I wanted to share with the readers of The Monkey Cage an email exchange about the Polish tragedy that I had with my colleague “Jon Eguia”:http://as.nyu.edu/object/JonEguia.html last week (Macartan Humphreys and Torun Dewan were also involved in the conversation, but for he sake of brevity, I’m just posting the exchange between me and Jon for now).
Jon wrote last weekend:
bq. I was reading about the Polish plane tragedy. I started to think about the impact for the country. Then, more generally, isn’t this a rare natural experiment on the value of a country’s leadership? What is the effect if you remove a country’s political, military and monetary policy leaders? I am interested in two indicators:
bq. 1) The reaction of the WIG index of the Warsaw Stock Exchange on Monday, or, if it does not open on Monday, next day it opens.
bq. 2) The reaction of the international markets on Polish bonds. Will Polish bonds plummet on Monday, fall slightly, or remain steady?
bq. If the stock market and the bond market both hold more or less well next week, I’d conclude that the leadership effect of a country is very small, and that the populist feeling that we could remove leaders and the next ones would do no worse is justified.
I responded at the end of the week:
bq. First, one of the hallmarks of the Polish transition has been how “smooth it has been”:http://www.tnr.com/article/politics/transitions. So one question might be how much of a _shock_ this actually was. Yes, the President died, but the temporary Presidential succession went very smoothly, and crucially Poland is a parliamentary republic, not a presidential one. And actually, the presidency has passed out of the hands of the main opposition party – where the president used his veto to make life difficult for the government – into the hands of the governing party. So if anything, once the dust settled, you might expect this to make policy making easier for the government. And apparently the rest of the transitions (esp. in military, but also in Central bank) seem to have gone smoothly.
bq. Now some data: Exchange Rates, zloty to dollar, this week:
bq. 04/10/2010,2.879
04/11/2010,2.870
04/12/2010,2.870
04/13/2010,2.846
04/14/2010,2.854
4/15/2010,2.834
04/16/2010,2.845
bq. So actually, Zloty has strengthened against the dollar.
bq. Stock market is a similar story – “it’s gone up”:http://www.gpw.pl/wykresy/wykres.asp?ticker=WIG20&BW=r.
Jon’s response back:
bq. Thank you for the data. The Polish currency strengthened against the US dollar, the stock market went up, and the price of Polish bonds went slightly up as well. The overall picture is that apparently, a well-functioning democracy does not suffer much (or at all) when it suddenly loses its leadership and is forced to replace it with the next-in-line cohort of leaders.
bq. I think it would be good to keep that in mind if a terrorist attack ever manages to wipe out a similar chunk of the elite of a western democracy. Obviously I hope it never happens, but if it ever did, doesn’t the Polish experience suggest that the attacked country would have lost very little as a direct consequence of the attack? The emotional reaction to the attack could magnify its repercussions and turn it into a major coup for the group that committed it. Suppose instead that the attacked country shrugged it off: I wonder if the attack could then become a largely inconsequential blip that failed to directly or indirectly harm the economy of the attacked country or the lives of its citizens.
We welcome comments from readers who want to join this conversation.
*********
I can imagine that some people will respond to this post by saying “how can you even think these thing about such a terrible tragedy? Why would you refer to a plane crash that killed real people as an experiment?”. To be clear, nothing in this discussion minimizes our “sympathy for the victims and their families”:https://themonkeycage.org/2010/04/an_unprecedented_tragedy_and_c.html. But this is essentially what political scientists do: we try to figure out the causes and consequences of political events, and these events by their very nature sometime involve violence and death. Indeed, there is a whole sub-field of political science dedicated to the topic of studying war, its causes, and its consequences. So just like an oncologist who conducts research on people who have died (or are dying) from cancer, we too need to consider the causes and consequences of events that have brought great sadness and tragedy to real people and their families.