Is Angela Merkel's Chancellorship About to End?

The German-language press has been full of stories recently about the impending end of Angela Merkel's Chancellorship. I doubt that it is quite so eminent as the headlines suggest.

• Angela Merkel: Der Anfang vom Ende? ("Angela Merkel: The Beginning of the End?") Süddeutsche Zeitung 26.09.2018
• Die große Konfusion ("The Great Confusion") Die Zeit 26.09.2018
• "Innere Unsicherheit" ("Inner Insecurity") Der Spiegel 22.09.2018
• "Merkels Autorität ist beschädigt" (Merkel's Authority Is Damaged") Süddeutsche Zeitung 26.09.2018
• "Der Machverlust" ("The Loss of Power") Die Zeit 26.09.2018. front page Österreich-Ausgabe 27.09.2018
• Merkel-Vertrauter gestürzt: Anfang vom Ende ("Merkel Intimate Unseated: Beginning of the End") Standard (Wien) 25.09.2018
• "Im Abendlicht" ("In the Light of Sunset") Der Spiegel 29.09.2018
• "Knapp nach halb Nacht" ("Almost At Half Power") Profil 01.10.2018
• Wohin geht die Macht, wenn sie geht? ("Where Does Power Go, When It Goes Away?")Die Zeit 26.09.2018
• CDU/CSU-Abgeordnete wagen mit Kauder-Abwahl Aufstand gegen Merkel ("CDU/CSU Representatives Venture An Uprising Against Merkel With Kauder-Ouster Vote") Standard (Wien) 25.09.2018

The recent flap started with Hans-Georg Maaßen, the head of the Verfassungsschutz, the internal security agenca charged with monitoring and countering groups that aim to undermine the democratic order, which typically means political groups with a possible violent tendency. After recent anti-immigrant violence in the city of Chemnitz, Maaßen made public comments that seemed to minimize anti-immigrant violence and even to sympathize with the extremists.

The opposition called for his ouster over those comments and for "allegedly providing members of the right-wing Alternative for Germany (AfD) with confidential material." (Judith Mischke, Merkel admits mistakes in case of domestic intelligence chief Politico EU 09/24/2018) The agreement the coalition reached was to take him out of that office and give him a promotion. The SPD rank-and-file and the opposition were outraged. So they moved him to a vaguely defined advisory position in the Interior Ministry.

Then came what Merkel expected to be a routine vote to re-elect Volker Kauder as the head of the CDU parlimentary club. Merkel supported Kauder, but the former deputy leader Ralph Brinkhaus was elected instead with 125 votes to 112 for Kauder. As Matthew Karnitschnig reports (Merkel loses key ally in conservative rebellion Politico EU 09/26/2018),

Before the vote, Merkel made a personal plea to the group at a meeting in the historic Reichstag building, telling members that she considers Kauder to be crucial to the stability of her coalition government. By selecting Brinkhaus against Merkel’s wishes immediately following her remarks, conservative MPs left no doubt that they are dissatisfied with the chancellor’s stewardship.

Merkel has been Chancellor at the head of a GroKo (Grand Coalition) of the CDU, CSU, and SPD since 2005, the exception being in 2009-11 when she headed a CDU/CSU/FDP coalition.

It's unlikely that either Merkel's CDU or the SDP would want to have a new national election after just having one last year.

Both the CDU and the SPD are facing political challenges. Merkel has to worry about pressure from the right from the CSU and the AfD (Alternative für Deutschland), especially on immigration. The SPD has been losing support dramatically over the last 15 years. After the 2013 election, they had a chance to build a majority "red-red-green" coalition of the SPD, the Left Party, and the Greens. They didn't even try, they were so eager to be Angela Merkel's junior partner for four more years. After the 2017 election, the three parties together no longer have a parliamentary majority. If the SPD over the next few years shrinks to a minor party - a real possibility - 2013 will stand out as a key moment on that journey to irrelevance.

Does Germany need a new party of the left?

The German SPD has made an initial agreement in exploratory talks for a new coalition government with Angela Merkel's CDU and the CSU. Such a new coalition would continue the current one, which resulted from the 2013 elections. The 2017 parliamentary elections were in October, but a new government has not yet been formed.

A continuation of the Grand Coalition (GroKo, as it's called for short) has been very controversial within the SPD. A party convention on Sunday approved the concept by a substantial but not overwhelming vote, 56% of the delegates supporting it. Although the convention also demanded further negotiations on the coalition pact. According to the analysis of Max Ferstl und Jasmin Siebert in the Süddeutsche Zeitung (Wie es nach dem Ja der Genossen weitergeht 21.01.2018), negotiating the new agreement will take at least another four weeks. And it has to be approved by an SPD convention again.

The party base has very good reasons to worry about the future of the SPD in a new edition of the GroKo. After the 2013 election, the three parties SPD, the Greens and the Left Party had enough parliamentary seats to form a majority for a red-red-green coalition. Merekel's CDU/CSU had the largest vote, so they got the first shot at trying to form a government. The SPD didn't even make a weak attempt to hold out for red-red-green. They were almost pathetically eager to become a junior partner in another GroKo headed by Merkel.

In 2017, the three parties didn't win enough seats together to even have a possibility of forming a red-red-green government. Merkel tried but failed to reach an agreement for a "Jamaica" coalition (CDU-CSU-Greens-FDP). So even after party leader and Chancellor candidate Martin Schultz initial rejection of any consideration of a new GroKo, he soon came around and reached an agreement which he and his supporters attempt to sell to the party base as including big improvements in the social-democratic direction. But the claim isn't entirely credible to voters. As ORF reports (Klare Haltung von Schulz 21.01.2018)

In den Umfragen rutschen die Sozialdemokraten unterdessen ab. So sieht etwa die überwiegende Mehrheit der Deutschen die SPD als Verliererin der Sondierungsgespräche mit der Union. Eine Umfrage des Meinungsforschungsinstituts YouGov im Auftrag der dpa ergab, dass nur neun Prozent der Auffassung sind, die SPD hätte sich durchgesetzt. 29 Prozent meinen dagegen: die CDU.

[Meanwhile, the Social Democrats have been slumping in the polls. So, for example, the overwhelming majority of the Germans see the SPD as the loser in the exploratory talks with the Union {CDU and CSU}. A poll by the opinion research institute YouGov for the dpa {news agency} showed that only 9% were of the opinion that the SPD had succeeded. 29% thought the opposite: the CDU.]

The low numbers on both sides in that poll are probably a reflection of that fact that the details of the initial agreement are "inside baseball," as American political commentators say. More seriously, the poll also found that in a new election, which would be the most likely result of a new failure to form a coalition over the next month, the SPD would get 3% less than they did in October.

The SPD is experiencing its own version of the crisis of social-democracy in Europe. The center-left was at a high point at the end of the 1990s. But at the same time, the European social-democrats started embracing the neoliberal gospel of reduction of government, deregulation, weaker unions and lower wages, and support for corporate-deregulation treaties staged as "trade" treaties. Once the center-left parties took major economic questions off the table for the neoliberal TINA (There Is No Alternative) position and the 2008 economic crisis hit, followed by the malfunction of the eurozone in the subsequent debt crises, a political crisis followed for social-democratic parties from Greece to Italy to France to Britain to elsewhere and, increasingly so now, in Germany.

Currently, that crisis for the SPD is manifesting itself in the low poll numbers, the deep divisions in the party over a new GroKo, and a new proposal from Left Party leaders Sahra Wagenknecht and Oskar Lafontaine for a Sammlungsbewegung (collective movement) on the left aimed at a new kind of unity movement or party for the left factions of the SPD and the Greens and (most of) the Left Party. ("Links Unten" Der Spiegel 4/2018 20.01.2018)

Albrecht von Lucke makes the case for the SPD agreeing to new GroKo in Die gärige Republik Blätter 1/2018. Essentially, he argues that being in government would give an SPD that was focused on building its image a chance to prove itself as a center-left party again by fighting for left ideas, programs, and positions. It's telling, though, that even in an article advocating for SPD participation in a GroKo, Von Lucke displays some pragmatic doubts about whether the SPD can actually pull that off. For instance, he notes that Martin Schultz has been blaming their participation in the current GroKo for the decline in the SPD's vote since 2013. Which raises the obvious question: what can voters expect different from the SPD in a new one?

He mentions that in the context of what even the Spiegel "Links Unten" piece flags as a critical turning point, the decision of Gerhard Schröder's red-green coalition to adopt his "Agenda 2010" program which included the now-infamous Hartz IV reforms, which have become a synonym for low wages, loss of union protection, and precious employment ("McJobs"). The Spiegel article gives it the obligatory praise for neoliberal dogma, saying that the "economic data" increased and "the number of unemployed sank." But:

... zugleich führten die Reformen zu einer massiven Ausweitung der Leiharbeit und erhöhten die Zahl der prekären Beschäftigungsverhältnisse.
Für Millionen Menschen, die sich einst von der Arbeiterpartei SPD beschützt gefühlt hatten, waren die Sozialdemokraten zu Verrätern geworden.

[... at the same time, the reforms led to a massive spread of temporary work and boosted the number of precarious employment situations. For millions of people who had once felt protected by the workers' party SPD, the Social Democrats had become traitors.]

This has been a widespread pattern for the center-left parties in Europe and in the United States, as well. Their traditional base was working class and "middle class," although that term is defining in various ways. When the center-left parties started adapting economic policies fundamentally similar to those of conservatives that resulted in increasing hardship and decreasing security for their traditional base voters. And they got hurt badly.

Nelson Lichtenstein gives an insightful description of how that process played out during the Clinton Administration in the US (A Fabulous Failure: Clinton's 1990s and the Origins of Our Times The American Prospect Winter 2018, currently behind subscription):

Many recall the 1990s as a moment of economic triumph with increasingly low unemployment, 4 percent annual economic growth, a booming stock market, even a balanced federal budget by the end of the millennium. Economists Alan Blinder and Janet Yellen called those years the "Fabulous Decade" in 2001, while a 2015 opinion piece in The New York Times bore the title "The Best Decade Ever? The 1990s, Obviously." Although the Republicans had seized control of Congress in 1994, it is worth remembering that Ronald Reagan's vice president, George H.W. Bush, took only 37 percent of the vote in 1992 while that stalwart Republican, Robert Dole, won just 40 percent in 1996. Politics were clearly in flux. The Clintons therefore had the historical moment to recast not just trade, investment, and health-care policies, but the regulations, norms, and expectations that would govern a post-Cold War version of U.S. capitalism.

