‘The left is back. The pact between WASG and PDS under the leadership of Gregor Gysi and Oskar Lafontaine has the potential to change the balance of forces in the political system forever.’ (Editorial in the conservative newspaper Welt am Sonntag)
After years of relative stability German politics is changing rapidly. Massive attacks on the welfare state have led to upheaval in the trade union movement, major splits in the reformist camp and a regrouping of the left, with the new Linkspartei (left party) led by Gysi and Lafontaine getting 8.7 percent of the poll, while both the social democrat SPD and the conservative CDU lost around 2 million votes.
The results show that broad sections of the German population oppose the growth of social inequality and are moving to the left politically. A Welt am Sonntag headline in the summer spoke of ‘The Yearning for Left Wing Politics’: ‘It is not just their populism that has made Gregor Gysi and Oskar Lafontaine successful. The country has changed, and the SPD lacks the answers.’ Nearly 5 million unemployed, falling real incomes including those of pensioners, deep cuts in the social safety net, and the fear of ‘cheap competition’ from abroad have reanimated the ‘need for explicitly left wing politics’. The newspaper then quoted a 2003 study by Bielefeld University which revealed that over 90 percent of Germans believe that ‘the rich always get richer, the poor always become poorer’. The study also showed that the assets of the richest 25 percent of Germans in the west of the country rose by 27.5 percent from 1993 to 2004, whereas the poorest 25 percent saw their assets decrease by 50 percent. In east Germany the richest quartile increased its wealth by 86 percent, while that of the poorest quartile fell by 21 percent. The great majority of the population said that they do not believe their personal interests are represented by the political system any longer: 71.5 percent fully or partially agreed with the statement, ‘In the final analysis, it is big business, and not politics, that has the say in our country’; 77.7 percent thought that decisions made by big business were at the expense of democratic participation; and 84.7 percent held the view that there should be more rights of veto, so that the big corporations could not do everything they want. Finally, it is worth noting that 79.8 percent of respondents agreed with the statement, ‘There are too few protests against bad social conditions in Germany.’
In another poll, carried out by Der Spiegel magazine in the middle of August, 73 percent in the east and 50 percent in the west stated that Karl Marx’s critique of capitalism is still relevant today. Marx was voted third place in a TV poll about ‘the most important Germans of all time’ a few months earlier. The magazine put Karl Marx on the cover of its latest issue with the headline, ‘The Ghost is Back-the New Power of the Left’.
I: The rise of the left-a political chronicle
The main reason for the crisis of the SPD and the emergence of the new left was the biggest attack on the welfare state since the Second World War-the Schroeder government’s ‘Agenda 2010’, announced in March 2003. Its main plank was a drastic reduction of unemployment benefits by a third, with 800,000 people receiving no benefits at all from January 2005. The unemployed are forced to accept jobs with pay way below average, while it has been made much easier for firms to sack people. Pensions have been frozen and effectively reduced through inflation. Healthcare must be paid for, with a visit from the doctor costing 10 euros.
At the same time the corporations have received a tax break. Agenda 2010 marked the departure from the system of ‘social partnership’ between capital and trade unions mediated by the state which has served German capitalism so well in the post-war period. Capital has moved on to open class war from above.
The speech announcing the agenda, with its declaration that ‘by 2010 Germany must be top of the league once more’, signalled the state of panic in which Schroeder’s government and the whole German establishment found themselves. From their perspective the winter of 2002 was in every respect one of crisis. The world had not yet recovered from an economic crisis that gripped the US, Europe and almost every industrial nation in 2000. The German economy had fallen into stagnation, with little prospect of recovery. The US’s war on Iraq seemed unavoidable, symbolising the new, unilateral power politics of the US and the apparent end of the epoch of a common ‘Western’ political interest.
The economic weakness of Germany weighed all the heavier, since the US could bring its military superiority to bear without scruple to the negotiation tables of NATO, the WTO, the IMF and the G8. For the German establishment, relegation from the circle of world powers was no longer unimaginable.
This atmosphere of crisis is in sharp contrast to that of the long boom following the Second World War, when high US arms spending provided secure export markets for Germany and Japan. West German capitalism could successfully overcome economic dips in 1949, 1954, 1958, 1963, 1967 and, to a limited extent, 1975 by export offensives. In the 1980s and 1990s the US set out to raise its profit rates through restructuring its economy, weakening the unions and lengthening working hours while wages remained stagnant, until a US worker worked about 25 percent longer than a German worker. On this basis the US was able to grow economically much faster than Japan or Germany-by 3.2 percent a year from 1990 to 2000, while Japan’s economy grew by 1.3 percent and Germany’s by 1.9 percent. In 2001-2002 the US economy grew by 5.9 percent, and Germany’s by only around 0.9 percent.
Faced with this situation, Agenda 2010 was introduced to heighten the competitiveness of the German economy in the face of the US challenge by attacking workers’ living standards. Schroeder said, ‘Interior modernisation [ie Agenda 2010] is the prerequisite for Germany’s assertion into global politics.’
