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Fareed Zakaria GPS

What's Behind Bare Shelves And High Prices In America; Where Have All The Workers Gone?; How Does Political Furor In Poland Relate To One Of The Biggest Fears About The Political Future Of The U.S.? Aired 10-11a ET

Aired October 17, 2021 - 10:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[10:00:29]

FAREED ZAKARIA, CNN ANCHOR: This is GPS, the GLOBAL PUBLIC SQUARE. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

(BEGIN VIDEOTAPE)

ZAKARIA: Today on the program, your supermarket bill is higher than it used to be. The car you want isn't available at the local leadership. And service at your favorite restaurant is molasses slow.

Why is all of this happening? We'll look at the massive logjam of container ships off America's coast. And we'll ask about those help wanted signs you're seeing everywhere. Why aren't Americans getting back to work?

Also, a new Warsaw uprising. Tens of thousands of Poles have turned out to express their anger, this time against their own government. I will ask Anne Applebaum what is happening in a country that many fear has turned into an illiberal democracy.

Finally, following the money all the way to South Dakota. Why in the world do the rich and powerful stash their wealth there? We'll explain.

(END VIDEOTAPE)

ZAKARIA: But first, here's "My Take." Just weeks after the tragic fall of Afghanistan, something important happened in the other country where America conducted a great nation-building experiment over the past two decades. Iraq held elections, which were mostly free and fair. Assuming this process leads to the formation of a new government, it will be the sixth peaceful transfer of power since 2004.

Although turnout was at a record low, this election marks real progress. A senior Iraqi official described it to me as a political earthquake. To recap, 18 years after America's invasion, which ushered in an era of chaos, civil war and rise of ISIS, Iraq's democratic system has endured. Elections have become routine, political parties compete in horse trade, and there is even a degree of pluralistic media and an increasingly assertive judiciary, not quite free and independent by Western standards but one that is showing some progress.

The same senior Iraqi official described the results as a political earthquake because he characterized them as a defeat for militias and a victory for the Iraqi state. You see after Iraq's army melted away in the wake of the 2003 American invasion, political power brokers and parties created their own armed militias.

Over time, the Shia militias grew in strength, especially when they were called upon to fight ISIS and became a kind of powerless state of their own. Many had close ties to Iran. But in this election by one count parties with militias went from 45 seats to under 20.

The second seismic aspect of the election has been the rise of Sunni participation. Sunnis, the minority group in Iraq, have been the most disaffected within the political system. They tended to be cynical by voting and they remain disgruntled. In the past they have on occasion fueled insurgencies. But this time they voted, managing to concentrate their votes in fewer parties.

"Al Monitor" estimates that if a few of these leaders can ban together, a unified Sunni bloc would have 50 seats in Iraq's 329-seat parliament, which would give it greater political power than it has had since 2003.

The big winner of this election is Muqtada al-Sadr, the fiery anti- American radical cleric whose militia battled American troops in the past. Now, however, Sadr has transformed himself into a political player who works within the Iraqi system. His rise to power could now force him to disband some of his own militias and support the state more strongly. There are signs he will do just that.

Interestingly, Sadr succeeded in this election through old-fashioned organizing, grassroots efforts and a smart forward-looking communication strategy. His party used new election laws effectively and actually created an app that told its supporters where and when to vote, thus efficiently distributing votes to gain maximum representation. Muqtada al-Sadr has come a long way from his days as a violent revolutionary and has gradually assuming a role as a canny party boss.

[10:05:03]

The third takeaway from the election is that despite Iranian religious, political and military influence in Iraq, pro-Iranian parties did not fare well. That same senior Iraqi official said whatever else one might say about Muqtada al-Sadr, he is clearly an Iraqi nationalist who does not like any foreign interference from any side in the country.

I asked the official what explains Iraq's relative success, and he's the first to acknowledge it is relative and tentative, he pointed to two large factors. First, after the fiasco of America's early policies in Iraq, strenuous efforts were made to incorporate all political groups into the political system. He said that one of the un-heralded successes of the surge, led by that great odd couple David Petraeus and Ray Odierno was to bring many of the Sunni militias back into the fold.

