Austrian Presidential Elections and the Decline of Mainstream Parties

If there is one thing that the presidential elections in Austria show is that the mainstream political parties no longer enjoy the legitimacy to retain power in the 21st century. Norbert Hofer from the FPO, and Alexander van der Bellen from the Greens made it to the second round, while the SPO and OVP candidates didn’t make it. One might still be able to claim that all is not lost for the grand coalition, consisting of Social Democrats (SPO) and Conservatives (OVP), because the federal president in Austria is not particularly powerful as is the case in France or in the US. The president represents the country abroad by visiting other countries and receiving foreign officials; he appoints the prime ministerial candidate, who is usually the first-ranked in the parliamentary elections; and he is the commander in chief of the army, though the administrative control lies with the defense minister and the country has not fought a war since it was founded.

The people in Austria were showing their discontent with the ruling coalition government. Some people within the leading party (Claus Raidl, OVP, in ORF “Report”, 25.4.2016) have said that the grand coalition with SPO and OVP only make sense during major changes like negotiating the state treaty or joining the EU. This statement implies that the country does not have major objectives, so the people no longer see a point to support the big parties. But those standard lines are nothing but lazy establishment thinking.

The Austrian electorate are really responding to two interrelated phenomena for which the governing parties do not have a genuine answer: the neoliberalization of the economy and the refugee crisis. As part of the neoliberalization of the economy, we have to analyze the world of work. 25.7% of the workforce are part-time employed, as of 2012. This situation mostly affects women (80%). Between 1996 and 2012, the number of low-wage workers receiving up to the tax-free threshold of currently 415 euros a month doubled to 300,000. (The poverty threshold would be about 1,000 euros a month per person). For the lowest decile of the income distribution, purchasing power declined by 40% between 1998 and 2012. Over 1 million Austrians are living in poverty, which is currently defined as an income less than 60% of the median income (numbers in Arbeit&Wirtschaft 2013). This might not mean that people are missing out on basics like food or medicine. After all, these are only relative and not absolute numbers, and Austria is still a rich country, but the poverty indicator shows the dispersion of income, which is certainly increasing.

Wealth inequality is certainly increasing, as the richest 1% of Austrians (about 80,000 people) own 469 billion euros in 2013, which was larger than the GDP of 307 billion euros, and is equivalent to 37% of the national wealth (Profil 2013). That is great for people, who live off of their assets, but but means nothing to people, who rely on their labor. The number of unemployed people increased from 322,000 in 2011 to 438,000 in 2016. That is currently a high unemployment rate of 9.4% and a dismal 14% in the capital in Vienna (Kurier 2016), which is much higher than the 5% or so, which Eurostat writes about, claiming that Austria is a country with a job miracle (here is one example in ELM 2013). The Austrian job situation, which is admittedly still better than in the more desperate parts of southern Europe, has become so dismal that there are currently more people receiving welfare (162,000) than unemployment benefits (153,000). Unemployment pays about a monthly 878 euros while welfare pays only 724 euros a month, while long-term welfare recipients only get 678 euros (DerStandard 2016), which to me sounds like everything but a cozy hammock.

Upon reviewing the political pages, you find that politicians in the government are calling for drastic reductions in benefits for long-term unemployed people (especially from the conservative OVP) as if they were responsible for the poor job market. Cutting benefits in times of greater need will also backfire on the government. Leaders are also calling for curbing refugee welfare benefits, which would presumably sit well with the electorate, who only want welfare for nationals. In Oberosterreich, the regional government had proposed to slash the monthly welfare benefits for refugees from 914 to 580 euros (Heute.at 2016). I find this proposal rather troubling, because it would mean unnecessary suffering for refugees without any benefit to low-income Austrian nationals, but at least the shameful government officials then have something to claim credit for.

The welfare issue intersects with the second problem, namely the massive increase in the number of refugees, which goes beyond the capacity of the country to handle them. There were 88,000 refugee applications in Austria in 2015, and only 11,000 so far in 2016 (De.statista), which reflects the harsher border policies in Austria, and the EU agreement with Turkey to keep more refugees out of the EU.

Naturally, there are the cultural difficulties of integrating a large number of people with a different language and culture, though I think that the Austrians would still be able to handle that as they had in the past. Another difficulty is economic, because the refugees, who receive the entitlement to stay, want and have to join the Austrian labor market, which is quite stressed given weak demand. Average economic growth from 2000 to 2005 was 1.7% and only 1.3% from 2005 to 2010. In 2014, growth was a paltry 0.4% (WKO 2015). That is not nearly enough growth to provoke a lot of job creation. Employers, who are looking for cheaper ways to produce things, are also investing in more technology, which tends to put a downward pressure on labor demand. I don’t see the government at all being concerned about a major jobs offensive given that the finance minister is reaffirming his commitment to reduce the national budget deficit (Friedlnews 2016). They are also not talking about creating a universal basic income or at least increasing benefits for means-tested welfare. What they are instead doing is to double down on failed efforts toward job activation (more research of it in Eichhorst et al. 2008). Despite the growth in active labor market spending since the late-1990s, the trajectory of the unemployment rate is increasing (AMS.at 2012).

