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Germany can take that smug look off its face

Middle class finding it increasingly difficult to make ends meet


By Lucian Kim

(Reuters) — If a Der Spiegel cover is any indication of the mood in Germany, then Europe's largest country is on the verge of an explosion. Two weeks ago, the newsmagazine highlighted the country's growing income inequality in a cover story on "the divided nation." The cover photo showed a couple in a gilded room with a dozen other people stooped in a claustrophobic cellar below them.

Last week, the magazine featured the "uprising of the 'Wutbuerger'" — a new German term combining the words for "rage" and "citizen" — to describe people mad as hell about the political status quo. The headline screamed "You guys up there are just lying to us all" over a paint-spattered image of German Chancellor Angela Merkel.

A yawning wealth gap and a voter rebellion nobody wanted to admit existed aren't unique to the United States. Across the industrialized world, the middle class is finding it increasingly difficult to make ends meet, while the losers of globalization are channeling their aggression into fringe politicians who know who's to blame. Modern Germany, a paragon of social peace and political moderation, is no exception.

"We have reached a tipping point," the Organisation for Economic Cooperation and Development warned last year. Income inequality in the 34 member countries is at its highest level in the past half century, the OECD said in a report. The average income of the richest 10 percent of the population is nine times that of the poorest 10 percent across the OECD, up from seven times 25 years earlier.

There is a time-tested European tradition of sneering at the crassness of American capitalism and the blowhards it produces. But Germans in particular are discovering that their society is not as equitable as they once believed, nor immune to the blather of populists.

In the decades following World War Two, West Germany built up its fabled social welfare system in part to compete with communist East Germany and in part to form a bulwark against the type of extremism that had given rise to Adolf Hitler. Consensus became a byword for the German way of doing politics.

After the collapse of communism in Eastern Europe and German reunification in 1990, the assumption was that the successful West German model would simply be transferred to the eastern half of the country. But as Germany struggled in an increasingly global economy, Merkel's predecessor, Gerhard Schroeder, slashed social benefits as part of a sweeping reform to make the country more competitive.

Unemployment dropped, and the working poor emerged. Large parts of the former East Germany failed to catch up with the West, and an angry underclass that felt cheated by the promises of democracy was created.

Research shows that Germany is far more similar to the United States in economic terms than most people might imagine. Germany's so-called Gini coefficient, a measure of income disparity, is 76 — closer to the 80 in the United States than the 69 across the euro zone. In a Morgan Stanley ranking of 20 industrialized countries, Germany came in as the sixth most unequal, right after the United States, preceded by Spain, Greece, Italy and Portugal.

Marcel Fratzscher, head of the German Institute for Economic Research, isn't only concerned about income inequality in Germany; he also worries about systemic barriers to social mobility. "I don't have a problem with the top 10 percent," Fratzscher told "Die Zeit." "I have a problem that the bottom 40 per cent are being left behind."

Robust economic indicators and government transfers to the working poor mask the dire state of affairs, according to Fratzscher. Germany's political class prefers to spend an extra 10 billion euros on social benefits to paper over disparities than to invest in education and infrastructure, he said. "We've long become a society of classes, if not castes."

Germany's socioeconomic polarization is finding political expression. In the autumn of 2014, a full year before the refugee crisis swept Germany, a group calling itself PEGIDA, or Patriotic Europeans Against the Islamization of the Occident, began holding rallies in the eastern city of Dresden. The protests, which kept growing in size, were directed at Merkel's government,"the lying press" and foreigners seeking shelter and opportunity in Europe.

The Alternative for Germany, or AfD, a Euro-skeptic party founded in the middle of the Greek debt crisis, seized on PEGIDA's message of discontent and repurposed itself to fight the establishment on the back of anti-immigrant sentiment. In 2014, the upstart party was voted into three state assemblies in eastern Germany. Since regional elections last month, the AfD is represented in half the country's state legislatures and aims to enter parliament in next year's national vote.

"The conventions governing Germany's political interactions are changing with incredible speed," "Der Spiegel" deputy editor Dirk Kurbjuweit wrote in a recent essay. The two-party dominance by the center-right Christian Democrats and center-left Social Democrats is under threat.

A poll by the magazine found that 57 percent of Germans agreed with the statement, "Those guys up there will do whatever they want anyway, and my opinion doesn't count." Among AfD supporters, 88 percent agreed. With more than 255,000 "likes," the AfD has more Facebook followers than the Christian Democrats and Social Democrats combined. Facebook has become a popular forum for people who feel their opinions are ignored by traditional media.

The similarities between supporters of the AfD and the insurrection led by Donald Trump inside the Republican Party are hard to ignore. Both movements are a visceral reaction to voters' fears about immigration, terrorism and the arrogance of the powers-that-be. Both gain strength in the electronic echo chambers afforded by social media. Railing against "political correctness" is a substitute for policy-making. In Germany, as in the United States, bashing migrants - particularly Muslims - is most popular where there are relatively few of them.

The reaction of German and U.S. elites is also similar: disregard, disavowal, disbelief. When "New York Times"columnist David Brooks confessed last month that he was "not socially intermingled" with Trump supporters and "did not listen carefully enough," he could have been speaking about the attitude toward the AfD taken by the editorial boards of Germany's leading news organizations.

Liberal societies are at risk in times of economic uncertainty. The political center is stable when the middle class is strong. But if enough people feel they're losing out, social conflict becomes inevitable. Populists feed on and drive polarization.

The kind of illiberal paradise that the likes of the AfD or Trump espouse already exists. Russia today offers a dystopian vision of a country run by an omnipotent leader where urban liberals have been shut up; the middle class is a demographic sliver between the super-rich and a vast underclass, and "patriotic" media spew fear and hate around the clock.


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