Fiscal consolidation under electoral risk

The European debt crisis has uncovered serious tension between democratic politics and market pressure in contemporary democracies. This tension arises when governments implement unpopular fiscal consolidation packages in order to raise their macroeconomic credibility among financial investors. Nonetheless, the dominant view in current research is that governments should not find it difficult to balance demands from voters and investors because the economic and political costs of fiscal consolidations are low. This would leave governments with sufficient room to promote fiscal consolidation according to their ideological agenda. This article re‐examines this proposition by studying how the risk of governments to be replaced in office affects the probability and timing of fiscal consolidation policies. The results show that governments associate significant electoral risk with consolidations because electorally vulnerable governments strategically avoid consolidations towards the end of the legislative term in order to minimise electoral punishment. Specifically, the predicted probability of consolidation decreases from 40 per cent after an election to 13 per cent towards the end of the term when the government's margin of victory is small. When the electoral margin is large, the probability of consolidation is roughly stable at around 35 per cent. Electoral concerns are the most important political determinant of consolidations, leaving only a minor role for ideological concerns. Governments, hence, find it more difficult to reconcile political and economic pressures on fiscal policy than previous, influential research implies. The results suggest that existing studies under‐estimate the electoral risk associated with consolidations because they ignore the strategic behaviour that is established in this analysis.     

Increased economic salience or blurring of responsibility? Economic voting during the Great Recession

There is a puzzle which emerged following the Eurozone crisis: whereas the salience of the economy suggests an increase in economic voting, the realization that economic policies have become Europeanised may blur the responsibility of national governments, thus decreasing economic perceptions' weight on electoral choices. Do these mechanisms exclude each other? Do they refer to different groups of the electorate? We first examine the longitudinal trends of economic voting from 2002 to 2015 in three bailed out countries, namely Ireland, Portugal and Spain, to see if the economy's salience during the Great Recession increased the relevance of the economic perceptions in these countries. Secondly, making use of a unique media dataset of the last 16 years we test whether exposure to major mainstream newspapers that focus on the EU mitigates economic voting. On average, economic voting increased following the crisis. However, individuals who are more informed about the EU tend to use economic voting to a lesser extent, given they are more aware of the national government's limited room for manoeuvre.     

Australia's Political Institutions and the Corruption of Public Opinion1

This article explores structural causes for the decline in the quality of Australia's political and policy conversations. Three are nominated. The first concerns the changing role of the major party organisations. These no longer contribute to agenda setting; they are no longer forums for activist and interest mobilisation; they no longer mobilise and cue a mass base. The second structural change concerns the rise in the role of the media. This is now the primary bridge between the formal political system and the surrounding society, a role for which it is singularly ill‐equipped. The third change concerns the misalignment between the formal political system and Australian society. The formal system was formed in the early twentieth century when Australian society was broadly divided by class allegiance. Those days are long gone. Class has decomposed. A variety of new concerns differentiate and pluralise social attitudes. Possible remedies are then discussed.     

Exploring the actions of Government Affairs Managers during economic and financial crises—an exploratory study in the European Union

This paper is a response to the paucity of theoretical and empirical research into the political actions undertaken by organisations to influence policymakers' responses to economic and financial crises. By using original, primary data gathered from semi‐structured interviews conducted with Brussels‐based Government Affairs Managers of multi‐national enterprises, it reports the results of inductive, exploratory research into corporate political activity during the 2007–2011 financial crisis. Results suggest that not all firms are in favour of increased regulatory intervention during times of economic upheaval. They also imply that, during recessions, firms are more likely to seek long‐term as opposed to short‐term relationships with policymakers, they also have a greater propensity to engage in collective political action than individual political action and they use information strategies more frequently than constituency‐building and financial‐incentive strategies. These results are subsequently used as the basis for a conceptual framework that draws on numerous theoretical traditions to capture the antecedents of firms' political behaviours during economic crises. Given the absence of theoretical and empirical work that actively engages with this issue, the research makes important contributions to the existing literature on corporate political activity. It also has practical implications for corporate political strategists and policymakers. Copyright © 2012 John Wiley & Sons, Ltd.     

