Germany’s Reunification - The Political Geography of Inequality - page 158

than the rest of the OECD. Only toward the end of what would be his last
term, the introduction of a number of marginal reforms to contain the costs of
both pensions and unemployment insurance were successfully exploited by the
opposition as a conservative attack on social rights, facilitating the victory of
the Red-Green coalition (Kitschelt 2004 ).
Given the concentration of welfare recipients in the East, public insurance
transfers to individuals account for a significant share of the overall financial
effort to incorporate the East. For instance, in 1995 social security outlays in
the East amounted to about 20%of the overall effort. These resources, together
with additional funds to allow state and local governments the provision of
additional policies, funded a “warm shower of resources” (Kitschelt 2004 )
designed to facilitate in social and political terms the economic integration of
the new members of the union.
The last dimension of the incorporation effort involves social assistance
(Sozialhilfe) and public employment policies. The former encompasses a variety
of programs and services provided by local authorities to look after individuals
who have exhausted their rights to unemployment compensation, lack mini-
mum pension contributions or otherwise need basic care in their daily lives.
The latter implies an effort to reduce the scope of the unemployment prob-
lem through an increase in the number of jobs available in the public sector,
often via small infrastructure and reconstruction programs. What distinguishes
these two programs from public pensions or unemployment insurance is that
local authorities are much more involved in their organization, implementation,
and most importantly, their funding (Mathias 2003 ). Because local authorities
diverge largely in the size of their tax base, this design is the source of significant
inequalities in service provision and public employment offerings, as well as a
source of dependency for local authorities, who need the financial support of
regional governments to undertake their efforts. Given the social consequences
of Reunification and the failure to launch a functional capitalist economy
in the East, such dependencies became particularly acute in the new l ander.
On the one hand, both social assistance and public employment became neces-
sary tools to cope with the transition process: the former to cope with depen-
dents, the latter to contain unemployment and the population outflow. On
the other hand, neither local governments nor the new l ander were capable of
sustaining these efforts. This required an additional transfer of resources from
the federal government and the western l ander. A large share of the transfers
from the federal budget and the western l ander reported in Table 6.4 helped
cope with this problem.
In sum, Reunification demanded a massive effort from Germany's fiscal sys-
tem. Indeed, it is hard to find a historical precedent for the sheer magnitude of
the economic effort toward the incorporation of eastern l ander into the feder-
ation. To give yet another point of reference, the overall incorporation effort
in 1994 amounted to 7% of Germany's GDP that year. And, the cumulative
effort throughout the period of interest amounted to about 46% of Germany's
GDP in 1994, almost half of Germany's economy. Its noble goals aside, this