Is inequality responsible for the rise of populism?
1 Introduction
Populist parties have seen a surge in support in recent years, putting significant pressure on mainstream parties and in some cases uprooting party systems which have been in place for decades (Mudde 2004; Oesch and Rennwald 2018; Häusermann and Kriesi 2015). A variety of attempts have been made to explain this rise. These range from cultural arguments (Ford and Goodwin 2017) to arguments based around certain groups’ dissatisfaction with their economic positions (Hopkin 2017; Hobolt and Tilley 2016).
Income and wealth inequality have increased notably over a similar time frame (Piketty 2014; Atkinson 2015: 80-81) and many authors have argued that it is a partial cause of the populist surge (Rodrik 2018; Han 2016). The reasons for this surge in inequality are multifaceted, encompassing advances in technology, de-industrialisation, and a tide of globalisation (Rajan 2010; Baccaro and Howell 2011; Rodrik 2012).
In this essay, I analyse the extent to which inequality and redistribution are factors in populist party support. While there is already some evidence for the relevance of inequality, it is not exactly clear why that link exists (Han 2016). It could be for purely economic reasons, i.e. citizens who are materially worse off relative to other citizens are upset and wish to punish the government or elect someone they hope will improve their economic position. Alternatively, it could have more to do with perceptions of unfairness or distributions of status, i.e. people gain a sense of status and self esteem from the size of their earnings and therefore when their wages are consistently decreasing or stagnating
relative to other citizens’, they are likely to grow increasingly restless and unhappy. This dissatisfaction manifests itself in support for populist parties.
I analyse which factor has the larger effect by comparing pre and post-tax levels of inequality. If the cause is purely economic then populist parties should see a significant drop in support according to the difference between pre and post-tax inequality. This is because when considering people’s actual material circumstances, it is post-tax-income which matters. If the cause is more based in a sense of status and self esteem then this difference should be less pronounced because low earners’ self esteem is unlikely to be bolstered by a sense of schaudenfreude at higher earners being taxed more.
My hypotheses are:
H1: Inequality has a significant positive relationship with support for populist parties.
H2: Redistribution mitigates the effect inequality has on support for populist parties.
H3: When inequality and redistribution are high, right populist parties will get more support than left populist parties.
2 Theory and expectations
Populism is a contested concept, of which there are several competing definitions (Kalt- wasser et al. 2017). Despite this, it is commonly agreed that populist parties have had a dramatic effect on European party competition over the past two decades. A further debate which is ongoing, however, is what the precise cause of their support is. Populist parties get the bulk of their support from working class voters and small business owners (Oesch and Rennwald 2018; Häusermann and Kriesi 2015). These are voters who previously formed a core part of the base of centre left and centre right parties respectively. There are two broad strands of argument for the rise of populist parties. The first is cultural. This argument is that populist parties, particularly those on the right have increased the salience of cultural issues which divide the bases of mainstream parties (Ford and Goodwin
2017). While it is true that the groups most likely to vote for populist parties are also the groups which tend to be most socially conservative (Oesch and Rennwald 2018), this argument is not without its critics.
The second strand of explanation lies in economics. Over the past forty years, inequality has increased dramatically. This is a result of myriad factors, all of which made it harder for traditional parties to satisfy the two primary components of their base simultaneously. On the left, the preferences of labour have become much more diverse than in previous decades. Rueda (2007) argues for a model of insiders and outsiders. Insiders are “those with secure employment” and outsiders are “those without” (Rueda 2007: 2). Insiders prioritise preserving their job security more than the unemployment of outsiders while outsiders prioritise reducing employment over preserving the job security of insiders. Rueda argues that social democratic parties tend to prioritise the preferences of insiders. This accentuates inequalities which already exist with insiders becoming increasingly secure
and outsiders becoming increasingly vulnerable and restless.
Similarly, on the right, the two major groups, small business owners and managers, have seen very different trajectories in recent decades. The reason for this is primarily globalisation. It is large, export-oriented firms who have benefitted from expansions of free trade. These businesses have been able to take advantage of expanded consumer markets while also being able to cut costs by moving elements of production to cheaper areas. Small businesses are far less able to take advantage of these factors and are therefore at a significant competitive advantage. Nonetheless, these large firms are also significantly more capable of influencing legislation because they are able to threaten to simply move to a different jurisdiction should governments implement policies which they deem to be particularly inhospitable (Rodrik 2012).
On both sides of the political spectrum, mainstream parties have neglected one of their major cleavages. In recent years, these cleavages have since split and begun supporting other parties who claim to better represent their interests. The vast majority of these parties are populist (Oesch and Rennwald 2018).
While there are strong arguments in favour of both culture and economics being causes of populist party support, I have not yet argued specifically for the link with inequality. Han (2016) offers a useful breakdown of the different ways inequality might influence party competition, although with a specific focus on radical right parties rather than populist parties in general. The first is that inequality actually reduces support for radical right parties by increasing the salience of class (Coffé et al. 2007). The second is that inequality increases support for radical right parties by causing divergences in the levels of social capital of different groups (Jesuit et al. 2009).
2.1 Expectations
If we reject the first hypothesis, then it appears that the argument of Coffé et al. (2007) is most accurate, although it is possible that there is simply no relationship between inequality and party support. This is because this argument implies that there would not be a clear positive relationship between inequality and populist party support, at least with right populist parties. If we accept the first hypothesis but not the second then it appears that the argument of Jesuit et al. (2009) is correct because this would imply that it is not material economic circumstances but rather social capital which is the primary link between inequality and support for populist parties. This is because if it was material circumstances which mattered then the level of redistribution should have a significant effect on support for populist parties as redistribution would lead to greater equality once the income was redistributed. The social capital hypothesis could still be true if all three hypotheses are true. This would simply imply that the social capital theory applies more strongly for right populist parties than left populist parties.
3 Methodology
I have three sources of data. The first is election results from 26 European countries from 1900 to 2020 (Döring and Manow 2021). The second is a dataset of European parties, categorising them as populist, or other types of radical (Rooduijn et al. 2019). Combining
these datasets allowed me to derive the results of populist, non-populist, far-left, and far-right parties from each domestic election between 1900 and 2020. Elections prior to 1970 were removed as these did not match the dates of the economic data. The election results were also grouped by election date, country, and party type. This was done because I was not interested in support for particular parties but rather in support for particular types of parties.
The third data source I used was the World Inequality Database (Alvaredo et al. 2018). This provided me with the top 10 percentile’s share of pre and post tax-national income and the GDP per capita for each country from 1970 to 2020.
I combined these datasets and was left with a dataset containing 1,851 observations. This was then filtered for non-populist parties. The unit of analysis was a single election in a particular country for a particular type of party. This was regressed on the economic variables from each country in the year of the election. The first of these is the share of gross national income going to the top 10 per cent of earners. This is a broad measure of pre-tax inequality in a particular period. The second independent variable was the level of redistribution. This was derived by simply subtracting the top 10 per cent of earners’ post-tax share of national income from their pre-tax share.
I use several linear regression models to model the impact of inequality and redistri- bution on support for populist parties. The dependent variable is the total vote share of populist parties in each election. The independent variables are the gross share of national income going to the top 10 per cent, the level of redistribution which took place in that country that year,the GDP per capita as a control variable. I also investigate interactions between gross inequality and redistribution and interactions between redistribution and support for different types of populist parties.
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