That political outreach was in marked contrast to policy in Afghanistan which from the start ruled out any Taliban participation in the political system. The second he said was the battle against ISIS. That struggle really brought the country together, he said. Iraq has always had a sense of being a nation and a polity but this deepened that identity and when we prevailed gave us all pride in that achievement.

The official cautions that Iraq's democracy remains fragile. Corruption is undermining the legitimacy of the state and the political system. For now he said the urgent challenge is that the losers in this election have to accept their loss and not resort to violence or extra constitutional means. Yet he sees encouraging signs. "We Iraqis have learned that we have no alternative but to handle our differences through politics, to trust in elections, and above all, to compromise, compromise, compromise."

Hmm. The losers should accept their loss and all parties must compromise. Who could have imagined a decade ago that Iraqi politics might provide some useful lessons for American democracy?

Go to CNN.com/fareed for a link to my "Washington Post" column this week. And let's get started.

Last month Costco announced it was reinstating limits on how much toilet paper you can buy. Chip shortages are bedeviling companies that make everything from computers to cars to cooktops. And you might want to start considering beginning your holiday shopping today, otherwise, you might not get what you want.

What in the world is going on? This is meant to be a recovery. Well, David Lynch wrote a terrific piece in "The Washington Post" explaining exactly that. He joins me now.

Welcome, David. So I'm in New York. I want to buy something. It's on the Web site. I get it. Why does it not get to me within the amount of time I'm used to getting it by?

DAVID LYNCH, GLOBAL ECONOMICS CORRESPONDENT, THE WASHINGTON POST: Sure. Well, at the moment whatever you order is probably sitting in a shipping container that's stuck on one of the several dozen ships, as many as 60 or 70 ships. They are anchored off the coast of Southern California just waiting for a spot at the dock to come in and unload.

But this has been going on since the start of the pandemic. You know, from the factories in Southeast Asia through the ports on the west coast of this country, to the trucking firms, the rail yards, right up to your doorstep, there have been problems one after another.

ZAKARIA: And each one feeds the other, right? So explain what happens. So as you said, there are all these ships waiting there. They can't get a spot. But now the trucks that have been waiting for my -- you know, for the ship containing my goods is now off-schedule, right?

LYNCH: Exactly. This system, you know, it sounds on the one hand the supply chain like the simplest idea. We're really just talking about moving boxes from point A to point B. But in practice it turns out to be devilishly complex. And the system works quite well under normal circumstances. And it's built to operate a little bit like runners in a relay race. I run my lap. I hand the baton to you, you run a lap and so on.

But if when I finish my lap, you're not there waiting to take the baton, it doesn't matter how fast the next guy is, the system grinds to a halt. And that's what we are seeing with the supply chain. Those ships can't get to the docks. When they do, it's terribly crowded. The trucks that normally get in and out in the blink of an eye take forever, and the same thing happens at the rail yards and the breakdown feeds on itself.

ZAKARIA: Is there a kind of regional cause to this, what's going on right now? Or is it just so complicated one can't even pinpoint a place where it all started?

[10:10:09]

LYNCH: Well, the original sin is really the change in consumption patterns that occurred as a result of the pandemic. You go back to last year when many of us were trapped at home for a long time. We all stopped going out and spending money on services, at restaurants, ballparks, movie theaters, concerts. And we all, many of us started ordering more stuff on Amazon, Walmart, and elsewhere, laptops, furniture, clothes, what have you.

And so if you look at the nature of the economy, services always dominates the U.S. economy. Makes up about 70 percent of spending. But the goods side of things, goods spending went down for about four months, surged right back up and now exceeds pre-pandemic levels. Services spending is still way down. So the nature of what we're buying has changed, and we've got a supply chain that's set up for an economy that no longer exists. We're in a new world.

ZAKARIA: And you point out that our entire supply chain is built for efficiency, not resilience. Explain what you mean.

