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must make itself responsible for those members of society whothrough physical or economic adversity could not take care ofthemselves.IV · Old Devil BudgetSOCIAL-WELFARE MEASURES took some care of the aged, thesick, and the idle. But social-welfare measures will not make aneconomic system function. If 20 per cent of the people are thevictims of want, the remaining 80 per cent must be enabled to continueproducing both goods and income for themselves and thevictims. Just as social-security and welfare measures became a fixedinstitution of the Reich to aid the underprivileged, public spendingof borrowed funds became gradually an institution of the Germancapitalist system to keep the functional portion of society alive.The German empire set up for business in 1871. It began underpeculiarly happy circumstances. It was born out of a short, victoriouswar that paid for itself and made a profit. Bismarck extractedfrom France an indemnity of 4,467,096,402 marks. Thiswas enough to enable the empire and the separate states to pay ofifall their war bonds and have a comfortable balance. The big Frenchindemnity became the parent of a vigorous boom in a new nationwhich set up for business debt free. One would suppose that thisvigorous state, with an industrious and thrifty people devoted toorderliness and discipline, with a passion for good public housekeeping,a large surplus in its hands, and a brilliant and forcefulstatesman at its head, would have continued to pay its way if thatwere possible. Yet the empire which began debt free in 1871 was by1875 g° m § to tne moneylenders. The central government's capacityto tax was limited. It could never collect enough to pay all its bills.The budget was chronically out of balance. Reichstag after Reichstagquarreled with the government about the budget. So that by1876 Bismarck resumed state borrowing. 1 Despite repeated deficits^'Financial Reform in Germany," by Gustav Cohn, University of Göttingen, Yale Review,Vol. 18, November 1909.87