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The author is a contributing editor to the Financial Times and writes the Chartbook newsletter
Germany is going through anxious times right now. Two issues dominate the headlines: the economic downturn and an alarming surge in support for the far-right Alternative for Germany, which currently polls at about 22 percent, outpacing the three ruling parties. These are seemingly unrelated economic and political issues. But they are linked through demographic politics and public investment.
Many factors combine to cloud Germany’s economic prospects. Energy price shocks hit hard. China’s economic slowdown is bad for German exports.But the most fundamental reason is exhaustion of energy growth model It was initiated 20 years ago by the welfare and labor market policies of the then Social Democratic and Green Party-led governments. The measures known as the “Harz IV” reforms pushed Germans to work by reducing support for the long-term unemployed and easing low-wage jobs. What drives above-average economic growth is not investment or productivity gains, but the “industrial revolution.”
With employment reaching record levels, this model has reached its natural limits. Demographic headwinds are hitting hard. If Germany wants to slow the decline of its labor force, it needs to increase immigration. Which brings us to the AfD.
Since its founding in 2013, the AfD has supported a variety of causes. Its initial annoyance was Mario Draghi’s management of the ECB. Then it opposed green climate policies. It is skeptical of the coronavirus and opposes Germany’s support for Ukraine.But by far the biggest concern among voters is Doomsday fear Related to migration.
The Alternative for Germany relentlessly spreads alarmism and promotes racial stereotypes and Islamophobia. But the transformation of German society is real. According to 2022 data, over the past half century, Germany has transformed from a largely monoethnic society to one that: 28.7% of the population were either born with a foreign passport or had one parent with a foreign passport. 2020, among children 40.3% of children under 5 years old are immigrants or have at least one foreign parent. In cities such as Bremen, the ratio is closer to two-thirds.
The German Bundestag responded by relaxing citizenship rules.changes in cultural norms foreigner Their presence in public life is striking. The vast majority of Germans remain open-minded and welcome diversity. But the role of cultural politics only goes so far. Many times, what is missing is money.
As the British experience of the 2010s shows, a combination of austerity and mass immigration can breed xenophobia. To make liberal immigration policies work and avoid dangerous conflicts between housing and social services, public investment is crucial. This is where Germany falls short. Public investment has been negative since the early 2000s and housing construction lags far behind. The debt brake, which has restricted public borrowing since 2009, has perpetuated underspending.
More apartments and daycares will not eliminate racism.a solid 14% of German voters have attitudes that place them on the far right. Two percent of the population are actual neo-Nazis. It’s sad, but a small number of people of this size can be quarantined. What is really worrying is that another 10-15% of the electorate (those who are concerned about immigration but do not support far-right positions) fall into the hands of the AfD.
Closing Germany’s borders is not an option. Not only does the German economy need labor, but millions of people around the world have a right to asylum and a legitimate desire to better themselves through immigration. To its credit, Berlin has advocated for a coordinated and sensible refugee policy in the EU. Contrary to the alarmists, Germany is not “full” and does not face the risk of apocalyptic chaos. But bottlenecks do exist in housing, education and social care, which means maintaining the status quo will exacerbate tensions.
What is needed to stop this corruption is not pandering to racism, but an agreement by all mainstream parties to provide an alternative to the Alternative for Germany through a coordinated program of public investment in housing and public services. If this requires circumventing the debt brake through off-balance sheet special funds, like those set up to deal with the crisis in Ukraine and the challenge of climate change, so be it. The success of immigrants was far more important to Germany’s prosperity and internal peace than the tens of billions of dollars spent building over-engineered U.S. fighter squadrons, microchip factories, and other darlings of industrial policy.
Svlook
