The Semisovereign Model of Governance

In political science, every once in a while, a book is published which redefines the way scholars think about a social phenomenon, a policy, a concept or an institution. It is, however, particularly rare for a book on the politics of a single country to have a similar impact: it is notoriously difficult to capture adequately the links between institutions, history, cultural environment and policy outcomes at the same time. More importantly, it is even more unusual for such a book to be accepted by the indigenous community of political scientists as one of the definitive accounts of that country.

Peter Katzenstein's 1987 book, Policy and Politics in West Germany: the Growth of the Semisovereign State, is just such a contribution. Conceived of as an illustration of the limits of domestic state power, it locates institutional structures and policy outcomes in the Federal Republic of Germany (or West Germany before 1990) within the country's specific historical and societal context. Its central argument is that policy in West Germany was defined by ‘incremental outcomes’, a pattern which, moreover, remained broadly constant across changes of government. This stood in direct contrast, for instance, to the much more dramatic changes introduced by Margaret Thatcher after the Conservatives came to power in the UK in 1979. The tendency towards incremental outcomes, so the argument continued, was conditioned by the ‘semisovereign’ structure of the state, which sees decentralised state institutions pitted, often individually, against strong centralised societal organisations.

Weak State, Incremental Bias: Semisovereignty in Comparative and Historical Context

Occasionally a book so successfully defines the central characteristics of a political system that it comes to inform the core assumptions, basic interpretations and agenda pursued in later studies. This applies with particular force to what are seen as its distinctive biases in economic policy management. It was Peter Katzenstein's (1987) seminal achievement to offer such an account of economic policy management in West Germany. Katzenstein's narrative was born out of a very different historical, institutional and ideational context from that of other countries such as France. The post-war reconstruction of West German economic policy was haunted by memories of the economic, social and political breakdown caused by hyperinflation in the 1920s and 1940s, by memories of the misuse of economic power by large firms and cartels, and by their association with the collapse into the barbarism of the Nazi period. Against this background, ‘economic stability’, the competitive market economy and ‘social partnership’ took on a deeply symbolic as well as practical value as guarantors of post-war liberal democratic stability. They decentralised and shared economic power (notably through competition policy and through co-determination in corporate governance), and put in place an institutional framework that was designed to prevent irresponsible political management of monetary and financial policy (in particular an independent central bank).

Introduction

The weakness of the (West) German ‘semisovereign state’ that Peter Katzenstein diagnosed in his book in 1987 was, according to his argument, not as insurmountable a disadvantage as one might have assumed. Quite the contrary: the profile of policy outcomes seemed to suggest that not having an almighty state could actually be an advantage. But the reason for these positive outcomes was not the state's weakness alone; it was the peculiar combination of a ‘decentralised state’ with a ‘centralised society’ that proved advantageous. It also helped to explain the central puzzle that West Germany presented when compared with similar cases of highly industrialised liberal democracies, namely the tendency towards only incremental policy change and the high degree of policy stability even after changes of government (Katzenstein 1987, pp. 4, 35).

Katzenstein argues that the ‘decentralised state’ and the ‘centralised society’ interact primarily through three ‘nodes’ in the policy network, namely political parties, co-operative federalism and parapublic institutions. In this chapter, the focus will be on the latter – and the question whether (and if so, how) their function in the German political system has changed. For the period since Katzenstein developed his hypotheses about (West) German politics in the mid-1980s has seen momentous changes in the history of the country. Above all German unification, but also further steps in European integration, certainly make it worthwhile to ask how far these developments have affected the ‘parapublic institutions’ that Katzenstein has portrayed as a vital ingredient of German politics.

Introduction

In the context of immigration policy, Peter Katzenstein's (1987, pp. 209–53) original analysis of the recruitment and management of ‘migrant workers’ reflected the political priorities of the time. During the mid-1980s, West Germany was still struggling to come to terms with the immediate effects of the so-called ‘guestworkers’ immigration (Gastarbeiter), under which millions of young, mainly male workers from Mediterranean countries (principally Turkey, Yugoslavia, Italy, Spain, Greece and Portugal) had been recruited between 1955 and 1973 for work in West Germany. Although the recruitment ban (Anwerbestopp) of 23 November 1973 did prevent further new arrivals of labour migrants, most of the 4 million or so workers who remained in the country at that time began to make West Germany their home for good (Castles 1985).