German capital sees Agenda 2010 as only a small step towards a thorough reorganisation of German capitalism, like that Ronald Reagan and Margaret Thatcher carried out in the US and Britain. ‘We need a German Thatcher’ was one of the first statements by the supposedly neutral newly elected president Horst Koehler, former head of the IMF.
The new resistance: 1 November and its aftermath
The burial of ‘social partnership’ has been carried out by the party which embodies social partnership-the SPD. This has had two effects. At first it stifled resistance because the trade union leadership, while recognising they were targeted, were reluctant to act against the government. A token protest in April 2003 was followed by a lull in summer. But among the rank and file of the trade unions and inside the SPD anger built up. The SPD lost more members in three months after the announcement of Agenda 2010 than the whole year before (the SPD has lost 130,000 members altogether since 1998), and hit a historic low of 27 percent in the polls. Surveys at that time showed that, while a majority said some sort of reform of the welfare state was needed, every one of Schroeder’s attacks had a majority against it. The problem was not a broad acceptance of neo-liberalism but a crisis of representation of the anger from below.
There were forces on the German left who were able to see this contradiction and formulate a political strategy. They jointly came up with the idea of a political demonstration which could serve as a focal point for the anger. The idea very quickly brought other forces into the field, crucially the best parts of the trade union left and unemployment initiatives, and an estimated 100,000 marched in Berlin against the government on 1 November 2003. Banners of the big trade unions Verdi and IG Metall were omnipresent on the march. The turnout from trade unions was big, in spite of the fact that the trade union leadership failed to mobilise and in part even attacked the demonstration. Several buses came from the big car manufacturers DaimlerChrysler, Volkswagen and Porsche. The turnout was organised by a loose network of left wing activists in the industrial and trade union apparatus.
The success of the demo did not come out of thin air. The ground was prepared by the anti-globalisation movement. Attac Germany grew from 400 members to 10,000 in a matter of two years after the Genoa protests, became the reference point for a critique of neo-liberalism, and influenced sections of the trade union left. The big anti-war protests in late 2002 and early 2003 also rehabilitated mass mobilisation as a way to engage in politics. The demonstration was the beginning of a new age of social mobilisation in Germany. A 500-strong German fringe meeting, with many trade union speakers, at the European Social Forum in Paris agreed to carry on mobilising. The pressure on the trade union leadership was so big that Frank Bsirske, head of the giant public sector union Verdi, came to the meeting and promised to mobilise. The next day of action on 3 March 2004 won the backing of the trade union, and half a million people demonstrated in Berlin, Cologne and Stuttgart against Schroeder. It was the biggest social protest since the war, and the biggest trade union mobilisation against a Social Democrat government ever.
The emergence of a political alternative and the polarisation of the trade union movement
The demonstrations were marked by anger at the Schroeder government and the desperate need for a political alternative. People were breaking with Schroeder in large numbers not because they were breaking with reformism, but because Schr?der was breaking with it. They were not deserting the SPD-the SPD was deserting them.
Panic gripped the leadership of the SPD at the beginning of March 2004. ‘Fear of a New Left Party’ said the headline in Bild, the biggest German daily, read by 12 million mainly working class readers. What had happened? A group of high standing Bavarian trade unionists, among them members of the national committee and district organisers of the giant engineering union IG Metall, had just announced the formation of the ‘Initiative for Work and Social Justice’. They explicitly did not rule out standing against Schroeder in the 2006 elections.
All of the initiators were longstanding SPD members-each had spent at least 35 years in the party. These were people who had for decades formed the backbone of the SPD in the trade union movement. The SPD has been hegemonic in the German working class movement since the demise of the Stalinist KPD in the 1950s. Fifteen out of 16 trade union leaders are members of the SPD, as are 80 percent of the trade union leadership bodies organised in the Deutsche Gewerkschafts Bund (the equivalent of the TUC). And 90 percent of the members of the SPD parliamentary fraction are trade union members. In general terms, the SPD and the trade unions have been two sides of the same coin. The trade unions provided ministers for the SPD under Schr?der-most notably the vice-secretary of IG Metall, Walther Riester, who took over the Ministry for Work and Social Security after Schroeder’s election victory in 1998. He became infamous for the introduction of the ‘Riester-Rente’, a pension privatisation scheme introduced in 1999.
The marriage between the SPD and the unions was the main reason for the relative lull in protests against Schr?der’s cuts from 1998 to 2003. But Agenda 2010 threw into crisis the traditional trade union strategy of influencing the SPD to ‘ward off the worst’. The worst was happening. The official trade union mobilisation for 3 April was one reaction, the breakaway of longstanding trade unionists and SPD members to ‘Initiative for Work and Social Justice’ another.
