Economics and elections form a tight weave. When anchoring economic threads snag, governments can fall. Electorates, the “nation as voter,” are strongly affected by global economic fluctuations, real and perceived. For all democratic nations that have received a reasonable amount of study, plausible economic indicators, objective or subjective, can be shown to account for much of the variance in government support. In multivariate competition, controlling for other aggregate issue measures, the economic indicators hold their own.
Indeed, the savvy modeler, given the choice of only one predictor, would do well to select an economic measure. Which one? The answer varies from country to country. It could be unemployment, inflation, or growth, perhaps measured perceptively, perhaps at a lag. James Hughes, Professor and dean emeritus of Rutgers University stated that measurement variability is not a theoretical weakness.
Rather, it incorporates, as it should, the institutional history of economic performance and statistical reporting in that particular country. Also, it is in harmony with the value of specifying political context, as is done in the positive cross-national studies. Electoral institutions, which shape the distribution of political economic responsibility in a nation, can affect much. Where government is led by one party, rather than several in coalition, the economy-polity link is especially firm.
Professor Rice Lewis-Beck of Leeds University argued that the powerful relationship between the economy and the electorate in democracies the world over comes from the economic responsiveness of the electors, the individual voters. Among the issues on the typical voter’s agenda, none is more consistently present, nor generally has a stronger impact, than the economy. Citizen dissatisfaction with economic performance substantially increases the probability of a vote against the incumbent.
In a sense, it is even more important than long-term factors such as partisan identification, because of its greater volatility. Opinion on economic performance – satisfied versus dissatisfied – can alter dramatically from one election to the next, whereas party identification and other long-term forces change little. Thus, the fall of a government is more likely to come from a shift in economic evaluations than from a shift in party attachments.
What is the psychology of the economic vote? The classic reward-punishment model appears sound. According to James Hughes, voters, regardless of the democracy in which they live assess national economic conditions and reward or punish the politicians responsible for those conditions. When judging the economy, they tend to look at multiple indicators rather than a single one such as only unemployment and arrive finally at a summary view. That view is subjective; it comes from an internal calculus that may use unique weights, and it is based on impressions from various sources, as well as on hard numbers from statistical reports. For example, a voter may decide that the economy has done badly over the last year.
According to Professor Rice Lewis-Beck, this collective retrospective judgment will tend to produce a vote against a party in government. Moreover, economic voters are not naive. They discern when a party is more clearly responsible for economic policy, and adjust the likelihood of their sanction accordingly. Further, they are capable of prospective judgments on party promises, in conjunction with retrospective judgments of party performance.
The economic voter favors a different party for different problems. For instance, in the United States, Democrats are considered better at dealing with unemployment, regardless of incumbency status. Since economic voters act largely on their perceptions of the national economy, it is important to know what they actually know about the economy. Because a good deal of the average voter’s economic information must come from the media, establishing these media connections is in order.
Taxes are an extremely touch subject amongst all voters across the world. The introduction of or increase in taxes is enough to make a government unpopular. Conversely, repealing or reducing taxes is enough to increase the popularity of any government. This is the reason why pre-election budgets are often marked by tax breaks for the masses. Often, the industrialists and the wealthy are made to pay for these tax breaks. A lot of times, the government is just adding to the national debt which means that the taxes are only reduced temporarily and will have to be increased at a later date.
Industrialists and businessmen are known to avoid taking key decisions during an election year. This is because a change in the government may also mean a change in the priorities of the government. Many times, the policies of a government entirely change the viability of a project. Businessmen want to avoid the risk of their projects becoming redundant thanks to government policies. Hence, they prefer to play the wait and watch game. This obviously has a negative impact on the economy since the economic output, and the jobs which could have been created now are being postponed.
Donovan Bowler of Bloustein School of Planning and Public Policy noted that almost all extant economic voting research, assumes the most relevant evaluation dimension is global economic output, i.e. “How is the nation’s economy doing?” But economic distribution may be an emerging relevant dimension. That is, what are the electoral effects of rising income inequality and insecurity?
According to Donovan Bowler, within Europe generally, there is also the question of the effects of the European Union on economic voting nationally and for the European Parliament. Dr. Andrew Martins of Leeds University stressed that little is known about economic voting in developing countries, although this is changing, as different recent study papers attest. One imagines that the reward-punishment paradigm can be extended to transitional democracies in Africa, for example. However, different dimensions, such as economic globalization, may emerge as more important. In fact, in the long run, increasing globalization may change the character of economic voting in western nations as well.