From Bismarck to Bankruptcy?

PRINCETON – Democracies find it hard to deal with inter-generational social transfers, and with pensions in particular. Like all such transfers, the demand for more security in old age produces a fierce clash of opposing interests. In favorable circumstances, those clashes are resolved by the promise and reality of economic growth. When times are bad, it is hard to provide a solution that is not based on deceit and lies.

The modern welfare state has a peculiar patron: Germany’s “Iron Chancellor,” Otto von Bismarck, who pushed through the big reforms of the 1880’s on sickness, accident, and old-age insurance against liberal parliamentary opponents. The motivation behind the reforms was avowedly cynical – to buy off labor protest, or, as he put it, to give the working class an interest in the state.