Former chancellor, Bruno Kreisky (1970-83), used to say that it is better to have a billion schilling (currency) in debt than to have one more unemployed person. He took it for granted that the state would subsidize state companies to keep them alive and retain staff. It was a very costly option, but it kept voters relatively loyal to social democracy while it lasted. As we can see, no one has been saying that today. The political price for today’s situation is high.

The helplessness of the government to address these two interrelated problems of a neoliberal economy and the refugee crisis naturally proliferates the voter support for the non-governing parties. There are currently only three realistic opposition parties in the Austrian political spectrum: The FPO (nationalist), the Greens (bourgeois left), and the NEOs (bourgeois liberal). The first two of these parties have proposed their candidate for the presidential elections, and have received substantial support. The Greens, however, were trailing the FPO candidate, Norbert Hofer, by 15 percentage points, whereby it is not clear (as I hope) whether there will be a non-right wing coalition strong enough to get the Green party candidate, Alexander van der Bellen, elected.

But this asymmetry roughly reflects the general power constellation that will be relevant in the next parliamentary elections in 2018. The Greens have a stable support base of 15% as of 2013, even though that share is unlikely to grow in 2018. The NEOs similarly only have a reservoir of maybe 5-6% support, as had been the case with the LIF party in the 1990s. Van der Bellen received 21% in the first round, which means that he got another 6 percentage points from the social democrats and the conservatives, who were frustrated with the status quo.

The FPO received 20% during the 2013 parliamentary elections and 36% for their candidate Hofer. That would mean that 16 percentage points were received from SPO and OVP. But if you look at the current polls for the parliamentary elections, the needle has clearly moved, as the FPO would securely get 30-32% of the vote (while OVP and SPO each get slightly less than 25% each), see Nationalratswahl.at. In other words, Hofer’s popularity is not a fluke. While with Van der Bellen we could say that people find an old economics professor, who has been in active politics for nearly 30 years, appealing and vote for his persona rather than his party affiliation, the same cannot be said of Hofer, who had been in politics a lot less time, in part, because he is much younger than Van der Bellen. Hofer supporters are FPO supporters, and their party reservoir is in the 30+ % range.

We should not forget that the support for nationalist parties is larger, because in times of despair it is easy to seek scapegoats, especially for the lesser educated and working class electorate, while making sound policy arguments will likely only attract bourgeois voters, who are always in the minority. With the current trajectory, it is only a matter of time until H.C. Strache, the FPO party leader, will become chancellor. I don’t know in what constellation that will happen. Maybe the OVP is more power-hungry than the SPO, and will join a coalition as they did in 2000, when the OVP got fewer votes than the FPO but still claimed the chancellorship, which was a first-time in the history of the republic. This time the OVP will have a less legitimate claim for the chancellorship, because the differential in votes would be much larger than in 2000.

Another alternative in 2018 would be to maintain the grand coalition, but with the support of the Greens, who will probably demand one or two ministries to back the continuation of the Faymann (SPO) administration. I am very skeptical of this constellation. Even though I am sure that Eva Glawischnig, the Green party chairwoman, would want to have governing responsibility, the issue is that the cost of keeping the FPO out of the government would get higher and higher. In 2023, the FPO could then get more than 40%, and when they get 51%, you can no longer ignore them. The reason why I project this is because I don’t think that the new government will solve the old problems better than the previous one. And neither do I think the FPO can solve them, but, in fact, make it worse with protectionism and scapegoating.

Maybe the refugee crisis will quiet down, assuming there is not another war in the Middle East or another drought in Pakistan or Somalia. These are pie in the sky assumptions, but I assume that they are true for now. Then the next problem is to solve the crisis of neoliberalism of which there had been many books and some speeches by left-wing leaders (Bernie Sanders, Jeremy Corbyn etc.), but not much movement. I neither think that the Austrian nor any other government will solve the problem by itself.

Yanis Varoufakis, the much scolded former finance minister of Greece, is using his elder statesman position to argue for a united European left-wing movement (Guardian 2016), whose primary goal it is to make the EU more transparent and accountable for the people, and then devise mechanisms to reduce debt and spur economic growth in Europe. He warns than inaction results in a post-modern 1930s, an eerie reminder of what could happen to supposedly stable democratic regimes, who can’t cope with their political-economic challenges of their time, and resort to authoritarianism and fascism, as we see in Poland or Hungary today.

The Austrians will decide on May 22 who will become the federal president. Whoever wins the elections, life will continue. I doubt, however, whether political stability will return in late-capitalism. There nor anywhere else in the west.

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