THE GREAT tragedy of German history in the 20th century is that she was on her way to achieving a powerful, if not dominant position, in the affairs of Europe through peaceful means when militarism diverted her onto a destructive course. In the late 19th century, Germany led the industrial world in the introduction of universal education, technical training for workers, unemployment insurance and the provision of other social services designed to enchance national productivity.

As John Maynard Keynes noted in his 1919 treatise, "The Ecomonic Consequences of the Peace":

"Round Germany as a central support the rest of the European economic system grouped itself, and on the prosperity and enterprise of Germany, the prosperity of the rest of the Continent mainly depended. The increasing pace of Germany gave her neighbors an outlet for their products, in exchange for which the enterprise of the German merchant supplied them with their chief requirements at a low price. . . .

"There was no European country except those west of Germany which did not do more than a quarter of their total trade with her; and in the case of Russia, Austria-Hungary and Holland, the proportion was far greater.

"Germany not only furnished these countries with trade but in the case of some of them, supplied a great part of the capital needed for their own development. . . . And by the system of 'peaceful penetration' she gave these countries not only capital, but what they needed hardly less, organization. The whole of Europe east of the Rhine thus fell into the German industrial orbit, and its economic life was adjusted according." As a result of Germany's success in both diffusing knowledge and applying technology, her share of world industrial output overtook Britain's in the first decade of the century and if the 1914-1918 war had not intruded, she would probably have displaced Britain as Europe's leading banking power by the 1940s. In fact, early 20th-century books about the rise of German economic power bear a striking resemblance to contemporary American books about the Japanese economic challenge.

As one economic commentator observed in a 1913 book ("Monarchial Socialism") about German corporatism, "The non-German trading upon a frontier of the world has the uneasy sense that in competing with the German he is opposing not an individual but a nation. The American in the Levant, South Africa or the Far East may be supported by a corporation powerful at home, with wide-spread alliances, yet he becomes dimly aware that while he after all only represents an individual company, somehow behind his German competitor is the German nation in a real and co-operating sense. It is the interaction of government and business, the conscious adjustment by directing mind of one part of national endeavor with another, that makes possible much of the narrative of trade conquest told quarterly in the thin brochures of the imperial statistical office. Tasks of statemanship in German ministries, next to those of administration, concentrate on contributions to the national trade policy. . . . The protection and extension of trade spheres have become the vital principle of foreign policy."