LYNCH: Sure. During the whole era of globalization, companies increasingly prioritize making things as inexpensively as possible. That's the whole logic behind these global supply chains that take parts from all over the world, stitch them together and perhaps do some final assembly in Mexico or the United States, and then you've got your product.

That makes sense if you strip out every bit of waste and cost, and as a consequence, whenever anything goes wrong, then you're suddenly caught short, and that's the lesson that we've learned during this crisis with the pandemic.

ZAKARIA: How do we get out of this? I mean, is this going to be as jerky, and while we're going to keep seeing these delays, it's going to be a while before the whole world economy is back the way it was.

LYNCH: Yes, I think many of the people we spoke to for our recent project say we have another year ahead of us of this sort of disruption. Doesn't mean it's necessarily going to be absolutely as bad as it is now, but it really has been a story of one thing after the other. Remember the Ever Given, the ship that got stuck sideways in the Suez Canal, and we have bad weather down in Texas that disrupted some key petrol chemical plants.

And now COVID outbreaks in now Southeast Asia. Next year, the middle of the year, the Longshoreman contract expires and so companies are already starting to order more goods in a proactive way to try and get ahead of that potential disruption.

ZAKARIA: And is there a way to kind of narrow the supply chain? Or is there any -- is anyone talking about a solution that doesn't require such a far, far flung global supply chain?

LYNCH: Well, there is a lot of talk about it. There's been a lot of talk of perhaps near-shoring of bringing factories if not all the way back to the United States, perhaps to places like Mexico. But there's no perfect solution to this problem other than ending the pandemic.

If we can end or completely contain COVID and our spending patterns return to normal, we start going out to restaurants more, start going back to concerts, start doing more of the travel and leisure spending that's been -- that's taken a big hit during the pandemic, that reallocation of consumer purchases would go a long way towards fixing what's broken.

ZAKARIA: David, fascinating. Thank you so much.

LYNCH: Any time.

ZAKARIA: Next on GPS, we'll examine one other factor in American's current crisis, unfilled jobs. The big question is why is it happening when the official unemployment rate is at a near-record low? The answer when we come back.

(COMMERCIAL BREAK)

[10:18:38]

ZAKARIA: The most commonly written phrase in America these days seems to be now hiring. I know I see those words just about everywhere I go. The Department of Labor says there are 10 million job openings in the country, and there are eight million people unemployed.

So what is the disconnect? To help us understand what's going on, I want to bring in Heather Long of "The Washington Post" who's written superbly about this subject.

So, Heather, explain to us, why is it if there are so many job openings, why are there are so many people still unemployed?

HEATHER LONG, ECONOMICS CORRESPONDENT, THE WASHINGTON POST: Well, Fareed, obviously, we're still in a pandemic and some people have health concerns. Also childcare concerns. We saw in September, for instance, unfortunately over 300,000 women left the workforce, meaning they had to quit jobs or stop searching for work because even though schools are reopening, it's been a very chaotic reopening and a lot of after-school programs unfortunately are not running right now.

So these issues are still at play, still holding people back from wanting to jump in. But I think there's something deeper going on here, and I have been writing about this since May, since the spring. I have been calling it the great reassessment of work in America.

We are just seeing workers, whether they're high-income workers, tech workers, law firm workers, all the way down to people who are in those $10, $11, $12-an-hour jobs are saying that they want something very different in life and in their careers, that this pandemic has really changed them and changed their thinking about what they want.

[10:20:19]

And that's why you're seeing a lot of people who simply don't want to go back to restaurant or hotel jobs. They are trying to find something else. We see a record number of people quitting right now.

Thirty million people have quit so far this year. People are calling it the great resignation. But it goes beyond that, we're seeing a wave of early retirements and a wave of people starting new businesses. We have not seen this level of entrepreneurship in close to 30 years in the United States.

ZAKARIA: And the wage rises do not seem to be making as much of an impact as people thought they would. I saw in the hospitality industry wages are up 18 percent but still people don't want those jobs.

