Europe’s Ruling Elites Remain under Pressure
It has been a while since we last wrote about the AfD party (Alternative fur Deutschland/ “Alternative for Germany” – see “22% can Imagine Voting for AfD” and “The March of Germany’s EU-Skeptics Continues”). Since then, quite a bit has actually changed about the party, so here is a quick summary of what has happened.
New AfD leader Frauke Petry surveying this weekend’s state election results
Photo credit: Sean Gallup
At one point about a year ago, it actually looked like the AfD was about to break apart and once again become a political non-entity. Readers may recall that the party originally arose in opposition to the euro and the centralized socialist EU super-state propagated by Europe’s political elites and the faceless bureaucracy in Brussels.
Its former leader and founder , German economist Bernd Lucke, was actually quite focused on these subjects. He generally espoused a pro free market stance and mainly sought to restore a greater degree of subsidiarity in the EU. The party supported immigration restrictions as well, but during Lucke’s time at the helm, this seemed more of a populist device designed to attract a few more votes and not the central issue the party cared about. In many ways the AfD seemed quite similar to UKIP in the UK.
German economist Bernd Lucke, founder and former leader of the AfD
Photo credit: WDKrause
However, last year a leadership struggle broke out within the party, between Lucke’s anti-euro and anti-EU faction and a faction primarily focused on immigration, led by Frauke Petry and others. The anti-immigration faction won out in the end and took over leadership of the AfD. Lucke resigned and has in the meantime distanced himself from his former party and is denouncing its new direction.
We personally regarded this event as quite a setback, but the change in the party’s program has turned out to revive its flagging fortunes rather noticeably: almost concurrently with the change in the AfD’s leadership and political direction, the refugee crisis began to impact Germany heavily. Elections in three German states over this weekend have seen the party gate-crashing establishment strongholds like a hurricane.
This continues a trend which we have discussed in these pages for quite some time: nearly everywhere, incumbents tend to be trounced in elections these days and protest parties are garnering enormous support, regardless of whether they are regarded as right wing or left wing parties (see “Incumbents Swept from Office Around the World” for details).
Voters appear primarily motivated by the wish to get rid of established ruling elites rather than the concrete programs of the protest parties they are voting for, even though all these parties are of course in some way “populist”. Ms. Merkel and many other members of Germany’s political establishment have clearly underestimated the widespread resentment their handling of the refugee crisis would create.
Living in a Bubble
This resentment is by no means confined to “uneducated extreme right-wingers”. One often gets the impression that Germany’s mainstream press would dearly like its fast-dwindling readership to believe so, but it is simply not true. By way of anecdote, here is a remark we recently overheard that is worth relating in this context (it was uttered by a lawyer who can definitely not be associated with the “extreme right”). We are paraphrasing below:
“Western citizens have to put up with ubiquitous surveillance nowadays and are often treated like common criminals at airports. All of this is being done to ostensibly “protect us” from terrorists coming from the Middle East. At the same time, millions of people from the very same area are now crossing our borders and are essentially just being waved through. Our political elites have completely lost touch with reality and are treating us like total morons”.
The man has become so disgusted with the bulk of mainstream press reportage in recent years, that he insists on using the moniker “lying press” for it these days (which has become quite popular in Germany). This is just one example – the change in social mood epitomized by such opinions is palpable everywhere and across all social classes. It is by no means confined to so-called “radicals”.
As we noted in a recent missive on Mr. Trump, whose success is part of the same phenomenon, there is apparently a vast gulf between what people will say in public and what they actually feel and say privately. For members of the political establishment, the situation is indeed very similar to the experience of the ruling elites of the former communist Eastern Bloc countries in the late 1980s. They are living in a bubble, far removed from the real world and its concerns – and they have begun to believe their own narrative. Now they are suddenly becoming aware that the electorate is no longer prepared to go along.
How most voters (rightly) perceive the EU today.
Cartoon by Peter Schrank
One should of course not be surprised that professional high-level bureaucrats and politicians (the two classes are essentially interchangeable in Europe) have lost all touch with reality. Many people employed in exalted positions in Brussels enjoy stunning salaries and perks at de minimis pseudo tax rates, often regardless of their non-existent job qualifications or the work they are actually putting in (as a glaring example see the EU’s digital commissar, whose understanding of modern technology is such that he appears barely able to switch on a TV set). The cronies are of course well supplied with taxpayer funds as well.
