On September 25, 2009, two days before Germany’s national elections, the center-left Social Democratic Party (SPD) debuted its campaign mascot: the terrier. At an evening rally in Berlin’s Pariser Platz, in the shadow of the Brandenburg Gate, party workers handed out thousands of red buttons emblazoned with a black schnauzer silhouette. Accompanying the button was a small paper flyer that explained, “With the tenacity of a terrier, SPD candidates bite at the calves” of the Christian Democratic Union (CDU), their center-right opponents and the party of Chancellor Angela Merkel.

Terriers are wonderful animals and adored by Germans, but they hardly made for a compelling image of political fortitude. Nor, come that Sunday, did the SPD. Once the largest political party in Europe and the leader of the international non-communist left, the SPD rang in at just 23 percent of the vote, down eleven points from 2005—a stunning collapse in a hyper-stable political system, where no party had ever dropped more than five points between elections. The SPD lost support in every age group, every income level, and virtually every federal state. In parts of former East Germany, it lost not only to the CDU but to the upstart, far-left Linke party, a synthesis of ex-communists and SPD dissidents. As a result, the SPD, which had been the CDU’s junior coalition party since 2005, is out of government for the first time in over a decade, with no clear leadership, mandate, or strategy for regaining power.

Though the results would not arrive for two days, the rally already felt like a political wake. Not a mile east of the site where fourteen months Barack Obama brought out 200,000 adoring fans, the SPD barely filled the modestly sized Pariser Platz. About ten thousand people appeared for what was supposed to be the biggest event of the campaign. According to many critics, the poor turnout—at the rally as well as the polls—was the fault of the party’s candidate for chancellor, Frank-Walter Steinmeier, a dough-faced bureaucrat who had risen through the SPD ranks as an advisor to former Chancellor Gerhard Schröder and was only now making his first run for public office.

Steinmeier is a horrible speaker. His voice rises and drops in volume, never modulation. He emphasizes random words and blows through his signature lines. “It’s a great view from up here,” he told the crowd from the podium, to the tune of U2’s “Beautiful Day.” “We can do more! I am ready. Are you too?” Muted claps, a few cheers. “Germany can have a good future! Everything is possible!” Despite polls showing Merkel’s party pulling away that weekend, Steinmeier insisted that “the CDU grows more nervous by the day; they’re shrinking like ice in the sun.”

To be fair, Steinmeier was only one of the many captains of the sinking SPD ship (and as the new head of the party’s Bundestag caucus, he still is). Aside from the telegenic Schröder, the party has run through a platoon of sub-par leaders of late: the 69-year-old Franz Müntefering, who looks like a Bond villain and who stole the spotlight from his party when he moved in with his 29-year-old girlfriend just before the election; Kurt Beck, a well-meaning but naïve provincial who ran the party for just over two years before getting the boot; and Peer Steinbrück, an economics wonk who did his best to stay outside the fray, though too often found himself in the middle of it. All of them sit alongside Schröder in the political center, but they could not be more different in spirit. Schröder is an inveterate competitor who won’t play golf because there is no direct opponent, while the 53-year-old Steinmeier famously still stays in his childhood bedroom when he visits his parents.

But the SPD’s leadership problems are just the surface, and the deeper issues extend well beyond Germany. Like center-left parties in France, Italy, the Netherlands, and most of Scandinavia, the SPD suffers from the crisis of purpose that the late political scientist and parliamentarian Ralf Dahrendorf predicted a quarter-century ago: it has become the victim of its own success, fighting for a social democracy that Europe has already achieved. Which is not to say that new challenges do not exist—the IT revolution, globalization, European integration, and the splintering of the working class are rewriting the terms of the European social contract, the very heart of the social-democratic movement. But the SPD is stuck fighting the battles of a previous war. “The SPD still wants to protect workers and jobs, but we’re in a post-social democratic party period,” Jackson Janes, executive director of the American Institute for Contemporary German Studies, said.

