Welfare State Financialisation as Driver of Regulation: The Case of Israel’s ‘Savings Plan for Each Child’

We argue in this paper that one of the driving forces behind the widening ‘regulatory’ dimensions of the welfare state is its financialization, namely the strengthening links between welfare policy, including redistributive practices, and financial logics and markets. We establish this argument through an in-depth process-tracing analysis of Israel’s “Saving Plan for Each Child”, a uniquely universal and financialized asset-based welfare program, in which bank saving accounts or investment provident funds are opened for every child, to which the National Insurance Institute deposits monthly instalments. We firstly show how the adoption of a financialized welfare program resulted from the conjunction of ‘traditional’ redistributive demands and a neoliberal opposition to the decommodifying welfare state. In the Israel case, these contrasting logics were articulated by the demand of the ultra-orthodox parties to re-enlarge Child Allowances and the resistance of Treasury officials to ‘passive’ benefits which hinder labor market participation. The financialized solution which was found, in which ‘redistribution’ is based not only on state funding but also on market returns, generated substantial regulatory efforts: demand-side-wise, the government intended to induce market transparency and mobility/flexibility to affect households’ behavior as investors; supply-side-wise, the government saw the program as a means to increase competition among financial institutions, thereby contributing to the development of the financial system. Our analysis sheds light on important current institutional changes in the welfare state, that result in the strengthening of the link of welfare policy and its beneficiaries to financial logics, actors and markets.