Their failure to take advantage of these fortuitous circumstances doomed any effort to build a more equitable economy or a political order powerful enough to sustain a dominant liberalism, a failure Donald Trump would one day seize. [my emphasis]

The SPD currently faces a dilemma in which their previous base voters and many of the current ones was lost confidence in the party's willing to fight for their interests.

So, on the one hand, participating in another GroKo would give the SPD a chance to have direct effect on government policy and give them public prominence in the form of ministerial positions. On the other, in this political moment, the election results and opinion polls seem to indicate that the SPD needs reframe its image. Not only in terms of policy but in showing their willingness to fight. The latter didn't happen very much when the SPD headed the opposition to Merkel's government of 2009-2013. They had served as the junior partner in a Merkel-headed GroKo 2005-2009. During the interim, their leadership was apparently focused on a new opportunity to become Merkel's junior partner in government again. Thus, the lack of any pretense in 2013 that they were even interested in a possible red-red-green government.

Albrecht Müller discusses both the current GroKo dilemma and the idea of a left Sammlungsbewegung in Linke Sammlungsbewegung – eine Schnapsidee oder die richtige Konsequenz aus der erkennbaren Ausweglosigkeit? Nachdenkseiten 15.01.2018. He argues that in the former case, it would be a bad idea. But he thinks the latter is a good idea. Because, in his judgment, all three of the left parties look to have poor political prospects for the near future.

Twilight of German and Austrian Social Democracy?

Eurointelligence reported this past week in Afraid of Merkel 05/17/2016 (second story on page):

This is a really sad story. In Austria, they hired a manager because no social democratic politician of sound mind wanted to become chancellor of the country - and thus a member of the European Council. The newspapers there described the job as a suicide mission. The same is now happening with the German Social Democrats. Sigmar Gabriel suggested over the weekend that he may welcome some real challengers for the 2017 nomination, and proposed a primary among members. His general secretary, Olaf Scholz, immediately dismissed the idea, saying that the party leader should have the first go. The decision now is to wait until the election in North-Rhine Westphalia in the spring of next year, which is just a few months before the elections. If those elections are lost, which the Social Democrats seem to expect, then the backlash might be so strong that Gabriel would be off the hook on having to run a campaign against Merkel, which he knows he will lose. In any case, he agrees with Merkel on most of the big political issues anyway. Their differences are due to the necessity of pacifying their respective parties. Frankfurter Allgemeine has an astute comment this morning, which says that Gabriel's lack of consistency is to blame for the SPD's plight, and the best thing he should do is to stop digging whilst in a hole. [my emphasis]

Sanders and "socialism"

Dan Roberts and Adam Gabbatt look at the "socialist" label and Bernie Sanders in Is the US ready for a socialist president? Sanders might be about to find out Guardian 02/06/2016.

Having seen the German Social Democratic Party push neoliberal policies for the last decade and a half, and enthusiastically backing Angela Merkel's Herbert Hoover/Heinrich Brüning economic policies, the "socialist" label has become pretty vague in practice. The SPD is one of the Ur-socialist parties, with Karl Marx as one of its co-founders. Although today's SPD prefers to stick with Ferdinand Lasalle as their founder.

Here I'll quote David Conradt's article, Social Democratic Party of Germany (SPD) Encyclopædia Britannica (accessed 02/06/2016). He doesn't talk about Marx' role in the merger of the two predecessor parties but it's a good sketch of classical European socialism of the late 19th century:

The SPD traces its origins to the merger in 1875 of the General German Workers’ Union, led by Ferdinand Lassalle, and the Social Democratic Workers’ Party, headed by August Bebel and Wilhelm Liebknecht. In 1890 it adopted its current name, the Social Democratic Party of Germany. The party’s early history was characterized by frequent and intense internal conflicts between so-called revisionists and orthodox Marxists and by persecution by the German government and its chancellor, Otto von Bismarck. The revisionists, led at various times by Lassalle and Eduard Bernstein, argued that social and economic justice could be achieved for the working class through democratic elections and institutions and without a violent class struggle and revolution. The orthodox Marxists insisted that free elections and civil rights would not create a truly socialist society and that the ruling class would never cede power without a fight. Indeed, German elites of the late 19th century considered the very existence of a socialist party a threat to the security and stability of the newly unified Reich, and from 1878 to 1890 the party was officially outlawed.

Fast-forward to the US and Bernie Sanders, 2016. "Socialism" has been used and misused so much that we have to look at what Sanders himself says about what he means when he uses the word for his own positions. Roberts and Gabbatt give us these glimpses in their not especially sympathetic to Sanders report:

As the only candidate proposing to abolish tuition fees at public universities, Sanders frequently takes on the role of a reverse auctioneer, asking members of the audience at his rallies to shout out how much student debt they have. For a while, the record was $300,000. Then he met a dentist who graduated with loans of $400,000.

But paying for college by taxing Wall Street speculation is not the only policy that has seen the senator from Vermont branded a dangerous extremist – by his own party. Despite the limited health insurance reforms passed by Barack Obama, 29 million Americans remain without any coverage and many more are underinsured to the point where they cannot afford to see a doctor. [my emphasis]

Tuition-free public colleges and "taxing Wall Street speculation." Of course the One Percent is happy to stigmatize such policies, and will do so no matter who advocates them.

But are they really terrifying for working and middle class voters? For some, sure. But if "socialism" for Sanders means better access to college, closing remaining gaps on health insurance while better controlling health care costs, taxing and better regulating giant bank, and reducing the currently extreme power of campaign contributors and corporate lobbyists - those things in themselves are not inherently scary for general election voters who aren't already committed Republican voters.

On the last topic, Roberts and Gabbatt write: "The notion, proposed by Sanders, that a corrupt campaign finance system is the only thing standing between voters and a once-in-a-lifetime opportunity to change this might seem simplistic. But it is proving wildly popular."

And they make this important point:

Confusion also stems from the fact that Sanders uses the phrase “democratic socialist” partly to stress his belief that change must come through the ballot box, but also because, in continental Europe at least, he would probably be known as a social democrat, a label that does not easily translate to the US.

A “Democrat” in US parlance is something the independent senator from Vermont only became when he decided to seek the party’s presidential nomination in May. Anyone using the word “social” in American politics might as well go the whole hog and add the “ist” before somewhere else does.

The first President Clinton never advertised himself with the "socialist" label. On the contrary, he emerged on the national stage as an advocate for the neoliberal "DNC" strategy of giving the Democratic Party a distinctly more conservative image. And when he ran for President in 1992, the supposedly moderate incumbent, Old Man Bush, pulled this: Bill Clinton and the KGB by Paul Wieck Christian Science Monitor 10/15/1992. One of the sleaziest pieces of sleazes US political history. But I doubt in the midst of a Presidential campaign, that Bill's wife is much embarrassed by the following, also reported by Dan Roberts: Sanders smeared as communist sympathiser as Clinton allies sling mud Guardian 01/22/2016.

Sanders is also calling for a "political revolution" and doing so without embarrassment. When he says this, he makes clear that what he is talking about is more ordinary people getting involved in politics with the goals of reducing the power of organized money and electing a Congress not dominated by Republicans. I'm sure that sounds pretty scary to a lot of Democratic office-holders. But it sounds like a good idea to me. Whether or not we want to quibble about the political-science definition of "revolution."

But we also need to see this in terms of how the right uses the term these days. Sanders parried a question from Anderson Cooper on the term this week by reminding him of the "Reagan Revolution" and the "Gingrich Revolution," terms that haven't bothering the Grand Old Party much.

Then there are our cornpone Duck Dynasty John Calhouns, like the Bundy boys and their fans. Not only such characters, but the NRA that few Republicans are willing to criticize at all, talk about the need for people to have unlimited access to guns in order to fight "tyranny" if the occasion arises. Now a clever pollster or sociologist could surely document that what most white people have in mind when they talk about "tyranny" in this context actually means "black people."

But we don't need any special studies to know that the Republican Party is perfectly comfortable with the formal justification of the need for unlimited gun proliferation as required to fight "tyranny." What would that mean if it ever got more serious than a bunch of fools seizing a building on a wildlife sanctuary? It would basically be applying the techniques of partisan warfare, aka, "terrorism": sabotaging infrastructure like bridges and power stations, ambushes on police and soldiers, assassination of hostile public officials. Ugly stuff even when employed in the best of causes. And our present-day junior John Calhoun's don't have a good cause.

So if the Republican Party's acceptance and encouragement of this kind of revolutionary and seditious rhetoric has persuaded the public to vote the Republican Party out of existence, Bernie Sanders calling for more citizen involvement to make the political system less corrupt is unlikely to send the voters fleeing in panic to Donald Trump or Ted Cruz or even the fresh-faced warmonger Marco Rubio.

The zombie of Merkel-nomics lurches on

In their 2011 book Modern Political Economics: Making Sense of the Post-2008 World, Yanis Varoufakis et al describe the basic macroeconomics of pulling the economy out of a depression with counter-cyclical stimulus:

When a complex capitalist economy enters a downward spiral like the one described in the previous paragraph, thrift makes things far, far worse. Then, the only glimmer of hope is the state. Uniquely able to step in and pump money into the economy, it is our only chance of ending the 'beggar they neighbour' logic during a recession. This is exactly what the Second World War did ... and how the post-war economic golden age came about. (pp. 211-212)

Even left-leaning economists now speak of the period of 1945-1973 as a Golden Age of capitalism. And in historical perspective, that seems to be justified.

This doesn't mean that there weren't still substantial destructive and self-undermining features of how the economic system was working. But the system in the advanced countries enjoying a substantial amount of stability and was spared severe, protracted crises on the scale and intensity of those of the Great Depression and whatever the historians eventually call the one that began in 2007-8.