The announcement of an initiative to form a political alternative to the SPD caused a storm, with over 100,000 hits on the homepage, thousands of interested people phoning up and hundreds of faxes of support, many from long-time SPD members thinking about leaving the party. The trade union based initiative coordinated itself with a second initiative called ‘electoral alternative’ comprised of ex-PDS members, members of Attac and left wing intellectuals.
In the course of two months, between 10,000 and 15,000 people came to meetings all over Germany to discuss the idea of a political alternative. The diversity was astonishing-longstanding trade unionists, often SPD members for decades, came together with unemployment activists and young anti-capitalists. The atmosphere was one of solidarity and excitement. Most people wanted a left alternative, active in building movements on the ground, and using the electoral and parliamentary process for that goal. The need for unity was stressed over and over again. ‘We all know that we have things that divide us-but let’s focus on what’s uniting us’ was the overall message. Some 700 people attended a meeting in June 2004 and decided to officially form a new party in autumn 2004.
Meanwhile the crisis of the SPD accelerated. In its heartland of North Rhine-Westphalia (the Ruhr industrial belt) the SPD lost 13,000 members in the first half of 2004. And the European elections of June 2004 were a catastrophe. The SPD lost 2.8 million votes and obtained only 5.5 million votes, or 21.5 percent of the poll.
The storm in the east-Hartz IV and the consequences
The union leaders did not organise any mass protests to follow the demonstration of March 2004. They had hoped that their show of strength would force Schroeder to compromise on some of the worst aspects of Agenda 2010. But he stood firm, knowing he enjoyed the support of German capital and the main opposition party, the CDU. SPD loyalists in the trade unions watched with horror as the protest nurtured new forces left of the SPD. Their reaction was to pull the plug on the protest. Schroeder, unexpectedly allowed off the hook, rejoiced: ‘The reforms are gaining acceptance now.’ His glee was premature.
The stage of protest, deserted by the trade union leaders, was filled in the summer of 2004 by hundreds of thousands of angry demonstrators, mainly in east Germany. Shouting slogans like ‘Down with Hartz IV, we are the people’, ‘Our pockets are empty, but Schroeder wants more’, ‘Without jobs, without a roof, without means, without hope,’ and ‘You won’t get your hands on my savings book!’ they took up the traditions of the Monday demonstrations which brought down the regime in East Germany 15 years earlier.
In the weeks before, millions of unemployed across Germany had received letters confronting them with the bitter reality they faced once Hartz IV, the restructuring of unemployment benefits as part of Agenda 2010, was implemented the following January. In east Germany, with an unemployment rate of 18.6 percent, Hartz IV meant the impoverishment of large sections of society.
The first demonstration in Magdeburg was initiated by a 42 year old unemployed railway worker, Andreas Ehrholdt, who distributed a few handmade leaflets. He had estimated that perhaps 200 would turn up. In fact 600 responded. A week later this figure had grown to 6,000, and by 9 August the crowd had swelled to 15,000. In the meantime protests spread like wildfire, with demonstrations in other towns. And the movement began to spread to the west, with 1,500 people on the first Monday demonstration in Duesseldorf, 500 in Munich and 1,000 in Kassel. On 23 August protests were held in 140 cities. On 30 August the protests peaked, with more than 200,000 people demonstrating in 200 towns, and Oskar Lafontaine, former SPD leader and finance minister under Schroeder and now the best known critic of Agenda 2010, addressing a demonstration of 60,000 in Leipzig-the city that was central in the 1989 movement.
The impact of the movement against Hartz IV on the fortunes of the SPD in the east became clear in the Saxony election in September, where the SPD scored 9.8 percent-falling under 10 percent for the first time. The big winner of the election was the fascist NPD, grabbing 9 percent of the vote-an eerie reminder that in a time of intense social crisis the political gap left by the mainstream party can be filled by the extreme right if no left alternative is available. The NPD had successfully engineered its whole election campaign around the opposition to Hartz IV-76 percent of those who voted for it cited protest against Hartz IV as the main reason to do so. The Hartz IV movement not only deepened the crisis of the SPD-it also put the trade union leadership in a vice. Michael Sommer of the DGB had said on 3 April he would do ‘whatever necessary’ to stop Hartz IV from being implemented. Quite rightly he said that the main target of the reform was the trade union movement-the prospect of impoverishment through being made redundant would be used by the bosses to wrestle concessions from their workforce. This prediction was vindicated in the following months, when the working week was extended to 40 hours without a fight at Siemens, DaimlerChrysler and VW-citadels of trade union might. But the union leaders had informally agreed upon an uneasy truce with the government when the movement erupted, and they refrained from supporting the protest-even as more and more local trade union bodies were drawn into the demonstrations.
Schr?der met with Sommer and other trade union leaders, invoking the spectre of a conservative CDU government should he be driven out of office by the protests. This argument that the SPD is the ‘lesser evil’ compared to the conservatives is and has always been wrong. A successful movement against Hartz IV with the trade unions at the core would have presented an enormous problem for any following government which tried to implement cuts-conservative or otherwise. But Sommer fell for the argument. The DGB stuck to its policy of not supporting the protests. This finally prevented the movement from achieving its goal. Without the apparatus of the trade unions, it was nearly impossible to spread the movement full force to the west. After months of protesting, the movement began to dwindle.