LONG: That's right. So I think a couple of different things are going on here, and as you mentioned wages particularly at the low end are rising in some of the fastest levels we've seen since the early 1980s. Obviously, companies are trying to respond, they're trying to lure people back. But the message that's being sent from a lot of workers is, more pay is a good start but they want more than that.

And that's the real message I think that's being missed here. When you actually call, as I do almost every day and talk to people who are unemployed or talk to people who have quit a job in the last few months, the number one reason they say isn't pay. That might be part of the story. But the number one reason is burnout, mental health issues, I want better work-life flexibility to be with family or to pursue other dreams that I have, and they feel that companies are not recognizing them and the sort of whole person that they are.

And so I think what we may see coming out of this is in a similar way we're in the biggest transformations in the labor market that we've seen since World War II, and World War II, of course, a lot of women took on jobs that they had never taken on before, and since World War II we've seen an increasing and growing number of women working in the United States and around the world.

And I think the shake-up that's happening right now is going to be similar in the sense that what we are seeing is a demand around the world, not just in the United States, for more flexibility in the workplace.

ZAKARIA: So one of the arguments that has been made about why there are so many people who are just not looking for work is that there were very generous unemployment benefits provided by the government. They did expire about a month ago. What does the evidence suggest about whether or not people were sitting back and not looking for work because they had fairly generous unemployment benefits?

LONG: Fareed, the evidence so far suggests that that is -- was barely a blip. It was not the main factor that's holding people back from going to work. Obviously, as you mentioned, about seven million Americans lost benefits over Labor Day, and we did not see a huge hiring boost in September. September was very weak hiring. But don't forget that over 20 states, almost all Republican states, over the summer in June and July had rolled back a lot of those more generous unemployment benefits over the summer.

And those states did not see any faster hiring than other states that had kept the benefits in place. So, again, I think the takeaway here is that something deeper is going on than just people sitting at home being lazy or not wanting to work. We need to understand that it's more than that.

I think another interesting point, particularly for your viewers, is these labor shortage issues are a global phenomenon. This is not just a U.S. phenomenon. And again, that suggests to me that if this were truly an unemployment insurance story, we would start to see more workers going back in the United States and, you know, other countries have even more generous unemployment benefits and we haven't necessarily seen -- we are seeing similar dynamics around the world.

ZAKARIA: You mentioned there's been a huge rise in start-up businesses and entrepreneurship, people starting the business they always have wanted to. Does also an uptick in productivity, is there not? What's behind that?

LONG: Yes. It's been aa phenomenal uptick in productivity. What we saw during the pandemic has been fascinating. Obviously, there was a huge digitization of so many different fields. There was a productivity gains for people not having to travel , fly around or through their daily commute, they were able to just log right in in many cases and go to work.

[10:25:09]

There's also been a rising automation. You think about, when you go to a hotel or an airport now, how few people you actually interact with. So much is done with the machine and the kiosk. Even ordering fast food now and you're punching a button instead of talking to a person in many cases.

So this has also helped to fuel a huge productivity boom during 2020 and 2021 and I'm moderately encouraged that this could potentially be a big driver of growth for the United States going forward, if we can keep a lot of these gains going. ZAKARIA: So all in all, what you are describing, Heather, sounds like

there may be some good news in this puzzling data. Thank you very much for joining us.

LONG: Thank you, Fareed.

ZAKARIA: Next on GPS, how does a political furor in Poland relate to one of the biggest fears about the political future of the United States? That story when we come back.

(COMMERCIAL BREAK)

[10:30:22]

ZAKARIA: A week ago Poles came out in droves to protest their own government. This was after major protests of a different kind from Poland's fellow E.U. nations. One foreign minister said that Poland was playing with fire.

At issue was a ruling from Poland's top court saying essentially that the Eastern European nation didn't have to follow European Union laws anymore, that Poland's laws supersede the E.U.'s.

Those are not the rules that Poland agreed to when it joined the E.U. in 2004.

