By now you probably heard that in Germany, the ruling party of Angela Merkel retained its power in this weekend’s election.
However, the real story is told by what happened with the third, according to Bentley econ prof Scott Sumner. This was actually a real victory for market liberalization, and not vote against immigration — which is how many European elections are characterised whenever a rightist party does well.
I have followed German politics for decades, and it is generally pretty predictable. Both the (moderately left wing) Social Democrats and the (moderately right wing) Christian Democrats used to each get about 40% of the vote. This time the Christian Democrats got only 33.8%. So why is it called a major victory for Merkel? The key is the performance of a third party, the Free Democrats. This small third party has traditionally been liberal on social and foreign policy issues, and conservative on economic issues. In other words they are the closest thing Germany has to a libertarian party; although of course they aren’t at all libertarian by American standards, just a bit more so than the two big parties.
Usually the Free Democrats struggle to cross the 5% threshold that is required for any seats in the German Parliament. They often barely make it with 7% or 8%. This time they got 15%, which is the most I ever recall them getting. So not only was it a swing to the right, it was a swing toward the more socially liberal and free market part of the right. Now Merkel can govern without help from the Social Democrats. And given the strength of the Free Democrats, I don’t see how anyone can say this is just an anti-immigrant vote. Rather, it is a vote against socialism.
So despite the worldwide economic slump, we really haven’t seen the rejection of free markets, except among regulators and the punditocracy — but then, they always do, right?