But the mood that fuelled the Hartz IV protests showed up in the west just as the commentators began to write off the protest as an east German syndrome. Opel workers in Bochum walked out in a lightning strike on 14 October on hearing the news that the parent company, US multinational GM, was to slash a third of its 32,000 European workforce, mainly in Germany. The strike lasted a week, and triggered a solidarity day of action across much of Europe and a massive wave of solidarity among the population of Bochum and R?sselsheim, where the main Opel factories were situated.
The IG Metall union refused to back the strike and the head of the enterprise committee, Klaus Franz, urged workers to go back to work. More importantly, the Opel workers came head to the head with the local leadership of the SPD. The Bochum-based North Rhine-Westphalia state government-a coalition of the SPD and the Greens-declared it would not support the workers. Harald Schartau,, the SPD economics and employment minister and a former district leader of IG Metall responsible for Bochum, announced, ‘There will be no wave of public money to save Opel. That will not achieve anything.’
After a week the Opel workers went back to work. The strike had been defeated-but the political fallout was yet to come. State elections in North Rhine-Westphalia were scheduled for 22 May 2005. As a leading member of the Opel strike committee commented, ‘I cannot imagine anyone here voting SPD again.’
The crisis breaks
On 1 January Hartz IV took effect. Schroeder’s main argument for the reform has been that it would ‘significantly lower the level of unemployment in Germany’. That argument turned to dust on 3 February when the new unemployment figures where announced. For the first time since the Second World War the number of unemployed in Germany had risen to over 5 million-12.1 percent of the total workforce. The figure sent shockwaves through German society. The SPD lost 10,000 members in one month. In a poll 90 percent said that unemployment was the main problem in Germany, and only 17 percent thought that the government could sort it out. The conservative CDU was way ahead of the SPD in polls thanks to the mass defection of former SPD voters to the non-voting camp. But it wasn’t trusted, either-70 percent said a CDU government wouldn’t bring a change for the better.
The ‘Initiative for Work and Social Justice’, which officially turned into a party named WASG at the end of 2004, continued to gather support. Membership had risen to over 5,000, more than 10,000 people subscribed to the newsletter, and more than 100 branches were founded. Different opinion polls were saying that if the WASG was to stand in elections in 2006, 11 percent would be prepared to vote for it, while a further 32 percent would seriously consider voting for it. 58 percent of ex-SPD voters would consider supporting it and 57 percent of young people under 24, while 60 percent of workers and 70 percent of the unemployed would also be prepared to support it.
Trade unionists, mostly from the IG Metall or Verdi, often formed the backbone of the local WASG groups. The draft for the programme was effectively written by trade unionists working in the economic department of Verdi, and reflected political positions the trade union had held for years but the SPD had given up. That only intensified the hidden civil war in the trade unions. Schr?der loyalists resorted to disciplinary measures to curb the growing influence of the new left inside the trade unions. Trade union full-timers who engaged themselves with the WASG were (and are) threatened with the sack, and pressurised. But the splits were going too high in the trade union bureaucracy to stop the alternative from taking root. Some high ranking trade union officials, most notably Frank Bsirske, head of Verdi, actually encouraged the formation of a left alternative, hoping to pressurise the SPD into a left turn. Some district organisers of the IG Metall union sympathetic to the WASG gave their full-timers time off to work for the WASG.
Elections took place in May in North Rhine-Westphalia, Germany’s most populous state and a SPD heartland for decades. The SPD leadership expected a defeat, but the actual outcome was a rout. With only 37.1 percent of the vote, it was the worst result for the SPD in 50 years, and marked the fall of the last remaining SPD/Green Party coalition government at state level. The SPD suffered losses particularly among its traditional supporters, losing 9 percentage points among workers and union members, and 8 percent of its previous vote among voters aged 30 to 44. WASG gained 180,000 votes, 2.2 percent of the total, in this, its first electoral intervention. This was the best first showing of a left party in the region since the Second World War.
Two hours after the election results were out Schroeder announced that he would hold early elections in autumn. Der Spiegel called Schroeder’s move a ‘suicide to avoid being murdered’. Schroeder and the SPD general secretary, Franz M?ntefering, feared internal resistance to their neo-liberal agenda and the party’s break-up. Ottmar Schreiner, the leader of the workers’ wing of the SPD, threatened to leave the party. Eleven MPs said they would not vote for tax breaks for big corporations.
M?ntefering told Schroeder he had lost control of the parliamentary fraction. Schroeder decided on early elections because, in the words of a source, ‘he wanted to choose the rope to hang on’. He also speculated that the WASG would not have the resources to contest an early general election. Schroeder’s manoeuvre backfired. The prospect of early elections forced a debate on cooperation between the WASG and the PDS-the successor party to the old ruling East German party, which has adopted a left reformist course. Oskar Lafontaine said he would head up a joint campaign by the PDS and WASG.