Joining me now is Anne Applebaum, a staff writer for The Atlantic, a Pulitzer Prize winner and a part-time resident of Poland. Applebaum's husband served as foreign minister and is a member of one of the parties currently in opposition.

Anne, first explain to us what Poland's supreme court is, because it's a new supreme court created or re-engineered by the current ruling party, which itself is highly controversial.

ANNE APPLEBAUM, A STAFF WRITER FOR THE ATLANTIC: Yes, I think a fundamental part of this story is to understand that the Polish constitutional court, which is what we're talking about, has been created by an unconstitutional law.

There's a way of picking judges that the ruling party has created which is opposed to the Polish constitution. There have been protests and legal challenges over the last several years, but the result of it is that it's a packed court.

So it's a court that contains judges on it who have been chosen directly by the government for political reasons. It's a highly politicized court. Many of its members are in close contact with the ruling party at all times.

For Americans watching, you have to imagine an American president fires half the judges of the supreme court and puts in his cronies and best friends instead. And that would change, of course, fundamentally the nature of the court.

So already we're talking about a court whose judgments aren't even recognized by all Polish courts anymore. So we're -- it's a -- it's a very controversial court and it's known to make judgments and statements that are what the government wants, nothing to do with the Polish constitution itself.

ZAKARIA: And the issues that this ruling party wants to be different about are what, a kind of social conservatism and things like that?

What do they campaign about when they say we want to not be bound by E.U. dictat?

APPLEBAUM: No, not at all, this is nothing to do with conservative socialism. This is essentially about their ability to preserve these unconstitutional laws. It's about their ability to go on breaking the rule of law inside Poland, and their ability to continue politicizing the court system and the -- and other aspects of the legal system, which is what they've been trying to do for the last several years, with a lot of resistance to it.

And, of course, what people in Poland are worried about is that this is happening in anticipation of perhaps an attempt to play around with the elections, perhaps to change results, perhaps to change the electoral law.

You know, so it's -- it's the ruling party saying, you know, we don't want anything to do with any -- with rule of law, you know, with any of these rules about rule of law that the E.U. has laid down.

ZAKARIA: And I imagine there are a lot of Poles who are horrified by this. What kind of opposition are they mounting and can they mount?

At this point it is the ruling party and it's a parliamentary system, right?

So it -- it dominates both the legislative and the executive branch.

APPLEBAUM: It -- it does, and it's trying to take over the judicial branch as well. There is an enormous amount of opposition and, actually, there was an almost spontaneous demonstration last weekend. It was called for on Thursday, and then on Sunday there were tens of thousands of people in -- in many -- most major cities, all major cities, actually, and many other smaller cities as well all over the country, waving E.U. flags and Polish flags.

And so -- you know, so those who are aware and who understand it are objecting. The opposition will object. The legal establishment will object. Many of the judges in the Polish system, those who are not yet part of the new political nomenclatura will also object and may even reject this court decision or -- or make judgments against it. So we are entering a period of a lot of conflict.

I mean, I think it's important to understand that this is not like Brexit. Pole -- 90 percent of Poles say they want to stay in the E.U.

[10:35:04]

This is something quite different. This is the Polish ruling party in effect, without admitting that that's what it's doing, pulling Poland out of the system of, you know, recognizable rules and laws that hold the E.U. together.

ZAKARIA: And it -- it seems like it's trying to essentially get rid of an independent judiciary in Poland.

I've got to ask, when you described it the way you did with regard to, you know, essentially politicizing the judges, possibly so that, when the next election takes place, the people who determine, you know, who won in a narrowly contested election, will be political hacks rather than impartial observers, this sounds a lot like what a -- a Republican party is doing in various states in America.

Do you see -- do you think there's a parallel there?

APPLEBAUM: Of course. You know, this is -- this is the, you know, known tactic of populist authoritarian leaders from Hugo Chavez to Erdogan in Turkey, you know, that the ruling party seeks to politicize courts and in some cases the media and then seeks to use that power to change the rules and to alter the system to guarantee its own victory, I mean, this is a -- this is a path to power and a path to dictatorship that we've seen repeating itself all over the world in recent years.

