Why Nobody Invests in Japan
Tokyo’s Failure to Welcome Foreign Capital Is Hobbling Its Economy
Germany has voted, and Chancellor Angela Merkel once again stands ready to form the country’s next government. But her Christian Democratic Union has taken a hit. Together with its sister party, the Christian Social Union, the CDU will control only 246 seats in Germany’s parliament, compared to the 309 it held before the election.
The most dramatic outcome of the election was the unprecedented entry into parliament of the right-wing Alternative for Germany (AfD) party. Yet the hollowing out of Germany’s political center could also prove consequential. The center-left Social Democratic Party, led by Merkel’s main challenger, Martin Schulz, took 20.5 percent of the vote—its the worst result since 1945. On Sunday, Schulz called the election a “bitter day” and pledged to lead his party into opposition.
Merkel now has two unprecedented choices. She can attempt to forge a minority government or she can try to form an coalition with two smaller groups, the Greens and the liberal Free Democratic Party, the latter of which has returned to parliament after a four-year absence.
Tough choices lie ahead for Germany’s Social Democrats, too. After years of centrism in a grand coalition, they will have to face the fact that many workers have turned their back on what was once a workers’ party. Although going into the opposition might be part of the answer to this problem, this in itself is unlikely to guarantee the party’s survival.
A BITTER TREND
Sunday’s performance must weigh heavily on the SPD. Its attempts to successfully challenge Merkel have failed for a third time. (Its previous efforts in 2009 and 2013 similarly brought historic defeats.) The 2017 election has become part of this bitter trend—a far cry from the days when the Social Democratic Chancellors Helmut Schmidt, Willy Brandt, and Gerhard Schröder captured the German electorate with landslide victories.
Many voters watched the German election campaign with indifference. For the Social Democrats, however, the campaign was a rollercoaster ride of renewed hope and resigned frustration. After Schulz became the SPD’s candidate for chancellor in January, the party experienced a surge in popularity, driven by pro-European enthusiasm embraced in part to counter nationalist tendencies in the wake of the election of Donald Trump as U.S. president and the surge of right-wing populists across Europe. In February, the Social Democrats topped the polls, reveling in public interest they had not enjoyed in years.
That moment, dubbed the “Schulz effect” by German commentators, proved short-lived. Over the months that followed, Schulz struggled to keep the momentum, and the SPD suffered a series of defeats in regional elections. Merkel, meanwhile, presided comfortably over a booming economy, enjoying widespread international support and a sympathetic domestic media. As the chancellor dominated the news cycle—between May and July, she hosted the G-20 summit in Hamburg, welcomed former U.S. President Barack Obama in Berlin, and met with Pope Francis in the Vatican—Schulz countered with sober policy proposals that failed to match the public attention given to Merkel. He also struggled to shed the image of provincialism bestowed by his initiation into politics as mayor of a small town in western Germany. (That reputation is undeserved, given Schulz’s tenure as president of the European Parliament.) By July, fewer than 25 percent of Germans planned to vote for the SPD.
Schulz had his party behind him: SPD delegates unanimously backed his bid for formal party leadership in March and his electoral platform in June. (This also explains why Schulz will stay on as leader of the party, at least for now.) But this mandate did not help overcome the party’s failure to criticize Merkel on the defining issues of her tenure. Over the last few months, both the CDU and the SPD have shied away from debating controversial issues, from Brexit and migration to trade policy and the future of the eurozone. Both parties felt that addressing these issues would only benefit the AfD. This, however, proved costlier for Schulz than for the chancellor. Especially when it came to EU and migration policy, the SPD struggled to find a convincing line of attack that did not echo the radical rhetoric of Germany’s populist contenders. The party’s official platform relegated the topic of immigration to its 74th page and did not refer to austerity even once.
Condemned to the center, the Social Democrats drew support from their traditional backers but struggled to reach new ones. In mid-September, only 15 percent of Germans felt that the party was adequately addressing their main concerns, according to the Allensbach polling institute.
