Germany’s Hidden Crisis

Oliver Nachtwey

Liberals praise modern Germany as Europe’s great success story. But behind the veneer of prosperity, resentment is building among ordinary Germans.

German Chancellor Angela Merkel and, Finance Minister and Vice-Chancellor Olaf Scholz arrive for the weekly German government cabinet meeting on February 27, 2019 in Berlin, Germany. Michele Tantussi / Getty

Interview by
Julia Damphouse

Since German reunification in 1990, Europe’s political center has steadily gravitated from Brussels to Berlin. In clashes over the eurozone’s future, Angela Merkel’s government has consistently posed as the defender of order and stability, as against the chaos unleashed by the debtor nations.

Yet the situation is not so pretty in Chancellor Merkel’s own backyard. With both its main centrist parties slumping in the polls and the far right on the rise, analysts’ attention has turned to the social ills underlying the country’s veneer of success.

Author of the recent book Germany’s Hidden Crisis, Oliver Nachtwey spoke to Jacobin’s Julia Damphouse about the decline in upward mobility, the falling expectations among young Germans, and the reasons why the post-World War II political order has begun to crack.

Julia Damphouse

The German economy is often portrayed in the international media as exceptionally stable, a success story when compared to “volatile” or indebted European economies. What are these analysts missing, and how do you see things differently?

Oliver Nachtwey

The darker the night, the brighter the stars. Germany did pretty well when compared to other advanced capitalist countries, and after 2005 it was also doing better than it had in the first fifteen years following reunification. But in more general terms Germany is on the same path of increased stagnation and growing inequality as most advanced capitalist countries right now.

The average annual growth rate in the 1950s and ‘60s had been nearly 5 percent, while the contemporary GDP rise has, comparatively speaking, been very modest. Despite claims of a boom in the German economy, since 2000 we have seen an average growth rate of barely over 2 percent.

More significantly, economic and institutional changes since the early 2000s have substantially undermined the old German model of tamed capitalism, which included a relatively high level of social security, modest levels of inequality, and a high level of social and political participation.

Until the early 1990s West Germans could generally expect what we refer to as “normal labor relations.” For workers, this meant a job with a permanent contract, protection from dismissal, and integration into the state social-security system, including health and unemployment insurance. Many also had the opportunity of participating in the codetermination process, which gave them some rudimentary elements of economic democracy. Beyond the obvious material benefits, this also afforded a strong sense of security. Workers felt they could expect from their employment situation and were able to plan for their future with a high degree of certainty. Nevertheless, this period should not be painted as a golden age. While the German — essentially male — working class was rising until the 1970s, “guest workers” were brought into Germany, but they were then quickly removed again during the first economic crisis. And at that time the normal employment was generally reserved to German, male skilled workers. Normally, women were expected to stay at home and look after their children and household. That said, this was a period of general upward mobility for the working class.

Now, inequality is on the rise and people are at increased risk of downward mobility. And a political crisis has led to a high level of instability in the party system, allowing the far right to find a foothold.

Julia Damphouse

What has caused this shift towards downward mobility?

Oliver Nachtwey

The deterioration of labor relations is the main cause of the transition to a society characterized by downward mobility.

In the 1960s, nearly 90 percent of all jobs were covered by so called “normal labor relations.” But since then, the situation has dramatically shifted. Since the 1970s, changes in the economy and state regulation have led to an increase an increase in precarious employment relations. In 1991, 79 percent of all workers were employed under normal labor relations, and by 2014 that figure had fallen to 68 percent. In other words, today one-third of the workforce is under so-called “atypical employment relations.” Not all these workers are precarious workers in a narrow sense, since some of the self-employed are well-paid and are happy not to have normal labor relations. But a clear majority of them are, indeed, precarious. These workers are employed in part-time, temporary or agency work and in general have less benefits and security. This leaves them unable to plan for their futures, in the way that people with other types of employment can.

These changes have also had a more immediate material impact: in particular, we have seen a growth of the low-wage sector, where people earn less than 60 percent of the median wage. This is very close to the official definition of poverty — yet this sector now makes more than 20 percent of the workforce. In particular, workers employed in low-wage jobs in the service sector make up a new “service proletariat.”

Julia Damphouse

In the book you argue that the shift has been a result of “increased workplace precarity”: but what exactly does this mean?

Oliver Nachtwey

In the past, the capitalist “reserve army of labor” consisted of the unemployed. Their demand for work exerted an external structural pressure on the wages and working conditions of those Germans who were employed.

What has changed is that the rise in temporary or agency employment has internalized this function, within the firm itself. Employees are increasingly split into two groups, with a power imbalance between their respective positions in the firm and in the general labor market. On the one hand are the permanent staff, who experience their relative security as a privilege; and, on the other hand, the precariat, made up of these temp and agency workers. The agency workers may be inside the firm, but they also have one foot outside of it, in unemployment. So, their mere presence reminds the permanent staff that their future might also become less secure.