Even worse for the SPD, voters now believe that the center-right CDU, at least with Merkel at the helm, is the more competent defender of the welfare state. Schröder fought for, and won, painful labor-market reforms in the early 2000s, which introduced greater workplace flexibility but also exacerbated the gap between rich and poor, driving hundreds of thousands of Germans into poverty. It was Merkel who insisted, in response, on shoring up the welfare state, and it is Merkel who, in the current governing coalition with the free-market Free Democrats, is resisting pressure to cut taxes (though she did accept some cuts as part of the coalition deal). “Angela Merkel is the opposite of the typical CDU member in many ways,” said Daniel Friedrich Sturm, a correspondent for the national newspaper Die Welt and the author of Where Is the SPD Headed? If Merkel has an American analog, it is New York Mayor Michael Bloomberg, a conservative by convenience who wins by tacking to the left of his left-wing opponents.

Faced with an opposition that had embraced critical elements of its own vision, the SPD failed to present an alternative. Steinmeier & Co. spent the campaign sniping at the Christian Democrats, which makes the terrier mascot more appropriate than the party intended.

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A few days after the vote, I met with analysts from the Friedrich Ebert Stiftung, a think tank aligned with the SPD. The mood in the headquarters, located just west of Potsdamer Platz on the leafy Landwehr Canal, reminded me of the days just after the 2004 U.S. election, when an unpopular war was not enough to stop George W. Bush from trouncing John Kerry and solidifying GOP control in Washington. Then as now, the left was shell-shocked by the results and in a panic about where to go next.

Everyone at the meeting had his or her own explanations for the debacle, and all of them were probably right. Christoph Pohlmann, a young analyst who used to cover South Africa for the Stiftung, told me, “Part of the problem is that the SPD is always the program party, and the CDU is the power party”—meaning that the SPD is great at coming up with ideas, and not so great at implementing them.

It is an old story. Since its emergence in the wake of the 1848 revolutions, the European social-democratic movement has been caught between a radical ideology and a reformist practice. Ferdinand Lassalle, the father of the German wing, founded his General German Workers’ Association on the premise that true human emancipation depended on the abolition of capital and property rights, a platform so close to communism that Karl Marx accused him of plagiarizing. Politically, however, Lassalle was a pragmatist. Rather than opposing the state, as Marx did, he saw it as a tool for winning more rights and benefits for workers, and he did not see a contradiction between utopian socialist ideals and gradualist politics.

Lassalle’s vision became the basis for the German Workers’ Party, the direct antecedent to the SPD. At the 1875 Workers’ Party conference in Gotha, a number of factions united behind the “Gotha Program,” which called for the party to use legal means to achieve a socialist society and which was notably criticized by Marx for its confused reformism. Yet Marx, who died in 1883, would have been pleased by the next landmark party congress, at Erfurt in 1891. There, along with changing its name to the SPD, the party adopted Marxism as its theoretical core. “We have the satisfaction that Marx’s criticism has taken effect completely,” Friedrich Engels boasted.

For a while the Social Democrats achieved that rarest of qualities in modern politics: hipness.

But the Erfurt program revealed the tension between a unifying utopian vision and reformist politics that, to this day, deeply divides left and center. From nearly the beginning, the reformists were driven by more than a theory. The gradual spread of industrialization’s benefits made workers believe they had a lot more to lose than their chains. They consistently backed labor-market reform, and all but a hard core eschewed the SPD’s radical elements. With 2.5 million union members in 1914, the urge for gradual change instead of revolution was unmistakable.

These tensions split the party apart during World War I, when the SPD leadership backed war loans to the government, a move supported by the patriotic working-class masses. In response, the radicals broke away to form their own party, the Independent Social Democratic Workers Party of Germany (USPD). Even combined with the communists, the USPD never represented more than 10 percent of the country. Yet during the Weimar years, when the SPD often stood as the sole defender of the fragile democratic state, the far-left proved a fatal foe. Suddenly the SPD had to run things, not just criticize them; the job of attacking the system fell to its proliferating enemies on the far left and right.

