Issue 229 of SOCIALIST REVIEW Published April 1999 Copyright © Socialist Review

Who gains from the fall of 'Red Oskar'?

The departure of Germany's finance minister heralds a shift to the right for the country's Red-Green coalition. It also highlights the crisis of European reformism, argues Lindsey German, and has implications in Britain as well
Workers from the IG Metall union on strike in January

'A first victory for the employers' was how one German union leader, Klaus Zwickel, described the sudden resignation of Germany's finance minister, Oskar Lafontaine. In reality the event is even more significant. It marks the sharpening of the battle between capital and labour throughout Europe, and is a sign that the capitalist class is willing to do anything to impose its will on a democratically elected government which takes even small steps towards limiting the power of big business. The events of last month in Germany have implications throughout Europe in the debate over the direction Social Democratic and Labour parties should take. Tony Blair could barely conceal his glee when Lafontaine went, believing that his departure strengthened the Blairite arguments in Europe. But the crisis in Germany's ruling Social Democratic Party (SPD) also has its reflection in Britain, if on a much smaller scale at present. The polarisation now taking place inside the SPD and the great social crisis which exists in Germany will have ramifications here as well.

Oskar Lafontaine is the most prominent figure on the left of the SPD and was the party leader. Until March last year, he was also candidate for chancellor (Germany's equivalent of prime minister) in the elections, but he stood back to allow the moderniser Gerhard Schröder to head up the election campaign on the grounds that he was more electable. The SPD won over 40 percent of the vote in the September 1998 election and formed a Red-Green coalition with the environmentalist Green Party. As soon as the coalition took office, however, Lafontaine made much of the running, forcing out Jost Stollman, a businessman appointee, from the economics ministry, expanding his own finance ministry responsibilities and urging more interventionist Keynesian economic policies to solve the problems of German capitalism. He rapidly became very unpopular with the bosses, especially when he proposed increasing taxes for big companies. He was disliked by the Blairites for putting an alternative to the slavish devotion to global capital so loved by Blair and Brown, and Rupert Murdoch's Sun decided to brand him as a hate figure. A front page last November asked, 'Is This The Most Dangerous Man in Europe?' under a picture of Lafontaine because of his policies on the euro. Lafontaine also angered the European bankers by calling for cuts in interest rates.

The Red-Green coalition was a government almost immediately plunged into crisis: over the economy, welfare, decommissioning of nuclear power stations and a law which would give immigrant workers dual nationality. Behind these particular crises was the growing clash between those who had elected the government and wanted greater equality, and the capitalists who were extremely worried about a left government, even one led by a moderniser such as Schröder. They felt that Schröder was too weak and unable to control the coalition; more importantly the capitalists want to restructure German capitalism in quite fundamental ways. They want to cut large numbers of jobs, so making German industry more internationally competitive, to weaken the trade unions and to make savage cuts in the German welfare state. They want, in short, to impose on German workers the reforms of Thatcherism which were never carried through by the previous Tory government under Kohl. The pressures of global international capital faced with recession, plus the pressures of Germany's leading role in enforcing the euro and European Monetary Union, mean that these attacks have to be carried out rapidly if German capital is to retain its dominant position. The urgency has been further reinforced by a swift slowdown of the German economy since the election, with recession looming and unemployment still at extremely high levels.

The German ruling class wants Schröder to be more like Blair in attacking his own supporters, and in moving decisively to challenge traditional social democratic policies. However, Blair has the massive advantage that the crucial role in weakening the working class movement was carried out under the Tories, and he has been the beneficiary. Schröder is faced with a much tougher job, because German workers and trade unions have not suffered similar defeats. This explains the high stakes gambled for by German capital in attacking Lafontaine and the left.

That is why, only weeks before Lafontaine's resignation, the employers effectively went on strike. Major German companies threatened to close down and move their whole enterprises out of the country. This was clearly a threat with little substance--BMW has talked of closing its British operation and is unlikely to transfer its German factories here. The giant insurance company Allianz and the nuclear power station bosses were among those who threatened flight--although it would be impossible to move their businesses out of Germany. The aim of the threat was to force government retreat on the question of taxes. The government was already under pressure from electoral defeat in the major state of Hesse (around Frankfurt), where the right wing parties had successfully played the race card. On Tuesday 9 March a group of employers from the nuclear power industry visited Schröder, ostensibly to lobby against decommissioning. Instead the meeting turned into a major attack on Lafontaine with the employers demanding a reversal of government policy.

