Borrowing for social security? Credit, asset-based welfare and the decline of the German savings regime

Abstract

This article investigates the question to what extent Germany fits into the recent trend of credit-based social policy that has originated in Anglophone economies. In the course of the financial crisis and with its preceding increase in private indebtedness in mind, a growing number of scholars have argued that loans to households have become a central component of contemporary welfare states. Because of comprehensive savings-promotion schemes, high levels of public welfare provision and a low homeownership rate, the German welfare state conventionally figures as the paradigmatic counter case to this intensifying relation between welfare and finance. This article argues, to the contrary, that one can observe the rise of credit-based social policy in Germany due to the gradual erosion of savings promotion, the expansion of quasi-public loan schemes and the restructuring of the welfare state since the mid-1970s. Based on document and statistical analysis, the article evaluates reform trajectories in the field of pensions, education and healthcare to substantiate this claim. Within the current low-interest rate environment in the Eurozone, the developments combined might well challenge the traditional savings-oriented features of the German welfare state and its political economy.