The Economic Policy of the German Greens

ARTICLES - 22 March 2021

By Alexandre Robinet-Borgomano

The German Green Party’s victory in Baden-Württemberg’s March 14 regional elections would appear to be a decisive step in its rise to power in Germany. In winning over 32.5% of the vote in one of the richest and most industrialized Länder in the country, the Greens, who have governed Baden-Württemberg since 2011, showed that they can put forward a pragmatic economic policy combining environmental advocacy with defense of industry. At the dawn of a "super election year" in Germany, it is up to the German Greens to build a coherent economic narrative that highlights the compatibility between economic development and environmental protection.

The Greens’ conversion to realism

Founded in West Germany in 1980, the Greens (Die Grünen) were originally conceived as an anti-establishment party, an amalgam of pacifist, pro-environment and anti-nuclear movements, with an economic philosophy still very much inspired by Marxist ideology. Presenting the Grünen as an alternative to the established political parties, the program the Greens adopted in 1980 proclaimed that "industrial development and consumerist society condemn the human being to intellectual and moral decline".

The German Greens made their début in electoral politics in 1983, when they first entered into regional parliaments and into the Bundestag. But they gradually renounced their anti-establishment position, an evolution that created a division between the "Realos", who sought cooperation with other parties in order to advance reformist ideas, and the "Fundis", who rejected the idea of assuming governmental responsibilities and instead advocated for a radical transformation of politics. A subsequent alliance with the Bündnis-90 party, founded in the former GDR after the fall of the wall, did nothing to smooth the fault lines of the internal conflict which came to a head in 1998, the year when the Greens became part the German Federal government lead by Chancellor Gerhard Schröder.

Today, there is no questioning about the Greens’ participation in government. In 2020, the Greens were part of 11 of the 16 regional governments, in coalitions with the CDU and the SPD as well as with the extreme left party Die Linke - in Thuringia, Bremen and Berlin - and with the Liberals of the FDP in Schleswig-Holstein and Rhineland-Palatinate. The Greens have been in power in Baden-Württemberg since 2011, and their approach to the 2017 negotiations for the formation of the federal government coalition further strengthened their credibility in the eyes of the public.

There are varying nuances to the party’s positions as expressed in the different Länder, ranging from the eco-socialism of the Berlin Greens to green conservatism as theorized by Winfried Kretschmann, and the more activist base still maintains positions that are further to the left than those of its leaders. Nonetheless the 2018 election of Annalena Baerbock and Robert Habeck, the charismatic duo now heading the party, put a definitive end to old schisms. As Amanda Sloat explained in a Brookings study titled: Germany’s new centrists? The evolution, political prospects, and foreign policy of Germany’s Green Party, today the Greens are united behind a center-left line, seemingly giving credence to the slogan "Radikal ist das neue Realistisch" (Radicalism is the new realism).

An ecological and social reconstruction of the market economy

In a break with the Marxist overtones of their beginnings, the German Greens are now strengthening their ties to economic circles. As a case in point: in 2018 former Green MP Thomas Gambke founded "the Grüner Wirtschaft Dialog", an exchange platform meant to create links between the Greens and the German economic world. Also created in 2018, and chaired by young deputy Daniel Bayaz, the Economic Council of the Greens (Wirtschaftsbeirat der Grünen) brings together politicians and business representatives such as Martin Brudermüller, CEO of chemicals giant BASF, and Hagen Pfundner of the powerful Federation of German Industry (BDI), to discuss prospects for the ecological and social transformation of society.

Accepting the free market as a basis of prosperity is now one of the pillars of the Greens’ economic position.

This new rapprochement with industry has been accompanied by a corresponding convergence of philosophy: accepting the free market as a basis of prosperity is now one of the pillars of the Greens’ economic position. As Jens Althoff, director of the Heinrich Böll Stiftung office in Paris, explains, "the Greens continue to prioritize the market, but a market that must be regulated so that it can better take negative externalities into account, and overcome its shortcomings. The Greens’ fight is not a fight against the logic of the market: it is a fight against the rents and monopolies that prevent the market from functioning effectively".

