Does Economics Explain the Rise of the Swedish Radical Right?

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As of late, I’ve been writing about populism and its causes. Economic reasons have been largely dismissed in various mainstream outlets and they have plenty of studies supporting the claim. However, it is very difficult to separate economic change from cultural change. What’s more, economic shifts provide the overall context for other anxieties to emerge. Too often, ignorance about the effects of these shifts drive the public to populism.

Recent evidence from the rise of the Sweden Democrats–a radical-right party–appears to support this view. The authors of a new working paper write,

We start from the timing of the Sweden-Democrat rise: growing to enter parliament between 2006 and 2010, and continuing to become Sweden’s third largest party in 2014 (with a 12.9 percent vote share). This period pre-dated the 2015 refugee crisis, but coincided with two events that worsened the relative economic lot for large segments of the population. In 2006, a Center-Right coalition of parties took power and implemented a dramatic reform agenda of tax cuts and social-insurance austerity with the purpose to “make work pay.” Over a mere six years, these reforms triggered a dramatic increase in income inequality. With earned income tax credits, incomes continued to grow among “insiders” with stable employment, while spending cuts implied a stagnation of disposable incomes for “outsiders” with unstable or no jobs. The second key event is the 2008 financial crisis. The crisis increased the job insecurity for “vulnerable insiders”, segments of the population with stable employment, but with jobs at higher risk of replacement by automation and other forms of rationalization than “secure insiders”.

To analyze the consequences of these events, we classify the population into economic winners or losers, starting out from comprehensive register data that provides a panel of yearly observations for the full adult population in 1979-2012. With this data, we can characterize the economic and social circumstances for individual politicians and for residents of each precinct or municipality…We find that the groups which faced a relative-income decline and higher job insecurity are over-represented among the politicians and voters of the radical right. Politicians from the Sweden Democrats include more outsiders and vulnerable insiders, compared to both the population and, very starkly, other political parties. Over-representation also grows across sub-groups of labor-market outsiders the more they lost (relative to insiders) from the make-work-pay reforms. For voters, we find a strong positive correlation between the Sweden Democrats’ electoral success and the impact of the economic reforms and the financial crisis (i) across municipalities and (ii) across voting districts within municipalities. Putting this correlation into a formal regression model, we can add a myriad of control variables from register data and other data sources. The strong correlation with negative economic shocks is not affected by the stocks and flows of immigrants from different regions, or by immigrants having jobs or being welfare recipients in a geographic area. They are also robust to controls for crime rates, media reporting on immigration, and local political contextual variables (pg. 1-2).

The authors suggest that “the political left offers a slate of politicians skewed away from labor-market outsiders and vulnerable insiders towards secure insiders. Adding to this evidence, we find that wherever groups of economic losers (or the losses they incur) are particularly large, the Sweden Democrats offer them more over-representation relative to other parties. Another side of our explanation is that economic shocks triggers diminished trust in government, of which the established left parties form part (following e.g., Algan et al. 2017). We find some support for this in survey data. The rise in electoral support for the Sweden Democrats temporally coincides with a clear divergence in trust in government institutions, including political parties, between labor-market outsiders and insiders. It is intuitive that candidates who themselves share the economic traits of disgruntled voters may stand a better chance to credibly bridge this trust gap” (pg. 2).

While the Swedish experience may not be the same as the American one, I think the two resemble each other far more than they differ. For example, when Gallup polled Trump supporters in early 2016, they found that Trump’s

unconventional résumé and style have helped attract their support for his candidacy, more so than his positions on issues or specific policies. In fact, other than his signature issue of immigration, mentioned by 8% of his supporters, no other issue is named by more than half that many — with between 2% and 4% mentioning his ability to deal with terrorists, his financial planning and budget expertise, and his handling of the economy and employment…[I]t is his nonpolitician background that comes to mind first, not his positions on issues, when supporters are asked to explain why they want him as their party’s nominee…Republicans who support Trump’s candidacy like him for being an anti-politician, and Trump’s willingness to say things that flout conventional norms governing political speech may only strengthen his authenticity as an outsider.

I don’t think it’s a coincidence that the desire for a (perceived) anti-establishment, anti-elite outsider followed in the wake of the Great Recession.