Why Is There No Household Debt in Germany…or Is There? Policy Regimes and the Institutional Analysis of Credit

One of the most remarkable features of what has been termed financialization is the unprecedented rise in household indebtedness over the past decades, which has thrown OECD countries on both sides of the Atlantic Ocean into ongoing economic and social turmoil. Against this background the ‘non-financialization’ of German households still represents a key puzzle in research on the growing importance of financial relations in contemporary capitalist societies: consumer debt and mortgage volumes alike have decreased during the 2000s, making Germany an outlier among most advanced capitalist economies. Nevertheless, at the end of the 1990s, German households had accumulated a debt-to-GDP ratio that was as high as in the US and the UK.

This paper sets out to explain this puzzling debt trajectory by applying a regime-approach rooted in comparative capitalism. Building both on régulationist and VoC accounts of capitalist development, the paper develops an institutionalist framework that allows investigating the politico-economic dynamics that shape households’ credit relations in five foundational spheres: (1) the financial system and banking; (2) monetary and economic policy-making; (3) the labor market; (4) the welfare state; and (5) the housing market. By applying this framework to the German case it becomes clear that liberalization trends fostering the expansion of credit to households have not been absent but were very much entrenched in the institutional trajectory of the export-and-savings-oriented growth model. Critical junctures in debt growth, however, are also associated with far-reaching political moments, here in specifically German reunification and the completion of the European Monetary Union. Therefore, the paper emphasizes the importance of an institutional analysis of credit that is both context-specific and enables a comparative investigation of financialization processes among households.