The eurozone is the poster child for the disastrous consequences of doing just the opposite of what basic macroeconomics indicates. Bill Black talks about the eurozone's situation in Germany’s Passive-Aggressive “Stimulus” Program New Economic Perspectives 11/08/2014:

Kilkenomics [in Ireland], being a festival of economists and comedians, has long reflected the economic consensus that austerity in response to a Great Recession is economic malpractice akin to bleeding a patient to make him healthy. One of the great changes in Europe in the last month is that the number of economic voices willing to make this same point have grown rapidly. Germany’s “there is no alternative” (TINA) to austerity claims were always absurd, but now many more European voices are willing to point out that there are superb alternatives – in Germany. ...

There a one trillion euro shortfall on German spending on infrastructure even though such spending (1) improves life, (2) saves lives and reduces injuries, (3) increases productivity, and (4) spurs economic recovery from the self-inflicted disaster of the second, gratuitous Great Depression that Germany inflicted on the eurozone by demanding austerity. Germany is actually running a substantial budget surplus even though this is crippling the German economy’s growth and impairing growth throughout the eurozone. The obvious win-win is for Germany to substantially increase spending on its infrastructure. Naturally, invoking TINA, Germany refused.

He explains that criticism from other eurozone members is now strong and persistent enough that Angela Merkel's government has seen the need to produce what Black calls "a faux stimulus program."

As he explains, the €3.3 billion per year "stimulus" program that Merkel is promoting actually represents a continuation of severe austerity economics. "The surprising fact is that Germany felt the need to gin up even an oxymoronic 'stimulus' plan given her constant invocation of TINA," he writes.

Wolfgang Münchau in The wacky economics of Germany’s parallel universe Financial Times 11/16/2014 describes the hold that austerity economics has on the Sehr Ernste Leute (Very Serious People):

German economists roughly fall into two groups: those that have not read Keynes, and those that have not understood Keynes. To describe the economic mainstream in Germany as conservative misses the point. There are some overlaps with the various neoclassical or neoconservative schools in the US and elsewhere. But as compelling as a comparison between the German mainstream and the Tea Party may appear, it does not survive scrutiny. German orthodoxy straddles the centre-left and the centre-right. The only party with some Keynesian leanings are the former communists [the Left Party]. [my emphasis]

This is his summary of the ordoliberalism that Merkel practices, a definition that in my mind understates how stone conservative (in American political terms) the notion is:

The Germans have a name for their unique economic framework: ordoliberalism. Its origins are perfectly legitimate – a response of Germany’s liberal elites to the breakdown of liberal democracy in 1933. It was born out of the observation that unfettered liberal systems are inherently unstable, and require rules and government intervention to sustain themselves. The job of the government was not to correct market failures but to set and enforce rules.

After 1945, ordoliberalism became the dominant economic doctrine of the centre-right. In the 1990s, the Social Democrats started to embrace it, culminating in Gerhard Schröder’s labour and welfare reforms in 2003. Today the government is ordoliberal. The opposition is ordoliberal. The universities teach ordoliberal economics. In the meantime, macroeconomics in Germany and elsewhere are tantamount to parallel universes.

That's a surprisingly generous description, especially since he goes on to note that the ordoliberals have "no obvious explanations" for that little matter known as the Great Depression.

He also gives some sense of what a basically nationalistic policy it is. And, less clearly, how much it comes down to dogmatic insistence on austerity policies no matter what.

But his conclusions is certainly appropriately pessimistic: "It is hard to think of a doctrine that is more ill suited to a monetary union with such diverse legal traditions, political system[s] and economic conditions than this one. And it is equally hard to see Germany ever giving up on this. As a result the economic costs of crisis resolution will be extremely large."

Prognosticating a bit of 2015 for Germany and the eurozone

"Europe suffers from fatal politics." - Joseph Stiglitz, August 2014

Bloomberg Businessweek's looking-forward-to-2015 issue has a page featured bullet-points about Germany and Angela Merkel's Herbert Hoover/Heinrich Brüning economic policies, Rainer Buergin and Brian Parkin, What's Bugging Angela Merkel: Germany's Biggest Challenges 11/06/2014.

One of the notable ones concerns the effects of economic sanctions against Russia:

The Germans'once-flourishing trade with Russia is feeling the impact of sanctions. For the 12 months ended in August, exports to Russia declined 26%.

It remains to be seen whether these sanctions do more damage to the eurozone economy or to Russia.

The problem is that pursuing Hoover/Brüning economic policies during a depression leaves restricted room for economic sanctions without giving your own economy a serious blow.

Buergin and Parkin also note that Angie has promised to balance the German national budget in 2015, another staple of Hoover/Brüning economics during a depression. They note this determination of hers is dismaying to "other European Union governments that want Germany - the EU's biggest economy - to spend heavily at home and stimulate demand for French. Italian,
and other EU nations' goods."

It would also be accurate to say its dismaying to bonehead macroeconomics, as well.

Also, it's more than a little misleading to talk about Germany's economy as a separate one. When you're part of a currency zone, the currency zone is your economy.

Germany is also considering enacting a national minimum wage law for the first time. It's surprising they haven't had one before now. But in practice, the "social partnership" between Labor and Capital in Germany has mitigated the need for such a thing until the last 10 years or so.

Buergin and Parkin describe it this way: "To accommodate her Social Democrat [sic] coalition partners, Merkel's government will introduce the first nationwide hourly minimum wage of €8.50 ($10.63) on Jan. 1." And, of course, conservative economists make the same argument that they make in the United States every time the minimum wage is debated, even though experience has debunked it again and again and again: "The research institute DIW, citing simulations, estimates that the introduction of the minimum wage will cost Germany 57,000 to 384,000 jobs."

ECB stress tests and Europe's fatal politics

"Europe suffers from fatal politics." - Joseph Stiglitz, August 2014

Gretchen Morgenson presents a report on the ECB bank stress tests, Cracks in the Stress Tests of European Banks New York Times 11/01/2014. She stresses the seriousness of the findings, and how important future financial supervision is to maintaining the banks' integrity:

A crucial aspect of the examination was an analysis of how each bank valued its assets, such as loans and interest-rate swaps and other derivatives holdings.

The derivatives holdings on these institutions’ books total hundreds of billions of euros. So it’s critical that banks accurately assess the risks that arise in these holdings when a trading partner gets into financial trouble. (This assessment is called a credit value adjustment.)

The analysis was discomfiting. The European Central Bank concluded that fully half of the sampled banks had inadequate practices when it came to calculating and adjusting their holdings for credit risks associated with derivatives trading partners.

She doesn't comment on the politically convenient aspect of the ECB stress test findings, which is that most of the problems they identified were in eurozone "periphery" countries like Italy.

And she doesn't mention the largr point emphasized by Wolfgang Münchau, which is that it's not the availability of credit that's keeping the eurozone in depression, it's deficient economic demand.

Martin Wolf looks at the stress tests in Europe’s banks are too feeble to spur growth Europe’s banks are too feeble to spur growth Financial Times 10/28/2104:

The optimistic assessment is that the ECB has at least done enough to mend the banking system. There are two things to be said for this judgment: first, the ECB has taken a close look at the quality of assets in the system; and, second, the “stresses” imposed in the tests are tough. They seem comparable to those imposed by the Federal Reserve on US banks. The ECB concluded that 25 institutions, nine of them Italian, would need to add a total of €25bn in capital. This number has already fallen to €13bn because of capital-raising undertaken this year.

Of course, it's a bit of damning by mild praise to say that the ECB stress tests "seem comparable to those imposed by the Federal Reserve on US banks." They also drew criticism from some economists for being excessively permissive.

Wolf proceeds to point out a non-trivial deficiency in the ECB stress tests:

Perhaps the most important possibility omitted by this assessment is that of sovereign default. This bears on a fundamental concern: risk-weighted capital requirements, on which the analysis is based, involve making judgments about the safety of different types of assets. This is especially problematic in the eurozone, where the lack of a unified fiscal backstop for banks means that national governments are responsible for rescuing troubled institutions. Moreover, the solvency of the eurozone’s highly indebted members is more doubtful than that of countries with their own currencies. Since a banking crisis would be even harder to deal with in the eurozone than elsewhere, it would be wise for its banks to have bigger capital buffers that stand a better chance of preventing one.

And he echoes Münchau's macroeconomic warning:

... one must doubt whether the capital in eurozone banks is enough to drive the economy forward. But this is just one part of a still bigger problem: the dramatic weakness of aggregate demand and the slow slide into ultra-low inflation and, quite possibly, deflation. Sounder banks do not necessarily generate faster growth in demand. Indeed, causality goes far more in the opposite direction. [my emphasis]

And the prospects for that are grim, thanks to the Herbert Hoover/Heinrich Brüning that Angela Merkel and her junior coalition partners in the SPD have agreed for years to impose on the eurozone. Joe Stiglitz wasn't kidding. "Europe suffers from fatal politics."

Euro crisis not over yet

Paul Krugman reminds us that the euro crisis is still very much with us (Europanic 2.0 10/11/2014):

Not that long ago the austerians who had dictated macro policy in the euro area were strutting around, proclaiming victory on the basis of a modest uptick in growth. Then inflation plunged and the eurozone economy began to sputter — and perhaps more important, everyone looked at the fundamentals again and realized that the situation remains extremely dire.

The panics over interest rates on national bonds of eurozone members culminated in 2012, when the ECB finally stepped in with a promise to backstop the eurozone bond market. This was a creative stretch of its legal authority, but is something central banks are normally able to do with their currency zones, which are mostly individual nations.

It was one of the faults of the euro currency design that the ECB wasn't originally given such authority outright. German Chancellor Angela Merkel opposed the action right up until then, but she finally grudgingly relented, when it became painfully obvious that the speculation was weeks or even days from wrecking the euro.

Merkel's Finance Minister Wolfgang Schäuble is still worrying that ECB chairman Mario Draghi is dangerously stimulus-oriented. (Stefan Riecher et al, Draghi Clashes With Schaeuble Over Steps for Europe Bloomberg News 10/10/25014):

As the International Monetary Fund’s annual meeting in Washington began, Draghi pledged anew to loosen monetary policy more if needed and called on those governments with the room to ease fiscal policy to do so. By contrast, Schaeuble warned against U.S.-style quantitative easing and urged continued budgetary discipline.

