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Saturday, September 25, 2021

Germany’s leftward lurch is a stunning economic upset

Professor Polleit said the relevant parallel is not what happened in Honecker’s hapless East Germany. “The risk is something more like the command and control system installed in the 1930s. They leave the ownership in private hands but there are ever more rules, ordinances, taxes, and subsidies, used to influence what can be produced and to regulate prices,” he said.

“Scholz doesn’t represent what the SPD actually stands for. My concern is that many Germans don’t yet understand what the policies really entail. We will move ever further away from what remains of the free-market system,” he said.

If Mr Scholz wins on September 26, he hopes to rein in his wilder colleagues by forming a “traffic light” alliance with the Greens and with the pro-business, low-tax Free Democrats (FDP) in charge of the finance ministry, relying on coalition imperatives to head off extreme temptations. 

But that depends on electoral arithmetic. Nor is it clear whether the Social Democrat base would accept such a business-as-usual formula when Die Linke is closer to their economic thinking. 

The Greens have their own ideological rift. Party candidate Annalena Baerbock and the Realo leadership have made their peace with industry – at least the new, if not the old – and accept that a regulated free market is the only viable way to steer the economy towards net zero.

The hardcore Fundis still want to ban everything, all the more as climate science pulls forward the feared date of runaway warming. They still see economic growth as vandalism. They still want to end the affluent way of life on principle. 

Hostility to enterprise is in their political DNA. It is this unreconstructed faction that dominates the party base and it is they who insisted on a supertax on high incomes, a Tobin tax, and a host of regulatory handcuffs, in the party’s draft manifesto.

Green Fundis and SPD Spartakists have much in common. Unconstrained in a coalition with Die Linke they might leverage each other’s radicalism in a feedback loop, dragging a reluctant Mr Scholz and Ms Baerbock along with them.

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