Initially scepticism on both sides was very big. But the urge for unity was enormous. Dozens of appeals by trade unions and left wing intellectuals called on the leaderships of WASG and PDS to get their act together and mount a challenge to Schroeder. Finally an agreement was reached. The PDS renamed itself ‘Linkspartei’ (the Left Party) to become more acceptable to voters in the west and signify that something new was beginning to take shape. In turn, the WASG refrained from fielding their own slate for the general election and stood candidates on the Linkspartei list instead. A two year process of talks is to check out the possibilities for a future merger.
The emergence of a new left force caused a storm and changed the atmosphere of the whole election campaign. What was supposed to be a quite dull affair, with SPD and CDU both standing on a neo-liberal platform, became a competition to out-left the new left. The SPD lurched to the left, attacking venture capitalists as ‘locusts’, promising to tax the rich and warning George Bush not to attack Iran. The Greens rebranded themselves as ‘the real left party’. Even the conservative CDU was thrown into turmoil, debating whether they should announce cuts before or after the elections.
The role of the PDS
Up to this point the PDS, despite standing on a political platform quite similar to the WASG, had failed to organise the anger which was moving to the left of the SPD. It was able to stabilise its good election results in the regional elections in east Germany at a high level, but it did not succeed in penetrating new layers of voters or in improving its membership structure. Where the PDS gained over 20 percent of the vote it relied mainly on pensioners, of whom a fair proportion mourn the ‘good old days’. The image of the PDS as successor party to the SED (the former ruling East German Communist Party) is the key reason why the PDS is barely able to reach out into the SPD milieu and gain a foothold in the west. Lothar Bisky, executive member of the PDS, said, ‘We thought that disappointed SPD members and disappointed left Greens would come to the PDS. That has not happened.’
The PDS has about 50,000 members, of whom more than 70 percent are over 60 years old. In the rural regions the ageing process has already led to the dissolution of party structures. A further problem for the PDS is its participation in government in Mecklenburg-Vorpommern and Berlin. While members of the PDS protest against the anti-social policies of the SPD, their representatives in these governments implement cuts together with the SPD. The PDS helped carry through nearly all the cuts in Berlin and defended them on political grounds, although they were barely distinguishable from those of a conservative regional parliament like Hessen’s. Most recently the SPD and PDS have imposed a 15 percent wage cut for transport workers, and regulations that allow cut-price employers with rock bottom wages to take over up to 30 percent of transport.
All of that represents not just some minor adjustments but rather hefty social assaults. There were broad protest movements in relation to all these attacks. The PDS fraction almost always stood on the other side of the barricades, not ever questioning the coalition with the SPD or seeking to stand shoulder to shoulder with the population. Its argument was that there was no alternative to the course of cuts if Berlin was not to go broke. Or it said, ‘Without us things would be even worse.’ But then the SPD says that too. Looked at most kindly, one could say that the PDS is in the business of promoting the lesser evil. The PDS’s power to mobilise against the dismantling of the welfare state has been weakened and its members and voters demoralised. In the European elections of 2004, despite the deep crisis of the SPD, the PDS lost 28,133 voters in east Berlin. According to a questionnaire by the Institute for Social Science at the Humboldt-University, 86 percent of Berliners are ‘fundamentally dissatisfied’ with the city government’s policies.
The politics of joining the government as a junior partner of the SPD and attacking their own supporters cost the PDS dearly, and has prevented them from becoming the left alternative that people yearn for.
The founding of the Left Party is a chance for the PDS to draw a balance sheet of their government participation-and bail out.
II: Opportunities and problems for the left alternative
The electoral alliance of the PDS and WASG has developed into an electoral movement against the dismantling of the welfare state that holds an enormous power of attraction. What opportunities and what limitations does this electoral movement have? Parts of the radical left and even Attac dismiss the new left party as an electoral error which signifies a dead end for the extra-parliamentary ‘movements’. They claim that an election success on the part of the left party ‘will change nothing in terms of the relations of social power’, and will lead ‘only to the integration of forces oppositional to the system in parliament and the bourgeois state’.
Of course we can’t predict with any certainty today what the political consequences of electoral success for the left party will be, because that depends finally upon what the leadership and members make of it. The experience of the Greens weighs heavily. They used the huge peace movement as a springboard into parliament at the beginning of the 1980s and were later co-responsible, as a party of government, for the military deployment of the German army worldwide. However, the repetition of such a betrayal of the extra-parliamentary movements is in no way inevitable. The electoral movement has already influenced the political climate. The Nazi block of the NPD and DVU, which still casts a threatening shadow on the political landscape after the election in Saxony last winter, has suddenly lost its monopoly of protest votes against the Red-Green coalition. The CDU/CSU are debating how open they can be with the electorate about their welfare-cutting policies, and the SPD and Greens, with their ‘left’ manifesto, border on denying their own Agenda 2010.
