Lessons from Schroder

“A politician thinks of the next election; a statesman of the next generation,” said James Clarke, an American theologian and author. By the standards of Clarke, former German Chancellor Gerhard Schroder, who attended the Jeju Forum in May, is a statesman. He was elected chancellor for the first time in 1998. In the 2002 election, he was reelected on a promise not to cut social welfare.

After a brief recession in 2001, however, Germany faced another downturn accompanied by low growth, high unemployment, sluggish domestic demand and decreased exports. Germany, which used to play the role of a driving force behind the European economy, had become “the sick man of Europe.”

The German ailment was a structural problem: a rigid labor market, government intervention, regulations on corporate activities, excessive social security programs and more than $1 trillion in unification costs.

The policies were appropriate for the ideology of the Social Democratic Party (SPD) of Germany, whose power has come from union support since the Weimar Republic. The republic itself was a regime established by the Council of the People’s Deputies, behind the SPD.

For the SPD to downsize social security programs, minimize market intervention and reform the sclerotic labor market - in West Germany or in unified Germany - was a huge gamble. Schroder, however, chose that path.

Risking a defeat in the next election for the sake of future generations, Schroder started a historic reform known as Agenda 2010, which was announced in 2003. It was made public only two years ahead of the general election. A politician would have been intimidated to do so, but Schroder, a statesman, did it.

That is the contrarian leadership of pushing forward a policy that will serve the next generation and the country’s future in the face of public protests. A contrarian takes a position or attitude contrary to the mainstream and is the opposite of a populist.

It was destined that leftists in the SPD would vehemently resist Schroder’s makeover and the labor unions threatened a general strike. Schroder himself was criticized as a traitor of socialism.

Hans Eichel, finance minister in the Schroder administration, took measures that would never be popular. He cut the income tax by 25 percent, reduced medical subsidies and trimmed the pension and unemployment subsidies. He also lifted the starting age of pension recipients from 65 to 67.

That was free market philosophy in line with the European Union’s Lisbon strategy. The reform’s title, Agenda 2010, also came from the year that the Lisbon Strategy would be completed.

That was the largest cut of social welfare spending in Germany since World War II. As expected, the plan faced a strong protest amounting to a rebellion within the SPD. This time, Schroder countered with a threat that he would resign without naming a successor if the party did not support the agenda.

About 500,000 protesters staged demonstrations in Koln, Berlin and Stuttgart. But labor unions could not stage strikes because the Constitution barred them from holding walkouts for political reasons.

Schroder resigned from the SPD chairman post after a vote of no confidence in the party and served only as chancellor. And he moved up the election scheduled for 2006 to 2005. The SPD, as expected, suffered a crushing defeat in the election and the Christian Democratic Union of Angela Merkel won power.

But Agenda 2010 was a great success. Unemployment decreased, exports went up and the economy recovered. Germany was no longer the “sick man of Europe.” By pushing ahead with economic and social reforms - delayed for a while since unification - Schroder opened a flower path to Merkel. Merkel owes half of her popularity to Schroder.

Germany already had a precedent for a contrarian leader. Konrad Adenauer, the first chancellor of Germany, decided to reinforce the country’s military, provoked by the 1950-53 Korean War and a recommendation by the United States.

But France and England, as well as other neighbors, protested and the German people, tired of war, also opposed the idea of rearmament. In the middle of chaos, Gustav Heinemann resigned as minister of the interior after famously saying, “God took arms out of our hands twice; we must not take hold of them a third time.”

Adenauer’s response is equally famous: “God gave us brains to think and hands to act.” Heinemann, then, changed his affiliation to the Social Democratic Party and was elected as president in 1969.

Our president and the government are stuck in the populism of Korean politics, while crude insults fly among political circles and civic groups go out to stage demonstrations whenever they have a chance. From us, Germany, which has the proud legacies of Schroder and Adenauer, deserves respect.

Unless a contrarian leader emerges in Korea and carries out a grand reform of politics, society and the economy for the next generation, the future of this country will only be gloomy.

JoongAng Ilbo, May 29, Page 35

*The author is a senior columnist of the JoongAng Ilbo.

by Kim Young-hie