The Predictability of Political Extremism

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The Predictability of Political Extremism
Posted on December 19, 2015 by Lambert Strether


The usual pattern

Alan de Bromhead, Barry Eichengreen, and Kevin O’Rourke write that the danger of extremism is greatest where depressed economic conditions are allowed to persist. Using data covering 171 elections in 28 countries between 1919 and 1939, the authors show that what mattered was not the current growth of the economy but cumulative growth or, more to the point, the depth of the cumulative recession. One year of contraction was not enough to significantly boost extremism but a depression that persisted for years was.

Kevin O’Rourke writes that in August of this year, the inevitable happened: our current recovery was overtaken by that of the interwar period.

Figure 1: World industrial output in the Great Depression and in the Great Recession



Manuel Funke, Moritz Schularick, and Christoph Trebesch write that far-right votes increase by about a third in the five years following systemic banking distress. This pattern is visible in the data both before and after WWII and is robust when controlling for economic conditions and different voting systems. The gains of extreme right-wing parties were particularly pronounced after the global crises of the 1920s/1930s and after 2008. But similar patterns can also be found after regional financial crises, such as the Scandinavian banking crises of the early 1990s. The authors also identify an important asymmetry in the political response to crises – on average, the far left does not profit equally from episodes of financial instability.

Figure 2: Far-right vote shares after financial crises



Francesco Trebbi, Atif Mian, Amir Sufi write that political polarization systematically increase around financial crises. Voters become more ideologically polarized. Government coalitions become weaker in terms of both vote shares and seat shares. Opposition coalitions become larger. Party fragmentation increases across the board. In his 2003 statistical analysis of the success of extreme eight parties in Western Europe between 1970 and 2000, Matt Golder finds that unemployment has no effect on right wing populist votes when the number of immigrants is low: it is the interaction between economic hard times and the presence of immigrants that boosts extremism.

Using data on OECD countries from 1970 to 2002, Hans Peter Grüner and Markus Brückner find that a one-percentage-point decline in growth leads to a one-percentage-point increase in the vote share for right-wing or nationalist parties. Declining growth rates reduce incentives of poor individuals to shy away from extreme policy platforms. Redistributing away from specific groups is more tempting when there is little prospect for improvements in the future. ......................(more)

http://www.nakedcapitalism.com/2015/12/the-predictability-of-political-extremism.html