The electoral success of the left party will strengthen the left wing atmosphere within society. It will encourage millions of people to fight against the continuation of Agenda 2010 policies. The new left party should not, however, promise its voters anything it cannot actually deliver. Disappointment nourishes doubt, and doubt leads to rejection. Oscar Lafontaine’s pre-election contention that a new government would ‘not dare to carry through measures for dismantling the welfare state if there were a great coalition and we got into the Bundestag’ carries with it the danger of such disappointment. For a conservative government only budges when the parliamentary opposition has become a funnel for a mass movement against cuts-on the streets and in the workplaces. The WASG will not be able to avoid facing up to lessons learnt in the decline of the SPD-and the balance sheet of their big partner, the PDS.
Social Democracy in power: lessons for the left alternative
The chancellorships of Helmut Schmidt (1974-1982) and Gerhard Schroeder (1998-2005) are linked by their distinctive yet equally unsuccessful economic policies. Schmidt’s economic policy followed the classical theories of the British economist John Maynard Keynes, whose starting point was the economic crisis of the 1930s. Keynes derived the crisis from the structural insufficiency of demand compared to supply. Here he differed from his ‘Left Keynesian’ pupils (eg Joan Robinson) by regarding the crucial factor in this crisis-inducing discrepancy to be profit rates that are too low. The Left Keynesians, in contrast, considered excessive profit rates to be the cause of the crisis of overproduction. The strategies for solving this were various, depending on different analyses In 1975-76 and 1978-80 the Helmut Schmidt government went down the road of stimulating demand through a programme of state investment, financed by state borrowing, while at the same time reducing wage costs. This mixture of elements of supply and demand was very successful in 1975. The reduction of wage costs strengthened the international competitiveness of German employers, while increased state demand for capital goods prevented a slackening off of the domestic boom. The total debt of the state grew 6.2 percent compared to 1973, and contributed to a recovery of growth by a spectacular 5.4 percent. But the hope that a short term boost of state demand brought about by renewed borrowing would carry on and keep the boom going proved to be an illusion in the face of internationally weak growth. The growth of the GNP sunk again in 1977 to 3 percent, and unemployment persisted at the unusually high level of more than a million.
In 1978-80 the Schmidt government began a new central investment programme similar to the one in 1975, but this time more large-scale and longer term. Once more wage costs were reduced (in 1979 wage increases were even below the 3 percent rise in inflation), and state demand for commodity goods was reflated. Real growth accelerated once more to 4.2 percent. Within two years over 900,000 jobs were created. Renewed worldwide economic crisis in the winter of 1979-80 destroyed these efforts. For the first time in post-war history imports outstripped exports considerably. The ‘export cure’ no longer worked. The government fell under the massive pressure of the export lobby of German industry and threw the central investment programme-and with that the central instrument of Keynesian crisis policy-overboard. After some delay it followed the other large industrial nations, reduced state borrowing in the midst of the crisis and slashed social spending on its own proletarian electorate. Thereby it contributed-contrary to the Keynesian textbooks-to an intensification of the crisis in the winter of 1981. Unemployment reached 2 million for the first time.
The Social Democrat farewell to Keynes did not follow from any ready-made theory, but arose under the pressure of internationalising capital markets and a drastic intensification of the pressure to compete. The pragmatic rejection of Keynes was not restricted to German Social Democracy. Similar experiences led to similar conclusions by the Labour Party in England, Mitterand’s Socialists in France and even Swedish Social Democrats.
The harsh reality was that Keynesian tax policies no longer worked, and state borrowing, with its inflationary effect, was suddenly seen as a threat to economic growth. Fritz Scharpf ’s book Sozialdemokratische Krisenpolitik in Europa (1987) provided the theoretical basis for ‘modernisers’ in the SPD after Helmut Schmidt’s fall. Scharpf wrote in conclusion, ‘This time, in constrast to the first three decades after the war, there is no plausible Keynesian stratgey through which social democratic goals can be achieved in a national context without endangering the functional needs of the capitalist economy.’ From this correct analysis-from a Social Democrat point of view-suicidal consequences were drawn. Scharpf challenged Social Democracy to develop a ‘Social Democratic supply-side economics, oriented to the increase of employers’ profits’. Such a Social Democratic supply-side economics had to always favour the income levels of the class of capital owners compared to the class of workers.
The ideological retreat of official Social Democracy from Keynes’s doctrine was preceded by its practical failure under Chancellor Schmidt. A whole generation of left and right Social Democrats followed the path recommended by Scharpf in the 1980s and 1990s. The policy of Agenda 2010 is only the most logical expression of a Social Democratic supply-side economics to date. Taking Scharpf ’s lead, wage cuts, the dismantling of the welfare state and redistribution from below to above became the cornerstones of the SPD modernisers’ theory.
