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When do politicians respond to voters and when do they respond to markets?

- July 21, 2014

Thousands of police protested outside the Portuguese Parliament in Lisbon on March 6, 2014 over pay cuts imposed by the government as part of an austerity drive to roll back public debt. PATRICIA DE MELO MOREIRA/AFP/Getty Images
People have written a lot about the effects of globalization: that it promotes economic growth, that it deregulates labor markets and hurts workers, that it forces governments to give up control over policies, and that it necessitates transnational solutions like a global wealth tax.  The events of the Great Recession — IMF rescue packages, bank bailouts, and so on — have arguably amplified these pressures.  This is particularly true for countries on Europe’s periphery, like Italy and Greece, where technocratic governments have been installed to implement public policies that are far from the public’s wishes.
These recent events suggest that markets lead governments to implement policies that are out of step with what voters want. We studied elections since the mid-1970s in 20 countries to examine how changes in a country’s engagement in world markets affects how political parties respond to public opinion. In our paper, “Responding to Voters or Responding to Markets? Political Parties and Public Opinion in an Era of Globalization” (ungated), we find that while elections motivate parties to respond to public opinion, economic interdependence distracts political elites from their voters and towards market actors, making parties less responsive to the average voter.
If parties are torn between voters and markets, then consider the preferences of market actors. Evidence suggests that market actors’ preferences lie far to the “right” of their country’s public’s political preferences, namely, that market actors prefer a smaller role for government to play in the economy than ordinary citizens.
There is a significant discrepancy between the ideological preferences of market elites relative to mass publics.  We compared surveys that gauge attitudes of mass publics and economic elites – mainly managers of top economic or financial firms, or representatives of major businesses (see details about the surveys here). The graph below displays differences in voters’ self-placements on a left-right ideological spectrum versus those of economic elites. Positive values indicate that, on average, voters are located to the left of economic elites in each of the 10 countries that overlapped with our study. With the exception of Italy, all of these differences are statistically significant. Moreover, the differences are meaningful: for Portugal, Belgium, Germany, and Denmark the mean ideological placements of economic elites are more than one full unit to the right of voters’ mean placements along the 0-10 left-right scale. In every country, the preferences of managers and business representatives are to the right of public opinion.

The graph’s columns report the mean self-placements of economic elites minus the mean self-placement in the electorate on a 0-10 Left-Right scale. Positive values mean economic elites are, on average, more right-wing than the electorate. Based on a difference of means tests, all of the differences are statistically significant at the .05 level, except for Greece (p = .07) and Italy (.30). Data: IntUne project; Figure: Lawrence Ezrow

In the paper, we develop measures of ideology for political parties and public opinion on the same left-right scale. If political parties are responding to voters, then we should find that shifts in the ideology of political parties correspond with shifts in public opinion. In the graph below, the vertical axis measures political party responsiveness in this fashion. The horizontal axis measures economic globalization, based on a country’s cross-border levels of economic flows and (the absence of) restrictions. The downward sloping line in the graph suggests that as economies become more globally integrated, parties become less responsive to voters.

The graph charts the estimated coefficient on public opinion shift on party position shifts over values of the economic globalization index (dashed lines report 90% confidence intervals). As a country’s measure of economic globalization increases, political parties become less responsive to public opinion. Data: KOF Index of Globalization; Manifesto Project Database; Eurobarometer surveys; Figure: Timothy Hellwig

Although parties have incentives to respond to public opinion, we show they do so only when the national economy is sufficiently sheltered from world markets. As countries become more deeply integrated into world markets, parties appear less and less responsive to citizen preferences. Specifically, we find that, all else equal, parties with governing experience in countries characterized by high levels of economic globalization do not respond in kind to shifts in public opinion.  We are left with this same finding across different data sets, different definitions of economic globalization, in different subsets of countries, over different time periods, and for different conceptions of party positions.
While we do not address the economic arguments for political parties responding to external market demands, the implications for democracy and political representation should not go unnoticed.
Lawrence Ezrow is a professor of government at the University of Essex in the United Kingdom. Timothy Hellwig is an associate professor of political science and Director of the Institute for European Studies at Indiana University.