Joining The Third Way

By JORDAN BONFANTE/BONN

Gerhard Schroder loves New York. His wife Doris, 35, a former radio journalist whom he married last fall, loves it even more, having lived in Manhattan as a single working mom in the early '90s. "In fact, my seven-year-old stepdaughter Clara is an American, because she was born in the U.S.," Schroder bragged to friends at a political bash in Hanover. "And Doris is always telling me, Let's go live in New York!"

Doris should not expect her husband to be packing his bags anytime soon. The odds are better than even that in the election this September, Schroder, 54, could become Chancellor of Germany, ending the almost 16-year reign of Helmut Kohl. As the latest member in the growing ranks of so-called Third Way leaders, Schroder hopes to emulate the success of left-of-center politicians like Bill Clinton and Tony Blair, who won office by scrapping traditional big-spending, big-government ideologies in favor of the free-market solutions advocated by their right-leaning rivals.

Wary of what he calls "philosophical catchwords," Schroder does not refer explicitly to the Third Way. The phrase seems to mean not simply a compromise between right and left but a synthesis of fiscal conservatism with social responsibility that can appeal across a broad middle. Schroder recognizes the idea in the rise of a like-minded international fraternity. "There's a mainstream of modern social democratic thinking, trying to find answers to the new questions arising from globalization," he says. "The main question is balance: how to modernize the society and modernize the economy and have social security--how to keep that balance."

As the standard-bearer of the Social Democratic Party, Schroder's slogan may be the prosaic "New Middle," but he has discarded years of leftist orthodoxy and learned from the mistakes of his predecessors. In 1990 the SPD promised to slow down the privatization of former East German industries to protect the workers; Schroder now preaches the need for the private sector to become more competitive by cutting labor costs. In 1994 the party proposed higher taxes on middle- and upper-income families; Schroder wants to cut the highest income tax rate from 53% to 47% and reduce corporate rates from 45% to 35%.

This past May, at an SPD issues conference in Cologne, odes to such Third Way themes as restructuring and self-reliance filled the air. Concluded Schroder: "The New Middle appeals to all those who want to grasp the initiative and experience the growing flexibility of the labor market. The New Middle appeals to those who want to fulfill the dream of self-employment, who are willing to take risks."

The New Middle is also intended to attract the growing number of young voters who are in a mood for change and are distressed by Germany's punishing 10.2% unemployment rate. Schroder's stress on "modernity" and technological "innovation" is directed at a new class of voters, independent-minded young entrepreneurs and technicians. So far, the strategy is paying off: current polls give Schroder a 16-point advantage over Kohl in the popularity ratings, leading 54% to 38%.

If Schroder's tech-tinged centrism bears some striking resemblances to Blair and Clinton, it is not accidental. The German hails Blair's emphasis on retraining workers instead of letting them live on the dole. Schroder admits that he has modeled his run on Clinton's 1996 campaign emphasis on "jobs and the middle class." The two also share a biographical affinity as self-made men who rose from humble, rural beginnings.

Some wonder whether he can deliver on his particular brand of Third Way promises. Unlike Blair's Labour Party, the SPD has not undergone an official ideological conversion, leaving Schroder the pragmatic flag bearer of an otherwise unchanged party in terms of both personalities and priorities. Schroder's best broadsword for beating back the party's left would be a resounding--and highly personal--election win. His freedom of action, though, will still depend on which parties form the governing coalition after the votes are counted.

Insiders believe that if the election should be close, Schroder would welcome a grand coalition, not with Kohl personally but with Kohl's Christian Democrats. That would give Schroder the leverage to control his party and put through pragmatic economic reforms along U.S. and British lines. And that is the direction he should follow if he is really listening to the majority. According to opinion polls, Germany's frustrated voters say they want the two big parties to work together to find a middle way out of the country's malaise. Kohl's record shows that he cannot be counted out. And if he closes the gap and forces a close race, a grand coalition may be exactly what the voters will get.