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The source of kitsch is the categorical agreement with being which the narrator earlier discussed. As to what the source of being is, that depends on your particular brand of kitsch (in many cases, the source is religion according to the narrator).
Franz, for example, was fascinated by the political kitsch of leftists.
He liked the Grand March because it was the emblem of such kitsch.
What makes a leftist a leftist, says the narrator, is not this theory or that, but his ability to integrate any theory into his own kitsch, the kitsch of the Grand March.