The Nazis banned the SPD in the 1930s, and after the war the party had a hard time getting back to its former size. But the CDU grew stale in the tumult of the 1960s, and in 1969 the SPD, under West Berlin Mayor Willy Brandt, finally won the chancellorship. These were the party’s glory years. Brandt’s charisma drove a new cohesion of center and far left—young radicals poured into the party rolls, inspired by his conciliatoryOstpolitik approach to East Germany and his embrace of new social issues such as the environment and human rights. In 1972 two-thirds of its new members were under 35. For a while the party achieved that rarest of qualities in modern politics: hipness. At the end of 1976, it had 1,022,200 members.

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As the SPD solidified power, however, troubles emerged. A global recession, oil shocks, and growing government debt threw into question the viability of Germany’s mix of rapid growth and a thick social safety net. The situation was similar to that of left-leaning parties across the developed world, particularly the American Democrats and British Labour. Not coincidentally, each of the three parties fell out of power in the early 1980s, not to return until a new class of leader emerged in the early 1990s.

Bill Clinton, Tony Blair, and Gerhard Schröder were each a product of the 1960s; each entered politics in the early 1970s; and each came to power believing that center-left politics could only survive through a dramatic reform of the social-welfare state, the “Third Way” theory. All three were handsome, TV-ready candidates who understood the importance of political triangulation among the left, right, and center. But their reforms were driven by more than political opportunism. Particularly in Germany, rigid labor markets combined with the onerously expensive welfare state to create a perverse incentive for workers not to work, and for employers not to hire new workers. Unemployed workers received fantastic benefits on everything from rent to train tickets; employment removed all the benefits. At the same time, with labor costs high and layoffs sharply restricted, employers were uneasy about adding to their rolls. All three leaders tackled the labor market head on during the 1990s. But while Clinton and Blair reaped political bounty, Schröder’s reforms destroyed him—and sent the SPD into a tailspin.

Schröder’s most significant reform was to cap the country’s lavish unemployment payouts at twelve months—after that, “long-term” unemployed workers receive about $475 per month along with rent and utility assistance. He also made it easier for employers to lay off workers and harder for the unemployed to refuse a job—say, because they thought they were overqualified—and still get government benefits. And the party’s rightward tilt continued after Schröder left. Under its coalition with Merkel, the SPD supported increases in the value-added tax and the minimum age of pensioners, both of which further sullied its reputation with the left.

Given Germany’s persistently high unemployment and rapidly offshoring industry, reforms were necessary. But Schröder never compensated for their negative effects. Cutting benefits does not in itself create jobs, and so in the short term Schröder cut adrift hundreds of thousands of workers, particularly in depressed regions such as rural Saxony. Half a decade later, the results are a more dynamic labor market, but also fast-growing economic disparities between rich and poor, East and West. Germans expect that sort of treatment from the CDU, but not the SPD. To the average German, Schröder seemed to have swallowed wholesale the conservative stereotype of the shiftless, unemployed worker living off the state, a stereotype completely out of sync with social democracy.

But Schröder’s problem was as much about politics as policy. For one, Clinton and Blair never had to deal with a powerful left within their own party. One of Schröder’s first challenges in office came from his finance minister, Oskar Lafontaine, a fiery leftist known as “Red Oskar.” Lafontaine publicly attacked Schröder’s Third Way policy proposals; Schröder pushed back, and won. Just months after taking office, Lafontaine resigned from the government and eventually formed his own party, the Linke. But thousands of Lafontaines remained in the party ranks, and they took to the streets against Schröder’s labor market reforms—one rally in Berlin drew 200,000 people. Yet in the face of controversy, Schröder seemed indifferent to the political needs of his own party, famously telling voters that there was no such thing as a left or right economic policy, only a successful or unsuccessful one. Within the party he was derisively known as der Genosse der Bosse, or “the bosses’ comrade.”

So while Schröder may have righted the German economy, in doing so he undermined his own party’s reason for being. Unlike the Democrats or even Labour, the social-democratic movement is grounded in a vision of progress toward social and economic equality. The Schröder reforms, however, were premised on the idea that something was fundamentally broken in the country, that the SPD as a movement was dead, and that a new path was needed. “How can you have deep reform when your myth says that things will keep getting better?” asked Herfried Münkler, a political scientist at Berlin’s Humboldt University and an expert on the history of German mythmaking. You can’t, of course. “Now they’re just technocrats,” he said.