In the past workers could expect that their lives would improve, and that the lives of their children would be even better. But since the turn of the century, poverty and inequality have been on the rise. This rise in poverty levels is characterized less by a marked increase in downward mobility than by a “decline in upward mobility.” To put that another way; downward mobility takes the form of working people’s inability to improve their condition. Those who are at the bottom find it increasingly difficult to get back on their feet again.

Julia Damphouse

One important observation you make is that the shift towards increased workplace precarity does not affect all demographics equally. How does this shift particularly affect young people?

Oliver Nachtwey

If we want to understand how the situation has changed for young people today, it’s useful to look at it in a bit of historical perspective. In the immediate postwar period, the children of the working class had significant opportunities for upward mobility, and many became skilled technical workers, white-collar workers or civil servants.

Their children, who grew up in the 1970s and ‘80s, had a different mindset and aimed for different types of jobs. They grew up in relatively secure material circumstances but adopted more “post-materialist” values. In contrast to their parents who strove for material comfort and stability after growing up in the period of World War II, this generation expected personal fulfillment and social recognition from their jobs. Many became (or aimed to become) freelancers with prestigious jobs (like architects or lawyers), scientists, journalists, or cultural workers.

Today, conversely, young people are experiencing increased precarity from the very start of their working lives, and this has changed their attitudes to work. They have become more serious, and while they share some of the same values as their parents’ generation they are looking more for stability in the future. And that is especially the case among those Germans who are attempting to rise from the working class and lower middle class. They are looking for a way out of precarity and competition.

After all, it is a fragmented picture. Those whose parents did achieve some real prosperity in the 1970s and ‘80s could lead a different lifestyle. You see that among people in their thirties living a cool bohemian hipster life in some trendy quarter of Berlin, working long hours, changing jobs all the time but also glorifying this kind of existence. Often, however, they are sheltered from the real stress and danger that comes with precarity, because their parents bought them their apartments.

Most of the young people with precarious jobs from working-class families won’t be similarly able to expect such comforts. Instead, they are managing their expectations downwards. They look for jobs with more security, and more and more young people are growing skeptical of claims that they should be willing to pay any price to “do what they love,” and indeed critical of a hyper work-focused “startup culture.” They’re looking for a decent life, with more free time for their friends. And yet rising rents often mean that students and young workers are forced into financial problems.

And when young people enter the labor market, they are now finding that secure jobs are few and far between. One way that jobs have become more uncertain is through the rise in temporary employment. In 2009, almost every second new job was under a limited-duration contract. These precarious conditions particularly affect the younger and less skilled. The average length of employment for young people has declined by 22 percent since the mid-1970s, and the low-skilled in particular frequently expect they will be unable to keep their jobs. Even if they do find a secure job later, their experience of insecurity lingers on.

Julia Damphouse

Anti-immigrant political messaging, in Germany as elsewhere, relies on exploiting or generating a fear of competition with migrants for jobs. Is this a reality, or is it just a fabrication of the Right?

Oliver Nachtwey

Yes, there is some competition. But this idea exists much more at the level of the political imaginary and its exploitation. Even in the lower-skilled sectors of the economy workers have relatively little to fear from competition from migrants, since Germany generally has a labor shortage. But to understand how this kind of messaging works, I like to imagine a metaphor of an “elevator society.”

Ulrich Beck coined the concept of the “elevator effect” in the 1980s to describe a society enjoying economic growth. According to this metaphor, all strata, from wage workers through to the wealthy, are all together in the same elevator as it goes up the floors. The inequalities between the social classes have not been abolished, but they play a less significant role when everyone is becoming more prosperous.

This kind of society has come to an end, and now we have an escalator society. But not all of the escalators are going up — many are going down. Some people are experiencing actual downward mobility. Either because they have some problem in their employment biography, like a period of unemployment, or too many years spent in a job with no growth, and they feel a sense of vulnerability.

But more often than actual downward mobility, people have the sense of facing increased competition in general. To put that in the terms of my metaphor, their experience is a bit like a person on a downward escalator and trying to run up it. Most people can run fast enough not to go down, but they know they have to keep running just to stand still. They have not experienced real downward mobility, but they are living in constant fear of it. The welfare cuts, liberalization policies, and austerity programs in the last twenty years intensified this subjectivity, governed by universal competition and social instability.

Since 2015, as they see things, their situation has remained the same, and they have to keep running to keep it, but at the same time, more than a million migrants have been arriving each year. In their imagination, aided by the political messaging of the Right, at the same time as they are running to try to reach the second floor, Angela Merkel is letting the migrants onto the second floor through the back door. In reality, the migrants start out from the basement. But people have been led to think that migrants have been given special treatment. This misconception is the basis for the success of anti-migrant messaging.