This abrupt change in policy had a number of effects, which together helped to transform the issue of migrant labour into a much broader policy area by the time of unification in 1990. First, the perspectives of the remaining guestworkers in 1973 changed. Even though few members of this first generation of immigrants had initially envisaged spending the rest of their lives in West Germany, the practical likelihood of return to their countries of origin diminished with every year that passed (Bischoff and Teubner 1992, pp. 114–17). Second, the prospect of settling in Germany for either the medium or even the long term encouraged the development of new, secondary migration to West Germany in the form of dependants, otherwise known as family reunification (Familiennachzug).

It falls to very few social scientists to coin a term that defines a polity but this is precisely what Peter Katzenstein achieved with the concept of semisovereignty (Katzenstein 1987), which forged an indissoluble association between the old Federal Republic and semisovereignty. Moreover, this term is not just a convenient label, but a carefully worked-out explanation of the politics and policy style of the old Federal Republic. Many who have not read the book but who have encountered the term also assume that it refers to West Germany's sovereignty deficit in the international arena.

In Katzenstein's 1987 work, however, the emphasis is almost exclusively on internal constraints, many of them self-imposed, that limited the sovereignty of the West German state and by which, in Katzenstein's words, ‘The West German state has been tamed rather than broken’ (p. 10). These internal constraints included the system of co-operative federalism and the role of parapublic institutions, most notably the Bundesbank. It is, of course, Katzenstein's internally grounded conception of semisovereignty that most obviously suggests a continuing relevance to the post-unity polity.

Context: the Pre-Sovereign Years

The external dimension remained very largely unexplored, though Katzenstein enumerated, but did not analyse, a series of factors which informed his argument that ‘Semisovereignty is an external condition of West German Politics’ (Katzenstein 1987, p. 9).

Introduction: Can Semisovereignty be Transferred?

Peter Katzenstein's analysis of the ‘semisovereign’ West German state is one of the most enduringly popular conceptualisations of German politics. This chapter asks whether Germans could transfer this widely admired model of policy-making to the new states in eastern Germany. The chapter frames German unification around the idea of ‘institutional transfer’, an idea explored more fully in the next section. The point of departure is the progressive crisis of the state socialist model in the German Democratic Republic (GDR), followed by the collapse of the GDR state, and the widespread hope among eastern Germans that their territories might not merely join the Federal Republic but also be remade in its image (McAdams 1993; Maier 1997; Hampton and Soe 1999).

It would be unrealistic to ask of a model that highlights incremental change to explain the most rapid period of institutional and policy change in the post-war period. In that sense, the question here is not so much whether the semisovereignty model predicts or explains the main contours of unification, but rather whether the political features it highlighted – including incrementalism, political bargaining and societal engagement – survived the move to the east. This is no easy question, for there is no one answer valid across all policy domains. Clearly, institutional transfer has resulted in many similarities between the political economies of western and eastern Germany. The question, however, is whether these similarities are more than ‘skin deep’.

Public administration and public policies aimed at its reform occupy a central position in Peter Katzenstein's (1987) analysis of the semisovereign state. They appear in four distinct ways. First, a decentralised bureaucracy is the third of four defining features of the ‘decentralised state’ that Katzenstein contrasts with ‘centralised society’. The fourth feature, the constrained power of the chancellor, is also closely connected to the administrative organisation of the German state, since the constitutional right of ministers to run their departments without interference from the chancellor ‘reinforces the bureaucratic fragmentation (Ressortprinzip) inherent in the federal bureaucracy’ (1987, p. 23). Second, two of the three ‘nodes’ of the policy network – co-operative federalism and parapublic institutions – are directly associated with public administration. Co-operative federalism is, to a large extent, about co-operation between the administrations at local, Land and federal levels, and many parapublic institutions – such as the Federal Labour Office (Bundesanstalt für Arbeit) – are public authorities in all but name. Third, public administration is key to explaining patterns of policy development, for ‘West German bureaucracy presents structural obstacles to large-scale changes no less formidable than the interaction of coalition governments, co-operative federalism, and parapublic institutions’ (1987, p. 255). Finally, administrative reform serves as an illustrative case study for the ‘analysis of the organization and political capacities of the West German state’ (1987, pp. 254–5).