The Social Democrats can take some consolation in knowing that they are not alone. Outside of the Iberian peninsula and, for the moment, Greece, the European center-left is in retreat everywhere, from city councils to the European Parliament. The Iberian exception is instructive. There, nearly a half century of fascist, ultra-conservative rule delayed the arrival of the secular, social-market modernity that has left social democrats in the rest of Europe grasping for relevance. Otherwise, the left has yet to find a compelling plan to steer the social-market ship it built. “They just reach for the old nostrums,” said Jeffrey Anderson, who directs the Center for German and European Studies at Georgetown.

Unlike Germany, however, the rest of Europe does not have a revitalized far-left. Lafontaine is everything Steinmeier is not: a great speaker, a campaign veteran (he was one of the youngest governors in German history), and an ideologue unburdened by the nuances of center-left politics. “We want to overthrow capitalism,” he told Der Spiegelin May 2009. “We will change the economic order.” During the campaign, his Linke party demanded immediate withdrawal from NATO and Afghanistan, the repeal of Schröder’s labor reforms, and a national minimum wage of eight Euros per hour, or roughly $12.

Passion is also the Linke’s weakness—it has never been more than a salve on wounded left-wing nostalgia, while the vast majority of Germans abhor its communist roots. Nevertheless, Lafontaine’s convictions, along with deep frustration in the East, did his party well. After cruising at 9-10 percent during the campaign, support rose to 11.9 percent on election day. Lafontaine later resigned as head of the party amid rumors of ill health, but his absence does little to resolve the dilemma of the German left. For many Germans, the Social Democrats no longer stand for social democracy—69 percent of voters say they do not know what the party stands for at all—yet it’s unlikely that more than 15 percent would ever turn to the far-left. History, in other words, has repeated itself. The SPD retains the plurality of left-leaning voters, but it is chronically hamstrung by challenges from dwarf parties at its wings. Only, this time, its membership is a small fraction of its former size.

Meanwhile, the SPD leadership is caught between the legacy of the Schröder era and the newly complex political landscape. Does it tack to the left and try to co-opt the Linke, but also cede the center to Merkel? Or does it burrow into the middle and try to beat the chancellor at her own game, but risk further alienating its left wing? And that is just the political side of the equation. More fundamentally, the SPD leadership has yet to explain what, exactly, social democracy—and the Social Democrats—mean in the 21st century.

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The SPD is headquartered in the Willy-Brandt-Haus, a glass-and-steel wedge a few blocks west of the Jewish Museum in Berlin’s Mitte District. Its center is hollowed out, like a corporate atrium, and even in the middle of a summer day the lower levels are cast in a twilight gloominess. This is where Steinmeier addressed his supporters after September’s election, and it is where, a few weeks earlier, I went to find out how the party was dealing with its own decline.

There I met with Benjamin Mikfeld, the 36-year-old director of the SPD’s planning and communications division and a rising star in the party bureaucracy. Coming from a country where political messaging has been honed to a fine and deadly art, I was surprised at Mikfeld’s blunt assessment of his own party’s situation. “We hear people saying, ‘We don’t know where the SPD stands,’” he said. “Our programs get high approval ratings, but the party doesn’t.” The problem in 2009, in his opinion, was that after four years of a relatively pleasant governing coalition between SPD and CDU, Steinmeier was unable to demonstrate what set his party apart, or even what made him different from Merkel. “Steinmeier and Angela Merkel are just very similar people, and so some voters don’t see a reason to back him,” he said.

The nature of politics in Germany is changing. Spurred on by the fragmentary nature of the Internet, young voters want to pick-and-choose political identities.

If the party has a future, it will be dictated in part by people such as Mikfeld: younger members who are more to the left than their centrist elders, but forgo the lockstep nostalgia of the Linke. Mikfeld himself was openly critical of the party’s Third Way period. “The result,” he explained, “is, no one knows what the party means.” Individually, young people find it hard to make an impact in the party. But like many SPD leaders, Mikfeld’s first steps up the party ladder were in the Jungsozialisten, or “Young Socialists,” an organization similar to the Young Democrats in the United States. The Jusos, as they are called, were a critical tool for incorporating the student radicals of the 1960s and 1970s, and since then have identified themselves with the party’s left wing. Not surprisingly, many of the Jusos now want to see the party move to the left, either absorbing the Linke or tightly aligning with it for the next election.

