By Christoph Butterwegge

[This article published in: Die Blattchen November 13, 2006 is translated from the German on the World Wide Web, Prof. Butterwegge’s “Reforming or Dismantling the Welfare State” is available at]

In the Weimar Republic, the welfare state first experienced an unparalleled boom. But the welfare state and democracy were gradually destroyed during the world economic crisis at the end of the twenties and the beginning of the thirties. How increased mass unemployment and dismantling the welfare state eroded the young republic is a lesson in historical-political education.

Weimar experienced a triumphant advance of the welfare state above all regarding public housing construction, development of the public health system and expansion of social security. After the First World War, caring for the unemployed replaced war welfare work. The need test recalling the interrogation procedure in unemployment benefits II encompassed applicants and relatives living together with them in apartments who were not obligated to support according to prevailing law. The family bonds were not strengthened as the official side hoped but rather destroyed. Younger unemployed whose support was cut or refused left their homes. Public emergency projects to which the jobless could be obligated were the main items of “productively caring for the unemployed” created in October 1919.

The supporters of these measures serving the “reconstruction of economic life” were mostly the communities and community associations. The authorities tested applicants’ willingness to work and excluded applicants from benefits without willingness. In work agencies, the sum of transfer payments would be reduced by demanding return favors, people assumed. Soon the employment of the unemployed cost considerably more than the mere support.

This is not different today with the so-called 1-Euro jobs and Hartz IV that creates “productive caring for the unemployed.” One result is the gulf between exaggerated expectations and the harsh reality feared in the future when public tasks will be converted and fewer emergency projects will be financed. That regular jobs will be destroyed is repressed.

“Compulsory work” was introduced in October 1923. Since then, the communities should make their support dependent on the economic effort of the affected in working up to 24 hours a week (up to 16 hours for heavy physical work)… The unemployed are employed to save labor costs. The law on work mediation and the Unemployment Insurance law from July 15, 1927 passed after long debates between the Reich government, unions and employer associations represented the social-political high water mark and the climax of Weimar welfare state development. The welfare system soon fell into financial problems since the 1928/29 winter was harsh and the economy was unstable.

The period of relative stabilization (1924 to 1928) had hardly ended before an argumentative assault against the welfare state began with emphasis on “growing social burdens.” The main agents of this attack were big industrialists in the Rohr, who hoped to replace the insurance principle with the caring principle, evade a budgetary financing of the welfare system and in this way increase their profits. Gustav Hartz was an intellectual spokesperson of the movement to smash the Weimar welfare system. In 1928, this German critic in his book “Irrwege der deutschen Sozialpolitik und der Weg zur sozialen Freiheit” (False Ways of German Social Policy and the Way to Social Freedom) proposed replacing social insurance a la Bismarck with compulsory personal savings corresponding to the privatization plans favored in the business camp. The common interests even including the odd name identity of the main actors may not divert us from the serious differences between then and today.

The social situation of the six million officially registered unemployed at the height of the world economic crisis was far more dramatic than the situation of the jobless today. They and their families lived under miserable conditions. The unemployment rate was more than twice as high as in the present and the world market dynamic was not as strong.

During the 1929/33 world economic crisis, the basic social-political consensus between the classes or their organized interest representation, employer associations and unions collapsed. The great coalition also broke down in March 1930. Its two wings could not agree on the financial consolidation of unemployment insurance. The business-friendly DVP insisted on cutting benefits while the SPD fraction unlike its Reich chancellor Hermann Mueller and his minister colleagues only supported higher contributions (3.5% rate at that time). In today’s language, one would say the contribution rate stability had absolute priority to prevent increased non-wage labor costs and not endanger the international competitiveness of the economic location Germany.

The German presidential cabinets following the Mueller government were less and less legitimated. They cut the basic social rights of employees and unemployed at a breakneck speed and dismantled the welfare state and democracy.

Retrospectively, the Weimar republic and its social system where unemployment insurance was at the top of the agenda were consciously destroyed. The contribution rate rose to 6.5 percent on account of the growing mass unemployment and corresponding contribution shortfalls. This rate was just as high as today. By a political salami tactic, the benefits were cut with simultaneous expansion of waiting times and benefit limits for the unemployed. Acceptance of the welfare state altogether suffered because its main function could hardly be fulfilled.