Happier times:Schröder and Lafontaine with the Green leader Fischer

The next day Schröder used his cabinet meeting to attack various ministers--most strongly, if implicitly, Lafontaine himself. Schröder's advisers put it about that the chancellor himself was thinking of resigning if he did not get his way in government. Within 24 hours, however, it was Lafontaine who had resigned all his positions, returning to his native Saarbrücken without a word to any of his supporters about the reasons for his abrupt departure.

Big business and the right wing were absolutely jubilant. Champagne was opened on the stock market and allegedly in Downing Street. Stock prices rose at speeds which set a postwar record. The falling euro picked up against other currencies on receiving the news. Instantly big business started demanding more. Further pressure was put on Schröder, to cut corporation taxes and abandon the nuclear reforms. All the talk was of an end to the Red-Green coalition. Despite the fact that the Greens have tried to distance themselves from the splits in the SPD, saying that Lafontaine's resignation had 'absolutely nothing' to do with them, and they are themselves calling for corporation tax to be cut now, the coalition's days are numbered: within months the Greens are likely to be out of the government, probably to be replaced by the FDP, one of the right wing parties which have played the race card in recent months. The confidence of the right has grown since the resignation, with the FDP claiming that its slogan for the European elections in June will be 'Yellow card for the Red-Greens'.

However, the triumph which greeted the resignation was short lived. Blair was able to claim victory for his Third Way and to see the defeat of Lafontaine as altering the balance of forces in Europe in his favour. Yet the rise of the markets only lasted a few hours before the problems facing Schröder became clearer and the optimism was tempered with fear that he would be unable to solve his problems.

The truth is that Schröder is in quite a weak position inside the party. He has little popular base and is cut off from the mass of traditional SPD supporters, who have been much more likely to look to Lafontaine. The SPD is now bitterly divided. A substantial minority of members of the leading party committee voted against Schröder taking over as party leader following Lafontaine's resignation, and he still has to face a special conference to confirm his position this month, where there is bound to be opposition. The left inside the SPD is quite strong and is calling for the resignation of Bodo Hombach, the German equivalent of Peter Mandelson and one of Schröder's closest advisers, accused of obsession with the media and 'uncontrolled self conceit'. The leadership of the Young Socialists is also highly critical of Schröder.

The SPD's slogan at the general election, accepted by Schröder, was twofold: 'modernisation of the economy and social justice'. Lafontaine's speeches and campaigns were key to winning, and he put a great deal of emphasis on the second component. Most SPD voters regard it as central to the party's policies. Schröder, is under increasing pressure from big business to concentrate on the first at the expense of the second, but he will only win this at great cost and with a fight inside the working class movement. At the very least, many SPD leaders locally fear that disappointment with the governmerit can lead to passivity and abstention in future elections, but there are also signs that organisations such as the PDS, the former Communists who are fairly strong in the eastern part of Germany, can pick up votes and supporters from disillusioned SPD members.

The level of class struggle has also been high in Germany, and much opposition to government policies is centred in unions such as IG Metall which have led strikes in recent months and among public sector workers. The power of the working class movement has become apparent, and any attacks on the welfare state or attempts to force job cuts through in order to placate the bosses are likely to be met with resistance.

Lafontaine is at present outside the government and the parliamentary process, but this may not be the end of him. Although many workers and activists are highly disappointed with the way in which he resigned--after all, nothing very bad had happened to him when he walked out without any explanation or attempt to rally his troops on the ground--he may well become a focus for discontent in the future. The pressures on German capitalism to become more flexible as the single currency proceeds, the onset of severe recession in Germany with high unemployment rising even more sharply, and the attacks on workers which will ensue, will lead to growing discontent and a sharpening of left and right inside the government. This is already happening. The debate has moved on, from workers seeing the need to defend the Red-Greens against the capitalists, to now seeing the split being within the party--with those around Schröder, siding with the capitalist camp while the left bitterly opposes it.

Whatever the exact outcome of the turbulent days around Lafontaine's resignation, it has marked a watershed in German politics and opens up a real polarisation from which socialists can grow. This is because Lafontaine's resignation also shows the weakness of the traditional reformist parties and of left reformism, which is unable to seriously confront the ruling class and therefore unable to deliver even the most basic reforms.