The differences demonstrate the lack of a common front in euro-area policy making as its economy continues to deteriorate and the IMF estimates there is as much as a 40 percent risk of a third recession since 2008.

As Krugman puts it, "Once the prospect of a cash shortage [that might force individual country defaults] was taken off the table [by the ECB's 2012 action], the panic quickly subsided, and at this point both Spain and Italy have historically low borrowing costs."

Krugman references a Frontline interview with the late economist Rudi Dornbusch, talking about the 1995 Mexican finance crisis, for the episode Murder, Money and Mexico: The Rise and Fall of the Salinas Brothers (1997).

YOU SAY IT WAS PREDICTABLE AND YOU DID SEE IT COMING. BUT WHY DID WALL STREET NOT SEE IT COMING?

Well, when it happened, it's a wide open question. An overvalued currency isn't tantamount to a crisis. The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought, and that's sort of exactly the Mexican story. It took forever and then it took a night. [my emphasis]

That sentence, "It took forever and then it took a night," is an important observation. Economic crises build up for a while, and then often take a sudden turn for the (much) worse. The eurozone has been visibly in crisis as a currency zone, which has extended and worsening the depression that began in 2008. In mid-2012, it was entering an "it took a night" phase. We're likely to see more of them. At least one more.

That 1995 Mexican crisis also had fixed exchange rates involved, as M. Angeles Villarreal describes in The Mexican Economy After the Global Financial Crisis 09/16/2010:

The Mexican economy suffered a financial crisis in 1995 that resulted from a number of complex financial, economic, and political factors. In response, the government abandoned its previous fixed exchange rate policy and adopted a floating exchange rate regime. Mexico’s currency plunged by around 50% within six months as a result, sending the country into a deep recession.

The gold standard was a type of fixed exchange rate for participating countries, and so is the euro.

Krugman describes the difference of the current situation to 2012, referring to the "zero lower bound." That term refers to very low interest rates. Nominal interest rates can't go below zero. They normally approach zero only in a weak economy, one that has lots of unused capacity, and therefore high unemployment. Neo-Keynesians like Krugman recognize that in such a situation, monetary policy can have only a very limited effect in promoting economic growth. (More orthodox Keynesians and post-Keynesians are more likely to question whether monetary policy can ever do much of anything to promote economic growth.) Krugman:

What’s happening now, however, is very different [from 2012]. It’s a slower-motion crisis, involving the euro area as a whole, which is sliding into a deflationary trap with the ECB already essentially at the zero lower bound. Draghi can try to get traction through quantitative easing, but it’s by no means clear that this could do the trick even under the best of circumstances — and in reality he faces severe political constraints on what he can do.

What strikes me, also, is the extent of intellectual confusion that remains. Germany still seems determined to regard the whole thing as the wages of fiscal irresponsibility, which not only rules out effective fiscal stimulus but hobbles QE, since it’s anathema for them to consider buying government debt.

And it’s remarkable, too, how the logic of the liquidity trap remains elusive even after six years — six years! — at the zero lower bound.

Merkel, whether from conviction or loyalty to German corporate bosses, is committed to her Herbert Hoover/Heinrich Brüning for the eurozone. She's also approaching it in a nationalistic way, pursuing policies from which Germany as a national economy benefits at the expense of most of the rest of the eurozone. Her policies at the same time ensure that German workers benefit very little from the advantages of the national economy. The lion's share of the benefits are going to the German One Percent.

Given her nationalistic focus, the only kind of external pressure that could force a change in her policy would be a country like Greece or Spain being willing to leave the eurozone - and thus provoke its collapse more generally - unless Germany backs off and allows a counter-cyclical, stimulative policy for the eurozone.

Within Germany, if the SPD followed an actual center-left economic policy, they could present a real challenge to it. But that ship has sailed. If they were going to do that in any immediate future, they would have tried to form a government after the 2013 Bundestag election with the Left Party and the Greens instead of rushing to become the junior partner in a Grand Coalition government headed by Angela Merkel.

Krugman doesn't see a happy ending to the euro crisis:

Europe has surprised many people, myself included, with its resilience. And I do think the Draghi-era ECB has become a major source of strength. But I (and others I talk to) are having an ever harder time seeing how this ends — or rather, how it ends non-catastrophically. You may find a story in which Marine Le Pen takes France out of both the euro and the EU implausible; but what’s your scenario?

Eurozone depression politics in Germany

"Europe suffers from fatal politics." - Joseph Stiglitz, August 2014

Paul Krugman in Replaying the 30s in Slow Motion 09/15/2014 provided a grim thought last Monday: "One European nation [Hungary] has already reached the point where its leader [Viktor Orban] openly declares his intention to end liberal democracy; thanks to austerity, extremist parties are gaining ground in elections, with Sweden (which squandered its early success) the latest shocker; and of course separatist movements are scaring everyone."

The EU should actually be doing something about that business in Hungary. But they're too busy enforcing Angela Merkel's Herbert Hoover economics on the eurozone. More Krugman: "We’re still nowhere like the 30s politically. But you do start to wonder whether self-congratulation over the political handling of Depression 2.0 will eventually look as foolish as the economic optimism of a few years ago."

A depression can cause political upheavals; gosh, who could have known?

You can't exactly see an upheaval in German politics yet, constrained as it is by the toxic consensus on Herbert Hoover/Heinrich Brüning economic policies for the eurozone.

The national Social Democratic Party (SPD) at a recent party convention happily affirmed their support for the neoliberal-nightmare treaty TTIP/TAFTA to undermine democratic regulations on business and, perhaps most catastrophically, to deregulate international banking and capital flows even further. And the national leadership semms especially upset that some of its members and activists don't like it. (Veit Medick, TTIP-Zoff in der SPD: Gabriel haut auf die Pauke Spiegel Online 20.09.2014)

The European Greens (Greens EFA) has created this brief video spot on the TTIP's menace to democracy and well-being, TTIP: A race to the bottom (new version) 07/28/2014:

The Genossen (the traditional German term used for SPD "comrades") have reason to be worried about their own party's present and future. AS Veit Medick explains:

Gabriels Abrechnung ist auch ein Zeichen für die wachsende Unruhe in der SPD. Nach dem bitteren Wahlergebnis in Thüringen hatte es erste Kritik am Parteivorsitzenden und dessen öffentlicher Einmischung in die Belange des Landesverbands gegeben. Zwar ist die Arbeit Gabriels in der Großen Koalition innerparteilich weitgehend unumstritten, immer mehr Sozialdemokraten sind jedoch angesichts der unverändert schlechten Lage in den Umfragen beunruhigt.

[Party Chair and Federal Economics Minister Sigmar "Sigi Pop"] Gabriel's settling of accounts [with TTIP/TAFTA opponents in the SPD] is also a sign of the growing unrest in the SPD. After the bitter election experience in [the state of] Thuringia [where the SPD showed poorly last weekend], there had first been criticism of the Party Chairman and his public intervention in the matters of the state party. Even the Gabriel's work in the Grand Coalition in widely disputed inside the party. However, more and more Social Democrats are disturbed disturbed by the unchanged bad situation [of the SPD] in the polls.]

Let's see, after last year's national parliamentary election, the SPD had enough seats together with the Greens and the Left Party to form the national government. But Sigi Pop and the other SPD leaders fell all over themselves to again become the junior partner to Angela Merkel's CDU in a Grand Coalition government committed to Merkel's Herbert Hoover/Heinrich Brüning economic policies.

Why, why would that affect the electoral support for a center-left party? Why would their labor constituency not embrace the idea that their own incomes should be slammed down, their job security undermined and social services rolled back in the name of a free-market fantasy about national "competitiveness"? Why, I just don't understand it, what could be going wrong for the SPD?

Speaking of Thuringia, it was one of two eastern German states that had Landtag (state legislature) elections last Sunday, September 14, along with Brandenburg.

But just as in last year's national Bundestag election, non-CDU left parties have the possibility to form the governments. In Thuringia, it would take the Left Party, the SPD and the Greens to form a government with a one-seat Landtag majority. If normal conventions were followed, the largest vote-getter among the three parties would head the government, that being the Left in this case. A Grand Coalition headed by the CDU with the SPD as a junior partner would also have a one-vote majority.

Brandenburg could have a government headed by the SPD with the Left Party as junior partner, or an SPD-headed government with the CDU as junior partner.

In German politics, both the Left Party and SPD are considered "red" parties, the CDU "black" and the Greens, well, "green." A Left/SPD/Green coalition would also be called a red-red-green coalition. A coalition of the SPD and the CDU is known as a Grand Coalition.

It will be especially interesting to see how the SPD conducts itself in Thuringia and Brandenburg. That is, how willing they are to form coalition governments with the Left Party. In Thuringia, the SPD is working on both the coalition possibilities. The Left Party gets the first shot at trying to form a government. (Erster Test für Rot-Rot-Grün in Thüringen Thüringer Allgemeine 19.09.2014)

The interference by Sigi Pop in Thuringia involved (Tilman Steffen, Gabriel bringt Landesverband gegen sich auf Die Zeit 15.09.2014)

Another eastern state, Saxony, had a Landtag election two weeks before those in Thuringia and Brandenburg. (Another little piece of Europe shifts right The Economist 09/01/2014) There, the only feasible government coalitions are a Grand Coalition or a black-green coalition. The CDU could also form a majority with the far-right anti-Europe Alternative for Germany (AfD), but they rejected that alternative. A Grand Coalition looks likely there. (Tillich will mit SPD über Koalition verhandeln Die Zeit 19.09.2014) There aren't enough seats for a red-red-green coalition there.

This Deutsche Welle English report, CDU rules out euroskeptic AfD for Saxony partner 01.09.2014, notes of the situation in Saxony, "Although the socialist Left party actually came in second place with 18.9 percent, both the CDU and SPD view the party as too radical to be a viable coalition partner."

