Bismarck’s social insurance legislation in Imperial Germany

A comparison with UK Liberal welfare reforms

Structure of Lecture

• Part A: Late 19th century Germany– The founding of an industrial empire– Social insurance legislation (1880s)

• Part B: Britain and social insurance– Demands for social reform (1880-1914)– Outcomes: social insurance in context

• Part C: Comparisons and conclusions– The different objectives (policy logics)– Regime contradictions

Part A: Germany in the late 19th century (recap) (1)

Empire, governance and industrialisation• Kaiser absolutism and Junker dominance

– Weakness of Reichstag (low tax capacity)– Weakness of liberal laissez-faire capitalism

• Rapid, successful industrialisation– State-sponsored: protectionist– Railways & armaments (German unification)– Post 1848 revolution: socialist problem (SPD)– Trade unions. RC: Hirsch Duncker (liberal): ‘free’

(SPD) – the latter being the most successful

Visions of Bismarck

Germany in the late 19th century (recap) (2)

Coping with poverty• Poor Law (in rural Prussia, quasi-feudal)• Prussian legislation

– 1849 Prussian law empowers municipalities to compel workers to join mutual aid societies

– 1854 Prussian miners compelled to join benevolent funds

• Rapid industrialisation and urban growth – Collapse of financial base of poor law– Pressure from localities for reform

Bismarck’s legislation

To win workers’ loyalty to the Reich• 1883 Health Insurance (joint contributions)• 1884 Accident Insurance (employers’

contributions)• 1889 Old age and Invalidity Insurance (tri-

partite contributions)

1879-1890: Anti-Socialist Laws in force (repression of ‘free’ TUs and SPD)

Common features

• Contributions and benefits all earnings-related• Cover confined to employed industrial workforce

(low protection for migrants, the very poor or women: excludes rural workers)– E.g. Ehrfurt: 1895 – 10% population covered by social

insurance

• Aim: to give skilled, well-paid and organised (socialist) German workers a vested interest in the Reich

New Kaiser: new policy

• More emphasis on incorporation free trade unions & SPD (not repression)

• Partly by fostering local autonomy and local responsibility for social policy– Reich to focus on foreign policy / trade– Local states and free cities to determine

operation of (particularly) health insurance and labour market placement services

– = varied responses to free trade unions– Local action informed by social science (Berlin)

SPD and sickness funds

• Whole range of established (& new) sick funds register under legislation.

• Sickness fund administration– Council elected in proportion to contributions– Financed two-thirds by workers: one-third by

employers (elected officials: 2 out of 3 = workers’ representatives)

– During repression, SPD use this to consolidate organisation at local level

Britain and social reform

1880-1914: origins of Liberal welfare reform

• Recurrent economic depression: recurrent crises in poor law finance (inner cities)

• Poverty exposed (Booth and Rowntree)– Threat to physical efficiency (Eugenics)– Threat to economic / Imperial supremacy

• 1906 and after: threat of Labour Party to Liberal parliamentary majority

British Liberal Welfare Reforms

Outcome: reforming the labour market• 1906 Trade Disputes Act (TUs legal protection)• 1908 Old Age Pensions Act (tax-funded)• 1908 Wages Boards Act (‘sweated’ trades)• 1908 Labour exchanges (decasualisation)• 1911 National Insurance (contributory)

– Part 1 health insurance (universal) – via registered friendly societies & trade unions

– Part 2 unemployment insurance (5 trades) – single central fund

Fabian socialist influence

Conclusions I: similarities

• Both cases see social insurance as part of solution to crisis of poor law.

• Insurance principle: identify and isolate regular workers= male heads of household – The vested interest in supporting the government

• Supporting economic modernisation (protection against new ‘risks’)– The significance of social science in the analysis of

social problems

• Consolidating Empire

Conclusions II: dissimilarities

Different objectives (policy logics)• Germany: working class allegiance to Reich

– SPD suppressed: welfare legislation passed– Contributory schemes offer social rights– Schemes aimed at well-off workers, not poor

• UK: meeting economic threat of pauperism – Welfare legislation & growth of TU protection– Contributory schemes = extension of ‘friendly’ society

protection– More tax payer subsidy (esp. pensions which include

cover for women)

Conclusions III: More dissimilarity

Counter-factual outcomes + remits of state power• Germany:

– authoritarian regime fosters social democracy = roots of industrial co-determination

– Limitations on nation state: Reich respect for municipal /state powers = diversity

• UK: – liberal democracy fosters autocratic (centralised &

bureaucratic) social insurance (actuarial principle)– Corrosion of local autonomy