The New Old World (45 page)

Predictably enough, the neo-liberal turn, conducted without zest and received without enthusiasm, misfired. For all its fanfare in the media, Agenda 2010 had minimal effect on the economy: even the most benevolent estimates could not attribute more than 0.2 per cent of additional GDP growth to it.
²²
But its effect on the political scene was another matter. The final dose of the package, ‘Hartz IV', cutting unemployment benefits—and named after the human-relations chief of Volkswagen, a long-time intimate of Schröder in Lower Saxony, who designed it—was too bitter for the unions to swallow with good grace. Growing unrest in the base of the SPD, and limited breakaways from it in the Ruhr and elsewhere in the West, ensued. In the
Länder
, the party lost one election after another. As evidence of its unpopularity mounted, discontent with Schröder grew. Finally, in the spring of 2005, the SPD was routed even in its traditional stronghold of North Rhine–Westphalia, the most populous state in the federation, where its boss had been promoted to the ministry responsible for framing Agenda 2010. Fearing to repeat the fate of Helmut Schmidt in 1981, repudiated by his own party for drifting too far to the right, Schröder decided on a pre-emptive strike, calling elections a year early, before he could be challenged.

To do so, he had to circumvent the Constitution, which forbade dissolution of parliament at the will of the chancellor, by staging a fake vote of confidence from which his deputies were instructed to abstain, to ensure his own defeat. This transparent violation of the
Grundgesetz
received approval from the highest court in the land, in a graphic illustration of the limits of Germany's
post-war legalism: since the leaders of both the SPD and the CDU, each for their own reasons, wanted to break the law, the judges accommodated them. Merkel, now heading the CDU/CSU ticket, could not wait to cash its lead—20 points ahead—in the opinion polls; Schröder could be sure the SPD had no choice but to rally to him. The contest that followed was fiercer than any since the attempt to bring down Brandt in 1972. By now the media, the
Frankfurter Allgemeine, Welt
and
Spiegel
leading the pack, were in full cry after Schröder, rounding on him for empty opportunism, and clamouring for a sharp break with the paralytic corporatism of the past. Egged on by the press, where she was hailed as the Thatcher the country needed, Merkel ran a stridently neo-liberal campaign, promising a society based on individual effort and flat taxes, without mollycoddling. Schröder, seeing his chance, counter-attacked with brio, ridiculing her fiscal proposals and denouncing the new CDU as a threat to social solidarity.
²³
So effective was his onslaught that by polling day Merkel's huge initial advantage had evaporated. When votes were counted, the CDU/CSU was ahead of the SPD by a mere 1 per cent, with four seats more in the Bundestag, and no parliamentary majority even with its ally the FDP. Schröder had to step down, but to govern Merkel had to form a Grand Coalition with his party.

Few greeted this outcome with much expectation. At best, it was generally held, if the two main parties had to share the onus of necessary but unpopular measures, rather than being able to blame each other for them, liberal reforms had somewhat more chance of reaching the statute-book. At worst, conflicts between them could lead to still direr immobilism. In fact, however, beneath the political surface of polls and parties, deep structural changes had
been underway, altering the parameters of rule. The unification of Germany had transformed the country, in two equally paradoxical ways. The long stagnation of the German economy, the central social fact of the years since 1989, is normally attributed in large measure, and not without reason, to the enormous costs of absorbing the former DDR—about $1.3 trillion at the latest count, requiring massive exceptional taxation, diversion of investment from productive innovation to infrastructural and environmental reconstruction, and escalating public debt. Notoriously, Germany's lapse from grace was so drastic that the country which had originally gone out of its way to clamp the Stability Pact, forbidding any country to run a deficit of over 3 per cent of GDP, like a fiscal Iron Virgin into Europe's Monetary Union, became itself the worst recidivist from it, violating the Pact's provisions six times in defiance of the Commission.

But in what seemed such a heavy burden to German capital also lay the conditions of its reinvigoration. For unification decisively weakened labour. When West German trade-unions attempted to extend their organizations to the East, and uphold nation-wide wage rates comparable to those in the West, they encountered industries that were crumbling so fast, and workers so beaten by surrounding unemployment, that failure was more or less foreordained. But once the East could not be integrated into the traditional corporatist arrangements of
Modell Deutschland
, these inevitably came under increasing strain in the West too. Cheaper labour in the former DDR was soon overtaken by still lower wage costs in Eastern Europe, as the prospect and then reality of EU enlargement drew a growing volume of German investment into Slovakia, Hungary, the Czech Republic, Poland and elsewhere. Beyond these, in turn, lay outsourcing of plants to Asia, Latin America, the Middle East, driving the original wedge of unification yet further into the domestic economy, prising loose the labour market.

