On the way to social investment? The normative recalibration of the German welfare state.

Author:Brettschneider, Antonio
  1. Introduction

    Comparative welfare state research has frequently characterized the German welfare state as being largely resistant to change. Germany used to be the textbook example for the "path dependency" of conservative-continental welfare states. According to many observers, virtually no relevant innovation at all was achieved in the 1990s due to a self-blockage of the political system. Surprisingly, by the beginning of the 2000s, a considerable number of reforms in all domains of the welfare state came up on the political agenda which decisively changed the face of the German welfare state. In its "long goodbye to Bismarck", Germany has been recombining its traditional "social insurance" approach with elements known to be typical of other regime types: on the one hand, lower social insurance contributions, reduced levels of income security through wage earner schemes, accompanied by demands for self-responsibility, and a stronger reliance on means-tested benefits point to a turn to a liberal welfare state; on the other hand, increasing tax financing and more spending on family-oriented benefits points to a move towards a more "Scandinavian" approach (Bleses and Seeleib-Kaiser 2004).

    This trend of "welfare hybridisation" (Hemerijk 2006:18) seems to be common to many European welfare states, thus blurring the traditional differences of welfare regimes that have guided comparative welfare state research ever since Esping-Andersens (1990) seminal work. According to many scholars, we are witnessing a general re-orientation of European social policies towards a new "social investment" paradigm (Palier 2006), gradually replacing the "old" paradigm of social insurance in the continental, conservative welfare states. The basic idea of the Social Investment paradigm is to move from "consumptive" to "productive" social spending; the idea of "activating" and "investing in the future", rather than spending and protecting in the here-and now, involves cutbacks in "passive" benefits and a re-channelling of social expenditures towards those welfare programmes that are considered to be "social investments" (especially education, training and family policy).

    This article will focus on the ideational dimension of this "recalibration" of the German welfare state. The main hypothesis of the article is that although the label "social investment" was not extensively used in Germany, the basic ideas that are incorporated in this political program did decisively shape the German discourse as well as the social policy reforms of the last years. It will be argued that a redefined idea of social justice lies at the core of the institutional restructuring of the German welfare state that we are witnessing. Within the "competitive solidarity" (Streeck 2000) of the new ideological mainstream, the main end of social policy has shifted from providing a considerable degree of equality and income security to the goal of raising the level of societal human capital and thereby increasing the international competitiveness of the German economy. This discoursively constructed shift of guiding regulatory principles has served as an ideational blueprint for many reforms of different social policy domains, including pensions, unemployment insurance, health insurance, and family policy. The gradual transformation from "protective" towards "productive" welfare, both on the ideational and on the institutional level, is pretty much in line with the "Social Investment" Paradigm as it was developed by Anthony Giddens (1998), Gosta Esping-Andersen (2002) and others.

    In that process of normative recalibration, the discoursive strategies of political actors have played a central role. The main argument of the "discourse" approach as presented by Schmidt (2000) and others is that in order to achieve substantial reforms, policy makers have to create an "interactive consensus" for change that enables them to overcome entrenched interests, institutional constraints and cultural impediments to reform. This consensus has to be constructed through discourses that seek to convince both citizens and elite groups to accept a potentially unpopular reform. Such a legitimatory discourse needs to include a cognitive dimension concerning the technical necessity as well as a normative dimension concerning the moral appropiateness of a proposed reform package. A successful discourse strategy must therefore demonstrate the relevance, applicability and coherence of a policy program, as well as its moral conformity with long-standing or newly--emerging national values such as equality, solidarity, freedom or social justice in general.

    The aim of this article is to describe and analyze both the changed interpretation of social justice that has emerged in the German social policy discourse as well as the different discourse strategies used by political actors to promote this new approach. The article is structured as follows: section 2 presents a brief outline the general framework of the Social Investment paradigm, identifying some key principles that have been relevant for the German debate. Section 3 shows how these key elements of the Social Investment paradigm have gradually been introduced in the German social policy discourse of the last ten years. Due to space restrictions, the analysis will focus on the normative rather than the cognitive dimension of the new interpretative patterns. Section 4 will try a description of the current state of affairs and discuss whether Germany is still on the way to social investment. A brief conclusion summarizes the main findings (section 5).

  2. The Social Investment paradigm

    The term 'social investment state' was first used by Anthony Giddens in his articulation of the "Third Way" (Giddens 1998). In his famous publication, Giddens advocates for a transition of European welfare states from a "corrective" and "passive" welfare state to a more proactive strategy, with much greater attention being paid to prevention, "activation" and social servicing. The guideline for future welfare state reform, he argues, 'is investment in human capital wherever possible, rather than direct provision of economic maintenance. In place of the welfare state we should put the social investment state' (1998: 117, emphasis in original). According to Anton Hemerijck, the Social Investment paradigm is "a new welfare repertoire based on consistent normative principles, coherent causal understanding, (re-)distributive concerns and institutional practices--a repertoire that is comparable in its generalities to that of the male-breadwinner Keynesian welfare state of the post-war decades" (Hemerijk 2006:1). Integrating the economic and social dimensions of public policy, the "social investment state" is presented as a pragmatic response to the perceived economic and social challenges facing mature welfare states in the face of economic globalization.

    On the European level, the increased focus on social policy as an investment, and a better integration of social and economic goals, was introduced in the Amsterdam Treaty in 1999 and then taken further in the Lisbon Strategy in 2000. According to the Lisbon Strategy, the general aim of modern public policy is to build a competitive and cohesive knowledge-based economy. Public policies should be redesigned in a way that economic, employment and social policies fit together and have a positive interplay. Within this general framework, investing in people and developing an active and dynamic welfare state is regarded as crucial both to Europe's place in the knowledge economy and for ensuring that the emergence of this new economy does not compound the existing social problems of unemployment, social exclusion and poverty. Already in 2000, the Portuguese Presidency of European Union comissioned a team of researchers to produce a report on "The Future of Work and Welfare" (Ferrera/Hemerijk/Rhodes 2000). The authors argue for a multi-dimensional "recalibration" of European welfare states in order to adapt them to the changed economic and societal circumstances of the 21st century. In 2001, the Belgian Presidency of the European Union commissioned Gosta Esping-Andersen and colleagues to draw up "a scientific report on the evolving architecture of the European welfare states". The revised version of this report, published in 2002, has become the single most influential publication of the Social Investment paradigm (Esping-Andersen et al. 2002).

    In its attempt to reconcile economic efficiency with social justice, the Social Investment paradigm combines two general lines of reasoning. The first line is a purely economic one, concerned with the productivity and economic competitiveness of national economies; the second line is a social one, concerned with equality, social justice and social inclusion within these national economies.

    2.1 The economic rationale: the returns of social investment

    The Social Investment paradigm is based on the assumption that a social policy design that focuses on investment in human capital is economically more productive than a one-dimensional retrenchment of welfare state spending as advocated by market liberals and orthodox economists. Rather than a drain on the economy, investive social policy is a crucial productive factor and a necessary feature of a well-functioning modern economy that has to position itself well in a high-stakes knowledge economy. The political recognition of the value of investing in human capital is based on the conviction that the human capital of a nation is a primary determinant of its economic strength. In an encompassing international market, a productive and educated workforce is a nation's most important competitive asset and a prerequisite for long-term economic growth. As the productivity of a national economy increasingly depends on the effective development and use of the human capital of all its citizens, (re-)directing resources towards...

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