Bismarck's social insurance laws

Between 1883 and 1889 the German Empire, under Chancellor Otto von Bismarck, created the world's first national system of social insurance. The Health Insurance Act of 1883 covered industrial workers for sickness, with contributions shared between workers and employers. The Accident Insurance Act of 1884, paid for by employers, covered injury at work, and the Old Age and Disability Insurance Act of 1889 gave pensions to workers beginning at age 70, a limit lowered to 65 in 1916.¹³⁴

Germany unified in 1871 and industrialized quickly, creating a large working class in crowded cities, and the socialist movement, inspired by Marx and the 1848 Manifesto, grew with it. Bismarck, a conservative, disliked socialism and in 1878 had banned socialist organizations through the Anti-Socialist Laws, but he combined repression with reform. He aimed to tie workers to the state by giving them security, which he said would take the wind out of the socialists' sails. Economists of the 'Socialists of the Chair' school gave intellectual support to state action. The laws were passed despite resistance from liberals who opposed state intervention and employers who disliked the cost.³

The program covered millions of workers and was widely copied. Austria introduced accident and health insurance in 1887 and 1888, Britain passed the National Insurance Act in 1911, and by the early twentieth century most European countries had similar systems. In the United States the Social Security Act of 1935 followed the pattern in pensions, and after 1945 the idea expanded in Britain's National Health Service and Beveridge reforms. The German model of contributory insurance run through funds, as opposed to taxes, remains the basis of health systems in Germany, France and the Netherlands. Bismarck's reforms did not stop the socialists, whose party became Germany's largest in 1912.³⁴