From ‘Tiger’ to ‘PIIGS’: Ireland and the use of heuristics in comparative political economy

This article analyses the consequences of the narrative construction of the group of countries that has been grouped as ‘PIIGS’ (Portugal, Ireland, Italy, Greece and Spain) for their sovereign debt risk rating. Acronyms for groups of countries can provide a useful shorthand to capture emergent similarities in economic profile and prospects. But they can also lead to misleading narratives, since the grounds for use of these terms as heuristic devices are usually not well elaborated. This article examines the process whereby the ‘PIIGS’ group came into being, traces how Ireland became a member of this grouping, and assesses the merits of classifying these countries together. The contention is that the repetition of the acronym in public debate did indeed shape the behaviour of market actors toward these countries. It is argued that this involved a co‐constituting process: similarities in market treatment drives PIIGS usage, which in turn promotes further similarities in market treatment. Evidence is found of Granger causality, such that increased media usage of the term ‘PIIGS’ is followed by increased changes in Irish bond yields. This demonstrates the constitutive role of perceptions and discourse in interpreting the significance of economic fundamentals. The use of acronyms as heuristics has potentially far‐reaching consequences in the financial markets.     

Lack of European Identity and the Failure of the Eurozone

Since late 2007, the Eurozone has been embroiled in a crisis that has seen GDP per capita stagnate, public debt soar, and unemployment reach record levels. This article argues that the Eurozone crisis will inevitably force fundamental changes in the structure of the EU. The only way to make the Eurozone work is through deeper fiscal integration of Eurozone economies. Yet wholesale fiscal integration cannot be achieved in the near term, due to the fact that EU citizens continue to identify more with their own nationalities than with Europe as a whole. The Eurozone economies of southern Europe will, therefore, continue to flounder, leading to further anti‐EU sentiment. Anti‐EU sentiment may eventually increase up to the point where one or all of these countries leave the Eurozone or the EU altogether. These propositions are supported with arguments from economic theory, and are bolstered by evidence from surveys and opinion polls.     

National Institutions and the Globalized Political Economy of Technological Change: An Introduction

In the last three decades research across the social sciences has made great advances in the political economy of technological change. Nonetheless, many of these insights are solely tied to national, sometimes regional, explanations of industrial R&D and innovation rates. Meanwhile, the impacts of the international system, and of the actions of individual countries, on technological changes across many countries, are increasingly more pronounced. It is therefore imperative that we expand our theoretical conceptualizations. For these reasons we have gathered, in this special issue, economists, political scientists, geographers, and sociologists to explore in a comparative way what we view as some of the critical areas for research at two different level of analysis—business and nations. This introduction will outline their major research themes and provide a brief history of the debate.     

Making Sense of Greek Austerity

The process of approving a Greek drawing on funds provided by the international community is now familiar. There is concern about the prospect of securing an agreement between the International Monetary Fund (IMF), the European Union (EU), the European Central Bank (ECB), and Greece, which satisfies all parties. This paper suggests that all parties to the agreement have interests in an orderly resolution of the Greek crisis that keeps Greece in the Eurozone. Furthermore, it argues that disagreements and delay before eleventh‐hour agreements can best be explained politically. The paper first demonstrates how Greece, the IMF, and the EU each have a clear interest in finding an orderly solution to the Greek crisis that allows it to remain in the Eurozone. It then outlines the incremental nature of the package and its strategic benefit both for the European banking sector, and governments in Greece and the Eurozone more broadly.     

Do voters learn? Evidence that voters respond accurately to changes in political parties’ policy positions

A premise of the mass–elite linkage at the heart of representative democracy is that voters notice changes in political parties’ policy positions and update their party perceptions accordingly. However, recent studies question the ability of voters accurately to perceive changes in parties’ positions. The study advances this literature with a two-wave panel survey design that measured voters’ perception of party positions before and after a major policy shift by parties in the government coalition in Denmark 2011–2013. Two key findings extend previous work. First, voters do indeed pay attention to parties when they visibly change policy position. Second, voters update their perceptions of the party positions much more accurately than would have been expected if they merely relied on a ‘coalition heuristic’ as a rule-of-thumb. These findings imply that under some conditions voters are better able to make meaningful political choices than previous work suggests.