These are people who have never had to prove themselves in voluntary exchanges in the marketplace. They evidently have little idea how their policies redound on the common man and that their efforts may actually be resented by those who are forced to pay their fat salaries. Meanwhile, the major qualities required for a successful political career appear to be identical with the essential character features of psychopaths.
The only reason why they haven’t been swept away completely yet is probably the fact that a great many people have become hopelessly indentured debt slaves in the inflationary modern fiat money system. Many are therefore presumably scared of upsetting the apple cart and altering the status quo – but these things tend to acquire a momentum of their own.
Many people also simply don’t have the time to look closely at the system and obtain all the information required to see through the dense fog of propaganda. Clearly though, more and more people are in fact deeply unhappy (even if they may often not be certain why) and are prepared to vent their frustration at the voting booth.
The great gravy train is increasingly in danger…
Cartoon by Iain Green
Below we show the actual election results, with a few brief comments interspersed. The states in which elections have taken place this weekend are Baden-Wuerttemberg (the third-largest German state by population), Rhineland-Palatinate (a mid-sized state) and Saxony-Anhalt (a small state on the former territory of the GDR).
As a side note: voter turnout has risen significantly in all three elections – a sign that protest parties have been able to motivate voters who had previously simply given up on voting because they were completely disenchanted with the political establishment and saw no possibility of changing anything or sending a message by voting.
Baden-Wuerttemberg is the stronghold of the Green party in Germany these days – it has turned out to be the strongest party there. Baden-Wuerttemberg is the only German state where the Greens enjoy a relative majority of the vote. The establishment parties CDU and SPD (conservatives and social democrats) have lost a lot of ground in the state – which for a very long time used to be a seemingly unshakable bastion of CDU support.
Winfried Kretschmann – Germany’s most “conservative” Green politician.
Photo credit: Thomas Niedermueller / Getty Images
The AfD went from zero votes in 2011 to 15.1% this year, and has evidently taken voters away from all political parties in the state except the Greens and the Free Democrats. The Greens in Baden-Wuerttemberg are a special case: their leader Mr. Kretschmann is probably the most “conservative” Green politician in Germany – the party is mainly putting up with him because he is evidently able to bring home the bacon.
The Free Democrats have recovered as well, which is gratifying from our perspective. In fact, we regard this as the best news coming out of this election, as the party’s political program comes closest to classical liberal positions. Meanwhile, the social democrats have been nearly wiped out in the state (consider though that the ideological and practical differences between the socialists and the Greens are barely noticeable, so this doesn’t really mean much).
In Rhineland-Palatinate, the socialists were actually able to gain a little ground, while by contrast their fellow travelers the Greens were nearly wiped out. Ms. Merkel’s CDU has lost ground there as well, which is mainly noteworthy because once upon a time the state used to be one of its strongholds as well. The Free Democratic party made it back into parliament in the state by getting more than 5% of the vote, but the AfD once again stole the show by going from zero to 12.6% of the vote.
Saxony-Anhalt is only a small state, but the election result there was a real shocker (it wasn’t completely unexpected, but the size of the shift in voter allegiances was still stunning). Traditionally there primarily the CDU as the strongest party and “Die Linke” (The Left) as the second-strongest party have been competing in the former GDR state: the CDU has always been perceived as the party of anti-communism, thus attracting those strongly opposed to the former communist system. On the other hand, Die Linke is essentially the democratic successor of the former SED (Unified Socialist Party), which ruled the GDR for decades.
While the CDU has lost a little ground in Saxony-Anhalt as well, it did remain on top as the party with the greatest electoral support overall. What is especially noteworthy in Saxony-Anhalt is the complete repudiation of the political left: the SPD has never posted a worse result in post WW2 German state elections anywhere. At a mere 10.6% is no longer a major party in the state. Die Linke has surprisingly also lost a sizable chunk of its support and not even the Greens have emerged unscathed. By contrast, the AfD has gone from zero to 24.2% of the vote, becoming the second-strongest party in the state in a single leap.