Julia Damphouse

I found your account of the relationship between the rise of Pegida, and later Alternative für Deutschland (AfD), particularly illuminating. What is the relationship between these economic changes, bringing an increased risk of downward mobility, especially for the lower middle class, and the rise of far-right “citizens movements” like Pegida and political parties like the AfD?

Oliver Nachtwey

The economic and political factors behind this must be analyzed in tandem. The current crisis is a social and a political crisis, where the traditional parties have become unmoored, leaving gaps in political representation. At the same time, economic changes have also shifted, and for many people this has changed their relationship with their employers and with the welfare state.

There is no direct causal link between feelings of economic insecurity or downward mobility and becoming a right-winger. Economic insecurity and anxiety lead to a situation of dissatisfaction and can lead people to ask fundamental political and economic questions about the society they live in. Who does society belong to? Who should it belong to? Why are things different now than they were before?

If there are forces in the political field who can develop an answer to these questions, then anything is possible. And we have seen contrasting answers to these questions in German politics over the past decade. Die Linke was founded in 2005 and for some time it articulated answers to key social questions and spoke to people who had the crucial combination of economic insecurity and political alienation.

Die Linke attached workers and the unemployed together with people who were disaffected with the political system. Many had experienced or feared downward mobility and felt degraded by the “Agenda 2010” reforms to the labor market, which allowed for the expansion of the low-wage sector and established more means-testing for benefit recipients. These reforms were in the spirit of those carried out in the United States under Bill Clinton.

So when we take economic and political factors in combination, we find that Germany was captivated by its own form of “there is no alternative” neoliberalism. And this left people feeling disenfranchised and unrepresented. Which fed into feelings of resentment. Many disaffected and angry people voted for Die Linke, and the party was able to present itself as an anti-establishment force. For a while it was able to tap into this energy and direct people’s resentment towards economic elites.

But more recently, just as the Social Democratic Party’s rightward shift once opened up space for Die Linke, the Christian-Democratic Union’s apparent leftward shift has allowed the AfD to gain a foothold. At the same time, Die Linke has lost some of its credibility as an anti-establishment force, through both its internal incoherence and its participation in regional government together with more centrist forces.

Julia Damphouse

What is the role of the center parties?

Oliver Nachtwey

Over the past two decades there has been a convergence of Germany’s main parties, with each moving toward the center. While the SPD shifted to the right on economic questions and became more neoliberal, the CDU has become more liberal: supporting marriage equality, abolishing mandatory conscription, boosting women’s labor market participation, and beginning the phasing out of nuclear energy.

Both aimed to capture the median voter. But by focusing on the middle they assumed that the people on the more radical wings of their parties will still get on board — for what other options did they really have? And as long as there is no alternative, this theory holds.

But this has created a real crisis of representation.

In 1969, the CDU/CSU and SPD collectively represented 87 percent of the ballots cast. In 1972 and 1976, this number reached close to 90 percent. By contrast, the current governing (not-so-) grand coalition combining all these parties only represents 53 percent of votes cast.

Julia Damphouse

It doesn’t seem like this trend is likely to end. In December Angela Merkel stepped down as leader of the CDU, and it then elected another member of the moderate wing of the party to replace her. Annegret Kramp-Karrenbauer (AKK) became leader after winning a contest against Friedrich Merz, a billionaire lawyer whose campaign promised to bring the party back to its “traditional” values and embrace of unfettered capitalism. What might this decision mean for the future direction of the party?

Oliver Nachtwey

The leadership vote was very close, with only a thirty-five-vote difference between the top two candidates at the congress. There is a significant division within the party, though the moderate wing has held on. In part this owed to the fact that while German political rhetoric has shifted to the right, the rise of the CDU’s more socially progressive wing does represent a real shift in the party’s values. In large parts of the country there a hegemonic green-liberal-conservative consensus. AKK represents the majority of the ordinary voters and functionaries in the party.

But this is not a particularly stable situation. The conservative wing of the party might try to revolt again, particularly if AKK faces electoral setbacks. But in the meantime, the results of the CDU’s Bavarian sister party, the CSU, in the recent state election have shown that running a hard-right election campaign is also no guarantee of success. In that contest the CSU lost ground to both the AfD and the Greens. This more than anything is the reason why AKK won. CDU party functionaries fear that by moving to the Right, they will lose their more socially conscious middle-class base to the Greens, who are placed to become a new conservative party.

Julia Damphouse

The recent result of the Green Party in the Bavarian state election (18.3 percent) took a lot of people by surprise. How to you interpret the party’s newfound success?