Schroeder and his government might have hoped in 2003 that his policy of redistribution would actually lead to high investment and more jobs. But GNP growth sunk to a meagre 1.3 percent in 2004-05, while unemployment figures climbed again instead of falling, The double failure of Keynesianism and Social Democratic supply-side economics, or rather the SPD neo-liberalism of both Helmut Schmidt and Gerhard Schroeder, was to a certain extent the force behind the collapse of Social Democracy.
‘Neo-Keynesianism’ and the WASG
The political and organisational break with the SPD on the part of Oskar Lafontaine and sections of the Social Democratic base of the SPD does not mean that in one fell swoop they have broken with ideas of social democracy-that is, with faith in the overcoming of crises of capitalism through ‘correct’ government policies.
The programme of the WASG states that ‘the power of capital must be restricted’. Belief in the taming of the tiger by pulling out its claws one at a time has proved itself to be a fatal error before, in Chile (1973) and in France (1982). Socialist governments collapsed in the face of political opposition (military coup in Chile) or economic boycott (the flight of capital from France). The bourgeois state does not allow capital to be partially disempowered and tamed.
According to the WASG programme the globalisation of capital, and the consequently decreasing power of national economic policies, derives from politicians’ decisions, as does mass unemployment: ‘The politics of established parties’ has led to the situation in which ‘officially 5 million people are without work’. But globalisation is not the cause-rather it is the consequence of the crisis of capitalism, and neo-liberal decisions on the part of politicians are an expression of altered economic processses. Crisis and mass unemployment are primarily the result of the economic laws of capitalism and not the result of a wrong politics. Of course, there is room for manoeuvre in political action, and this can have positive or negative economic consequences, but these strategies of political action have limits set on them. This is how Schmidt’s government created almost a million jobs through the Central Investment Programme in 1978, but it could not prevent the outbreak of worldwide crisis of 1980-81, which demolished this achievement and created 2 million unemployed.
The emergence of the WASG is due to the reaction of parts of the Social Democratic trade union body to the crisis of neo-liberalism. The WASG quite correctly insists that Schr?der’s supply-side oriented policy, with its one-sided reduction of wages costs to the benefit of the wealthy, failed by its own criteria-that is, the perceivable reduction of unemployment. The WASG’s programme quite correctly points to the fact that the logic of cost reduction brings with it the danger of a never-ending downward spiral of wages and social benefits, and so initiates a deflationary tendency which is similar to the worldwide crisis of the 1930s.
Therefore the demands to retain the achievements of the welfare state, sectoral collective agreements, the introduction of a minimum wage and a general strengthening of the masses’ buying power-all elements stressed in the WASG programme-are not only correct, but also quite rational from the perspective of the wage-earning classes. By opposing the bloc of neo-liberal policies, which even the Social Democrats and the Greens have adopted, the WASG breaks apart the broad political consensus of ‘Location Germany’.
However, the WASG acknowledges the crisis of old-style Keynesianism too. While the general WASG programme talks of a ‘debt-financed investment programme to overcome crisis’, there is no return to Keynes in the election manifesto. The Future Investment Programme (FIP) laid out in the WASG election manifesto might bear the same name as the one under Chancellor Schmidt in 1978, but there the similarity ends. All that is said on state indebtedness is that it ‘should be dismantled in socially just ways’. The security of the welfare state and the fight against unemployment by FIPs is to be financed by a heavier financial burden on the middle class (through national insurance contributions) and the rich (tax increases), and no longer through state borrowing. While the old style ‘classic’ Keynesianism under Karl Schiller (SPD finance minister 1966-72), and then under Chancellor Helmut Schmidt up until 1982, always went hand in hand with a profit-oriented policy of costs attentuation, the WASG demands an increase in mass buying power: ‘Wages form…the largest part of demand. They must be increased,’ so that the supply of goods meets a corresponding demand.
In contrast to Keynes and, for that matter, Karl Marx, who both saw the central cause of the emergence of crises of overproduction, or, put another way, demand crises, in too low profit rates, the pupils of the left ‘Neo-keynesians’ assume that too low wages are the cause of crises. From this emerges the inclination to simply reverse the neo-liberal argument (‘excessive wage costs as cause of crisis’). But the ‘underconsumption argument’ does not stand up to historical scrutiny. No long term left politics can be based on it within a capitalist system. A government that directs redistribution from above to below and executes state programmes of demand through tax increases for the rich would soon meet with the bitter opposition of the whole employer class, not least because of the leading role that export traditionally assumes in Germany as a motor of domestic boom.
The theorists of underconsumption believe that the capitalists can be compelled to adopt a certain policy, because they assume that employers share a ‘general’ interest in an increased buying power. That which sounds rational in terms of national economics is, however, overturned by the business logic of individual employers. The capitalist system of competition does not recognise an actual ‘collective capitalist’ interest that could ignore the situation of competing individual capitals and overcome crises by the introduction of a lasting increase in mass buying power.
