21
established which handles at least all transfers in cash in favour of families as well as the
financing of these transfers (a „caisse familiale“, in German „Familienkasse“).16
It is, however, not intended by the German government to realise such an approach. A main
reason is that government tries to reduce the volume of the federal budget and not to extend
it by taking over tasks that are now realised within social insurance or at least the financing of
these tasks by tax revenue.17 Therefore, the German Government plans to fulfil the demands
of the Constitutional Court regarding long-term care financing by increasing the contribution
burden of those contributors who are not caring for children. This additional burden will also
affect those contributors, who raised children in the past. This measure is focused on the
period of child caring and therefore is not an instrument to compensate families because they
raised children which produces (positive) external effects for other persons in various
institutions or for the society in general.
5.3 Financing of family policy and human capital formation
In general, there seems to be a great consent in Germany about the objective of improving
the economic situation of families with children during the period of raising and educating
children. The realisation of this can be an important element in a strategy of increasing human
capital. The development of human capital is of decisive importance for future productivity
gains and improvement of the well-being of the population. Improving the possibilities for
higher productivity by education within the family - among other things also by passing on
social values - as well as in education in general, training and retraining in an ageing society
seems to be of utmost importance. Therefore, it should be decided how to allocate tax
revenue for different types of capital formation. My personal view is that in Germany recent
decisions in allocating scarce public resources aim too much towards formation of financial
capital and not into human capital formation. However, these decisions were very much
according to the “spirit of the age“ (“Zeitgeist“) and were in the interest of influential actors
of the capital markets. Decisions in German pension policy illustrate this very clearly.18 The
discussion on the role of families and how to improve their economic situation could, however,
be a chance to redirect public attention as well as public money more towards human capital
which is a central base for future economic competitiveness and development as well as for
the economic well-being of the population.
16 This proposal is not new in Germany. It was an element of the proposals of an expert commission
of the federal government for preparing pension reform in 1997, but not implemented.
17 The obligation to fulfil the Maastricht stability criteria is an important political argument to repel
proposals like the one presented above.
18 The instruments for realising this are discussed in Schmahl (2003).