The result was a steep decline, not just in the numerical strength of German trade-unions—membership of the DGB dropping from 11 million in 1991 to 7.7 million in 2003—but in their ability to resist unrelenting pressures from German capital. Real wages fell for seven successive years, giving German firms an ever sharper competitive edge in high-end international markets. By 2004, Germany was once more—as it had been in the seventies—the world's leading exporter of manufactures. Such success was built, not on an outstanding performance in productivity—US gains were
significantly greater in the same period—but on wage repression, as workers were forced to accept longer hours and less pay under threat of outsourcing, and domestic consumption remained flat. But with a swelling export surplus, investment increased; and once the business cycle kicked up, growth at last accelerated in 2006, just as Merkel settled into office. By early 2008, unemployment had dropped by nearly two million. The serum of deregulation, injected from the East, seemed finally to have worked.

Yet, in a second and reverse paradox, the unification which transformed the economic constitution of the country, releasing a less inhibited, more ruthless capitalism, has shifted its political landscape in the opposite direction. For the vast sums poured into the East, though they modernized the fixtures and fittings of society—communications, buildings, services, amenities—failed to create any commensurate industrial prosperity or sense of collective dignity and equality within the Federal Republic. The DDR was shabby, authoritarian, archaic by the standards of Bonn. But in the shadow of the state, all were employed and still relatively equal. With annexation by the West, and rapid demolition of the larger part of its industrial park, carpetbaggers arrived and jobs disappeared. In the rest of the ex-Soviet empire, the immediate sequels to Communism were often harsher, as countries that were poorer to start with fell into their own patterns of dislocation and recession. But, not squeezed into the same instant compression-chamber of competition, they had more breathing space for adjustment and reconversion; it was not long before their rates of growth were higher and rates of unemployment lower than those of the
neue Bundesländer
. This superior performance had not just economic, but sociological roots. In Poland, Slovakia, and Hungary, the restoration of capitalism was accomplished by local political elites—typically a combination of ex-dissidents and former party functionaries on the make—who made sure its fruits went principally to them. However popular or unpopular they might be at any point in the electoral cycle, they were an integral part of the local society.

In East Germany, no comparable stratum emerged. There, top political, economic and cultural positions in the new
Länder
were rapidly dominated—indeed, often virtually monopolized—by an influx of Westerners. Thus although unification would raise overall living standards in the East, as even the jobless received
Western-style benefits, capitalism was widely experienced as a colonization rather than self-promotion, let alone emancipation. Even where it brought material benefits, it was not appropriated as a native dynamic, but remained inflicted, a force still felt as substantially alien.
²⁴
Had all boats risen in the same tide, as Kohl promised, this effect would certainly have been less. But the painful sense of a cashiered past—a life-world irretrievably devalued—was not just a subjective reaction to the consequences of unification. It had an objective reflexion in the demographic disaster that overtook the East in these years, as the old lingered, the young left, and the middle-aged were shelved. A population of 16 million in 1989 had collapsed to 12.5 million by 2008, and was set to fall further—perhaps much further—with the exodus of young women to the West. Between 1993 and 2008, no less than two-thirds of eighteen- to twenty-nine-year-olds born in the East had abandoned it.
²⁵
In the DDR, a leading writer from the region has remarked, buildings rotted, but they contained people, who had work; now the buildings are brightly refurbished, and the people are dead or gone. A quarter of the housing stock is empty, and many a smaller centre of habitation, particularly in the north, risks becoming a ghost-town.

In these conditions, the one party to defend a certain memory and express a regional identity could scarcely fail to flourish. When Kohl fell, the PDS had a fifth of the vote in the East. When Schröder fell, it had a quarter, and was the second-largest party in the region, a whisker ahead of the CDU and not far short of the SPD. Such growth was not uninterrupted, nor without setbacks: a drop in its vote in 2002, loss of office in Mecklenburg-Vorpommern, a sharp rebuff for its acceptance of social retrenchment in Berlin in 2006. Nor was the evolution of the party itself any linear progress. Its two most prominent leaders, Gysi and Bisky, withdrew for
a period, after failing to convince it that German troops needed to be available for military missions dispatched by the Security Council. Its members remained extremely advanced in years: three-quarters of them pensioners, more than half over seventy. In a sense, such severe limitations made the resilience of the PDS all the more remarkable.