It is not difficult to see why public administration and administrative policy should be at the heart of the debate about the semisovereign state.

What has been the effect of unification on Germany? Was it negligible, as Tocqueville famously argued for the effect of the French Revolution on post-revolutionary France? Was it transformative, as British Prime Minister Margaret Thatcher feared at the time, as she watched what to her looked like a new German colossus poised once again at the apex of the European hierarchy of status and power? Or was it moderate, as I argue here, conforming to a pattern of change that typifies Germany well before 1989? The chapters in this volume provide an updated answer that gives me a welcome opportunity to revisit a book that I wrote almost two decades ago: Policy and Politics in West Germany: the Growth of a Semisovereign State (Katzenstein 1987).

I adapted the book's title from one of the classics of American political science, E. E. Schattschneider's (1960) The Semisovereign People. Schattschneider offers a sophisticated analysis of American political institutions and organisations as a mobilisation of class bias. ‘The flaw in the pluralist heaven is that the heavenly chorus sings with a strong upper-class accent’ (Schattschneider 1960, p. 35). Analogously, Germany's semisovereign state creates a bias for incremental action. What Stanley Hoffmann (1968) argued for the United States' foreign policy in world affairs, holds also for Germany's semisovereign state in domestic politics. A semisovereign state is not free to act as it pleases.

Peter Katzenstein (1987, pp. 168–92) portrayed the West German welfare state as a highly segmented polity governed by consensual politics and providing generous social benefits. In fact, at first sight, not much has changed during the past two decades: compulsory insurance for all wage earners (sozialversicherungspflichtige Beschäftigung) is still provided by separate funds for pensions, health, unemployment, occupational accidents and – since 1995 – nursing care for the elderly (Pflegeversicherung). The system is still highly fragmented, and is administered according to a person's region of residence as well as that person's occupation. Thus, several regional funds are in charge of pensions for blue-collar workers (Arbeiter), whereas pensions for white-collar employees (Angestellte) are funded on a national basis. Civil servants (Beamte) receive their old-age benefits from current state budgets, while other public-sector employees are covered by the national white-collar workers' insurance scheme, supplemented by a complementary insurance which puts them on a par with civil servants. There is an entirely separate pension scheme altogether for miners, and finally, self-employed persons (Selbstständige) are allowed to opt out of the system altogether, which they normally do, since private pension and medical providers normally offer better levels of cover at lower costs than the statutory schemes.

Health insurance too still rests on a multitude of local, regional and national institutions. Although employees have been free to choose their health insurance fund since 1996, which has inevitably weakened the linkage to occupational status, the federal government has introduced a portfolio balance system to support those funds with bad risks.

Introduction

It is interesting to note that Katzenstein's original work on the semisovereign state did not include environmental policy as one of its specific domains for analysis (Katzenstein 1987). To a certain extent this is a curious omission, given that it was precisely at that point in the late 1980s that Germany's reputation as an ‘environmental leader’ (Weale 1992a, 1992b) was at its highest and that, in this policy domain at least, the German semisovereign state's capability to manage change appeared the most pronounced. Indeed, compared with other large European states, Germany in the 1980s was highly responsive to both the real environmental challenges associated with complex industrial societies and the higher levels of public unease about the trajectory of such societies, as manifested by the discourse of the ‘new politics’ and the emergence of Green parties (Lees 2000a, 2000b). As noted in chapter 1, some of those states, such as the United Kingdom, were characterised by unitary structures. Thus, the fact that the semisovereign Federal Republic outperformed states that were assumed to possess superior steering capacities was in itself worthy of note.

