Krugman: Economic Contraction Begets Rightwing Extremism

Tribesman Paul Krugman short-shrifts his Harvard homie Benjamin Friedman in favor of a couple of Germans! who make exactly the same Captain Obvious Point! The outrage! There ought to be a law!

Krugman is alarmed that economic contraction leads to so-called “right wing extremism”

That’s the message of a recent paper by the economists Markus Brückner and Hans Peter Grüner, who find a striking correlation between economic performance and political extremism in advanced nations: in both America and Europe, periods of low economic growth tend to be associated with a rising vote for right-wing and nationalist political parties. The rise of the Tea Party, in other words, was exactly what we should have expected in the wake of the economic crisis.

So where does our political system go from here? Over the near term, a lot will depend on economic recovery. If the economy continues to add jobs, we can expect some of the air to go out of the Tea Party movement.

But don’t expect extremists to lose their grip on the G.O.P. anytime soon. What we’re seeing in places like Utah and Maine isn’t really a change in the party’s character: it has been dominated by extremists for a long time. The only thing that’s different now is that the rest of the country has finally noticed.

Here’s the Germans’ article:

16 May 2010 Print Email
Comment Republish

Will the global crisis lead to a rise in political extremism just as during the Great Depression? This column examines the vote share for extreme parties in a sample of 16 OECD countries over three decades. A one-percentage-point decline in growth leads to a one-percentage-point increase in the vote share for right-wing or nationalist parties.

The global crisis has hit OECD nations hard – the hardest since the crises of the 1930s. As the Great Depression was associated with a rise in political extremism, the world may be facing similar political developments today. Understanding to what extent declining growth rates lead to political extremism is hence of high importance. Is political extremism always likely to be marginal in rich economies? Will changes in growth promote support for right-wing or left-wing parties, or both?

Benjamin Friedman has argued that GDP per capita growth is a key factor for the development of a political system (Friedman 2005). His analysis, based on various historical case studies, points out that only a continuous improvement of individual living standards provides the ground for the development of what he calls a more “open” society. Accordingly, it is not so much the level of GDP that determines the way in which a democracy develops but the growth rate.

Over the last decades, political parties with extreme platforms frequently challenged more moderate incumbents in many western democracies. These entrants into the political market challenged long-term political incumbents with platforms that included major differences in the distribution of resources compared to more standard policies. In many cases, such political platforms propose to redistribute resources away from specific subgroups of society such as ethnic minorities, or citizens of specific regions.

In our recent CEPR Discussion Paper (Brückner and Grüner 2010), we examine the question of how GDP per capita growth is linked to the support for extreme policy platforms for a panel of 16 OECD countries. Our paper highlights the link between political regimes that emerge from the success of extreme electoral platforms and rising individual uncertainty about future income streams. Economic growth makes this uncertainty more costly for risk-averse voters. 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.

In our empirical analysis, we proxy the support for extreme policy platforms by the share of votes received by right-wing or nationalist parties in the surveys conducted by the ZEUS on voting attitudes during the period 1970 to 2002. Obtaining an estimate of the causal effect of output growth on the support for extreme policies is of course complicated by many other factors – such as history and culture – that likely shape both the support for extreme policies and economic growth. We address this issue by controlling in our empirical analysis for so-called country fixed effects, which allows us to identify the link between economic growth and the support for extreme policies from exclusively the within-country variation of our panel data. We also exploit the significant response of OECD countries’ output growth to oil price shocks to study – using instrumental variables techniques – how a plausibly exogenous shock to per capita GDP growth is linked to the support for extreme policies.

Our main finding is that higher per capita GDP growth is significantly negatively linked to the support for extreme political positions. While estimates vary between specifications, we find that roughly a one percentage point decline in growth translates into a one percentage point higher vote share of right-wing or nationalist parties. Moreover, we find that the amount of income inequality in a country affects the role that growth plays. Highly unequal countries display a lower growth effect than more equal countries. For countries with a more equal distribution of income, a one percentage point drop in the growth rate may increase the vote share of far right parties by up to two percentage points.

Our results therefore make clear that countries should not expect right-wing parties to get majorities unless growth declines quite as much as in the 1920s. Nevertheless, even with a less significant fall in economic growth rates, a rise in support for extreme parties is likely to change political outcomes – for example through their impact on incumbent parties’ political platforms.

Our more recent research on the vote shares of other groups of political parties points out that smaller growth rates mostly benefit right wing and nationalist parties – and not so much the communist parties. One explanation for this asymmetry may be that voters perceive right wing parties as generating more individual income uncertainty.
Conclusion

Our results lend support to Benjamin Friedman’s view that economic growth determines the direction in which a democracy develops. This also implies that solving Europe’s growth problem may have important consequences that lie outside the purely economic sphere.

If they want to bring back the “economic growth par-tay” for Americans, they’ll have to deport millions of immigrants. Barring that, we get organic, deep rooted, cultural growth of “right wing extremism” which in my view, is just common sense. Liberalism depends on cornucopianism.

Our job is to take advantage of the situation, since we are not under any American exceptionalist religious illusions that “God gives us prosperity” and therefore we should “feed the world.”

I have been talking about Friedman’s book for years. He thinks the “moral consequences of economic growth” are good — that is, people are “tolerant, and open.” I think economic growth is just a Jewish bribe of our moral compass, corrupting and co-opting the more easily corrupted, and silencing the rest of us with the power of the well funded Anarcho-Tyranny state.

Surplus wealth has been the weapon of Anarcho-Tyranny; a huge “jobs and patronage program” for liberal bureaucrats. This is what Krugman and Friedman celebrate, and fear to lose. Whose going to pay for “landlord testers” to call landlords and make sure they are renting to minorities? Whose going to enforce diversity? How will companies be able to pay for affirmative action employees who don’t pull their weight? Good question.

I fear for those poor tenured professors, who will have to resort to walking around with a sandwich board that reads, “Will deconstruct the white male patriarchy . . . for food. No skills, please help. My intentions were always good.” LOL.