Social Justice or Economic Folly?

It calls itself the Left Party, die Linkspartei in German, and it's making an already unusual election campaign even stranger. Made up of the successors to East Germany's communist party, the Party of Democratic Socialism (PDS), and disaffected left-wingers who split off from the Social Democrats, the Election Alternative for Jobs and Social Justice, the Left Party has attracted surprising support with its message of wealth redistribution, bigger government and offers of more for everyone, except the capitalists.

One and a half months before possible early elections in September, the new party is polling 12 percent nationwide. In eastern Germany, it has the support of a stunning 33 percent of the population, according to a poll conducted last week.

"We need a new culture," Gregor Gysi, the former charismatic leader of the PDS who is now heading the Left Party campaign, said in an interview. "We need wage increases. We have to see social costs as something positive, and taxes have to be fair."

That means, the well-off should pay more of them, according to the economic platform that the party has released. It says its suggestions will restore balance and justice to a German economy which has been thrown out of kilter by seven years of neo-liberal policies and which is structured to benefit only the rich.

"Those who earn the most, they are given tax relief, and that’s not right," said Bernd Ihme, a policy spokesman for the Left Party. "We want to make clear that it's possible through redistribution to change how money is spent and whom it benefits."

Bigger government

The list of changes the party wants to make to Germany's tax and welfare system is long. First on the agenda is the scrapping of the unpopular Hartz IV labor and welfare reforms, which were instrumental in triggering the formation of the party in the first place.

The reforms, which were put in place by Chancellor Gerhard Schröder's government, were meant to tackle unemployment, spur job creation and ease the strain on Germany's severely burdened state coffers. But to the Left Party, which balked at the cuts in welfare payments for the long-term jobless, the reforms are nothing more than "legally decreed poverty."

The party's economic ideas include raising corporate taxes, which Schröder had lowered, shortening the work week, establishing a minimum wage of 1,400 euros ($1,708) a month, bringing back a tax on stock market transactions, raising inheritance and gift taxes and reintroducing a wealth tax.

The party would increase welfare payments and government subsidies, financing it all with what it says are the 65 billion euros it would take in through the new taxes.

Roll back reforms

All in all, it would overturn most of the reforms that Schröder's Social Democratic-Green coalition put into place over the past seven years. It is also the stuff that gives economists and business leaders nightmares, since they say it has no place in the world of 21st century economics.

"We live in a globalized world," said Winfried Fuest, an analyst at the Cologne Institute for Business Research. "With those kinds of suggestions put into place, we would no longer be competitive. It’s a backwards-looking policy that economically is completely mistaken."

They say increasing the tax burden on corporations would weaken domestic and foreign investment in Germany and make an already expensive labor force even pricier. That could increase the number of firms who move production abroad because of lower wage costs and dissuade new or foreign firms from setting up shop in Germany. That, in turn, would increase unemployment and drive up the costs of Germany’s already expensive welfare system.

"We need growth, that is what will bring us jobs," said Rene Hagemann-Miksits, spokesperson for the BDI industry association. "And it's very clear that the (Left Party) program will do nothing to provide that."

His group has released a statement detailing the Left Party's plans, concluding by saying "such a program would be fatal if it ever were realized as economic policy."

Same old neo-liberal story?

But for the Left Party's Ihme, such talk is merely political posturing by groups interested more in defending their own interests than looking after the common welfare of the population.

"Those are standard arguments that we've heard for years," he said. "If you lower non-wage costs, then jobs will be created. Well, we've had two legislative periods to try that, and it hasn't happened." Now is the time to do something new, he added.

He admits that the program, no matter how well the party does in the Sept. 18 vote, will likely not be put into practice 100 percent. But that it could help influence the debate and help shift economic policy from its current less-regulated course.

According to financial analyst Fuest, it's already done that. According to him, the success of the party in opinion polls has already made the bigger parties nervous and they are already backing away from some of the previous pro-reform stances they had. The SPD added a wealth tax to its party platform, bowing to the strong political wind. Even the conservative CDU, which is largely expected to come out on top in September, has toned down talk of bitter, but necessary medicine for Germany.

"The CDU has become very cautious when it comes to announcing further painful reforms," he said. "They’re just not saying much these days."