In defence of the original decision to omit environmental policy, however, one might also point out that it is when one is in the midst of change that it is hardest to define its overall parameters, trajectory and long-term consequences. Almost two decades later we are better placed to enjoy the benefit of hindsight and to take the long view.

Introduction: Federalism in Katzenstein's Policy and Politics in West Germany

Peter Katzenstein's treatment of federalism in Policy and Politics in West Germany (1987) was one of the classic accounts of co-operative federalism. It built on, reconciled and took forward what had hitherto been the pioneering texts: Fritz Scharpf et al. (1976) on Politikverflechtung, the interlocking of tiers of government in the policy process; and Gerhard Lehmbruch's Parteienwettbewerb im Bundesstaat, which explored how the dynamics of multi-tiered party competition could produce an equally interlocked ‘all-party proportional government’ through the interaction of different party majorities in Bundestag and Bundesrat (Lehmbruch 1976, p. 168). The arguments in Scharpf and Lehmbruch ran along parallel and largely unconnected trajectories. Parties did not really figure in Scharpf; Lehmbruch did not immerse himself in the institutional detail of the policy-making process. Each provided a brilliant but partial account. Katzenstein provided the linkage.

This linkage came in the juxtaposition of a ‘decentralised state’ with a ‘centralised society’ (Katzenstein 1987, p. 15). The decentralised state was a multifaceted antidote to Hitler. It was manifested in a strong Constitutional Court, the sectorised and regionalised operation of the civil service, ministerial autonomy under the Ressortprinzip, but above all federalism. West German federalism evolved in a way which was unusual. The division of powers was primarily functional, separating responsibilities for legislation, which was mainly carried out at the federal level, and implementation, which was mainly the responsibility of the Länder governments.

Directives are one of several instruments that are used in EU social policy. This chapter puts them into perspective, outlining the wider context of the EU's social dimension over time and the important role played by Directives. The main finding is that the role of binding regulative action has not been diminished, despite the debates on the open method of co-ordination (OMC). Therefore, we argue, studying social Directives is crucial not only for understanding the past, but also the present and, very likely, the future of European social integration.

Competences and decision modes

The 1957 EEC Treaty basically left social policy in the hands of the member states. The Treaty did not provide for an outright Europeanisation of social policies since too many national delegations had been opposed to such a move. The dominant philosophy of this Treaty was that welfare would be provided by the economic growth stemming from the economics of a liberalised market, and not from the regulatory and distributive capacity of public policy (see, for example, Leibfried and Pierson 1995; Barnard 2000). It is indicative of the Treaty's pro-market bias that its only explicit legislative competence in the field of social policy related to the free movement of workers, which for the most part even allowed measures to be adopted on the basis of qualified majority voting (Articles 48–51 EEC Treaty).

However, the European Community's action capacity was incrementally increased in day-to-day politics.

Beyond the state of the art

Our study contributes to the existing literatureon European integration, policy implementation, public–private interaction in policy-making and policy analysis. While detailed arguments can be found in the above chapters, this chapter is where we highlight some of the most important findings.

1. The process of designing and implementing EU law is political. In fact, it isa prime example of multi-level politics in practice. This seemingly simple and unsurprising finding has a number of aspects.

• Since the founding of the European Economic Community in the late 1950s, and especially since the beginning of the 1990s, the stock of EU legislation in the area of social policy and labour law has acquired a considerable depth and breadth. Hence, this policy area is not entirely left to ‘courts and markets’, although these are important (Leibfried and Pierson 2000).

• EU labour law is not a sum of insignificant rules that fail to go beyond what already exists in the member states. First, qualified majority voting has allowed the adoption of Directives even in the face of explicit opposition from individual governments. Second, the negotiators in Brussels sometimes lack information on what a specific rule will change in their domestic system. And third, domestic governments in general seem to consider the EU level a ‘normal’ arena of policy-making that supplements the realm of domestic politics.