To adapt or to disregard? Parties’ reactions to external shocks

Abstract

How do parties react to unanticipated events such as external shocks? Do they adapt to the consequences of the external shock or do they disregard them? Using the global financial crisis as an empirical example and testing the expectations for parties’ economic policy shifts in 23 European democracies based on Chapel Hill Expert Survey data, the article demonstrates that government parties react more to an external shock than opposition parties, particularly in countries where the external shock has been more severe. This has implications for a broader literature in comparative politics by fostering the dialogue between the political economy literature on external shocks and the literature on party policy shifts by showing the significant impact exogenous events can have on party positioning.

Keywords:

• External shock
• party positions
• global financial crisis
• policy shifts
• policy responsiveness

Acknowledgements

A previous version of this paper was presented at the 2015 European Political Science Association Annual Conference in Vienna. We thank the participants for helpful comments and suggestions. We also thank two anonymous referees and the editors, as well as Nicole Rae Baerg, Chitralekha Basu, Marc Debus, Tristan Klingelhöfer, Sebastian Koehler, Constantin Schäfer, and Sjoerd van Heck for their valuable feedback on earlier versions of this article.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Some studies deal with other, non-economic shocks that nevertheless have economic effects, for instance climatic disasters connected with adverse effects on economic growth (Albala-Bertrand 1993; Skidmore and Toya 2002).

2 Additionally, government parties are assumed to be loss averse and thus more prone to change their policy positions in order to stay in office (for a detailed discussion on government parties’ loss aversion, see Schumacher et al. 2015).

3 This reaction does not have to be in line with voters’ preferences or public opinion because parties in office have to handle the balance between voters’ preferences and, for instance, economic and international actors (see Ezrow and Hellwig 2014).

4 In contrast to an economic recession lasting for several months, the external shock of the global financial crisis had far-reaching repercussions. During the crisis, the value of financial institutions and assets dropped remarkably in several countries and led to a panic among investors and the population, which withdrew money from the banks, thus reinforcing the negative effects of the external shock.

5 As LeDuc and Pammett (2013: 495) write, the economic impact of this shock was also reflected in public opinion as seen in surveys from 2009. Four out of five respondents in European countries stated that their life conditions at that time were worse than before and a large majority was pessimistic regarding the future.

6 Government parties in crisis countries will face the risk of losing votes if they do not react to the consequences of the external shock. Therefore, we expect them to move in one or the other direction also as a signal to voters that they realised that they have to do something.

7 The 23 countries are: Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and United Kingdom. Croatia, Cyprus, Luxemburg, and Malta were excluded from the analysis because these countries are not covered in every CHES survey needed for the empirical analysis. Estonia was excluded due to a lack of data on long-term interest rates.

8 For instance, the Danish elections were held in September 2011, almost three years after the bankruptcy of Lehman Brothers. Restricting our sample to countries that held elections close to the external shock would not allow for an analysis of as many countries as possible affected by that shock.

9 We do not expect parties to reconsider their policy views on legalising same-sex marriages or abortion issues due to this specific external shock. On the contrary, parties should rather consider their programmatic views on economic issues than on social ones. The correlation between parties’ absolute position changes on the general left–right dimension and changes on the economic dimension corroborates our argumentation. The correlation between parties’ policy shifts on these two dimensions before and after the external shock is rather low (Pearson’s r = 0.43). Furthermore, parties’ policy positions on the general left–right dimension do not differ over time (Dalton and McAllister 2015; Schumacher et al. 2015), but they do so on other policy dimensions (Thomassen 2012).

10 Ideally, we would rely on party position data that has been gathered more closely to the external shock under study; yet this is not the case for a comparative large-N study.

11 Experts were given the following instruction: ‘Parties can be classified in terms of their stance on economic issues. Parties on the economic left want government to play an active role in the economy. Parties on the economic right emphasise a reduced economic role for government: privatisation, lower taxes, less regulation, less government spending, and a leaner welfare state.’

12 On the use of long-term interest rates as a proxy for the economic effect of an external shock see Gürkaynak et al. (2005), Peersman (2002) and Raddatz (2007). Detailed information on all the data sources used are provided in Table A1 in the Appendix.

13 We include all parties that run for national elections and that are covered both in CHES and in ParlGov (Döring and Manow 2016). If there have been elections held in the last three months of 2008, we use the cabinet composition following these elections for the coding of government party.

14 The substantial results are robust against using the difference of countries’ long-term interest rates between the end of 2009 and the second quarter of 2010. In fact, only four countries faced an increase in long-term interest rates in this period: Greece, Portugal, Spain, and the United Kingdom.

15 Note that the sovereign debt crisis in EU member states clearly was not exogenous to European political actors (see Featherstone 2011).

16 The substantial results presented are robust against using an alternative coding of only green and radical right parties as niche parties (see Meguid 2005).

17 The substantial results do not change either when using 5% of the votes for creating the dummy variable or when using parties’ vote shares as continuous variable.

18 Figures 2–4 are based on the plotplain scheme in Stata version 15.1 (Bischof 2017b). Figure 3 has been created using the user-written command coefplot (Jann 2014).

Additional information

Notes on contributors

Patrícia Calca

Patrícia Calca is a postdoctoral fellow at Instituto Universitário de Lisboa (ISCTE-IUL), Centro de Investigação e Estudos de Sociologia (CIES-IUL), and a visiting fellow at the University of Konstanz, Center for Data and Methods. Her research interests include political institutions, comparative politics/comparative political economy, EU, legislative behaviour and decision making, public policy analysis, political accountability, and corruption. [[email protected]]

Martin Gross

Martin Gross is an assistant professor at the Geschwister-Scholl-Institute of Political Science at the Ludwig-Maximilians-University of Munich, Germany. His research focuses on local politics, political institutions, party competition, coalition politics in multi-level systems, and EU cohesion policy. [[email protected]]