What transformed a regional into a national force was the neo-liberal turn of the Schröder government. There were demonstrations all over Germany against Hartz IV, but the PDS mobilized the largest in its Eastern bastions, some hundred thousand strong. In the West, the groupings based in the unions that broke away from the SPD formed a list that ran, without great success, in the next
Land
polls, and wary discussion of some kind of cooperation between the two forces followed. It was Schröder's decision to call a snap election in 2005 that galvanized what might otherwise have been a protracted and inconclusive process. Running on a common platform as simply
Die Linke
—‘the Left'—their combination took 8.7 per cent of the national vote, ahead of the Greens and not far short of the FDP, netting fifty-four seats in the Bundestag.
²⁶
The catalyst for this success was Oskar Lafontaine, returning to the political scene as the leader of the Western wing of Die Linke. Hated for quitting Schröder's government even before its turn to the right, and feared for his tactical and rhetorical skills, Lafontaine was henceforward the
bête noire
of the SPD—a traitor who still undeservedly enjoyed national recognition, and could now encroach on its electoral base. So, in effect, it proved. In one
Land
election after another in the West, where the PDS had never been able to gain a foothold, Die Linke easily cleared the threshold for entry into the Assembly—Bremen, Hamburg, Lower Saxony, Hessen—with a varied array of local candidates. More ominously still, national opinion polls gave Die Linke between 10 and 13 per cent of the electorate, making it potentially Germany's third-largest party.

Behind the rise of Die Linke has also lain the long-term decline of the two dominant parties of the Bonn Republic. In the mid-seventies
the CDU/CSU and SPD commanded 90 per cent of the electorate. By 2005, their share had sunk to 70 per cent. Remorselessly, secularization and tertiarization have shrunk what were once the core electorates of each. Church-going Catholics, 46 per cent of the CDU/CSU vote in 1969, had plummeted to 12 per cent in 2005; unionized manual workers from 25 per cent of the SPD vote to just 9 per cent. Their memberships too have fallen steeply: the SPD from over 940,000 in 1990 to just under 530,000 in 2008; the CDU from some 750,000 to a fraction over 530,000—the first time it has surpassed its rival; the CSU, which has held up best, from 186,000 to 166,000.
²⁷
After the war, under an electoral system that distributes seats in the Bundestag proportionately to the votes of any party with at least 5 per cent of the ballots cast, the formation of a government had usually required the participation of the FDP, which held the balance between the two blocs. With the emergence of the Greens in the seventies, this three-party system gradually became a four-way contest, making a government without the FDP possible for the first time in 1998, the Red–Green coalition.

The consolidation of Die Linke, were it to hold, would transform this political calculus, making it mathematically more difficult for any two-party combination to achieve the requisite majority in parliament, other than a Grand Coalition between Christian and Social Democracy along current lines. This has long been the normal formula in Austria, and might eventually become so,
faute de mieux
, in Germany. But the political traditions of the two countries are not the same. The institutionalized carve-up of positions in state and economy between Catholics and Socialists in the
Proporz
system, a reaction-formation arising from the experience of civil war in the Austria of the thirties, has never had a counterpart in the Federal Republic. Here grand coalitions, anyway liable to be destabilized by the cycle of competitive
Länder
elections, have always been regarded by both parties as abnormal makeshifts that encourage extremism on their flanks, to be wound up as soon as possible. In the sixties, it was the CDU that lost ground in the Grand Coalition, to the advantage of the SPD. Today it is the other way around,
Merkel and her colleagues benefitting at the expense of a seemingly rudderless Social Democracy, as Schröder's departure left a divided party, tacking clumsily away from the centre to counter the rise of Die Linke, to the ire of its neo-liberal wing, without much to show for it electorally. With its ratings currently around a quarter of the electorate, depths never reached before in post-war history, the SPD faces the prospect of a structural crisis. For what unification has delivered is, in effect, a new political system.