If everything is so "wunderbar" in Germany, why are voters so unhappy?

Admittedly, there is an element of "tiredness of the elected" which is reflected in the results of the last German federal elections. In the state of Hesse, for example, the CDU has been running the regional government for 19 years, the last five in coalition with the Greens. It's hardly going to hang in power after the recent resultsCDU saw its share of the vote decrease by 11 percentage points, while in Bavaria, the CSU, which has governed Bavaria for almost three years in the last seven decades, lost its majority at the beginning of the month.

The October elections follow last year's national elections, in which Merkel's CDU / CSU coalition remained in power, but also had the biggest swing against it (-8%). His former partner in the "grand coalition", the SPD, finished second, with a just over 20% of the votes: "A historic minimum: almost 6% less than in the last elections" More recent polls Today, we are showing the SPD behind the Greens in national support and giving additional votes to Die Linke, from the far left.

Clearly, the so-called "grand coalition" between the two largest German political groups (the German political equivalent of a GOP / democratic party coalition) did nothing to preserve their political wealth. Both parties were discredited by the adoption of excessive budget cuts and commercialism, which prevented the German people from enjoying the fruits of their own work because it continues to be shipped abroad. As a teacher John Weeks Remarks:

"Germany provides the classic example of the export-led recovery in the era of austerity: a stagnant real wage for the working class as a whole, a labor market with two levels ("double") that institutionalizes poverty level wages and a persistent and massive surplus trade. The trade surpluses that seemed to be a rather curious German obsession in the 1950s and 1960s become, in the age of austerity, one of the major obstacles to global economic prosperity. "

Why? Merkel's continued advocacy of "sound public finances" (which effectively suppressed domestic demand), as well as her government's desire to maintain global export dominance, has prevented a similar option for others. Member States of Germany.

Here is the paradox: without these countries "living beyond their means", these "knickers" in southern Europe would not have the capacity to buy German imports, which would have the effect of maintaining trade surpluses. of the latter (thus supporting growth allowing Berlin to record balanced budgets). It's an economic death loop for them.

To bring Angela Merkel to recognize this point has proved almost impossible. When asked about the austerity imposed by Germany on countries on the periphery of the EU, she cheerfully rejected the concernsaffirming: "Austerity gives a bad air; I call it balancing the budget. "

But here is the thing. Fiscal equilibrium, or the compression of wages, is not what makes Germany's long-term economic success. Historically, "GermanyWirtschaftswunder"Has been supported as part of a conscious desire to move technology to high-end and well-paying jobs, as well as preserve a domestic manufacturing ecosystem (rather than relocate). The weakening of this approach has not only resulted in optimal GDP growth, but also greater inequality.

So why do it? Because this conveniently gives German leaders an enormous leverage in their negotiations with the now weakened unions: Remove your wage demands, they can discuss them, or we relocate to Portugal, Spain or Eastern Europe, where the workers will perform jobs with far less pleasure rates of wages.

I've already discussed the backlash that this mix of toxic politics has spawned in countries such as Italy. But it is now more and more evident to German voters that the strategy as a whole is a disadvantage, as it largely benefits German industrialists at the expense of the country's increasingly marginalized workers. As with salting wounds, historically generous German welfare programs are being reduced, even as the government is expanding access to the safety net. by allowing one million Syrian refugees "Who had already registered elsewhere in the European Union to enter and register in Germany, temporarily suspending EU law requiring asylum seekers to be removed in the first country they entered. "

Whatever the humanity of the impulses that governed Merkel's policy on refugees, it was red meat for the German right. In addition, the German left has been hampered by the generosity of this humanitarian policy on refugees in a context of reduced social assistance spending. After all, it's the government of Gerhard Schroeder led by the SPD that introduced the famous Hartz Reforms. These labor market initiatives reduce unemployment benefits and long-standing employment protections for the German economy, all with the stated aim of making German exports "more competitive".

the Hartz apologists argue that these reforms have permanently reduced German unemployment by almost 3%, making it a model worthy of emulation. This is certainly what Germany has said to the rest of the European Union.