Tom Strohschneider, a commentator at the website of the Left Party newspaper Neues Deutschland quotes historian Jürgen Kocka saying, »Wenn die Sozialdemokratie nach einem utopischen Überschuss sucht, dann findet sie ihn in dem großen Ziel, den Kapitalismus zu zivilisieren« ("If Social Democracy is looking for Utopian overshoot, then they will find it in the great goal of civilizing capitalism"). (Ohne Überschuss dated 22.09.2014; accessed 21.09.2014)

Strohschneider frames the left/center-left political situation in Germany this way:

Die Frage nach dem künftigen Kurs der Sozialdemokraten ist aber auch eine nach der Zukunft der Idee, für die sie einst stand: als jener Teil der gesellschaftlichen Linken, die trotz Bemühungen zur Zivilisierung des Kapitalismus durch Reformen nicht den Anspruch hat fallen gelassen, über ihn hinauszugehen.

Schafft die SPD eine Rückbesinnung? Skepsis fällt hier leicht. Häme sollte man sich aber sparen - nicht nur, weil andere linke Parteien vom Stillstand der Sozialdemokraten kaum profitieren. Es ist eine Frage praktizierbarer Alternativen überhaupt. Ohne die SPD wird es auf absehbare Zeit keine Antworten geben. Mit dieser aber auch nicht.

[But the question of the future course of Social Democracy is also one of the future of the idea, for which it once stood: as part of the social Left, which despite efforts to civilize capitalism through reforms, had not given up the demand to go beyond it.

Will the SPD achieve this reversion? Skepticism comes easily here. But one should refrain from mockery - not only because other left parties {the Left Party and the Greens} hardly benefit from the standstill of the Social Democrats. It's above all a question of practical alternatives. Without the SPD, there will be no answer in the foreseeable future. But also not with this one {i.e., not with the SPD in its current state}.

As Wolfgang Münchau noted before last year's elections, the Left Party and the Greens were offering pragmatic Keynesian solutions to the eurozone crisis, although the Greens have voted in the Bundestag to support Merkel's Hoover/Brüning policies.

Without a left coalition, more specifically without a left coalition that includes the Left Party and the SPD, there is no practical alternative to changing Merkel's destructive economic course from within German politics. So in the next few years, the impetus for such a change is far more likely to come from resistance from the "peripheral" countries within the eurozone.

Tags: angela merkel, austerity economics, eu, euro, european union, left party, spd

Social Democrats opposing eurozone austerity? Can this be true?

I'm in a bit of a hopeful mood at the moment. So I'm willing to interpret it as some kind of progress that we're seeing signs that the Social Democratic parties in Europe are realizing they need to make more of a show of opposing German Chancellor Angela Merkel's austerity policies that are wrecking the "periphery" countries of the eurozone.

I'm referring to a report in Spiegel Online (Gregor Peter Schmitz, Debatte um Euro-Spardiktat: Vier gegen Merkel 18.06.2014) that describes how the leaders of four Social Democratic parties are making such a show: French President François Hollande, German SPD leader Sigmar "Sigi Pop" Gabriel, Social Democratic candidate for EU President in May's elections Marting Schulz, and Italian Prime Minister Matteo Renzi.

Renzi's success in the May European elections in keeping his Democratic Party in first place and the Five Star Movement a distinct second is probably a big part of the impetus for this. He took a position that austerity measures should be lightened in the short run in exchange for a commitment to even more drastic neoliberal measures to reduce wages and living standards in the near future. And that's what the four Social Democratic leaders are demanding, according to Schmitz' report.

I believe that the Social Democrats see a need to raise their profile among their base voters if they don't want to lose their status as the largest left party in various countries. And it's good that they recognize that they have to at least pretend to not be such enthusiastic fans of austerity as they have been during the current depression.

But as a change of policy, I just don't buy it yet. For one thing, the messengers are questionable. Hollande campaigned in 2012 on a promise that he would oppose Merkel and insist on a renegotiation of the EU Fiscal Suicide Pact before he would recommend the French Parliament to approve it. But as soon as he got elected, it was embarrassing how fast he scrambled to cave in to Merkel and start promoting austerity, not to mention looking eagerly for wars in which to get involved.

So I'm skeptical that Hollande is really ready to stand up to his pal Merkel now. As Bush the Magnificent, Liberator of Peoples and Scourge of the Heathen famously said, "Fool me once, shame on ... shame on you. Fool me, can't get fooled again."

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Renzi replaced the previous Prime Minister of his own party sounding like he was more eager than his predecssor to push "reforms," the neoliberal euphemism for reducing salaries and wages, deregulation, and cutting public services.

SPD Chairman Sigi Pop is current Vice Chancellor and Economics Minister in Merkel's Grand Coalition (GroKo) government. In a thoroughly lackluster campaign last year, the SPD also mildly criticized Merkel's austerity measures, especially as they touched German voters, but didn't give much attention to articulating any kind of alternative to Merkel's eurozone policies. And after their second-place finish, they couldn't wait to become junior partner (again!) in a Merkel-headed GroKo government.

Martin Schultz as leader of the Social Democrats in the European Parliament has generally been a faithful Angie-bot on European issues. And he's part of the German SPD, as well.

And these four are going to leading the charge against Angie-nomics?

Miracles happen. Depressions and losing elections have been known to focus politicians' minds.

But the real test is whether they will seriously fight Merkel on this, or whether it's just political Kabuki. When the SPD seriously threatens to pull out of Merkel's GroKo and form a left government in Germany with the Greens and the Left Party, then I'll take Sigi Pop and Angie-bot Schultz more seriously.

Schmitz also features this recent quote from Sigi Pop:

Wir Deutschen stehen heute besser da als viele andere Staaten, weil wir uns mit Gerhard Schröders Agenda 2010 ein hartes Reformprogramm auferlegt haben. Aber auch wir haben damals Zeit gebraucht, um die Staatsschulden zu senken.

[We Germans are in better shape today than many other states because we imposed a difficult reform program with Gerhard Schröders Agenda 2010. But we also needed time then to reduced the public debt.]

Agenda 2010 was basically the Social Democrats' bigger capitulation to the neoliberal agenda, and its effects limited German income and decreased job security. If Sigi Pop is praising Agenda 2010 while he's suggesting that, well, maybe we should possibly think about easing up on the austerity in the eurozone for a brief time as long as the neoliberal "reforms" are enforced even more intensely soon after - he's not serious about fighting austerity.

Tags: angela merkel, austerity economics, eu, euro, european union, france, françois hollande, spd

A surprisingly good analysis of the SPD's worst problem - and from an SPD journal!

The SPD magazine Berliner Republik. Das Debattenmagazin 2/2014 has a surprisingly good critique of the SPD's austerity policies during the current economic and euro crisis by Hans Kundnani, Die SPD und Europa.

Um zu verstehen, wie tief die SPD in die Europapolitik der Merkel-Regierung verwickelt ist, muss man also zunächst auf die Ära Schröder zurückblicken. Als dieser im Jahr 1998 an die Macht kam, versprach er, die Arbeitslosigkeit zu reduzieren, die gerade auf mehr als vier Millionen gestiegen war. Die Ursache dieses Anstiegs: Deutschlands verarbeitende Industrie war immer stärker dem globalen Wettbewerb ausgesetzt und litt vor allem unter der Konkurrenz aus den Schwellenländern. In seiner ersten Amtsperiode schaffte es Gerhard Schröder nicht, die deutsche Wirtschaft zu reformieren. Aber die Reformen der Agenda 2010 in seiner zweiten Amtsperiode führten – zusammen mit anderen Faktoren – zu einer Verwandlung der deutschen Wirtschaft.

Parallel dazu, aber eher als Folge der erstaunlichen Lohnzurückhaltung, welche die Tarifpartner im ersten Jahrzehnt des neuen Jahrhunderts vereinbarten, fielen die Lohnstückkosten in Deutschland im Vergleich zu anderen europäischen Ländern dramatisch. Zur gleichen Zeit produzierte die Einführung der gemeinsamen Währung einen Kreditboom in anderen Ländern des Euroraums, von der deutsche Firmen massiv profitierten. Auch war die Schwäche des Euro im Vergleich zur D-Mark für deutsche Exporteure ein Vorteil – plötzlich waren sie außerhalb Europas viel wettbewerbsfähiger. Nach 2005 begann die Arbeitslosigkeit zu fallen und Deutschlands Leistungsbilanz entwickelte sich von einem Defizit in Höhe von 1,7 Prozent des Bruttoinlandsproduktes (BIP) im Jahr 2000 zu einem Überschuss von 7,4 Prozent im Jahr 2007.

To understand his argument about the development of the SPD's current position, it's helpful to remembers some major dates:

• 1998-2005: Red-Green Coalition government, headed by Chancellor Gerhard Schröder and Vice Chancellor/Foreign Minister Joschka Fischer
• 2005-2009: First Grand Coalition (GroKo) of the CDU and Social Democrats headed by Angela Merkel (CDU)
• 2008: recession begins in Europe setting off a period of economic depression for which there is currently no end in sight
• 2009-2013: Kleine Koalition of the CDU and Free Democrats (FDP) headed by Angela Merkel (CDU)
• 2009: The Greek debt crisis comes to light when the new social-democratic PASOK (ΠΑΣΟΚ) government of Giorgos Papandreou (Γιώργος Παπανδρέου) revealed that the previous government of the conservative New Democracy party had concealed the level of the country's debt
• 2009-present: The combination of the economic crisis, the Greek debt crisis, speculative attacks on the bonds of other eurozone countries, bailouts for banks and the austerity policies insisted upon by the Troika (IMF, EU Commission, ECB) conforming with the dogmatic demands of Merkel's "ordoliberalism" produced a situation of high debt in several "periphery" countries coupled with depression-level economic conditions with no immediate prospect of emerging from them that has now reached the point of lowflation/deflation, which creates even greater hurdles to a recovery.
• 2012: Approval of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, which is referred to in short as the Fiscal Compact or the Stability Compact. Or by me as the Fiscal Suicide Compact, because it writes into the national constitutions of the eurozone countries arbitrary and highly restrictive deficit and debt limits, effectively outlawing the use of normal macroeconomic ("Keynesian") fiscal policy to combat recessions and depressions.
• 2013-?: Second GroKo of the CDU and Social Democrats headed by Angela Merkel with both parties firmly committed to continuing the austerity policies against the periphery eurozone countries.