Oliver Nachtwey

People who are at risk of downward mobility, the lower middle class, are not the Green Party’s electorate. They can and will continue to be a party of affluent liberal humanitarianism. And of course, they are right to be in favor of open borders, key to this stance. Voters found that the SPD was not so liberal, and in the grand coalition with the CDU it has made a lot of dirty deals. Like Merkel, the Social Democrats caved to the media pressure demanding the closing of the borders This meant that those with a liberal-humanist perspective went from the SPD and the CDU to the Greens.

This is why the Greens have been the real winners here. And certainly their electorate are not being won over to the AfD. They are the party of teachers, civil servants, and the urban cultural elite: a party of the liberally minded upper middle class. The Greens thus had no problem at all positioning themselves in relation to the refugee crisis. Their voters are both socially liberal and objectively secure; they are not susceptible to the fear-mongering promoted by the far right. Most live in middle-class and affluent areas, often far from refugee accommodation and a world away from the lives of the refugees themselves, and are employed in areas of the labor market where they do not fear competition from migrants. This, even admitting that the changes causing “economic anxiety” have sources that have very little to do with objective levels of competition, and certainly not from recent immigrants.

Naturally, the Greens are also gaining attention because of the increasing social awareness of climate change. But they are far from a radical alternative. As Loren Balhorn said recently “the Greens are now the party of anyone in Germany who wants to keep things more or less the way they have been for the past 30 years — but with more electric cars.”

The Left should be skeptical of the Greens’ progressive record in general. The party participates in state-level governments in Hessen and Baden Wurttemberg, and in both situations, they have gone along with federally mandated deportations, as other nominally left-wing governments have. But somehow this gets overlooked.

Julia Damphouse

Looking to Germany’s other main center party, you have written in Jacobin about the SPDs lackluster attempt at “renewal,” and indeed not much has come of it. A common refrain from the far left is that “social democratic parties are failing because they’ve abandoned their bases.” To what extent is this an accurate assessment of the situation of the SPD? Is the solution to the crisis as simple as a reestablishment of an earlier form of social-democratic politics?

Oliver Nachtwey

We can see examples abroad of attempts to renew and revitalize social democracy. They most strikingly include the examples of Jeremy Corbyn and Bernie Sanders, but even Jean-Luc Mélenchon and Podemos are a kind of renewed social democracy. But the SPD? They’re not even trying. I don’t think they have any idea what they’re doing, they don’t even have any faith in themselves that a renewal is possible. Right now, they are on the same path of the French Socialist Party, and PASOK in Greece. They will lose their status as a major party and achieve results of 10–15 percent. In Bavaria they were polling at only 6 percent.

There is thus a good chance that Germany’s oldest party will become a minor party, which will cling to relevance by continuing to take part in governing coalitions. It has a diminishing electoral base made up just of professional-class people with socially liberal ideas, with little power to change society for the better. This is a far cry from the broad-based, working-class party that it used to be.

There is no one in the upper levels of the SPD with the capacity and the will to reestablish the party. Part of the problem is structural. Corbyn was in a position to stay in Labour, and then change it, because of the party system, which gave him no alternative party with which to align himself. Even during the Blair era, there were still socialists in the Labour Party because they had no other option. But this has not been the case in Germany. We have no Corbyn because the socialists have turned their back on the SPD and joined Die Linke.

It might not be possible for it to “become a working-class party again.” What, indeed, is the state of the working class in contemporary Germany? There is, without a doubt, a working class in an objective sense, but the old working class of male steelworkers and coal miners — to pick two stereotypical examples — is a thing of the past. The working class has modernized. It is no longer possible to rely on the traditional ties of the working class to social democracy. The new precarious working class of the low-wage sector lacks the traditional cultural and institutional ties to social democracy through trade unions, and building these ties from scratch is difficult. Developing these ties, creating a working-class identity, and building class consciousness is extremely difficult.

The electorate the SPD has now is made up of more or less well-educated and progressive white-collar workers and civil servants, and some of the traditional industrial working class who feel affinity towards it because of their trade union activity. Party strategists are worried that if the SPD were to move boldly to the left or adopt anticapitalist rhetoric, it would lose its middle-class vote. They have chosen their electorate, but it is now nearly indistinct from that of the Green Party.

This is an unstable situation, but there are still possibilities. There is a possibility that there will be further radicalization on the Right, that the AfD will grow in strength, but it is also possible that they could lose momentum. On the other hand, there is also of course an objective possibility of a reenergization of the Left. The “Unteilbar” (Indivisible) demonstration, a liberal-left coalition against the right in favor of a more open and inclusive society which brought more than half a million people into the streets of Berlin, represents one avenue of possibility. It points a way to building political action which, though it stands outside of the parliamentary arena, can promote a broad progressive vision.