This article has been reproduced from the Socialist Standard (April 1999), the monthly\njournal of the Socialist Party of Great Britain. <\/p>\n\n\n\n
In March the man the right wing Sun<\/em> newspaper in Britain once called the most\ndangerous man in Europe resigned as Germany’s Finance Minister. The Sun<\/em>\u2014or\nrather it’s owner Rupert Murdoch as a capitalist himself\u2014 disliked him because they\nthought he had plans to increase direct taxes on profits in Britain up to the same level\nas in Germany. <\/p>\n\n\n\n Oskar Lafontaine was chairman of the German Social Democratic Party (S.P.D.) which\nreturned to power in October 1998 after years in opposition. Politicians who are out of\noffice for long periods often loose their grip on capitalist reality\u2014that governments\nmust nurture profits and provide an environment in which they can flourish since they are\nwhat makes capitalism go round\u2014and imagine that governments can work wonders simply\nby political will. <\/p>\n\n\n\n Sometimes, when returned to power after years in the wilderness, they try to put this\nmistaken idea into practice. The classic example was the French leftwing government, with\nCommunist Party participation, that came into office when Mitterrand was first elected\nPresident in 1981. They really believed that they could “relaunch the economy”\nby “increasing popular consumption” and so they brought in measures to increase\nthe minimum wage (which in France affects all wages since they are tied to it) and social\nbenefits. <\/p>\n\n\n\n The result was not long in coming. Instead of economic growth being relaunched,\ninflation increased, leading to three devaluations of the franc in as many years. Within a\nyear the new government adapted its policies to capitalist reality; they clawed back the\nreforms they had introduced and imposed austerity as a means of shifting the balance back\nfrom consumption to profits. They had learned the hard way that you cannot run capitalism\nin the interests of the excluded majority. <\/p>\n\n\n\n Since, with Kohl winning election after election, the S.P.D. had been out of power for\nfifteen years, the big question after their September 1998 election victory was: would\nthey make the same mistake as the first Mitterrand government, especially as they were in\ncoalition with the Greens who also had ideas which if seriously pursued would threaten\nprofits? <\/p>\n\n\n\n Oskar Lafontaine had written a book in which he proposed, as a way of getting Germany\nout of the current crisis, that wages and salaries should go up in line with productivity.\nHe repeated this in newspaper articles and interviews after the S.P.D. election victory.\nSince this would result in wages and salaries going up faster than they had been, it was\nequivalent to the policy pursued by the 1981 French government. And the thinking behind it\nwas the same: if wage and salary earners had more to spend this would create more markets,\nso stimulating the economy to grow again. <\/p>\n\n\n\n In the event this turned out to be just another electoral promise but it earned\nLafontaine the reputation of being “Red Oskar”. Red used to signify\nrevolutionary and has always been the fetish colour of Socialists. But there was nothing\nrevolutionary about Lafontaine’s ideas. He was merely putting forward the orthodox\nKeynesian nostrum that in a period of economic stagnation you should increase spending. Of\ncourse by the end of the 1970s Keynesianism had proved to be an utter failure on this\npoint, as Marxists had foreseen years previously. But it is a measure of the very narrow\nmargin of manoeuvre of reformists these days that even milk-and-water Keynesian reformism\nis denounced as “revolutionary” and “red”. <\/p>\n\n\n\n Although, as Finance Minister, Lafontaine never tried to implement his idea of tying\nwages and salaries to productivity he did introduce some new direct taxes on profits and\nhe kept on calling on the European Central Bank to reduce interest rates. He believed that\nthis would help Germany out of the crisis (even though in Japan interest rates are less\nthan 1 percent and they’re still in the economic doldrums). For a Finance Minister to\nrepeatedly call for a lowering of the interest rate was seen as out of order or even\ncounterproductive. The ECB, which fixes the minimum short-term lending rate for the whole\nof Euroland, had to refuse such calls just to prove it did not give in to political\npressure. <\/p>\n\n\n\n It was this that was the immediate cause of Lafontaine’s downfall. The interest rate\nreduction which he and the rest of the German government wanted was being held up by his\npolitical interference making it difficult for the Bank to do this. So pressure was bought\nto bear and he left politics to spend more time with his family. Yet another reformist\npolitician bit the dust. Good, or rather good as long as it helps workers in Germany and\nelsewhere realise that reformism is a dead-end.<\/p>\n\n\n\n Author: ALB<\/p>\n\n\n\n Please email your comments about this article to feedback@worldsocialism.org<\/a><\/p>\n\n\n\n Back to the Politics Index<\/a><\/p>\n\n\n\n
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