AfD top candidate André Poggenburg of Saxony-Anhalt (left), with Thuringian AfD leader Bjoern Hocke (right), celebrating the election result in Saxony-Anhalt
Photo credit: Wolfgang Rattay / Reuters
As can be seen from all this, the election was actually not really about “left” and “right”. Obviously, many people who have traditionally voted for left wing parties have decided to give their vote to a party widely perceived (and certainly described as such in the entire mainstream press) as an extreme right-wing party.
The ideologies generally considered as extreme left-wing and right-wing are in essence little but different sides of the same coin anyway – in that sense, the willingness of voters to make such a jump is perhaps not too surprising. The alleged ideological chasm is a lot less wide than most people generally realize.
As an aside, it is quite interesting that the successor party of the former communist SED is practically never denounced as a “dangerous party of the extreme left” in the German press. Never mind that its ideological forebears have ruled in a ruthless dictatorship, brutally oppressing millions of people for decades. That’s OK though, because they did so with “good intentions”. This actually goes to show how deeply rooted Marxist ideas have become in the supposedly capitalist West – the notion that Marxism would be just fine if only it were “implemented correctly” continues to be as widespread as it is fallacious.
Long faces among the apparatchiks: Saxony-Anhalt’s SPD leader Katrin Budde and Die Linke leader Wulf Gallert. Voters have fled from them in droves.
Photo credit: Jens Wolf / DPA
Considering that such a big electoral upset can happen even in Germany – a country with very low unemployment, a still fairly strong economy and high stock prices – establishment politicians elsewhere in Europe have every reason to fear even more upheaval (it couldn’t happen to a more deserving bunch). We enjoy their discomfort as just much as the discomfort of the Washington elites in the face of Mr. Trump’s ascent, although we remain extremely wary of what is rising in their wake in many places.
Superficially the recent wave of migrants combined with Ms. Merkel’s tone-deaf reaction to the resentment it has caused appears to be responsible for this stunning political backlash. However, as we have mentioned previously, we believe there is actually a deeper underlying trend that is finding expression.
The refugee crisis very likely only proved to be a convenient trigger event – if it hadn’t been that, it would have been something else. After all, the AfD was originally founded in opposition to the EU and the euro. In short, one must try to differentiate between actual causes and mere symptoms. In all likelihood, a big influx of refugees wouldn’t have provoked a similar backlash in the 1990s, a time when optimism was generally still in an upswing, this is to say, “social mood” was still positive.
One thing readers need to keep in mind about all this is that growing disenchantment with the system and resentment against the established order is likely to greatly affect political and economic stability and with it financial market volatility in coming months and years. This is not a trend that is going to go away quickly or quietly.
Charts/tables by: Der Spiegel
Dear Readers! We are happy to report that we have reached our turn-of-the-year funding goal and want to extend a special thank you to all of you who have chipped in. We are very grateful for your support! As a general remark, according to usually well informed circles, exercising the donation button in between funding drives is definitely legal and highly appreciated as well.
Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke
3 Responses to “German State Elections: Establishment Challenged by Voter Revolt”
Most read in the last 20 days:
- How the Welfare State Dies
Hollande Threatens to Ban Protests Brexit has diverted attention from another little drama playing out in Europe. As of the time of writing, if you Google “Hollande threatens to ban protests” or variations thereof, you will find Russian, South African and even Iranian press reports on the topic. Otherwise, it's basically crickets (sole exception: Politico). Gee, we wonder why? They don't like him anymore: 120.000 protesters recently turned Paris into a war zone. All...
- Free Speech Under Attack
Offending People Left and Right Bill Bonner, whose Diaries we republish here, is well-known for being an equal opportunity offender - meaning that political affiliation, gender, age, or any other defining characteristics won't save worthy targets from getting offended. As far as we are concerned, we generally try not to be unnecessarily rude to people, but occasionally giving offense is not exactly beneath us either. The motto of the equal opportunity...
- Toward Freedom: Will The UK Write History?
Mutating Promises We are less than one week away from the EU referendum, the moment when the British people will be called upon to make a historic decision – will they vote to “Brexit” or to “Bremain”? Both camps have been going at each other with fierce campaigns to tilt the vote in their direction, but according to the latest polls, with the “Leave” camp’s latest surge still within the margin of error, the outcome is too close to call. The battle lines are...