Kundnani argues:

Um zu verstehen, wie tief die SPD in die Europapolitik der Merkel-Regierung verwickelt ist, muss man also zunächst auf die Ära Schröder zurückblicken. Als dieser im Jahr 1998 an die Macht kam, versprach er, die Arbeitslosigkeit zu reduzieren, die gerade auf mehr als vier Millionen gestiegen war. Die Ursache dieses Anstiegs: Deutschlands verarbeitende Industrie war immer stärker dem globalen Wettbewerb ausgesetzt und litt vor allem unter der Konkurrenz aus den Schwellenländern. In seiner ersten Amtsperiode schaffte es Gerhard Schröder nicht, die deutsche Wirtschaft zu reformieren. Aber die Reformen der Agenda 2010 in seiner zweiten Amtsperiode führten – zusammen mit anderen Faktoren – zu einer Verwandlung der deutschen Wirtschaft.

[In order to understand how deeply the SPD is mixed up in the European policy of the Merkel government, one must first look back to the Schröder era. When he came to power in the year 1998, he promised to reduce unemployment, which had just climbed to more than four million. The origin of this increase: Germany's manufacturing industry was more and more shut out of world competition and suffered above all from the copetition of the developing countries. In his first term in office, Gerhard Schröder did not manage to reform Germany's economy. But the reforms of Agenda 2010 in his second term led - together with other factors - to a transformation of the German economy.]

Agenda 2010 was a neoliberal program very much in the spirit of what we in America call "bipartisanship," resulting in far less job security and many more low-paying jobs.

Kundnani continues, explaining that the combination of the adoption of the euro currency, the Agenda 2010 reforms and a general willingness on the part of German unions to accept wage increases that lagged significantly behind productivity increases:

Parallel dazu, aber eher als Folge der erstaunlichen Lohnzurückhaltung, welche die Tarifpartner im ersten Jahrzehnt des neuen Jahrhunderts vereinbarten, fielen die Lohnstückkosten in Deutschland im Vergleich zu anderen europäischen Ländern dramatisch. Zur gleichen Zeit produzierte die Einführung der gemeinsamen Währung einen Kreditboom in anderen Ländern des Euroraums, von der deutsche Firmen massiv profitierten. Auch war die Schwäche des Euro im Vergleich zur D-Mark für deutsche Exporteure ein Vorteil – plötzlich waren sie außerhalb Europas viel wettbewerbsfähiger. Nach 2005 begann die Arbeitslosigkeit zu fallen und Deutschlands Leistungsbilanz entwickelte sich von einem Defizit in Höhe von 1,7 Prozent des Bruttoinlandsproduktes (BIP) im Jahr 2000 zu einem Überschuss von 7,4 Prozent im Jahr 2007.

[Parallel to that, but rather more the result of the astonishing wage restraint on which the tariff partners {labor and management} agreed in the first decade of the new century, the unit labor costs in Germany fell dramatically in comparison to other European countries. At the same time, the introduction of the common currency {the euro} produced a credit boom in other countries from which German firms profited massively. Also, the weakness of the euro in comparison to the Deutschmark was an advantage for German exporters - suddenly they were much more competitive outside Europe. After 2005, unemployment began to fall and Germany's trade deficit at the level of 1.7% of the gross domestic product (GDP) in the year 2000 developed into a surplus of 7.4% in the year 2007.]

This is a good description of how Germany benefits from the euro currency, a matter that neither the CDU or the SPD nor the mainstream German press are much inclined to explain on any kind of regular basis.

As Kundnani points out, the SPD was anxious to take some credit for their own party for the improvements that were occurring. And since they had embraced the same basic neoliberal approach as the CDU takes, they couldn't really criticize its downsides without inviting reflection on their own role in creating them. Not that the SPD's leaders were especially interested in criticizing the CDU. After all, they agreed to become the junior partner in her first government, and now in her third one.

And then there's just plain old nationalism: "In Bezug auf die Eurokrise teilt die Partei nämlich weitgehend Merkels Grundannahmen, darunter besonders die Vorstellung, die deutsche Wirtschaft sei für andere Länder ein Vorbild." ("In realtion to the euro crisis, as a matter of fact the Party [SPD] shares Merkel's basic assumptions to a large degree, especially including the concept that the German economy is a model for other countries.")

But in the currency union, that's an exceptionally short-sighted a self-destructive way to approach it.

For the SPD, Kundnani argues that developing a constructive alternative to Merkel's austerity policies would involve some real self-criticism of their approach in the 2000s. It would require a rejection of the neoliberal, let-the-market-run-wild assumptions that they hold now.

In the 2013 German election, the SPD offered up some suggestive but vague programs to try to strike a profile distinct from Merkel's and the CDU's, talking about special measures to combat youth unemployment and vaguely acknowledging that Germany's current trade surplus made not be all good. But as soon as the election was over, they couldn't wait to become the junior partner in another Merkel-led, pro-austerity GroKo. The SPD couldn't be bothered to make even a head-fake toward holding out in the coalition negotiations to try for an SPD-led majority left government with the Greens and the Left Party, which numerically was a possibility. If we count the SPD as left, which most people still do, the German election last year produced a left/left-center majority in the Bundestag.

Kundnani characterizes the CDU and the SPD over the last year as following the same destructive policies toward the eurozone, but with the CDU coming off as wanting to compel the other countries to be like Germany, while the SPD wants to help them become like the superior Germans. Either way, the destructive nationalism and the Herbert Hoover/Heinrich Brüning economic policies are the same in all essential respects.

He also notes that the SPD has criticized Merkel for not doing more along the same lines as their neoliberal reforms. Good grief!

Yanis Varoufakis renders a similarly harsh judgment on the SPD and European Social Democracy more generally when he writes (Europe’s Crisis and the Rise of the Ultra-Right is the Left's Fault 06/09/2014):

Rather than constantly clashing with industrialists and merchants in order to extract from them a share of their profits, social democratic parties of government believed that a Faustian bargain with financiers could: (a) yield more funds for social programs, (b) end their conflict-ridden relationship with industry, and (c) allow them to hobnob with the rich and powerful, as partners, while still lavishly funding public hospitals, schools, unemployment benefits, the arts etc. It seemed like a dream come true for suited men who did not want to abandon the working class to its own devises but who had had enough of ... class struggle. [OMG! Did he say class struggle?]

Faustian bargains come, alas, with clauses written in blood. Europe’s social democrats, lured by the cacophony of money-making in the financial sector, numbed by the myth of some 'Great Moderation', and excited by the mystical notion of 'riskless risk', agreed to let finance free to do as it pleased in exchange for funds with which to prop up welfare states that were relics of a bygone post-war social contract. That was the social democrats' game. At the time, it seemed to them a better idea, more fathomable, than having to be constantly in conflict with industrialists, seeking to tax them to redistribute. In contrast, they found a cosy relationship with bankers more amenable and easy going. As long as the 'leftist' politicians let them do as they pleased, the financiers were happy to let them have some crumbs off their gargantuan dinner table.

The Spanish Socialist activist Beatriz Talegón posted on her Facebook page today complaining about the old guard in the Spanish PSOE, specifically about their indifference or tacit support of the monarchy, "Por favor, Señores, dejen paso, con todo respeto. Treinta años pisando alfombras les han hecho olvidar de dónde vienen ustedes..." ("Please, gentlemen, with all respect: just go away. Thirty years walking on the carpet have made you forget where you came from ...") Having read her book No nos avergoncéis (2013), I feel safe in saying she would apply the same sentiment to their neoliberal economic policies, which seem to be as deeply accepted by the PSOE leadership as by the SPD's.

Ironically, as Kundnani also describes well, what is critically needed for the eurozone as a whole is for Germany to follow a stimulative policy that would increase the wages of Germans and thereby generate a higher internal aggregate demand, both within Germany and in the eurozone as a whole. German workers could start receiving a higher share of the gains in productivity over the last decade, of which on the average they have received little so far.

But such a policy would have redistributive effects that the German One Percent would find undesirable. So without political parties articulating a serious left criticism and explaining the real alternatives and fighting the One Percent politically over them, the eurozone course to disaster will continue.

Did Varoufakis say "class struggle"? The problem right now in the eurozone is that the One Percent have been very successfully carrying on a class struggle that is destructive to everyone else as has put the "European project" on the road to ruin without effective enough democratic resistance.

Tags: angela merkel, austerity economics, eu, euro, european union, spd

Martin Schulz tries to sound left-center, isn't very convincing

Martin Schulz, the German social democrats who is the European Social Democrats' candidacy for the EU Presidency is making a weak attempt to sound like a center-left candidate, talking about the need to create jobs, "but good jobs." He's also talking vaguely about the need for more "state," i.e., more active government. And he's making nice noises about identifying with the suffering of the victims of the depression and being loyal to their base voters. (Schulz: "¿Y si hemos sido nosotros quienes hemos abandonado a nuestros votantes?" El Diario 30.03.2014)

I don't buy it at all.

Martin Schulz has been a loyal Angie-bot in supporting German Chancellor Angela Merkel's massively destructive Herbert Hoover/Heinrich Brüning austerity policies. And his home party, the SPD, is currently the junior partner in Merkel's Grand Coalition government and also loyally committed to the austerity policies.

As Klaus Busch writes in Die Krise der EU und das Europaprogramm der Großen Koalition in Deutschland EU Infobrief 1/2014:

Die großen Erwartungen, die insbesondere in Südeuropa in eine Regierungsbeteiligung der SPD in Deutschland gesetzt wurden, sind bitter enttäuscht worden. Der Europakurs der alten und der neuen Regierung Merkel unterscheidet sich in den wesentlichen Punkten nicht. Weder in der Frage der gemeinsamen Haftung (Eurobonds, Schuldentilgungsfonds) noch der direkten Beteiligung des ESM an der Bankenrestrukturierung noch einer expansiveren deutschen Wirtschaftspolitik zur Entlastung der Leistungsbilanzen der Defizitländer gibt es einen Politikwechsel. Auch die strukturellen Mängel der Eurozone werden durch die neue Regierung nicht in den Blick genommen. Daher könnten bereits kurzfristig die Probleme des europäischen Bankensektors angesichts der Konstruktionsmängel der Bankenunion zu einem erneuten Aufflammen der Eurokrise führen.