This gave Germany’s smaller parties room to maneuver. In eastern Germany, in particular, many voters abandoned the SPD in favor of fringe parties that capitalized on popular anger against Merkel’s positions on migration and austerity. The AfD managed to establish itself as a new home for blue-collar voters, many of whom wanted to send a message of discontent to the established political parties in Berlin. On Monday, the German newspaper Die Zeit reported that the SPD had lost 500,000 of its former supporters to the right-wing populists.
THE RISKS OF OPPOSITION
In the years ahead, the SPD will need to win back its former supporters and redouble its efforts to attract Germans on the right and left who feel politically, economically, and culturally disenfranchised. This will prove difficult, but it is not impossible. More than 60 percent of AfD voters chose the right wing for lack of any other alternative, according to Infratest Dimap. Only 30 percent of AfD voters fully embrace the party’s political positions. Many who back the AfD, in other words, are ideologically flexible. These voters can and should be recaptured.
In practice, the prospects of the Social Democrats depend largely on whether the they will be able to capitalize on their future role in the opposition and confront an unprecedented coalition of the CDU, the Greens, and the Free Democratic Party. To form such a coalition, the CDU will have to manage the deep ideological differences between the Greens and FDP and soothe the concerns of France, where many officials oppose the FDP’s calls for revising EU treaties and possibly suspending Greece from the eurozone.
Then there is the question of public approval. Although enthusiasm for another grand coalition has waned, a partnership between the CDU and SPD remains the most popular option among voters, with only 36 percent of Germans expressly rejecting the possibility, according to a September poll by YouGov. Among supporters of the Social Democrats, however, the mood is different. On Sunday, a round of cheers erupted in the party’s Berlin headquarters when Martin Schulz declared that his party’s cooperation would CDU stops.
This clear positioning was largely unexpected. Just a few weeks ago, Schulz had announced that any future coalition agreement would have to pass a membership referendum. For the SPD to join a coalition with the CDU, Schulz had formulated a number of “unnegotiable” positions—including the establishment of equal pay for men and women, the preservation of pensions, and closer European cooperation. What is more, several SPD officials, such as Foreign Minister and former party leader Sigmar Gabriel, initially favored forming another grand coalition, pointing to their party’s responsibility to govern and its recent social-democratic victories, such as the introduction of a minimum wage and the establishment of gender quotas in Germany’s corporate boardrooms.
In view of Sunday’s devastating result, however, the party leadership decided to opt out and embrace the opposition–announcing this step soon after the first results trickled in. “The confrontation between center-left and center-right has to stand at the center of political debate in Germany,” Schulz said, promising not to relinquish the role of opposition to the right-wing populists and to “fully concentrate on the renewal of the party.”
There are good reasons for going into the opposition. Successive centrist coalitions tend to strengthen parties on the political fringes, because they lead voters to believe that mainstream parties differ from one another only superficially. The AfD’s success in Germany demonstrates this tendency, as does the rise of the right-wing Freedom Party in Austria, which has been governed by grand coalitions for decades. And in the opposition, the Social Democrats could finally attempt to heal the ideological rift between them and the far-left Die Linke.
But skepticism is also in order. Across Europe, center-left parties have recently been ousted from power only to become even more deeply marginalized in opposition. Some, such as the French Socialists and the Dutch Social Democrats, have failed to regenerate public support since losing power. For others, such as Greece’s Panhellenic Socialist Movement (PASOK), the path into opposition has led into obscurity.
In this context, the notion that the SPD could regain strength merely by withdrawing from government seems too optimistic. Indeed, such a move might simply exchange one position on the sidelines for another, substituting the role of junior partner in government for the role of most moderate critic in the opposition. AfD leader Alexander Gauland on Sunday declared that his party would “hunt Merkel and … reclaim our country,” and Sahra Wagenknecht, the leader of Die Linke, promised to be the “social leader of the opposition.” Surrounded by such voices, the Social Democrats could soon find themselves relegated to the role of the loyal opposition, struggling for relevance and attention. This part could prove as toxic for their electoral prospects as membership in a grand coalition.