- A Market Ready to Blow and the Flag of the Conquerors
Bold Prediction MICHAELS, Maryland – The flag in front of our hotel flies at half-mast. The little town of St. Michaels is a tourist and conference destination on the Chesapeake Bay. It is far from Orlando, and even farther from Daesh (a.k.a. ISIL) and the Mideast. St. Michaels, Maryland – the town that fooled the British (they say, today). Photo credit: Fletcher6 Out on the river, a sleek sailboat, with lacquered wood trim, glides by, making hardly a...
- Going... Going... Gone! The EU Begins to Splinter
Dark Social Mood Tsunami Washes Ashore Early this morning one might have been forgiven for thinking that Japan had probably just been hit by another tsunami. The Nikkei was down 1,300 points, the yen briefly soared above par. Gold had intermittently gained 100 smackers – if memory serves, the biggest nominal intra-day gain ever recorded (with the possible exception of one or two days in early 1980). Here is a picture of Haruhiko Kuroda in front of his Bloomberg monitor this...
- Rule Britannia
A Glorious Day What a glorious day for Britain and anyone among you who continues to believe in the ideas of liberty, freedom, and sovereign democratic rule. The British people have cast their vote and I have never ever felt so relieved about having been wrong. Against all expectations, the leave camp somehow managed to push the referendum across the center line, with 51.9% of voters counted electing to leave the European Union. Waving good-bye to...
- The Problem with Corporate Debt
Taking Off Like a Rocket There are actually two problems with corporate debt. One is that there is too much of it... the other is that a lot of it appears to be going sour. Harvey had a good time in recent years...well, not so much between mid 2014 and early 2016, but happy days are here again! Cartoon by Frank Modell As a brief report at Marketwatch last week (widely ignored as far as we are aware) informs us: “Businesses racked up debt in the...
- What Could Possibly Go Wrong?
A Convocation Of Gamblers The Wall Street Journal and BloombergView have just run articles on the shadow banking system in China. This has put me in a nostalgic mood. About 35 years ago when I was living in Japan, I made a side trip to Hong Kong. Asia's Sin City, Macau Photo credit: Nattee Chalermtiragool I took the hydrofoil to Macau one afternoon and the same service back early the next morning. On the morning trip, I am sure that I saw many of the...
- A Darwin Award for Capital Allocation
Beyond Human Capacity Distilling down and projecting out the economy’s limitless spectrum of interrelationships is near impossible to do with any regular accuracy. The inputs are too vast. The relationships are too erratic. The economy - complex and ever-changing interrelations. Image credit: Andrea Dionne Quite frankly, keeping tabs on it all is beyond human capacity. This also goes for the federal government. Even with all their data gatherers and...
- Janet Yellen’s $200-Trillion Debt Problem
Blame “Brexit” BALTIMORE – The U.S. stock market broke its losing streak on Thursday [and even more so on Monday, ed.]. After five straight losing sessions, the Dow eked out a 92-point gain. The financial media didn’t know what to say about it. So, we ended up with the typical inanities, myths, and claptrap. “Investors” are pushing the DJIA back up again..apparently any excuse will do at the moment. The idea may backfire though, as exactly the same thing happened...
- The Fed’s Doomsday Device
Bezzle BALTIMORE – Barron’s, in a lather, says the market is facing the “Two Horsemen of the Apocalypse.” Huh? Only two? There were four last time! Supposedly, the so-called Brexit – the vote in Britain this Thursday on whether to leave or remain in the European Union (EU) – and uncertainty over where the Fed will take U.S. interest rates are cutting down stocks faster than a Z-turn mower. But Brexit is a side show. As our contacts in London...
- Gold and Brexit
Going Up for the Wrong Reason Gold is soaring. It should—and a lot—but in my view not for the reason it is. Indeed gold is insurance for uncertain times, a time that Brexit seems to represent. But insurance is an administrative cost — one must minimize its use. August gold contract, daily – gold has been strong of late, but this seems to be driven by “Brexit” fears - click to enlarge. Moreover, insuring against Brexit might ironically be equivalent...