consign their merchandise 

 via German railways or German ships at greatly reduced freight 

 charges. In other words, by means of the State operation of rail- 

 ways the Government is enabled to practice a sort of railway dump- 

 ing by which the transport charges can be reduced for the benefit of 

 the export trade or of foreign traffic. 



Role of State. — M. Hauser emphasizes the function of the German 

 State in economic domination through its ownership of railways, 

 and its military and naval consumption, together with its hold on 

 the electrical industry acquired by its monopoly of canal towage. 



In regard to the cartel the State finally resolved to make a virtue 

 of necessity by adopting a policy of toleration and supervision which 

 wound up in some cases by the State absorbing the cartel as in the 

 case of the loose jointed union between the government and the coal 

 syndicate, or by the State organizing the cartel as in the case of the 

 potash syndicate, which owed its existence in the first place to the de- 

 sire of the Government to regulate the production of the Prussian 

 Stassfurt mines and to keep the price sufficiently high to preserve 

 for the nation the material required for agriculture. The potash 

 syndicate holds a unique position among German cartels owing to 

 the fact that German potash production has resulted in the largest 

 national monopoly known among minerals. The aim of the Kali- 

 syndikat was not to encourage export by reduction in prices on the 

 foreign market, but rather to raise the export prices and thus by a 

 system of reverse dumping to reserve material for home consumption. 