[The great expectations which were placed upon a participation in government by the SPD in Germany, especially in southern Europe, have been bitterly disappointed. The European course of the old and the new government of Merkel are not differentiated in the essential point. Neither in the question of common debt (eurobonds, debt reserve funds) nor the direct participation of the ESM in the bank restructuring nor a more expansive German economic policy to relieve the current accounts of the deficit country is there a change of policy. Even the structural shortcomings of the eurozone are not taken into account by the new government. So the problems of the European bank sector in view of the faults in the construction of the bank union could quickly lead to a new outburst of the euro crisis.] (my translation)

Tags: angela merkel, austerity economics, eu, euro, european union, grand coalition, martin schulz, spd

The (German) politics of the (hoped-for but not really) "new Cold War" over Ukraine

... Obama was blindsided by events in Ukraine, but why the administration didn't see this coming remains a mystery. No matter what Putin says, Yanukovych's ouster was not the result of some deep Western plot, and in many ways Yanukovych deserved to go. But the United States as far from a neutral party in this process, as top U.S. officials -- including Assistant Secretary of State Victoria Nuland and U.S. Ambassador Geoffrey Pyatt -- either took actions or made statements that showed clear support for the demonstrators and a clear U.S. preference for interim Prime Minister Arseniy Yatsenyuk. Unfortunately, they intervened without considering how it might look to Russia, especially after 20 years of NATO expansion, the deployment of missile defenses near the Soviet border, and George W. Bush's 2008 proposal to bring Ukraine and Georgia into NATO. This was geostrategic incompetence of the highest order, but that is what happens when presidents and secretaries of state are too busy with a zillion other things and stop paying attention to what their ideologically driven subordinates are up to. [my emphasis]

- Stephen Walt, The Solve-Everything, Do-Nothing White House Foreign Policy 03/18/2014

Über-Realist Walt isn't making excuses for Russia's misdeeds and violations of international law in the Ukraine/Crimea crisis. Nor is he drooling like many American conservatives do over Putin's shirtless manly manliness. But he is pointing out that the United States does not control the Ukraine and that Russia has a perceived stake there and that a less provocative US approach to the political turmoil in Ukraine might well have produced a more pleasant result from the Western perspective than what happened.

This is the way grownups and serious politicians should be talking about this thing.

Little Tommy Friedman, on the other hand, in Walt's words, "thinks Obama can't decide if he's Pollyanna, John Wayne, or Henry Kissinger (as if these are the only options)." (The referenced piece of Friedman's continuing self-embarrassment is The Three Faces of President Obama New York Times 03/15/2014)

But politics is politics, as Joe Stalin said shortly before he signed the German-Soviet Nonaggression Pact that, among other things, divided Poland between Germany and the Soviet Union.

So I was intrigued to see this polemic by Fabian Reinbold against the German Left Party's position on the crisis, Linkspartei in der Krim-Krise: Die Putin-Versteher Spiegel Online 17.03.2014, which blast the Left Party for taking what sounds to me a position a lot like Walt's.

A bit of background. The Left Party evolved over time since the fall of the German Democratic Republic (Communist East Germany). It started off as the "postcommunist" successor party to the old East German Communist Party. It merged with a left group from western Germany to form the current Left Party.

The state of the euro crisis has put the Left Party in what is potentially a qualitatively new situation in German politics. The center-left Social Democratic Party (SPD) is a junior partner in Angela Merkel's Grand Coalition (GroKo). And with minor and mostly cosmetic differences, the SPD is totally on board with Angie's brutal austerity policies that are laying waste to the economies of the southern eurozone countries.

In last year's German Parliamentary election, it was only the Left Party among the real contenders for Bundestag seats that both offered a Keynesian critique of Merkel's economic policies and also had opposed them in the Budestag. The Green Party also offered such a critique but had voted for Merkel's austerity policies in the Bundestag. If the Greens and the Left Party form a working alliance, they have the chance to jointly benefit politically over the next few years. With the center-left (the social-democratic parties) in countries like Italy and Spain having badly discredited themselves by embracing ruinous neoliberal economic "reforms," it's entirely feasible that a Green-Left alliance could occupy much of the political space the SPD currently does, similarly to how the Five Start Movement surged in Italy in last year's elections.

Reinbold's polemic tries to portray the Left Party as pro-Putin. There's a couple of key points on this. One of which has to do with his insult phrase "Putin-Versteher," literally "understanders of Putin." For anyone of a mental age older than Tommy Friedman, i.e., older than elementary-school age, knows that understanding something or someone is not the same as sympathizing with or supporting them. So when someone tries to make it a stigma to understand a potential adversary nation, that's a very good sign they're up to know good. In the real world, understanding adversary countries may be even more important than understanding friendly ones. Especially when one of those potential adversaries is a nuclear power, which Russia still is.

Second, the fact that the Left Party has some historical roots in a party that possessed a reverence for the Soviet Union is a whole different thing than admiring Vladimir Putin's political model in the Russia of 2014. I mean, if you reason like a FOX News pundit or David Gregory, you might think, "Well, uh, the Soviet Union was headed by Russia, or maybe they were the same thing, and they were Communists and that's left and now Putin heads Russia so he must be a Communist, too, like Obama or something."

But in the post-elementary-school population, that would be a pretty sad assumption for people to make. Because if there are people who consider themselves "left" who also admire Putin's kleptocratic-oligarichal half-baked version of democracy or consider it a goal to strive for, I'm not aware of it. And I think that it's fair to say that in the German Left Party, neither those who judge Putin's Crimea maneuver more harshly nor those who are more focused on the EU's and the United States' mistakes in the crisis consider Putin a "left" model or an ally to be defended.

It's like the old "red-baiting," except it's more like Russia-baiting.

I doubt the Left Party will be inclined to bow and scrape and try to show their foreign policy belligerency by denounced and double-denouncing Russia and Putin. I doubt that approach works much better in German politics than in the US. (See Digby, Objectively Pro-Putin Hullabaloo 03/18/2014)

The larger question is how the Greens will play this. If they let stuff like this drive a wedge between themselves and the Left Party that prevents making a combined political effort as the opposition in the Bundestag, that would likely prove to be a self-defeating course.

There are some dubious signs so far on the Greens' response, such as the Greens' Bundestag caucus head Katrin Göring-Eckardt portraying Left Party leader Sahra Wagenknecht as a Russian today. (Göring-Eckardt Twitter post 14.04.2014; Michael König, Grüner Streit um Anti-Wagenknecht-Kampagne Süddeutsche Zeitung 17.03.2014)

And some hopeful ones, like this petition signed by Robert Zion and other Greens declaring, "Wir Grünen stehen auf der Seite des Friedens und der Freiheit. Unsere Seite ist nicht die des Nationalismus, weder die Seite Putins, noch die der Gruppe der Rechten in der Ukraine." ("We Greens stand on the side of peace and freedom. Our side is not that of nationalism, nor that of Putin, nor that of the rightists in Ukraine.")

Albrecht von Lucke writes in Die gespaltene Opposition Gegenblende 11.03.2014:

Dort, wo Linke und Grüne in der Opposition tatsächlich zur Zusammenarbeit verdammt sind, etwa zwecks Einberufung eines Untersuchungsausschusses, werden sie notgedrungen kooperieren. Ansonsten aber herrscht ein gewaltiges Distanzierungsbedürfnis – auch und vor allem von Seiten der Grünen.

[There where the Left Party and the Greens in the opposition {to the GroKo} are actually condemned to work together, for instance in the need to call for a investigative committee, they will be compelled to cooperate. But otherwise a powerful need for distance reigns - particularly and especially from the side of the Greens.]

There have been differences of emphasis in the public positions of various Left Party leaders on the Ukraine/Crimea crisis, which seem to turn less on differences in actual policy outlook than on the degree to which they are willing to target the SPD and the Greens in their criticism. Wagenknecht has been more inclined to do so, Party Chairs Katja Kipping und Bernd Riexinger less so. (Markus Decker, Kipping und Riexinger kontra Wagenknecht Mitteldeutsche Zeitung 13.03.2014)

It's worth noting that one of the more notable figures expressing criticism of the EU's policies toward Russia in the Ukraine/Crimea crisis is former SPD Chancellor Gerhard Schröder, who surprising more-or-less explicitly admitted to having committed war crimes himself to defend or at least explain Russia's actions. (Gerhard Schröder, Russia and the Crimea 03/09/2014) And Schröder even has Russian financial connections that make his comments more dubious than anything Fabian Reinbold quotes from Left Party figures.

The SPD had the theoretical opportunity after last year's election to attempt to form a center-left coalition government with the Greens and the Left Party, because together they had a majority of seats in the Bundestag. The SPD national leadership wasn't in the least interested. But to reassure the Party base that wasn't entirely happy about their entering a Grand Coalition headed by Merkel, the SPD leaders promised that next time, four years from now, they would consider a coalition with the Left Party. (You didn't have to read hard between the lines to get the suggestion that it meant in four years, or when hell freezes over, whichever comes later).

SPD Vice Chancellor and loyal Angie-bot Sigmar "Sigi Pop" Gabriel; Reinbold reports that Steinmeier is grumping publicly that the Left Party is parroting "dummer Propagandalügen des russischen Staatsfernsehens" ("dumb propaganda of the Russian state television"). Sigi Pop can't distance himself from the Left Party fast enough. No surprise at all there.

Tags: crimea, german green party, german left party, grand coalition, spd, ukraine

SPD during the First World War (2 of 2)

Susanne Miller provides a detailed account of the politics of the German Social Democratic Party (SPD) in her book Burgfrieden und Klassenkampf. Die deutsche Sozialdemokratie im Ersten Weltkrieg (1974). A large part of the story involves the split of the Party into the Majority SPD (MSPD) and the Independent SPD (USPD).

