But buffeted by two oil price shocks, in 1973 and 1981-82, and unable to stem the rapid rise in unemployment, the SPD lost electoral favor. For 16 years, from 1982 to 1998, the SPD was consigned to the political wilderness while Chancellor Helmut Kohl of the rival Christian Democratic Union (CDU) reigned supreme. Kohl also lured SPD supporters by adopting some of the social justice agenda: more generous unemployment benefits and new a child-rearing allowance. [...]
Schröder’s major initiative was the so-called Hartz reforms, which reduced benefits for unemployed workers and so pushed them harder to look for new jobs. As a result, workers who could not retain their privileged positions in Germany’s best-performing firms accepted low-wage temporary and part-time “mini” jobs in the low-productivity services sector. Such workers fell into a trap of low earnings and increasing economic insecurity. Unsurprisingly, they steadily transferred their allegiance from the SPD to other parties, including what now is called the Left Party, which promised to work harder for workers’ protections and rights. [...]
But Schröder aggressively promoted a narrow German national interest in European affairs. He fought for national voting rights in the Council of Ministers. To protect the German automaker Volkswagen, he blocked a European Union proposal for the reform of corporate takeover legislation. Schröder’s parochial interest was motivated by his allegiance to Volkswagen, on whose supervisory board he had sat as governor of the state of Lower Saxony. And while Schröder rightly opposed the European Central Bank’s excessively tight monetary policy and the European Commission’s mindless pursuit of fiscal austerity, he sought only a German exemption rather than a constructive change in rules. [...]
The SPD’s intellectual influence was particularly insidious in the area of “labor market reforms.” In October 2014, Renzi announced what was to be his singular achievement: the Jobs Act. Much like the Hartz reforms, the act weakened workers’ rights and, despite claims of protective provisions, reinforced the tendency toward jobs with insecure tenures. Italian governments before Renzi’s had implemented similar reforms, which indeed increased employment. But the evidence from the past reforms was that they dulled the incentives for employers and employees to increase productivity and, hence, contributed to the steady decline in Italian productivity growth. Renzi’s Jobs Act seems destined to prolong Italy’s near-zero productivity growth.
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