The Political Consequences of Socio-Economic Inequality

Abstract

The main value added of the dissertation the new theoretical framework and empirically proves the existence of an intermediary factor in-between socio-economic inequality and rise of populism, namely the institutions, both political and economic. While there is some empirical evidence showing the direct effect of economic insecurity and institutional trust on populism (e.g. Guiso et al. (2017), Dustmann et al. (2017)), this is the first study of its kind to show how the impact of economic insecurity on populism varies depending on the level of institutional trust. I find that when enlarging the definition of economic insecurity, institutional trust moderates populist voting of various socio-economic groups differently. When an individual is highly economically insecure, trust in national institutions does not alter the probability of voting for populist parties and populist voting remains generally high. They seem to represent the closest candidate to being the real “economic voters”. For them, when making a voting decision, trust in national government does not matter, and their economic situation is the main determinant: their experience with long-term unemployment, their less secure jobs and their limited ability of making ends meet is key to their voting decision. The results contribute to a better understanding of populism as well as institutional trust. Since the results show that the choices of both right and left-wing populist voters are driven by economic insecurity and moderated by a lack of trust in institutions, populism as ideological tool used by a variety of populist parties in the region seems to have the same root causes for support. In terms of institutional trust, the findings point to the significance of the proposition by Krueger et.al. (2021) to focus on swift trust in transient economic settings, which are especially important in the voting booth and might be structurally different from institutional trust on any other day or a different context. My results suggest that policy makers concerned to increase trust in institutions should first try to understand more carefully which aspects of the institutional environment is deficient, and then work systematically to improve them, focusing consistently on the long term as well as short term changes. Moreover, real institutional reform needs to start from the experience of the population on the ground, with a special focus on the most economically insecure. Chapter, 4 shows evidence that for the most part, Central and Eastern European populist parties shift on the issue of immigration but stay put on the issues of economic redistribution. The comparative example of the Labor Party and Fidesz, shows that contrary to empirical findings of Abou-Chadi & Orlowski (2016) when both parties became dominant mainstream parties with experience in government, they did not have an incentive to moderate their position. They do not seem to sharpen their positions in terms of economic inequality. Instead, both employed a “niche party profile” (Meyer & Wagner, 2013), choosing a more extreme position on the issue of immigration, emphasizing them in their campaigns. In addition, the findings help to nuance the conclusions by Spoon & Klüver (2020) in an important way. The comparison of Fidesz and Darbo Partija (Hungary and Lithuania) shows that taking a more immigration-skeptical position helped the former party to capitalize on votes by taking over issue ownership from the competition on the far right, while going tough on immigration did not prevent losses for the latter, with the concomitant decrease in salience of the issue. The voter-party linkage (Kitschelt et al. 1999) is the key element and determinant of the difference of success in Hungary and Lithuania. While Fidesz invested heavily in voter-party linkage, institutionalizing itself through engaging with the civil society, their three positional shifts were successful. The Labor Party of Lithuania invested less in the voter-party linkage, impeded mostly by the corruption scandals. Instead, it tried to shift on the immigration dimension preemptively, but heavily overestimated the magnitude of the refugee crisis in Lithuania and have suffered electoral losses. All in all, the rise of populism in Europe is a product of both supply (party strategies, policy when in government) and demand (voter preferences). While socio-economic inequality in the changing global economic conditions is an important determinant of success of it, it is not the only factor behind its persistency, especially in Central and Eastern Europe. Other factors, such as the experience of the refugee crisis first-hand, corruption scandals, competition in the party system, quality of institutions are important signals for both populist parties and its voters. The dissertation contributes to a better understanding of populism. Institutions matter, also in terms of populist voting, as their positive evaluation by voters, prevents them from voting for anti-systemic parties, depending on the level of economic insecurity. When analyzing the evolution of political parties, the need to discern nativism from populism is the key, highlighting the importance of the proposal by Art (2020). Some parties become populist, by fully embracing the thin ideology of the “us” versus “them” divide, while changing their ideological positions or moving across the ideological spectrum towards the radical right. Others might use nativism only as an electoral tool, while leaving their ideological stance in ambiguity.