Germany: The demise of the Social Democrats, the return of anti-Americanism

Ich bin ein... loser?

Chancellor Gerhard Schroeder's Social Democrats (SPD), led locally by Minister-President Peer Steinbrueck, fell to the Christian Democrats (CDU) in Sunday's state election in North Rhine-Westphalia (NRW), and Schroeder is now poised for a confidence vote in the federal Bundestag that will likely lead to an early election, perhaps this fall. NRW, Germany's most populous state and the industrial center of the country, is the heartland of the SPD, and the new center-right CDU-FDP (Free Democratic Party) coalition will be the first non-SPD government there since 1966. The CDU, under Juergen Ruettgers, received 44.8% of the vote and won 89 seats; the SPD 37.1 and 74; the FDP 6.2 and 12; and the Greens, the SPD's coalition partner in Steinbrueck's government, also 6.2 and 12.

This is stunning news in NRW, which, with an unemployment rate of 12.1%, is experiencing the economic doldrums that are currently plaguing the whole country. But the ramifications of what was merely a state election will be significant. Schroeder: "With the bitter election results for my party in North Rhine-Westphalia, the political basis for the continuation of our work has been called into question." Said his rival, Angela Merkel, federal leader of the CDU and Schroeder's main opponent: "This is a historic victory... This clearly shows that Red-Green governments are unable to solve the burning problems of this country, such as unemployment and a sluggish economy." Indeed, NRW was the last state to be run by an SPD-Green coalition.

What this means to us is unclear, although we in North America are sure to feel the effects of a shift in German leadership, not least in terms of Germany's political and economic participation in Europe. But what is clear is that we are in for a repeat of Schroeder's anti-American campaign of 2002, when he shifted to the left and used the war in Iraq to eke out a narrow victory over the CDU. Whatever his motivations -- and who doesn't shift around the spectrum to try to win close elections? -- I've always thought that Germany's opposition to the war was more principled than France's, which, as we now know, was in bed with Saddam and deeply involved in the oil-for-food scandal. In France, anti-Americanism is a way of life; in Germany, it's more of a useful campaign tool. Perhaps that makes politicians like Schroeder mere opportunists, but at least their friendship is generally sincere, whatever the rhetoric. And now it's back: The SPD has already begun its shift to the left in preparation for a fall election, and the results in NRW, where the party lost despite a strong labour base, will only accelerate the shift. As Clay Risen has outlined in an excellent piece in The New Republic, the new demon is "international capital," an indication that Kapitalismus-Kritik will be a cornerstone of Schroeder's election campaign. So much for Schroeder's moderate (even Blairite) neo-liberalism. The SPD is back, in speech, to its old-fashioned socialism. From Risen's piece:

[I]t's been no surprise to see his party's leadership take a sharp populist turn over the last few weeks, lashing out at "international capital" and the "Anglo-Saxon" business model as a threat to the German social system. In some ways it's a repeat performance of his 2002 federal election strategy, in which to save his post he demonized Bush on Iraq and all but tanked U.S.-German relations. Fortunately, Schröder has been able to repair some of the damage done by that first attack, sending soldiers to Afghanistan and training Iraqi troops. This time around, though, the debate engendered by his party's rhetoric is both more virulent and more likely to spread uncontrollably, influencing not just bilateral government relations but business relations as well. And that's bad news for both sides of the Atlantic.

While the debate spawned by the SPD has spread to include "foreign" capital writ large, the initial target was very specific. In an interview last month, SPD Chair Franz Müntefering referred to foreign hedge funds as "locusts" that sweep in on German companies, gobble up their value, and then leave...

The problem, of course, is that the debate will likely do more than reorient the SPD--in the minds of foreign investors, it is likely to reorient Germany as well. Schröder has tried to limit his focus to a specific kind of investor and play down the impression that he is going after foreign capital in general. In the same speech calling for hedge fund limits, he said, "We need foreign capital coming into the country." But that's a distinction lost on most voters tired of high unemployment and stagnant growth. Indeed, Müntefering's attack found fertile soil in the minds of many Germans, coming as it did in the wake of anti-Americanism stirred by Schröder's last populist Hail Mary. A union magazine, for instance, recently published a cover that read, "U.S. Companies in Germany: Bloodsuckers." And it's not just the working class: On a recent trip to Germany, I heard repeated criticism from mainstream German politicians of the "Anglo-Saxon" business model, which many view as a growing threat to German society.

It's also a distinction likely to be lost on foreign investors themselves. Even if they decide that Schröder is just trying to score political points, it's a clear signal that the chancellor is unwilling to take full responsibility for his previous efforts at opening the German economy--and thus likely to behave unpredictably in the future. If he's willing to dabble in anti-capitalist rhetoric to win a state election, who knows what he will do next year? To be sure, there needs to be room in German politics for a critique of globalization, which is inarguably a challenge for countries with robust social welfare systems. But as more than a few critics have pointed out, the SPD should be looking for ways to harness foreign capital to social ends, not scare it away. Germany's tax revenues are down significantly, and economists predict that for the foreseeable future the European economy, riding on a meager 1.5 percent growth, will be incapable of providing the investment boost needed to get the public till full again.

As the Financial Times noted this week, "Mr. Schröder's plan suggests that the anti-capitalist tone could ... also inform policy over the next 16 months." Whether that will save him in 2006 is anyone's guess; given the public's anti-American sentiment, it could very well be a winner for the SPD. But it will be a loser for everyone else.

Risen is right. There does need to be a healthy critique of globalization -- in all capitalist societies. In addition, Germany's tradition of social capitalism has long been a healthy counterpoint to "Anglo-Saxon" liberal capitalism. But turning on foreign investment when your own unemployment rate stands at 12% and when even your own heartland turns against you isn't the right way to go. And it's particularly worrisome whenever Germany turns inward and sets itself in opposition to some designated "Other" -- even if that "Other" is as seemingly banal as "international capital".

Anti-European conservatives will hold this up to be yet another sign of Europe's decadence. Whatever my own reservations about the future of Europe (not least its anti-democratic tendencies), it is important that Germany, the continent's leading economy, be engaged with its European partners, as well as with its traditional allies across the Atlantic. At least we know that Schroeder is just playing typical political games. But at what price?