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What will drive political uncertainty in 2017?

Summary:
2017 promises to be another challenging year for Europe's liberal democracies. Many EU member states are facing elections where economic and cultural worries could provoke populism. This op-ed will be published in Capital, Dienas Bizness, El País,  Nikkei Asian Review and Nikkei Veritas. An edited version will be published in Algemeen Dagblad. As 2016 draws to a close, a sense of unease is gripping many commentators who look ahead. This year brought victories for Brexit and Donald Trump. The outcome of both votes was largely unexpected. What will 2017 bring? The EU is facing three, or even four, elections in major member states. The Netherlands, France, Germany and possibly also Italy will go to the polls. The results of all four elections are far from certain at this stage. Indeed, voting behaviour seems to have become difficult to predict. Economic and sociological research points to a number of different factors provoking these recent electoral upsets. The debate is broadly about whether it is economic issues such as income inequality, cultural issues such as a rejection of equal rights for women, minorities and gay people, or factors relating to citizens’ perceived loss of control over their destiny that has driven people to support populist candidates and causes. At first sight, the economic factors seem to have played a strong role.

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2017 promises to be another challenging year for Europe's liberal democracies. Many EU member states are facing elections where economic and cultural worries could provoke populism.

This op-ed will be published in Capital, Dienas Bizness, El País,  Nikkei Asian Review and Nikkei Veritas.

What will drive political uncertainty in 2017?

What will drive political uncertainty in 2017?

What will drive political uncertainty in 2017?

What will drive political uncertainty in 2017?

What will drive political uncertainty in 2017?

An edited version will be published in Algemeen Dagblad.

What will drive political uncertainty in 2017?

As 2016 draws to a close, a sense of unease is gripping many commentators who look ahead. This year brought victories for Brexit and Donald Trump. The outcome of both votes was largely unexpected. What will 2017 bring? The EU is facing three, or even four, elections in major member states. The Netherlands, France, Germany and possibly also Italy will go to the polls. The results of all four elections are far from certain at this stage. Indeed, voting behaviour seems to have become difficult to predict.

Economic and sociological research points to a number of different factors provoking these recent electoral upsets. The debate is broadly about whether it is economic issues such as income inequality, cultural issues such as a rejection of equal rights for women, minorities and gay people, or factors relating to citizens’ perceived loss of control over their destiny that has driven people to support populist candidates and causes.

At first sight, the economic factors seem to have played a strong role. The vote for Brexit predominantly came from the countryside, where GDP per capita levels are significantly lower than in the cities. Moreover, income inequality levels are much higher in the United States and the UK than in continental Europe. And indeed, one can show that the Brexit vote is significantly affected by regional income inequality, though the effect may not be very large.

The second explanation is a rejection of progressive cultural norms. An interesting study by Ingelhart and Norris emphasises this aspect. They offer evidence that the recent protest votes are a cultural backlash against progressive values. And it is true that public discourse, especially on social media has totally changed. Unfortunately, it seems to have become widely acceptable to talk of the supremacy of white populations and engage in racist discourse.

Finally, there is the question of loss of control. In a striking survey by YouGov, Trump voters are shown to strongly endorse values such as respect for authority. Those who think it is more important to respect authority than for children to be considerate are shown to tend towards right-wing authoritarianism. And the vote for Trump was also very much influenced by concerns over immigration. Similarly, the vote for Brexit was driven to a great extent by immigration fears.

If one buys primarily into the economic story, Europeans should not be too worried about next year’s elections. After all, continental European countries have the largest welfare states in the world and inequality levels are comparatively low. To be sure, youth unemployment levels in particular are still worryingly high and need to be urgently addressed. But elections are typically won among older voters in our aging societies. Moreover, job creation is now robust.

But if one puts more emphasis on the cultural aspects, and in particular on the sense of losing control, then the outcome of elections in Europe looks less certain.

The recent terrorist attack in Berlin, most likely carried out by a refugee who had applied for asylum, could drive a further shift in the mood among Germans. On the other hand, the cultural values of tolerance, respect and rationality are quite deeply rooted in today’s Germany. The race for the German chancellery is still wide open.

In France the conservative candidate couples traditional cultural values with far-reaching proposals to reform the French state and its economy along liberal lines. Will this prove a winning combination? The far-right candidate offers an anti-foreigner ticket and economic proposals that could take France out of the Euro and do great damage to the country’s economic wellbeing. Again, the outcome is uncertain, and we do not know if cultural worries and anti-foreigner sentiment will prevail.

Despite their differences, all countries heading for elections share one common agenda: they must prevent uncontrolled immigration as experienced in some periods of 2015. Building capacities for border control and counter-terrorist intelligence will be fundamental for the future of Europe. But it will be equally fundamental that Europe stays true to its values and protects those who legally deserve protection.

In 2017 voters will give their verdict on whether European and national policymakers have delivered. But these electoral battles will go well beyond immigration and inequality. Cultural factors seem to be more central than most economists would like to accept. And it is in this arena where citizens and experts will have to engage, if they wish to sustain liberal democracy.

Guntram B. Wolff
Guntram Wolff has been the Director of Bruegel since June 2013. His research focuses on the European economy and governance, on fiscal and monetary policy and global finance.

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