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How the Communists Rule Germany

October 11, 2005

John F. Kennedy said that "Communism has never come to power in a country that was not disrupted by war or corruption, or both."

Germany must be the great exception. Germany has experienced no war in the last years and the corruption rate is certainly lower than in many other countries. Yet the successors of the Communist SED from Eastern Germany won almost 9% in the last election about three weeks ago, in a country that is so proud of its alleged freedom-orientated and pro-market constitution. This 9% was decisive because it prevented the formation of an electoral coalition for reform of any sort.

Thus do we observe the remarkable reality: a decade and a half after the Berlin Wall fell, and all these years after the discrediting of the socialist idea all over Europe, it is the Communists and their supporters who are preventing reform and the socialists of various stripes whose policies are keeping the German economy off the growth path.

Before getting to the details of the most recent elections, consider the history. In the decades since World War II, Germany has turned into a welfare state of incredible dimensions: six weeks of paid vacation per year for every employee (guaranteed by law), myriad possibilities to shorten the working life (only a handful of German citizens over 60 still work), a working week of only 35 hours in many industries, and extensive social security and health insurance.

Simultaneously with the growing welfare state the unemployment rate grew steadily and economic growth diminished. Together with the demographic impact of an ageing society — low birth rates and expanded life spans — the German welfare state is increasingly unviable. Since the end of the 1990s more and more people admit that the glory days of the German "Soziale Marktwirtschaft" are over.

Surprisingly it was the Social Democratic Party, traditionally the biggest defender of the welfare state, that began the drive to change with some moves toward deregulating the labor market. What happened then was decisive: the left wing of the SPD complained about the politics of their own chancellor in the public media.

Some of them, including the former top candidate and chairman Oskar Lafontaine, left the party to cooperate with the East German SED, now called PDS. Germany's Left Party was born. It is nothing more than a combination of the surviving defenders of Marxism and the disappointed defenders of the welfare state who don't want to face the reality of a global market.

Keep in mind that Germany has no active public debate concerning the choice between freedom and statism, and libertarian ideas have no public presence. Voters are easily manipulated. The parties, especially the SPD, saw how voters changed sides and ran to the Communists. They promised the time of the welfare state is not over yet. They promised minimum wages, more unemployment benefits and an end to globalization. The also warned of "foreign workers." Probably the leaders of the Left Party saw the absurdity of these promises, too.

But why did this party garner more than 26% in Eastern Germany where the people should know what Communism means, namely eliminating private property and canceling freedoms? Luca Ferrini pointed to an answer in his article "Why do people vote for Communists?" People who haven't experienced freedom are not attracted to the necessity of self-responsibility that comes with the idea of a free society. It seems much easier to live in a society where everyone else is responsible for your actions.

A free society means the chance to be successful for those who are creative, innovative, and ready to take a risk: if you succeed, you get the benefit and you are free to choose what to do with it. But in a society like Eastern Germany with an unemployment rate of more than 20% in many counties, the dependence on the benefits of a welfare state is so immense that people decide not to vote for a cut of their own publicly financed income and benefits.

The perverse result is that these people exercise the decisive influence over a whole country and prevent the parties that have a will for reforms from doing anything at all. The roots of this evil situation are again in the welfare state: after 1990 the government brought the welfare state to Eastern Germany and prevented economic development under free-market conditions. The result was high unemployment and inefficient production.

Election Results

On September 18th Germany's conservatives won a narrow victory against the coalition of the Social Democrats and the Green Party but fell short of the majority needed to form a center-right government with their preferred partners, the free-market orientated and pro-business Free Democrats. The Communists were the reason.

The Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU) had been expected to reach more than 40% of the votes. Instead the CDU plus the CSU together won only 35.2%. That gives them 226 seats in the new 598-seat Bundestag, the lower house of the parliament. These are four more seats than Schroeder's Social Democratic Party, SPD, which won 34.3% of the votes (222 seats).

The lower-than-expected number of seats makes it impossible for the conservative top candidate Mrs. Angela Merkel to form a center-right coalition. The preferred partner, the Free Democrats reached 10% of the votes, which is fantastic for this party. But it gives them only 61 seats in the Bundestag, which is not enough for a center-right coalition.

Schroeder's current coalition partner, the Green Party, reached only 8% of the votes or 51 seats. So also the old coalition of the SPD and the Greens has no majority yet. The reason again:the Communist Left Party. It is a combination of some former left-wing Social Democrats, who left the party because of Schroeder's labor market reforms in the last years, and the former SED in Eastern Germany — the party of the dictators of the former German Democratic Republic. They won almost 9% of the votes and 54 seats.

This demonstrates not only the attractiveness of Communist policy, it also shows the existing disunion between former Western and Eastern Germany. In Eastern Germany more than 26% of the people voted for the Communists, almost nobody did in Western Germany.

Without Eastern Germany the coalition of the Conservatives and the Free Democrats would have a big majority in parliament. A result that is preferred by many economists because CDU/CSU and the Free Democrats have a big majority in the upper house of the parliament. A majority in both houses makes the way for some necessary reforms in Germany.

Possible Coalitions

Besides a coalition of the two big parties, SPD and CDU/CSU, there are some other possibilities and impossibilities. The Green Party, as well as the SPD, could rule out a coalition or cooperation with the Communists to form a leftwing government. The Free Democrats could rule of a coalition with the SPD and the Green Party. That makes it difficult and almost impossible to form a coalition between the Free Democrats, the Conservatives, and the Greens. The situation is dissatisfying for every side. Neither the center-left parties of the Social Democrats and the Greens, nor the Conservatives and the Free Democrats, can build a government. And again, the reason: the huge number of votes for the Communists.

Current Situation

More than two weeks after the election it seems increasingly likely that Germany will be governed by a grand coalition of the Conservatives (CDU/CSU) and the Social Democrats (SPD). After three meetings of the heads of these parties, the possibility of such a coalition is much higher than any other constellation.

Mrs. Merkel claims a mandate to put together a government under her leadership. Her position is strong since her party has stood behind her, though the winning margin to the Social Democrats is very small. Gerhard Schroeder, the incumbent chancellor, who had earlier ruled out a grand coalition with Mrs. Merkel, now sounds open to a deal. So he said: "It will be possible to form a stable constellation that will keep Germany on its reform path for four years."

But Schroeder also claims the position for the chancellor in a grand coalition although his party lost more than 4% and is no longer the strongest party in the parliament. The two did not resolve their dispute over who would be in charge. They put it off for another day.

The positions of the Conservatives and the Social Democrats are so fundamentally different that a grand coalition can only produce a non-satisfactory compromise. And yet the need for reform is desperate in many areas: public health insurance, social security, educational policy, energy policy, the question of Turkey's entrance to the European Union, and external affairs with Russia, China, and even the United States.

 SocialismAn ideology destroyed: $25

To sum up: Mrs. Merkel is very free-market orientated, even for some conservatives. She wants to privatize more public companies and wants to abolish a big part of bureaucracy and to weaken the power of the labor unions. In a grand coalition, she will be required to water down these proposals and tolerate the more socialist policy of the Social Democrats. Although the SPD undertook some worthy reforms during the last years, they suffer from the old problem of believing too much in the power of the state and its bureaucracy.

And so the tragedy is clear: the continuation of socialist-style policy is the means that the German political establishment will choose in order to avoid granting more power to the former Communists of East Germany. Communists controlled less of Germany 20 years ago than they do today. It does make one wonder who won the Cold War after all.

Thomas Rudolf is a PhD student in economics at the University of Bayreuth. EmailComment on the blog.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

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