Ingo Schmidt teaches economics at the University of Northern British Colombia in Prince George and is coeditor of Goettringer Betriebsexpress, a local labor magazine in Germany. He is affiliated with the Scientific Advisory Board of ATTAC-Germany. He also works as a labor educator.
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For seven years Germany has been governed by a center-left coalition. This government was elected in 1998 because a majority of the electorate was tired of conservatives promising that fiscal austerity, lower unemployment benefits and social security, and restrained wage growth would bring prosperity and full employment. However, the new government’s program has made that of its predecessor look like neoliberalism with a human face. The new government, led by the Social Democratic Party of Germany (SPD), has launched the most severe attacks on labor and social standards since the establishment of a welfare state after the Second World War. Since, for most of its history, the SPD has presented itself as the main force pushing for expansion of the welfare state, its anti-worker actions have deeply disappointed its followers and surprised its opponents.

This dismantling of the welfare state led to a dramatic decline in electoral approval and party membership, and also triggered a wave of mass protests. However, a movement capable of challenging the government did not emerge.

It was not street protests but a series of crushing defeats in provincial elections that eventually induced the federal government to call for new elections. This step led to a paradoxical situation. On the one hand, Christian Democratic Union (CDU) is generally expected to win these elections. On the other, there is no doubt that they will continue the neoliberal politics that led to the SPD’s decline in the first place. An explanation for this seeming contradiction is to be found in the different capabilities of these two parties to mobilize their constituencies. While the CDU can still draw on support from diverse social layers, the SPD has been hard hit by the loss of support from workers and unemployed people. Contrary to what one might expect, the CDU is not a one-sided party of the upper classes but has its own welfare state-oriented currents. Neoliberal hegemony in Germany has never been complete. While the perceived need to improve international competitiveness is widely accepted, there is at the same time a strong “taste for the welfare state.” This contradictory consensus is deeply entrenched in (West) Germany’s postwar history and still is crucial to political developments. Unions played a major role in the formation and transformation of this consensus, which consists of export-oriented growth and corporatist moderation between labor and capital.

Confronted with the SPD’s neoliberal turn, one faction within the unions opted to continue the alliance with the SPD. Doing so, they argued, would be the only way to defend the very existence of the welfare state against the conservatives. Against this position, another smaller faction opted for a more movement-oriented unionism. Some unionists went so far as to begin building a new party. After federal elections were announced in May, union leaders turned back to support the SPD, which they portrayed as the lesser evil. Efforts to build an electoral alternative that appeals to the SPD’s former voters continue, tolerated but not endorsed by the unions. Given the German unions’ record of suppressing any deviation from their official line, this might be seen as a step toward more openness and union democracy. In reality, it indicates the loss of the unions’ voice in parliamentary politics.

The decline of the unions’ political significance encouraged capitalists to challenge long-established principles of collective bargaining. Until very recently, unions demanded higher wages and shorter working hours, while employers tried to contain such claims. Now the employers have taken the initiative by calling for lower wages and longer hours. Faced with the threat of plant closures, the unions have often accepted deteriorating working conditions and incomes in exchange for guarantees of jobs for a limited time. Compared to this assault on the very core of the unions, occasional participation in protests and campaigns seems rather hopeless.

This state of affairs poses two questions: First, will the hollowing out of the basic institutions of the welfare state over the past three decades lead to their eventual abolition? And second, will the current crisis of the SPD and the trade union movement pave the way for a new approach to labor politics? In dealing with these two questions the following hypothesis will be explored: The postwar history of labor and the welfare state is characterized by a high degree of institutional continuity. However, the long-lasting slowdown of economic growth has led to a decline of social standards and the erosion of the welfare state’s social base. While institutions such as social insurance and collective bargaining might survive current attacks on the welfare state, these institutions may contribute to outcomes that fundamentally change the character of the system. The social integration of the majority of working people brought about by the welfare state might be replaced by the exclusion of more and more people from what was previously understood to be their rightful share of collectively-produced wealth. From a set of institutions that integrated the working class into the capitalist system while raising the social standards for workers, the welfare state might become an apparatus to defend the privileges of a new middle class that has developed as a byproduct of this very system. I will also argue that a kind of institutional fetishism, which is deeply entrenched in the main currents of the German labor movement, is a major obstacle facing any successful fight against such a development.

To understand the labor movement and the corporatist welfare state of which the movement’s mainstream has become an integral part, we must take into account the feudal legacy that is incorporated in these modern phenomena. Feudalism in Germany was marked by decentralized political power held by a number of regional princes, above which was a weak central power, and the separate economic autonomy of the medieval city, which permitted the development of wealthy and powerful craft guilds. This separation is reflected in the labor movement’s strict division of labor between the SPD and the trade unions. Labor’s political concern has been the transformation of the feudal state into a democratic state; in the SPD’s early years this often was called a “people’s state.” As a reaction to feudalism’s fragmented power, the SPD pushed for unity among the masses of people, sometimes ignoring the dividing lines of class, as the social base for the democratic state. The goal of such a state was to improve the condition of working people through legislation. The trade unions, however, were to concentrate on collective bargaining with employers. They were not to mobilize workers for political action, especially not for political strikes. Since the unions arose originally from the medieval craft guilds, they were not only prepared to confine themselves to a narrowly defined economic role, but they also developed a strong productivist ideology that made it almost impossible to organize unskilled workers.