But this is only part of the story and masks the real underlying damage created. The Dutch economist Servaas Storm has among othershighlighted whereas "reforms" have conveniently bypassed many of the key German industries, particularly in the manufacturing sector:

"The German manufacturing force depends on a regulated and co-ordinated core in which workers in these industries receive high wages, strong employment protection and good social security … It would have been absolutely impossible for German companies and workers to adopt the neoliberal policies and rules that Berlin wants to impose on southern Europe. The Hartz reforms have bypassed these "core industries" (for good reason) and effectively created a secondary secondary labor market in the service sector [emphasis added]."

Thunderstorm concludes that "Germany's manufacturing strength is based on high wages and" rigid "labor relations, not on low wages and" flexible "working conditions!" There is a set of rules for the manufacturing sector and another for the rest of the economy, originally Hartz reforms. And yet the Merkel government has refused to acknowledge this fact and advocates precisely the opposite for all other EU countries: namely the creation of a "secondary low salary, mini-employment, flexible labor market ", the difference being that it wants to impose these conditions on a multitude of industries in southern Europe, not only in services, but also in the manufacturing sector. The "cure" in Berlin has also conveniently ignored the massive growth of private sector debt over the period up to 2008, which, as noted by Storm and C.W.M. Naastepad argued, were "aided and encouraged by the liberalization of the European financial markets (in integration)," and that German banks exploited to the maximum (and were released when everything cleared).

What has been the impact of creating this low-wage service economy with a secondary mini-job? In an interesting parallel with what is happening on the American labor market, the Institute Arbeit und Qualifikation (Institute for Work, Skills and Training) According to the report, the German economy has experienced growing inequality as a result of the sharp rise in the number of low-paid workers as a percentage of Germany's total labor force (so-called "mini jobs") Other studies have confirmed this, exacerbated by virtual neglect of workers affected by the 2008 financial crisis. In addition, the pay gap between men and women in Germany also one of the widest in Europe: "Women earn 21.6% less than men in Germany, which is a margin wider than the EU average of 16.5%, according to 2015 government data," according to local Germanybecause it is often women who are forced to take up mini-jobs.

In essence, there has been a massive redistribution of income in favor of capital in relation to labor, exacerbated by growing inequality between men and women, all in the guise of "labor market reforms". The irony, like Servaas Storm concludesis that the economic performance of Germany has been aggravated and not improved: "The German economy grew by 1.2% per year between 1999 and 2015, and only 0.8% between 2008 and 2015 – which is hardly a sign of good economic health. Not surprisingly, diverting resources from those with the highest propensity to consume inevitably weakens overall economic performance. Add an excessive tax restriction, which suppresses domestic demand, and you get a recipe for voter discontent.

The German electorate increasingly identifies these policies with major parties, which helps to explain the rise of the hard-line AfD and the Greens; although with regard to the latter, despite all its good faith in the environment, the Green Party is now firmly centrist in its overall economic orientation ("Cycling neolibs", according to Jutta Ditfurth, co-founder of the partyUnfortunately, this would suggest that the growing populism in Germany will finally find its greatest manifestation on the right, if the experiences of other countries there is nothing to do. This is particularly true in Germany, where Merkel's liberal immigration policies have generated more support for the AfD.

Historically, it has not worked well for Berlin (or the rest of the world). But it's really not that different from what has emerged here in the United States, the essential difference being that the American political system is a duopoly. This means that these political tensions are manifesting themselves in the two main parties, rather than creating new, more extreme political parties. In other words, you get a Republican asset, rather than an AfD. But the trends are similar and respond to comparable politico-economic phenomena: the suppression of government policy as a broader public policy instrument, on the grounds that market mechanisms are better instruments for the realization of the public good . The governments of Merkel have actively perpetuated this ideology. But devoid of a strong governmental role, the opposite has turned out to be true for Germany and most other liberal Western democracies. We have learned that the markets themselves are not neutral, but disproportionately focused on the interests of capital versus labor. The outside observers, who have decried the rise of extreme nationalism / protectionism and have confirmed Angela Merkel, anti-Trump incarnation of a rules-based multilateral liberal orderIt might therefore be useful to consider the consequences of his impending political death. Maybe she was not all she was supposed to be. We must do better if we want to avoid more assets.

Marshall Auerback is a market analyst and commentator.

Marshall Auerback

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Marshall Auerback