That's the question asked by European economists Manuel Funke, Moritz Schularick, and Christoph Trebesch (FST). FST are the authors of terrific earlier study relating right wing populism to financial crises. Here's their description of their earlier study:
"In 2015, we published a study that compiled data on nearly 100 financial crises and more than 800 national elections in 20 democracies since 1870. We found that far-right parties are the biggest beneficiaries of financial crashes. After a crisis, the share of the vote going to right-wing parties increases by more than 30 percent. We also found that government majorities tend to shrink and governing becomes difficult as more parties and antiestablishment groups get into legislatures. These effects turn up in the wake of financial crises but, crucially, not in normal economic downturns.
Why are financial crises so disruptive? To start with, they are manmade disasters. People blame elites for failing to prevent them. It’s often not hard to find policy failures and cronyism among the rich and powerful, so trust in the political system erodes. This opens the door to political entrepreneurs who try to set “the people” against the "ruling class.”
The tendency to blame elites after financial crises might suggest that far-left parties would benefit as much as far-right ones. But that doesn’t happen. Our research shows that the far left’s vote share stays about the same in the aftermath of a crisis. It seems that when social groups fear decline and a loss of wealth, they turn to right-wing parties that promise stability and law and order. In the 1930s, for example, it was the German petite-bourgeoisie that enabled Hitler’s rise to power. Similarly, the election of U.S. President Donald Trump was decided by the middle and working classes.
Right-wing populists are much more willing to exploit cultural cleavages and blame economic problems on foreigners and those who supposedly put the interests of a global elite above those of their fellow citizens. As British Prime Minister Theresa May put it last year, “If you believe you are a citizen of the world, you are a citizen of nowhere.” The left, by contrast, has traditionally taken an internationalist outlook and usually avoids crude rhetoric against foreigners and minorities. People want to attribute blame, and the right is willing to present scapegoats: immigrants, China, or the European Union. The names change but the playbook remains the same."
So far, so plausible. But FST are puzzled by the following:
"Our historical data show that most political upheavals after financial crises have been temporary. After five years, voting patterns usually return to their pre-crisis status quo, fractionalization within parliaments decreases, and the far right loses its momentum.
This time is different. Ten years on, fractionalization, polarization, and far-right voting are all alive and well. The established political system continues to stumble from one shock to another. Even countries that until recently had been immune to far-right politics have started to succumb."
After citing various possible explanations, FST conclude:
"The most important reason for populists’ lasting success, however, is likely structural. The financial crisis of 2008 was a major shock, with more long-lasting effects than the average financial crisis. And the crash was just one of a series of disruptions over the past ten years. Politicians have seized on terrorist attacks and surging refugee flows to widen cultural splits. China and Russia now offer an authoritarian alternative to the Western model of open societies and free markets. Median incomes in the Western world are stagnant and inequality is rising. Lackluster economic performance in many countries has meant that the political trust the financial crisis destroyed has not recovered.
It’s hard to say how long the current political instability will last, in part because we don’t yet know enough about how populists perform in office, why they are often reelected, and what makes countries immune to populism."
Those are indeed the questions. Guess we're all involved in a real-world research project that few saw coming and none of us wanted.
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