But that does not make a leftward tilt inevitable. In fact, while the Jusos are political progressives, structurally they play an important role in conserving the party status quo. Their size and power within the organization mean that aspiring SPD leaders have to get involved at an early age, and the more time and energy they commit the better. That is a great way to lock in future growth, but it also locks out new ideas and outside influence. Unlike in the United States, mid-career transfers—say, from law or the nonprofit world—into politics are almost unheard of. As a result, the party moves very slowly, even when dramatic changes in direction are needed.

Ironically, the Jusos also make it hard for the SPD to grow its ranks among the country’s youth. The nature of politics in Germany is changing; spurred on by the fragmentary nature of the Internet, young voters want to pick-and-choose political identities, with flexible organizations that can accommodate varying levels of interest and commitment. Not only is that not part of the SPD’s current game plan (or any other major party’s), but the SPD does not even recognize the Web as a political challenge—or opportunity. “We have a classic membership structure,” said Mikfeld. “We have local and neighborhood organizations, and they hold weekly meetings. So we don’t need the Internet to communicate so much.” And he insisted that after seeing the rolls of young members drop for decades, the party was now seeing a flood of interest—“the under-25s are more into the SPD, especially young women,” he said. The poll results, though, speak for themselves. The party came in third among young voters, behind the CDU and even the once-stodgy Free Democrats.

So if the SPD continues to muddle through, without redefining itself one way or the other, what does that mean for the German political landscape as a whole? In the weeks after the election, pundits chattered about the “Romification” of German politics, that with the SPD slipping and the Free Democrats, Linke, and Greens ascendant, perhaps the people’s party model was a thing of the past. If the SPD remains stuck with election results in the low twenties, that might not be the worst outcome; shorn of its working-class base and social-justice raison d’etre, it could settle into being the party of the post-ideological middle-class left. But longtime Germany observers doubt that is where things are headed. “I’ve been hearing slogans about the end of the Volkspartei for 30 years,” Janes said.

Instead, he said, there will be a cleaning of the SPD stables. Steinmeier, Münterfering, and their generation will have to go, and younger leaders—such as the new party chair, Sigmar Gabriel, or Andrea Nahles, the new general secretary—must come to the fore. Nahles leans further left than Gabriel, but both have signaled their openness to working with the Linke and, in general, moving the party away from the remains of Third Way centrism. Where they will take it remains an open question.

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If the SPD is a victim of its own success, who cares if it implodes? And if the CDU is bent on aping social democracy anyway, is the SPD even necessary? It won’t be, assuming things stay the same. But don’t count on that. The CDU’s flirtation with centrism is largely due to Merkel, and she will not last forever. Her potential successors, particularly the charismatic defense minister, Karl-Theodor zu Guttenberg, are mostly free-market fundamentalists, and they want nothing more than to dismantle the social-welfare state. Zu Guttenberg said as much in a white paper leaked a few weeks before the election.

Moreover, social democracy may have settled the issues of industrial society, but it did so just in time for industrial society to give way to a globalized economy, one with its own complicated and pernicious effects on labor and social equality: immigration, fluctuating employment levels, and offshore outsourcing, to name a few. “We heard the same thing in the 1990s, that the SPD was a victim of its own success,” said Pohlman of the Ebert Stiftung; “but in any case I believe the social question is coming back.”

If it does, it will be in a different form: less a question of how to protect workers from their bosses and more of how to protect workers from cheaper labor halfway around the world. There is no obvious answer to these challenges, but the free-market fundamentalists of the CDU and the Free Democrats—as well as the populist, anti-globalization far-left—have left the field wide open for the SPD to provide a realistic solution grounded in a new vision of social equality. It is something that smart people at the Ebert Stiftung are thinking hard about these days. For the party’s sake, folks in the SPD better be doing the same.