Course Title: Political Science and Public Policy
Course Code: GV478E
Candidate Number: 73234
How Much Should We Worry? – A Lot
1. Introduction
In his article “How Much Should We Worry”, Inglehart (2016) discusses if we should fear for democracy given the recent rise of authoritarianism in Western democracies. He admits that growing inequality and dysfunctional government (particularly in the U.S.) have fuelled this rise. In the long run, however, he argues that modernisation, a large educated middle class and especially the democratic principle “One person, one vote” is likely to decide the struggle between the elite few and the remaining 99.9% of the population in favour of the latter.
I disagree with this optimistic view. Firstly, there is empirical evidence that wrong democratic decisions cannot be undone democratically. An extreme example is the victory of the NSDAP in the 1932 federal elections in Germany and the subsequent Enabling Act 1933, which gave the government, led by Hitler, power to enact laws without the involvement of parliament. Secondly, it can be perfectly rational for the masses, including the educated middle class, to support authoritarian populists. As a result, authoritarian populism can be a self-strengthening rather than a self-correcting phenomenon and therefore may be here to stay. This essay will focus on the second point mentioned above.
2. Rising authoritarian populism in Western societies
In the 21st century, the modern Western democracies of North America and Europe are experiencing a spectacular rise in voters’ support of authoritarian populism. Since the end of World War II, authoritarian populists, as classified by Johansson Heinö (2016), have traditionally had stronger presence in the multi-party proportional-representation democracies of continental Europe (e.g. Italy, Austria, Germany, Netherlands). However, most recently they have been also successful in countries with a majoritarian electoral system (Trump in the U.S.) and have won the historic Brexit referendum in the UK. This year, there will be parliamentary elections in Germany and the Netherlands, with a significant increase in the vote share of authoritarian populists expected. In France, it is entirely possible at this moment that Marine Le Pen will be elected president.
The political establishment, mainly moderate left- or right-wing parties, seem to be incapable of stopping this trend. The support authoritarian populists receive in a number of Western countries is now significantly above the typical protest voter potential observed in the last 50 years. In Austria, the FPÖ is leading the opinion polls only a decade after it was heavily punished by voters for a disastrous performance in government.
With some of the most fundamental achievements of modern liberal democracies (independent media, courts and protection of minority rights) under threat from these parties, the question is how far the rise of authoritarian populism can go and how long it can last.
3. Why do educated people play the lottery?
Let’s take a step back and have a look at something we are all familiar with. Millions of people play the lottery. Why? Barberis (2013) argues that people tend to overestimate the likelihood of extreme events. Therefore, they pay more for their lottery ticket than its economic value (the expected payout). But why do educated people play the lottery? It should be clear to them that lotteries, like casinos, would not exist if they did not make money, i.e. win on average. One of my friends, a successful London lawyer educated in Eton, plays the lottery every week. When I asked him why, he responded, “If I want to buy a bigger house these days, I can’t afford it with my lawyer salary, so I might just as well spend a few pounds and hope for the jackpot, as unlikely as it may be.”
Educated people play the lottery although they know perfectly well that they cannot win on an expected value basis. The reason they still do it is that it makes no difference to their life if they have the money a lottery ticket costs or not. But if they want to seriously improve their lifestyle, they need a big winning. With the same rationale, people choose to play lotteries that pay out higher jackpots than others, even if they perform worse for their customers on an expected value basis. Using an example with simple numbers:
– Lottery ticket A payout: 50% +10, 50% zero.
– Lottery ticket B payout: 1% +100, 99% zero.
(Both tickets cost the same. Assume also that good houses cost 10, and the next class higher up in the housing hierarchy costs 100.)
A risk-neutral person would prefer Ticket A (expected payout of +5) to Ticket B (expected payout of only +1). However, a person with a high risk tolerance, induced by his need or desire to upgrade to a better house, may prefer Ticket B over Ticket A as it has a higher maximum payout (+100 vs. +10).
Kahnemann and Tversky (1979) introduce prospect theory to explain this behavior. Contrary to expected utility theory, which states that decision makers under uncertainty maximise their expected utility, they argue that decision makers take into account best and worst-case scenarios.
