Be less cynical, stupid

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It is the state of economy that decides elections: Or so the theory goes. The evidence, however, suggests that voters do pay far greater attention to the issues and politicians really do mean what they say.

I recently came across an essay which I wrote as an undergraduate in the 1960’s. My politics professor had asked me to tackle the thesis that the incumbent government would almost always be re-elected because it could manage the economy to create a pre-election boom. Then, as now, the view that ‘it’s the economy, stupid’ dominated almost every discussion of political strategy.

The argument relied on three propositions. First, that the main influence on voting behaviour is the amount of money in the voter’s pocket. Second, that the main concern of politicians is to secure re-election, and this concern is the basis of their economic policies. Third, that governments actually have enough control over the economy to achieve their intentions.

With the collapse of the Keynesian consensus since the 1960’s, everyone is now more sceptical about the last of these claims. And since I wrote that essay, evidence has continued to accumulate that the first two propositions are also doubtful.

Do voters re-elect governments when the economy is doing well? The belief that governments would ensure economic growth and with it their own survival was a product of the 1950’s, when – mostly right-wing – governments around the world had presided over rapid expansion and had been resoundingly voted back into office. The achievement of Harold Macmillan in 1959 set the tone. His government told voters that they had never had it so good and knocked twopence off the price of a pint of beer just before the election.

But even in the 1960’s, there were reasons to doubt that the economy was the decisive issue. The Conservatives should have won in 1964 (when the economy was booming and Sir Alec Douglas-Home led his party to defeat), and Labour should have lost in 1966 (when Harold Wilson was in charge of a rapidly deteriorating economic scene). If you focus simply on the growth rate in the economy, the best elections to have fought were those of 1964, 1987 and 1997 (yet the government lost two out of three) and the worst were those of 1966, 1974 and 1992 (yet the government won two out of the three).

Perhaps voters take a longer-term view, and assess performance over the life of a parliament. If they do, they will find little difference in the outcomes of the parliaments of the last fifty years. Still, the electorate should have been grateful to Edward Heath in 1974 (they were not) and to Margaret Thatcher in 1987, (they were). And they should have punished James Callaghan in 1979 (they did) and John Major in 1992 (they did not). If there is a relationship between economic performance and the results of British parliamentary elections, it is not an obvious one.

The economy seems to have more of an influence in the United States. Jimmy Carter in 1980 and George Bush Sr in 1992 had unfavourable economic backgrounds – and both lost. The most advantageous conditions were faced by Lyndon Johnson in 1964, Richard Nixon in 1972, Ronald Reagan in 1984, and Bill Clinton in 1996 – and each secured re-election. Al Gore should have won in 2000. Perhaps he did.

People who are cynical about this election campaign may find it surprising that politicians do not seem to manage the economy with their eye on re-election. But that is the conclusion of the most careful analysis of the relationship between economics and elections, by Alesina and Roubini*. The authors test two alternative hypotheses of political behaviour – the opportunistic and the partisan.

The opportunistic theory suggests that business cycles will broadly coincide with electoral cycles. The partisan theory takes a different view of the relationship between politics and the economy. Left wing governments expand the economy in their first years in office and then, finding these policies mostly unsuccessful, retrench. Right wing governments contract the economy at the beginning of their term and then, also finding these policies unsuccessful, expand.

New Labour since 1997, and the Clinton administration in the US, are exceptional in not having followed these conventional partisan policies (and this may account for their success). But the model describes the Thatcher years, the Mitterand years, and the recent changes of control in continental Europe.

One implication of the partisan theory is that the economy is more likely to be booming when the election is called if there is a right wing government than a left wing government. Historically, this has been true. But if the thesis of cynical politicians and cynical voters were correct that would mean right wing governments would secure re-election more often than left wing ones. Mostly, they are not. If Labour win on June 7, Conservatives and Republicans will have won re-election six times since 1960 and Labour and Democrats five. It would be six if Gore had taken Florida.

The theory of cynical, self-interested politicians manipulating cynical, self-interested voters is exaggerated. In the statistical analysis which Alesina and Roubini undertake the partisan theory wins out clearly over the opportunistic theory. If econometrics does not lie, nor do politicians. The best explanation of their behaviour is that, for better or worse, they mean what they say. And the best explanation of voters’ behaviour is that they make their minds up on the basis of the issues and the competence of governments. It is wise to be cynical about politics, but possible to be too cynical. As my professor was.

A. Alesina & N. Roubini Political Cycles and the Macroeconomy, MIP Press 1977

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