Finance: Research, Policy and Anecdotes

The German elections from last Sunday have been described as a watershed moment for post-WW II Germany – the first time a rightwing populist party (AfD) enters parliament, and right away as third-largest party. For those Germans – like me – who still view and judge German politics under the historic legacy and burden of the Third Reich this is indeed shocking and worrisome. On the other hand, many observers have described the elections as the moment when Germany became a normal country, normal like most other European countries with a right-wing populist party.  The question is whether this is simply a new status quo or the entry door to something far worse, as in 1930 (when the NSDAP had its electoral breakthrough moment). The new constellation has also complicated the formation of a new government coalition enormously.  Having lived more than five years in The Hague, I had a deja-vu moment on Sunday evening – Germany finally turns Dutch - a multi-party parliament where you need more than two parties to form a government. And that is where there is a positive aspect.  For the first time on federal level, a government might include two smaller parties (Liberals and Greens) from two opposing camps and who normally would not govern together.  That finally moves German politics away from the rigid political camp approach where smaller parties are bound to a larger partner (Liberals to Christian Democrats and Green Party to Social Democrats).  While already overcome on the state-level, such a “transactional” rather than ideologically coherent federal government can be seen as progress.

The results of the German elections stand in the tradition of a populist wave on both sides of the Atlantic.  After Macron’s election as French president one might have thought mistakenly that the wave has been beaten back – and with 13%, the AfD is still a rather small group – but the struggle continues for the liberal democratic centre. The underlying conditions of a population segment that feels left behind – in economic, social and cultural terms – are still there and have to be addressed.  It is interesting that the social democrats have campaigned on the theme of social justice and redistribution, but have not managed to appeal to this population segment.  Rather than blaming immigration (which is rather low in areas with high AfD support), it might be a cultural disconnect between leftist intellectuals and population segments in rural, poorer areas that simply do not feel well represented by the urban global elite.  It is a problem beyond economics and thus a challenge for all social scientists. Having just read Hillbilly Elegy, I am increasingly convinced that this was not just another protest vote, but the result of a long-term cultural process of alienation.

It is in these days that politicians have to lead rather than follow the Zeitgeist.   Angela Merkel stands in the tradition of Konrad Adenauer and Helmut Kohl as transformative political leaders of post-WW II Germany – the former because of the Franco-German reconciliation with Charles de Gaulle, the latter because of the German unification. By opening the border to the refugees in 2015, Angela Merkel looked beyond any political calculus and followed beliefs and instincts. She has changed the face and socio-demographic structure of Germany forever. It is now her turn to use her fourth and final term in office to work against the populist Zeitgeist to strengthen Eurozone integration, save globalization from its excesses but also slow destruction by Donald Trump and his followers, and uphold a tolerant and liberal society in Europe. She has a willing partner on the other side of the Rhine – it is up to her to use this historic opportunity

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