The constitution of 1871 established the Second Reich, a
nation-state united on the basis of dualistic constitutionalism.
The emperor controlled foreign policy and the combined military
forces of the German states. Germany remained a federal union,
however, and the aristocratic-monarchical order was preserved in
the individual states. The Bundesrat (Federal Council) and the
Reichstag (Imperial Parliament) exercised the power of
legislation. State rulers were represented in the Bundesrat,
whose members held office by princely appointment; the people
were represented in the Reichstag, whose members were elected on
the basis of universal male suffrage but whose powers were
limited by the emperor and the Bundesrat.
Six major political parties predominated: Conservative Party,
Free Conservative Party, Center Party, National Liberal Party,
Progressive Party, and Social Democratic Party of Germany
(Soziademokratische Parti Deutschlands--SPD). The Conservative
Party represented Prussianism, aristocracy, and landed property.
The pro-Bismarck Free Conservative Party represented nobles and
industrialists. The Center Party, although conservative regarding
monarchical authority, was progressive in matters of social
reform; it represented Roman Catholic institutions in Germany.
The pro-Bismarck National Liberal Party was composed of moderate
liberals who advocated constitutionalism, a laissez-faire
economic policy, secularization, and material progress. The
antiauthoritarian and democratic Progressive Party championed the
extension of parliamentary prerogatives. The Marxist SPD was
founded in Gotha in 1875 from a fusion of Ferdinand Lassalle's
General German Workers' Association (1863), which advocated state
socialism, with the Social Democratic Labor Party (1869), headed
by August Bebel and Wilhelm Liebknecht.
Bismarck's early policies favored the National Liberal Party,
which, in coalition with the Free Conservative Party and the
Progressive Party, constituted a parliamentary majority in 1871.
The federal chancellery published a new commercial code,
established a uniform coinage system, and founded imperial banks.
The French indemnity payment provided capital for military
expansion, railroad construction, and building projects. The
Kulturkampf (struggle for civilization) with the Roman
Catholic Church resulted in the subordination of church to state
and the secularization of the educational system. German
financiers and industrialists, citizens of a potentially powerful
nation-state who were finally provided with a unified internal
market, took ample advantage of investment opportunity. A
speculative boom, characterized by large-scale formation of joint
stock companies and unscrupulous investment practices, resulted.
The Gründerzeit (era of promotion, 1871-73) ended in the
stock market crash of 1873.
The crash of 1873 and the subsequent depression signaled the
impending dissolution of Bismarck's alliance with the National
Liberals. After 1873 the imperial government repudiated
liberalism and abandoned free trade. Popular support for German
liberalism also waned. Catholic opposition to the
Kulturkampf strengthened the Center Party, doubling its
popular vote in the Reichstag elections of 1874. In the late
1870s, Bismarck began negotiations with the economically
protectionist Conservative Party and Center Party toward the
formation of a new government coalition. Conservative electoral
gains and National Liberal losses in 1879 brought the
Conservative coalition (consisting of the Conservative Party,
Center Party, and National Liberal Party) to power. The Reichstag
drafted a political program based on protectionism, and an
alliance between the landed aristocracy and industrialists
consolidated the domestic system.
Data as of July 1987