It doesn't add up

The affair also raises much wider international questions. The defeat of Lafontaine has been described by some on the left in Germany as a turn towards Blair. Yet the Blair government has been relatively lucky that so much of its way was paved by the previous Tory administrations. What is remarkable about Germany is the speed at which the government is unravelling. Retreats over all of its major controversial planks have now either happened or are on the cards. Lafontaine talked tough to the employers but delivered little (his budget was fiscally neutral), and was unable to stand up to the employers in deeds, rather than words. The government remains weak. The German magazine Der Spiegel called Lafontaine's removal 'Schröder's second chance', and he is now expected to act decisively against the SPD's traditional supporters. Failure to do so will bring criticism from the employers--success in doing so will bring opposition from workers.

The events in Germany, the most powerful capitalism in Europe, with a strong working class movement and influential SPD, also point to the failure of international social democracy. The collapse of the postwar consensus, based on welfare, full employment, and a mixed economy between private and nationalised industry, has led to a crisis of reformism which is both unable to deliver the goods in terms of what workers want and unable to seriously confront the system which produces attacks on workers. This has led to a systematic retreat from traditional reformist policies and an accommodation with big business and the market--'Blairism' in Britain and 'Schröderism', if he can get away with it, in Germany.

The left reformists have reacted bitterly against these developments, but have been unable to map out a clear alternative because they accept many of the basic precepts of 'modernisation'.

Thus much of the left internationally looked to Lafontaine for change, and particularly to his Keynesian economic policies to provide an alternative to the deregulated free market. Yet his departure seems to have confirmed in their minds that big business is all powerful and that nothing can be done to challenge the global markets. Will Hutton, who previously looked to the traditional 'Rhineland' model of capitalism as providing an alternative to the free market, now seems to regard Lafontaine's defeat as signifying that global capital will always win out. Paul Anderson, writing in Tribune, said, 'Without Lafontaine it is going to be more difficult to set up the institutions and introduce the policies that Europe needs if it is not to be crucified by the combination of rampant globalisation and the ECB's [European Central Bank's] monetary conservatism. These comments assume that such arguments can only be conducted at the level of government and big business, in which case the left will always lose out, rather than understanding that there are real forces--most importantly the organised working class--which can challenge these priorities. Failure of the parliamentary left to base itself on such forces means that it is weak in the face of even a verbal onslaught of the sort that Lafontaine faced.

The power of capital can be challenged by an alternative power, but it has to be based on the campaigns and struggles of ordinary working people rather than on manoeuvring at the top. This is true in Britain as well. Blair will feel vindicated by the events in Germany, and his position is, for now, stronger than that of Schröder, but he too faces a number of political crises. The elections in May are likely to be less than a triumph for Labour, as the nationalists in Scotland and Wales position themselves to the left of Labour and Gordon Brown wheels in millionaire businessmen to attack them for increasing public spending. A number of strong Labour councils in England are under threat from the Liberal Democrats. The opposition at grassroots level seems to be growing, with sizeable demos against factory closures in Scotland and Wales, a handful of significant strikes around the country, and the growth of support for the national demonstration over the low level of the minimum wage on 10 April.

Yet here too the weakness of Labour's left has so far been evident, both organisationally and ideologically. The events in Germany demonstrate that the ruling class is prepared to use extra-parliamentary means to win its demands. It has bullied and blackmailed to win changes in government policy. It has confronted a democratically elected politician whose policies it did not like. It has rejoiced in his departure. If nothing else, the events show what contempt such people have for the will of the people or for any democracy. But they also show that the SPD and Labour leaders are unable to confront such politics, but instead rush to appease them. They prove the need to build an alternative to Labourism and reformism, based on the power of working people, which is the only power that can challenge the capitalist class.

Understanding Oskar

Oskar Lafontaine has been the key figure on the left of the SPD since the mid-1980s. He is enormously popular with the party's rank and file. He was born in the small state of Saarland, which borders France, in 1943. His left wing reputation stems from his defence of Keynesian policies of stimulating demand and regulation of capital. He has had a series of confrontations with Germany's and Europes central bankers. His politics are firmly constrained within the SPD's tradition.

Kevin Ovenden

Return to
Contents page: Return to Socialist Review Index Home page