4. Prospect theory and voters’ behaviour
How is this relevant for voting behavior and the rising support of authoritarian populism? Eckles and Schaffner (2010) find evidence that risk preferences influence voters’ decisions and expected policies are not the only decision criterion for citizens. They argue further that risk preferences can override expectations: risk averse voters support the incumbent even if he moves further from their policy preferences because they prefer the devil they know to the devil they do not. Kam and Simas (2010) test the relationship between voters’ risk preferences and their policy choices and find that people with higher risk tolerance tend to prefer probabilistic outcomes to certain outcomes. Martin (2016) also argues that risk-tolerant voters are more likely to support new parties than risk-averse voters.
According to Inglehart and Norris (2016), the rise of authoritarian populism has one of two roots: economic insecurity or cultural issues (predominantly xenophobia). It could be argued that the latter is to a certain degree only a symptom and not a root of the problem. When people have the feeling that there is enough to share, they tend to be more tolerant towards foreigners. But the higher the economic insecurity, the more people feel they have nothing to lose and the more they will be inclined to take risk in the ballot box.
And who offers the biggest bets on election day? Populists. They promise much more than moderate parties, with the result that they are significantly less likely to deliver on their promises. But when voters feel that moderate parties have nothing to offer that will have a meaningful positive impact on their lives even if they deliver on all their promises, they will rather take the (small) chance that the populist might deliver on his (big) promises. And the higher their risk tolerance, the more inclined they will be to vote for the candidate or party that promises the most. This explains why the “walking, talking political lottery” called Donald Trump is today the president of a country with one of the biggest inequality problems in the West (Evans, 2016).
5. Conclusion and policy recommendations
Applying prospect theory to voters’ behavior can explain why authoritarian populism is gaining so much support in the 21st century. More people, including the educated middle class, feel that they are in a lose frame and therefore choose the high-risk alternative in the ballot box. Furthermore, the current trend may not be a self-correcting phenomenon. I.e. if populists gain power and fail to deliver on their promises, the feeling of being in a lose frame and, consequently, risk tolerance among the electorate may rise even further. Subsequently, people will vote for a populist (though not necessarily the same one) again rather than coming back to a moderate party.
So what can moderate parties do before it is too late? First of all, they can stop wasting their efforts explaining to voters that populists will most likely fail to make their lives better (e.g. Remain campaign in the Brexit referendum). We know that populist supporters do not vote along their expected utility function. Second, moderate parties should stop trying to beat populists at their own game by becoming populists themselves (e.g. the current UK prime minister, who promises the British people an excellent deal from the Brexit negotiations). As members of the establishment, they have little credibility in doing so.
So what could be done? Electoral system reforms are a popular discussion topic among politicians as well as academics. The reforms may aim at facilitating effective government (e.g. Mayr and Mittelstaedt, 2017) or giving voters the feeling that they have a choice again (e.g. Blumenau et al, 2016). In the short term, this might work, but it remains to be seen if such reforms are capable to cure more than just the symptom of the problem. If voters remain highly risk-tolerant, they might in the long run still prefer to vote for the populist candidate, whether as leader of his/her own party or as candidate on the open list of a moderate party.
In the medium term, it will be important to convince voters who think they have nothing to lose that this is not true. For instance, the reintroduction of compulsory military duty could remind people of the value of peace. If I cannot outsource the fighting to someone else, if it could be me or my children on the battlefield, I might be more inclined to play it safe in the next election.
But long-term solutions will need to go further than that. They need to tackle the problem at its root, i.e. what drives voters into higher risk tolerance. There is clearly no one-size-fits-all solution. As different parts of society have been lost to populists for different reasons, they will have to be won back with different solutions. Whether such measures take the shape of a basic income, a negative income tax as proposed by Friedman (1962), a robot tax (Gates, 2017), a global tax on capital (Piketty, 2016), a thin capitalisation rule that prohibits excessively leveraged companies to deduct interest expense from their corporate tax bill or something completely different, remains to be seen. But it must be possible to have a public political debate about all these things, to give voters the feeling that they are not left behind.
And last but not least, these policies will have to be implemented by moderate parties as long as they are still in power. For once the “0.1% jackpot / 99.9% zero” political lotteries call the shots, we know what to expect: zero.
Bibliography
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