At the 2019 Bielfeld congress, the Greens adopted the motion "An economy adapted to the future for sustainable prosperity", which contained several concrete measures to further this goal. Drawing on the work of economist Nicolas Stern, the German Greens advocate for better handling of negative externalities, for example through setting an ambitious price for CO2. With respect to the digital economy, the Greens support increased regulation of online platforms and taxation of the sector’s giants, in order to ensure free and undistorted competition in that domain.

Defending the market does not stop the Greens from advocating strong social measures, such as raising the minimum wage to €12 (from its current level of €9.50), the gradual implementation of the 30-hour workweek or the introduction of a universal basic income. The need to deal with the economic consequences of the coronavirus pandemic has also led the Greens to strengthen their social platform: in an interview with ARD last August, Robert Habeck, co-president of the German Greens, proposed increased taxation of assets or tax withholding from higher incomes to help fund the elevated levels of public expenditure linked to the pandemic.

Investing in tomorrow’s economy

The economic narrative the Greens have deployed is based on the idea that the foundations which have made the German economy successful in recent decades - chemicals, the automotive industry, the construction of machine tools - are now a thing of the past, and therefore the country must reinvent itself. Aware that Germany must transform to preserve the foundations of its prosperity, the German Greens have positioned themselves as being in support of innovation, the deployment of investment policy and the establishment of a European industrial strategy capable of supporting this transformation over time.

The most notable change in the Greens’ economic position is their new confidence in technological progress and innovation. Breaking with the skepticism with which environmentalists initially viewed technology, the German Greens have succeeded in establishing themselves as a progressive party committed to supporting business creation, one that is particularly well-represented in the German start-up scene. In conversation with the weekly publication Die Zeit, Annalena Baerbock, co-president of the German Greens and potential candidate for the Chancellery, argued for the creation of a venture capital fund financed by the State to support start-ups, as well as for the implementation of tax credits for those companies that invest in sustainable innovation. Similarly, the Greens advocate for a new European industrial strategy that would allow Europe to strengthen its sovereignty in technology, semiconductors, artificial intelligence and 5G.

The German Greens have succeeded in establishing themselves as a progressive party committed to supporting business creation, one that is particularly well-represented in the German start-up scene.

As the experience of the Greens in Baden-Württemberg has shown, economic pragmatism has now prevailed over ideology and it is difficult today to clearly distinguish a green economic policy from the policies of the other parties.

Undoubtedly, investment is the one area in which the Greens most clearly stand out from the other parties in power. As Sven Christian Kindler, the Greens’ spokesman for budget issues in the Bundestag, explains in an interview: "If we don’t invest heavily in climate protection and digitization now, we will miss the global moment, and worse, we will destroy our livelihoods... this is the time to launch a 500 billion euros investment fund to cover the next ten years. For that, we need a fundamental reform of the debt brake, so that the net investments of this fund can be financed in the future through loans". In Germany’s emerging debt debate, the Green Party’s position is clearer than its competitors. For the Green Party, the debt brake represents a particularly dangerous disincentive to investment in a country that for several years has suffered from a chronic lack of public investment - a view now shared by many economists and by the BDI.

Conclusion

In December 2020, the Federation of German Industry (BDI) published an assessment of the Greens’ economic program. If this document provides a critical view of the party’s economic position, the critique is not so much of its economic orientation as of a perceived lack of precision and concrete measures. This assessment is indicative both of the new attention business circles are paying to the Greens’ proposals, and of the party’s equivocation in the lead-up to the coming elections.

In their attempt to leave open the possibility of forming a coalition with either the conservatives, the Liberals, or the SPD, the Greens continue to maintain an ambiguous economic stance. For the Green Party, it is less a question of asserting a new competence in the economic realm than of presenting itself as a credible coalition partner. Where they have long been reluctant to take power, the Grünen are now ready to make the kinds of concessions that will allow them to assume a new prominence in Germany.

Copyright: Tobias SCHWARZ / AFP / POOL

The Economic Policy of the German Greens

By Alexandre Robinet-Borgomano

The Greens’ conversion to realism

An ecological and social reconstruction of the market economy

Investing in tomorrow’s economy

Conclusion

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