The Political Economy of the SPD Reconsidered: Evidence from the Great Recession

Abstract

The transformation of Germany's political economy in the last few decades has strongly been influenced by the SPD. Still, the economic programme of the SPD remains contested since several authors characterise the party's economic platform differently. This paper reconsiders the political economy of the SPD in light of evidence from the Great Recession. It combines quantitative content analysis with process tracing in order to situate the party in research on the moral economy of contemporary Germany. The quantitative content analysis shows that the SPD attempted to shift its position on the welfare state and economic liberalism in response to the crisis, but it remained wedded to orthodox fiscal policies. Based on elite interviews with social democratic politicians and policy-makers, the paper explains this response with the absence of an economic paradigm. Weakened by internal conflict, the SPD made programmatic decisions with reference to electoral calculations and it remained trapped by its pre-crisis support for economic supply-side policies. Therefore, the SPD was unable to oppose the conservative economic discourse in Germany and failed to develop a consistent economic programme in response to the Great Recession.

ABOUT THE AUTHORS

Björn Bremer is a researcher in the Department of Social and Political Sciences at the European University Institute in Florence, where he is a member of the ERC project ‘Political Conflict in Europe in the Shadow of the Great Recession’. He holds a BA in Philosophy, Politics, and Economics (PPE) from the University of Oxford and an MA in International Relations and International Economics from the School of Advanced International Studies (SAIS) at Johns Hopkins University. His main research interests focus on the politics of macroeconomic policies and the welfare state.

ACKNOWLEDGEMENTS

I thank Hanspeter Kriesi, Dan Kelemen, Tobias Schulze-Cleven, Sidney Rothstein, Josef Hien, and two anonymous reviewers for very helpful comments and suggestions on this paper. A previous version of this paper was also presented at a workshop for this special issue in San Francisco and I am very grateful for insightful comments from all the other participants.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the author.

SUPPLEMENTAL DATA AND RESEARCH MATERIALS

Supplemental data for this article can be accessed on the Taylor & Francis website, doi:10.1080/09644008.2018.1555817.

Notes

1. The Great Recession is defined here as the economic crisis that begun in September 2008, when the US investment bank Lehman Brothers collapsed. It conceptualised both the 2008 financial crisis and the Euro crisis as one economic crisis.

2. Helmut Schmidt still famously said that he would prefer five percent of inflation over five percent of unemployment.

3. Schröder eventually forced Eichel to withdraw from this position (see Figure 4) and Germany was thus the first country (together with France) to break the Maastricht criteria. In 2004 the federal government incurred the largest deficit in the post-war history.

4. A detailed explanation of how the dataset was created is included in Appendix A.

5. A list of all issues included in these categories is included in Appendix B.

6. The left-right position for both parties is calculated by the mean of all statements from the three economic categories, weighted by the salience of the individual categories.

7. For the SPD this move was in the spirit of the Third Way, which Blair and Schröder had outlined in the late 1990s. As discussed above, this Third Way re-oriented social democracy and it culminated in the Agenda 2010 that aimed to reform the German welfare state and labour market.

8. During the crisis, the SPD also became challenged by electoral competition from the far left after Die Linke was founded as a merger between the east-German Party of Democratic Socialism (PDS) and the Electoral Alternative for Labour and Social Justice (WASG) in 2007.

9. All translations of quotations from both interviews and secondary sources are my own.

10. For example, in October 2008, Joachim Poß already argued that ‘those who demand spending cuts during the crisis, must not be in their right mind’ (Deutscher Bundestag 2008b, p. 19328).

11. In exceptional situations and in order to respond to economic downturns the federal government would still be allowed to run larger government deficits.

12. For example, the debt brake was prepared by the finance ministry, which continuously had been under the control of the SPD since the 1998 election.

13. Schneider had already been instrumental in putting the question of government debt on the table prior to the economic crisis. He was the author of several papers with other SPD politicians and policy-makers demanding immediate action on Germany's debt.

14. The appeal was signed by 64 Professors as well as more than 150 other economists.

15. Steinbrück explicitly linked the debt brake to the stimulus programmes, arguing that the debt brake was necessary to ensure that the federal and state government would return to the path of fiscal consolidation (Deutscher Bundestag 2009).

16. For similar reasons, Steinmeier's economic programme for the elections, the so-called Deutschland Plan, also focussed less on the demand-side policies pursued in response to the crisis but more on supply-side policies to generate long-term growth. As one economic advisor put it, the SPD ‘never offensively claimed credit for the stimulus programmes…it did not correspond to the German mainstream economic thinking’ (personal interview, 15/03/2018).

17. For example, it criticised the government for failing to share the costs of the bailouts with the private sector and made its support conditional on a financial transaction tax (Wonka 2016).

18. Dauderstädt (personal interview, 14/11/2017) put this in the following way: ‘The party's position was very strongly driven by public opinion…It rather followed the popular Volksseele instead of offensively advocating for other positions’.

19. This suspicion is, for example, illustrated by the fact that Angela Merkel already referred to the Swabian housewife to whom ‘money saved is money earned’ in 2009 (Benoit 2009).

20. Sigmar Gabriel, who became leader of the SPD in 2009, charted this path. Several politicians and economic advisers described him as a strategic opportunist, who carefully listened to the public mood and opinion polls. Reportedly, he even made his decision to step down as a party leader in January 2017 with reference to opinion polls, which he had commissioned. This style of making decisions was representative for his tenure as party leader from 2009 to 2017.

21. A summary of the results from the survey is available here: http://www.forschungsgruppe.de/Umfragen/Politbarometer/Archiv/Politbarometer_2014/November_II_2014/ [accessed 20 October 2018].

22. For example, in a joint press release the budgetary spokesmen Schneider and Kahrs emphasised the importance of the balanced budget in 2015 and explicitly argued that ‘a balanced budget and higher investments are not a contradiction’. However, in the same press release, they stated that ‘with higher public investment, we are securing the maintenance and expansion of the infrastructure and, thus, the future viability of the country’ (SPD Fraktion 2015).

23. As shown above in Figure 2, the lack of difference between the SPD and the CDU/CSU also emerged because the CDU/CSU under Angela Merkel strongly moved towards the left. Partly, the CDU/CSU adoptd social democratic positions to demobilise SPD voters.

Additional information

Funding

The author acknowledges funding from the ERC project ‘Political Conflict in Europe in the Shadow of the Great Recession’ (POLCON) (Project ID: 338875) and the German Academic Exchange Service (DAAD).