And, of course, for me it's a very strange moment to have parallel kind of politics in Poland and the United States, really two very different countries with different histories and sociologies and demographics and so on, and yet you can see some of the same patterns unfolding, is eerie.

And, of course, they influence one another. The Poles follow very closely what's going on in the United States. They take inspiration from it. And they, you know -- and they see what Trump did and they're -- they're looking to do something like that.

ZAKARIA: On that sobering note, Anne Applebaum, thank you.

APPLEBAUM: Thank you.

ZAKARIA: Next on "GPS," billions of dollars stashed in tax havens where you might least expect them. My next guest will help us follow the money trail to South Dakota.

(COMMERCIAL BREAK)

[10:41:25]

ZAKARIA: When you think of a tax haven, you might think of Switzerland or the Cayman Islands. What about South Dakota?

It's hard to imagine, but the prairie state of fewer than 1 million people is actually home to a burgeoning trust industry used to park billions and billions from overseas and shield the money from scrutiny.

That is according to the Pandora Papers, a blockbuster investigation using a trove of nearly 12 million confidential financial documents.

My next guest says this is just one of the myriad of ways in which America actually enables corruption all over the world.

Sarah Chayes is a journalist who has studied corrupt networks across the globe. Her most recent book is called "On Corruption in America and What Is At Stake."

Welcome, Sarah.

First, tell us the story of South Dakota. South Dakota basically says, if a company comes and registers, we will not ask too many questions about who owns the company. But that's always the issue, that you have a company, but in many places you are required to reveal who are the ultimate owners of that company?

SARAH CHAYES, JOURNALIST: In this case it's not as much companies as it is trust, the type of thing that, you know, an ordinary wealthy family might set up for their children.

But in this case in particular what South Dakota does is allow the trust to be perpetual, which means it just gets passed down and passed down and passed down. That's among the things that the state -- you know, basically the laxness of the regulations in South Dakota. And so it's become a magnet for money often from criminals or corrupt officials from around the world.

ZAKARIA: And this is something that happens in rich countries a lot in various forms. People often talk about London real estate. One of the reasons why there are so many billionaires with shady money who have ended up buying huge apartments, houses, mansions in London is that there are very few questions asked about that. Does -- does America do that in other ways?

CHAYES: Absolutely. The art market is another very important one. There's basically no regulation, and so you can park your assets as works of art or you can use them as investment properties with none of the regulations that you would have, you know, if you were trading in securities. And, of course, properties also in Florida is another excellent example, and in certain places in California.

And there -- there are efforts under way at the moment to try to force some transparency, as you suggested, the problem being that we don't even know who's buying these properties because it's a company that belongs to another company that belongs to another company that has signed on the dotted line.

ZAKARIA: Now, I assume some of the vast amounts of money that are finding their way into all of these havens is money that has been spent by the U.S. government and the U.S. military in places like Iraq and Afghanistan.

I ask you this because you spent so much time in Afghanistan trying to help the U.S. -- I remember you were trying to help General Petraeus at one point. Is there any moral or lesson from that -- those stories of America just, you know, throwing money at the problem and hoping it will somehow get stability in Afghanistan and instead getting massive amounts of corruption?

CHAYES: Yes, and I think there are two lessons to be learned.

[10:45:04]

One is that it matters, the behavior of a government toward its own citizens. People were being robbed not only of the development resources that should have been reaching them but they were also being robbed on a daily basis by every government official they encountered, and they were losing their dignity as well as their money. And that's what really matters.

Because people start to get angry, and then they go to extremes. And in the case of Afghanistan, that meant the Taliban.

The second lesson is a harder one, I think, which is to say Afghanistan really looks a lot like a mirror of us. I mean, I've heard Afghanistan before the current tragedy, I've heard it called a failing state, right?