In a previous post on this topic, I listed several factors that Miller identified in a separate article for the SPD's prowar course. From "Die Sozialdemokratie in der Spannung zwischen Oppoisitionstradition und Regierungsverantwortung in den Anfängen der Weimarer Republik" in Hans Mommsen, Hrsg., Sozialdemokratie zwischen Klassenbewegung und Volkspartei (1974):

• Responding to the general opinion among their voting base
• The SPD's view of Russia, expertly exploited by Chancellor Theobald von Bethmann-Hollweg
• Their (internationalist?) hostility to British and French imperialism
• The claims of France on Alsace-Lorraine
• "The hope of improving their own status through inner political reforms," i.e., their desire to be accepted as a legitimate political party which they hoped supporting the war would achieve (my translation)
• Fear of repression which would roll back their political achievements and subject their Party resources and property to confiscation, censorship or banning

Miller notes in that article that "to the German workers’ movement, the Wilhelmine Reich appeared to them as the ground of their existence and their effectiveness, which they wanted to maintain."  (my translation) In practice and for better or worse, the policy of "August 4", the date of the SPD's decisive 1914 vote for the Kaiser's war credits, represented a decision by the majority (MSPD) faction to commit themselves to being a political party within the Imperial order.

In the book, she elaborates those themes in much more detail.

One of the factors that emerges strongly in Miller's narrative is the level of political trust the SPD leaders placed in the Kaiser and his governments. Through some combination of complacency, patriotism, national shortsightedness and careless judgment, the SPD leaders generally thought even in the immediate weeks after the assassination of the Archduke Franz Ferdinand that the German government was genuinely seeking to preserve the peace.

Miller notes that during the July Crisis, hardline antiwar Social Democrats like Rosa Luxemburg and Heinrich Ströbel were still convinced even at the end of that eventful month of the Kaiser's genuine desire to avoid war. Ströbel writes of the general Social Democratic attitude in Germany toward foreign policy in the prewar years (Schuld und Sühne, 1919):

... aber man traute in gutgläubiger Verblendung unsren Machthabern doch nicht die tollhäuslerische Absicht zu, die Fünkchen eines unbeträchtlichen Konflikts mit vollem Bedacht zum ungeheuerlichen Weltenbrand anblasen zu wollen.

[... but one trusted with a good-willed blindness that our rulers were certainly would not want to have the insane intention to completely deliberately blow the spark of an insignificant conflict into a monstrous world blaze.]

Ströbel notes that Kurt Eisner, one of the most important antiwar leaders and an adherent of the USPD when it broke off, initially believed at the start of the war that Russia had forced the German Kaiser into a war he didn't want, the propaganda line that Bethmann Hollweg successfully pushed onto the SPD Reichstag faction to convince them to vote for war credit on the fateful August 4. (Eisner for a couple of months in 1918-19 became the head of the revolutionary workers council, aka "soviet", in Bavaria; he was assassinated by Count Anton von Arco-Valley on February 21, 1919.)

Rallying around the national war cause, however painfully dubious it may appear, is something with which Americans have become very familiar over the last 13 years or so. I don't want to read more recent experience back into 1914-18. But anyone familiar with the rhetoric of jingoism, which we still hear constantly from FOX News and like-minded radio ranters, will understand the phenomenon Ströbel describes:

Die Bekehrung der roten Internationalisten zur Kriegspolitik Falkenhayns und Hindenburgs, Bethmanns und Hertlings, brachte das Lob der ganzen deutschen Presse1 freundschaftliche Handedrücke im Parlament und in der Öffentlichkeit, brachte die dankbare Anerkennung von Zivil- und Militarbehörden, brachte Ehrungen, Reklamationen und gesicherte Einkünfte.

The conversion of the red [social-democratic] internationalists to the war policy of [Erich von] Falkenhayn and [Paul von] Hindenburg, Bethmann [Hollweg] and [Georg Freiherr von] Hertling brought the praise of the entire German press, friendly handshakes in Parliament and in public, brought the thankful recognition of civil and military officials, brought honors, satisfactions and secure incomes.

This relates to several of the bullet-points above. As Arthur Schlesinger, Jr. has written, all wars are popular in the first 30 days. A politician who defied the national patriotic surge would be taking a calculated risk.

Still, the SPD had been nominally committed to an anti-imperialist program that required them, along with their sister parties in the Socialist International (aka, Second International), to oppose any "imperialist" war. As Miller explains, though, neither the SPD nor other major European socialist parties had made practical and concrete plans on how to go about it when and if that moment came. The SPD conducted antiwar demonstrations almost up until the day they switched The social-democratic parties of Britain and France also went along with their country’s war policies.

Another important background factor was that the general expectation on both sides of the initial conflict was that war would be relatively short. The American Civil War could have served as at least a possible precedent in their thinking as a cautionary example of how a present-day war could become an extended conflict with massive casualties. But Germany, Austria-Hungary, France, Britain, Russia and the Ottoman Empire were looking to more recent European conflicts such as the German wars of unification against Denmark, Austria-Hungary and France. The Balkan Wars of 1912-13 had displayed exceptional cruelty and bloodlust. But they were ended in a relatively short time.

As horrible as the Great War turned out to be, there was a general expectation on all sides that the war would be a short conflict. That it would become such an extended horror ending with the end of the dynastic empires of Austria-Hungary, Germany, Russian and Ottoman Empire was not part of the calculations of any major political grouping, including the Social Democrats.

Miller devotes a large portion of her book to examining the pragmatic-sounding claims of the SPD that they achieved respectability and were able to mitigate the worst effects of the war on the homefront and pave the way toward the postwar assumption of power. With minor exceptions, Miller finds these claims wanting in substance. From influencing the war aims to exclude annexationist goals to relief for hungry civilians suffering from serious food shortages to extracting political concessions and protecting workers’ rights to opposing punitive demands against Russia in the Brest-Litovsk peace negotiations, the SPD/MSPD didn’t wind up with much to show for its efforts.

Miller describes well how the SPD was set up to take the blame for Germany’s defeat and the bandits' peace which followed at Versailles. The SPD ended the war at the head of the government and can rightly claim to have established parliamentary democracy in Germany. That is a big thing. And during the war, the SPD (MSPD) built a political alliance with the "bourgeois" Center and the left-liberal Progress Party, which was the first appearance of what became the core Weimar coalition. Also a big deal.

Miller writes of the wartime alliance with the Center and the Progress Party that it was:

... den entscheidenden Schritt sowohl für ihren Eintritt in das Kabinett des Prinzen Max von Baden als auch für das spätere Zustandekommen der „Weimarer Koalition“ ... Soviel auch für dieses Argument und die damit verbundene positive Bewertung des Ausbrucks der Sozialdemokraten aus ihrer Oppositionsrolle spricht, halt solch eine Sicht einer genaueren Prüfung doch nicht stand. Denn die Bereitschaft der bürgerlichen Parteien, Sozialdemokraten als gleichberechtigte Partner anzuerkennen, und der Wunsch der Reichsleitung, sie an der Regierung zu beteiligen, waren in erster Linie durch die Kriegslage bedingt. Erst mit dem Schwinden der Siegesaussichten wurden die Sozialdemokraten zu verantwortlicher Mitarbeit herangezogen. Als dann die Niederlage zum Faktum geworden und das Land in revolutionäre Gärung geraten war, übergab der letzte kaiserliche Reichskanzler sein Amt dem Sozialdemokraten Friedrich Ebert. Zu einem ähnlichen Verlauf wäre es aber wahrscheinlich gekommen, wenn die Sozialdemokratie weiterhin verschiedene Richtungen in ihren Reihen geduldet und ihnen die Freiheit gewährt hätte, sich öffentlich zu äußern - wenn also die Spaltung vermieden worden wäre. Und auch der Umkehrschluß liegt nahe: hätte das Deutschte Reich den Krieg nicht verloren, wären die alten Mächte am Ruder geblieben. Ihre Haltung den Sozialdemokraten gegenüber hätte sich nicht grundlegend geändert, mochte sich diese in der Kriegszeit vom nationalen Standpunkt aus auch noch so bewährt haben.

[... the decisive step as much for their entrance into the [late wartime Imperial] Cabinet of Prince Max von Baden as also for the later achievement of the “Weimar coalition” … Despite so much that speaks for this argument and the positive evaluation connected with it of the breaking out of the Social Democrats from their opposition role, such a view nevertheless does not hold up to a closer examination. Because the willingness of the bourgeois [non-socialist] parties to recognize the Social Democrats as an equal partner, and the desire of the Imperial leadership to have them participated in government, were in the first line determined by the war situation. Only with the fading of the prospect of victory were the Social Democrats brought into responsible collaboration. [Here, “responsible” should probably be in quotation marks.]

Then when defeat had become a fact and the country was moving into revolutionary ferment, the last Imperial Chancellor gave his office to the Social Democrat Friedrich Ebert.

And as Miller says of counterfactual scenarios on this matter, "Freilich gehören solche Überelegungen in die Kategorie unbeweisbarer Spekulation" ("Clearly such reflections belong in the category of unprovable speculation").

But by falling into Ludendorff's trap and willingly putting themselves in the position of presiding over the final defeat and the signing of the ruinous Versailles peace treaty, the SPD got only limited benefit for showing themselves to be good patriotic Germans. The rightwing nationalists and the Nazis kept right on portraying them as enemies of the state and the nation anyway. Konrad Adenauer and his Christian Democratic Union even kept it up after the Second World War.

Miller's book provides an impressive mixture of descriptions of very specific characters with their ambitions and limitations, the various specific incidents and parliamentary maneuvers that make up the story of the SPD during the war, and careful descriptions of the policy perspectives of various factions.

She doesn't lose sight of the tragic aspects of the story. But she also doesn’t make the SPD the villain of the piece, for all the problems she points out with their actions. And while the USPD emerges from her account as being more far-sighted and responsible than their MSPD rivals and associates, she is also careful to point out that the wartime elections that took place in which the USPD and the MSPD stood up competing candidates, the MSPD came out the clear winner. She attributes the USPD's failure to itself achieve more tangible results after the party split in 1917 especially to weaknesses in their general leadership.

The story leaves little doubt that the split over war policy left the SPD that existed in 1914 in far more difficult position in 1918-19 than they would have faced without the split occasioned by the MSPD's far-reaching support of the Kaiser. And not only in supporting the war policies but in accepting the regime itself in a way that left them without adequate strategies to deal with the political situation that arose at the conclusion of the war.

Tags: erster weltkrieg, first world war, heinrich ströbel, kurt eisner, european union, spd