Capitalists are in permanent competitive struggle with each other for market segments, and offload the costs of this struggle onto workers. A left government working within capitalism cannot ignore this logic. As Marx correctly observes, ‘The state is unable to overcome the fact that the contradictory interest of each individual capitalist is an interest in the greater power of consumption of all workers, with the exception of those used by him and in the lowest possible wages of his own workers.’ And we can add to this-all the less so when the competition is international within globalised capitalism and not all competitors are affected by state measures. Confronted by this, Oskar Lafontaine and other left Keynesians have raised the demand for international ‘social standards’.
However, these cannot exist as long as one economy has lower wages and longer working hours, and therefore has an advantage in the international competition. The comparatively high rates of growth of the US since the start of the 1990s have their source not only in the increased state demand for armaments (‘right’ Keynesianism), but also in the smashing of trade union might and with that an increase in the social rate of exploitation (lower wages, longer working hours, etc). The US would only enter into an international social pact if it cemented the current conditions. Government efforts to overcome the German crisis by forcing wages and social standards to the US level with Agenda 2010 must also fail, since they can only lead to a downward spiral of all the major national economies, just as in the 1930s. Lafontaine objects rightly that this politics can only end up like in the cinema, when some people stand up in order to see better and so force the others to stand up too. Eventually everyone sees just as well or badly as they did before, but now they are all standing.
It doesn’t depend on government…
Oskar Lafontaine and Gysi as the leading figures of the left party have a long term perspective of participation in government in order to be able to influence economic trends, growth and social policy. However, the history of the German welfare state shows that its fate does not depend upon the government but rather on the opposition, or more accurately the type of opposition. The social reforms that went the furthest in Germany were fought for in the revolution of 1918-19 (the eight-hour day, factory council law, legal securement of collective bargaining), and the greatest ‘social reformers’ in Germany were right wing conservative politicians such as Bismarck and Adenauer. In the main, lasting social reforms were not achieved by left wing governments but by conservative governments, even contrary to the particular interests of employers (Bismarck 1881-87, Adenauer 1957-61).
Social gains are always the product of social relations of power. Under Bismarck the SPD developed into a dangerous left opposition while at the same time trade unions grew into fighting mass organisations, increasing pressure enormously. Under Adenauer the trade unions regained their strength. In October 1956 IG Metall pushed through the shortening of the working week from 48 to 45 hours. In the same month 34,000 metal workers in Schleswig-Holstein went on strike for the right to the same sickness pay as office workers. The successful strike lasted almost four months, ending on 14 February 1957-nine days before a famous large-scale pension reform was agreed in the Bundestag. Pressure outside of parliament created the climate for reforms. Even under Willy Brandt substantial pressure needed to be built up to force through reforms-in those days largely through student and young worker movements, and an upturn in factory strikes.
The new Left Party’s participation in government at a time when we face lasting tendencies to depression in world capitalism would quickly bring it into conflict with the interests of its voters and supporters. The crisis of German social democracy is not the result of this or that mistaken government policy, but the fact that every government policy must serve capitalism. Put differently, the correct demands of the WASG programme-and also the PDS programme-stand in sharp contradiction to the real interests of the employer class. Under contemporary economic conditions, unlike in the years of the long boom from 1949 to 1974, every serious struggle to maintain or even extend the welfare state will lead to bruising conflicts with the ruling class. It’s no longer possible to return to ‘social partnership’.
A painful experience awaits the WASG and many of its supporters-namely the revelation that its programme will prove to be incompatible with capitalism. Oskar Lafontaine dared to predict in the last sentence of his new book Politics for All that the programmatic demands that he has developed will only be achievable ‘when the people revolt’. The full significance of this statement was perhaps not clear to him when he wrote it.
Postscript: Another blow to neo-liberalism
The headline news about the German general election was the shock failure of Angela Merkel’s CDU to get the overwhelming majority predicted by opinion polls. They had the third worst result in their history, down by 1,891,500 votes compared with 2002. But the most significant thing was the failure of either party to get a mandate for thoroughgoing neo-liberal ‘reform’.
The SPD did very badly by recent standards, even if their 34.3 percent was up from their poll rating of 27.5 percent in mid-June. They lost over 2 million votes compared with the 2002 general elections and 4 million compared to 1998. Their coalition party, the Greens, lost 300,000 votes.
The Left Party did remarkably well, getting 4,086,000 votes, 8.7 percent of the total-ahead of the Greens, and only just behind the CDU’s preferred coalition partner party, the FDP (which increased its vote, probably at the expense of the CDU, to 4,619,000). The Left’s vote was over 2 million up on the PDS’s vote in 2002, and nearly twice that party’s opinion poll rating just before the agreement on the new party in June. It got 4.7 percent of the votes in the West-3.2 percent more than the PDS got running by itself in 2002.
(These figures are based on the list votes of the parties, not constituency votes which slightly favour the bigger parties.)