And I would often say, places like Afghanistan may look like failing states, but that's because their leadership isn't trying to govern. They're not trying to be a state. What are they trying to do? Enrich themselves, and they're incredibly successful at doing that, and they're very sophisticated, these networks.

Well, let me just ask you for a moment to take a look here at home. Let's look at some failing policies, like the Afghanistan war, the Iraq war, two lost wars, an economic meltdown that brought down practically the world economy, a rampant, galloping environmental crisis and, you know, an opioid epidemic and a COVID pandemic that have been badly handled at best, that have killed, each of them, more than, you know, several hundred thousand Americans.

And now let's look at the executives of defense contractors, financial investment firms, real estate firms, pharmaceutical companies and -- and fossil fuel giants, who have cycled in and out of government, or at the very least have been very influential in terms of shaping governmental policies. Let's see how they're doing. Pretty well, right?

So I begin to wonder, is Afghanistan not holding up a mirror and showing us, warning us, how bad it can get if we don't bring our own sort of systemic corruption, if you will, into control?

ZAKARIA: Sarah Chayes, very important book. Thank you for being with us.

CHAYES: Thanks for having me, Fareed.

ZAKARIA: And we will be back.

(COMMERCIAL BREAK)

[10:52:25] ZAKARIA: And now for the last look. For 16 years Germany has had just

one chancellor, Angela Merkel. Only two Germans have held the office for longer, Helmut Kohl and Otto von Bismarck.

Now, after a very close election, it will likely be led by someone outside Merkel's party. Her center-right bloc of Christian Democrats suffered its worst performance in its history.

So what accounts for the electoral shift?

Part of it, of course, is that Merkel overshadowed all others on her side. In addition, the successor within her own party made several missteps. But perhaps more significant, Merkel had moved her party away from its conservative roots, partly by joining forces with the center left for three of her four terms.

That left an opening for a man named Olaf Scholz to portray himself as Merkel's heir apparent. After all, he is Merkel's vice chancellor and finance minister. But he wasn't from her party.

And in the end 1.5 million voters abandoned Merkel's center-right party for Scholz's center-left one.

But a changing electorate was also at play. Where immigration dominated the 2017 elections, exit polls showed that voters this year were more concerned with economic issues and climate.

This may account for the success of two smaller parties, the environmental Green Party and the pro-business Free Democratic Party. These parties are already dominated by younger voters, and another million and a half of Merkel's party votes went to the two parties. They became the king-makers. Whichever of the top two parties they support becomes the ruling coalition.

And against this backdrop was another notable change. The far-right, populist anti-immigrant policy, AFD, lost its place as the main opposition party, falling from 12.6 percent of the vote in 2017 to 10.3 percent this year.

Princeton political scientist Rafaela Dancygier explains that candidates who turned away from the divisive topic of immigration to focus on issues like pensions, taxes and climate did better than those that tried to co-opt the far right's xenophobic language.

The liberal Free Democrats, for instance, told a German news agency that migrant workers could contribute to the shrinking pension fund. The Social Democrats ran more candidates from immigrant backgrounds than ever before, according to Dancygier.

Consequently, this will be the most diverse Bundestag in history, reflecting Germany's increasingly multicultural society.

[10:55:01]

Just over a quarter of the German population is now either an immigrant or the child of one. And although refugees have become politicized in the past, about three-quarters of all German refugees say they feel welcome, according to a government study.

Even the anti-immigrant AFD might be ever so slightly backing away from its hardline stance. A University of Wisconsin political scientist found that campaign posters on immigration used softer language than years previous.

Instead the far-right party played up COVID skepticism, tapping into an anti-vaccination, anti-lockdown constituency and following a playbook laid out worldwide from Australia to Italy to, of course, the United States.

Over the last few years, mainstream parties like those in Austria and Denmark have co-opted some of the far right's anti-immigrant language to lure away their voters. Even the Republican Party borrowed the populism of Donald Trump's lock, stock and barrel. But in Germany the centrist parties proved there is another and more honorable way.

Thanks to all of you for being part of my program this week. I'll see you next week.