From the defeat of Austria in 1866 until 1878 Bismarck was allied primarily with the National Liberals. Together they created a civil and criminal code for the new empire and accomplished Germany's adoption of the gold standard and move toward free trade. Just as they had earlier written off Bismarck as an archconservative, liberals now viewed him as a comrade--a man who had rejected his conservative roots. Many conservative leaders agreed with this assessment. Bismarck had cashiered kings, gone to war against conservative regimes, and adopted policies that promoted rapid industrialization. Their fears were further enhanced when he joined liberals in a campaign against political Catholicism (Kulturkampf) in 1873.
Bismarck had not counted on the emergence of new parties such as the Catholic Centre or the Social Democrats, both of whom began participating in imperial and Prussian elections in the early 1870s. Along with the left liberal Progressive Party, he labeled them all enemies of the empire (Reichsfeinde). Each in its own way rejected his vision of a united Germany. The Progressives found the empire too conservative and its elite essentially feudal; the socialists questioned its capitalist character; and for the Centre the empire was Protestant and too centralized.
Bismarck's aim was clearly to destroy the Catholic Centre Party. He and the liberals feared the appeal of a clerical party to the one-third of Germans who professed Roman Catholicism. In Prussia the minister of public worship and education, Adalbert Falk, with Bismarck's blessing, introduced a series of bills establishing civil marriage, limiting the movement of the clergy, and dissolving religious orders. All church appointments were to be approved by the state. Clerical civil servants were purged from the Prussian administration. Hundreds of parishes and several bishoprics were left without incumbents.
The Kulturkampf failed to achieve its goals and, if anything, convinced the Catholic minority that their fear of persecution was real. Bismarck gradually relented in his campaign, especially after the death of the activist pope, Pius IX, in 1878. But he never relented in his hatred for the Centre leader, Ludwig Windthorst, a Hanoverian who had earlier experienced Bismarck's methods in the annexation of his kingdom. Bismarck's speeches continued to be barbed with anticlericalism until his fall in 1890.
In 1878-79 Bismarck initiated a significant change in economic policy, which coincided with his new alliance with the conservative parties at the expense of the liberals. Tariffs were introduced on iron as well as on major grains. The new policy was a result of the "great depression" that had swept Europe and the United States in the mid-1870s. Bismarck's shift had serious political implications: it signified his opposition to any further evolution in the direction of political democracy. The liberal ministers Falk and Rudolph von Delbrück resigned, and Robert von Puttkamer became minister of public worship and education in 1879 and minister of interior in 1881. The grain tariffs provided the Junker estate owners of Prussia, who constituted the main opposition to political reform, subventions that isolated them somewhat from the world market. From 1879 onward, the landed elite, major industrialists, the military, and higher civil servants formed an alliance to forestall the rise of social democracy.
Ever since the Commune of Paris of 1871, Bismarck had developed an uncompromising hatred for socialists and anarchists. His attacks on them were egregious. At one point he wrote, "They are this country's rats and should be exterminated." Another time he called them "a host of enemies bent on pillage and murder." He thus introduced a crude and unsavory discourse into everyday German politics that was to be long-lived. Although only two socialists sat in the Reichstag in 1871, their number and support grew with each election, until they had 35 seats in 1890. As early as 1876 Bismarck had sought legislation to outlaw the party but failed to get a majority. After two assassination attempts against William I he prorogued Parliament and ran a campaign in which the socialists (quite unjustly) were blamed for the failed efforts to kill the emperor. The conservative parties triumphed and the Social Democratic Party was banned in 1878. The ban was renewed until 1890.
The second part of Bismarck's strategy to destroy social democracy was the introduction of social legislation to woo the workers away from political radicalism. During the 1880s, accident and old-age insurance as well as a form of socialized medicine were introduced and implemented by the government. But Bismarck's two-pronged strategy to win the workers for the conservative regime did not succeed. Support for the Social Democrats increased with each election.
"Bismarck, Otto von" Encyclopædia Britannica Online.