adplus-dvertising
Connect with us

Politics

How the debt crisis of 2008-09 fueled populist politics – MIT News

Published

2 years ago

 on


The economic downturn of 2008-09 has often been described as a financial-sector crisis, featuring failing banks. But it was much more than that. Many people with stagnant or dropping incomes, having borrowed to sustain their standard of living, found themselves deep in debt when the economy sagged and joblessness increased.

In turn, those economic problems created a political shift: Many debtors became attracted to populist politics, with consequences still reverberating around the world. Now, a study co-authored by an MIT professor connects some of these dots in detail. Examining Hungary, the research finds that the right-wing political party Jobbik benefitted significantly from the aftermath of the crisis, using the debt issue to engineer a realignment of many voters.

Specifically, by charting the pattern of political shift in relation to the prevalence of debt, the study suggests that about one-fifth of the total political shift rightward in Hungary at the time can be attributed to the presence of personal debt, especially foreign-currency denominated debt that was owed to foreign banks.

“This was very salient for many people, and it was a key aspect of the crisis that touched people every single month in their pocketbook,” says Emil Verner, an assistant professor of finance at the MIT Sloan School of Management and a co-author of a paper detailing the study’s results. While Jobbik once had a paramilitary wing and was often accused of anti-Semitism, he notes, the aftermath of the economic crisis allowed it to add voters who formerly shunned it: “The far right … [was] able to attract a number of voters, middle-class or even slightly higher than middle-class people, who had mortgages and otherwise probably wouldn’t have voted for the far right.”

The paper, “Financial Crisis, Creditor-Debtor Conflict, and Populism,” appears in advance online form in the Journal of Finance. The authors are Győző Gyöngyösi, a researcher at the Leibniz Institute for Financial Research SAFE, in Frankfurt, Germany; and Verner, who is the Class of 1957 Career Development Professor at MIT Sloan.

Local problems, foreign lending

Hungary’s lending boom started in 2000 and became oriented around loans in foreign currency: By 2008, the Swiss franc denominated over 60 percent of household debt. Between September 2008 — a key month for the global economic crisis — and Hungary’s April 2010 elections, Hungary’s national currency, the forint, depreciated by 23 percent. Household debt increased during this time by a whopping 4 percent of precrisis national GDP.

Meanwhile, the same time period also marked a shift in Hungary’s political landscape. The far right only received 2.6 percent of the vote in Hungary’s 2006 elections; that increased to 17 percent in 2010 and 20 percent in 2014.

To investigate the relationship between debt and politics, the scholars examined data at the zip code level across Hungary about the amount of debt and foreign debt held, as well as voting data. That allowed them to pinpoint variations within the overall political shift in Hungary and to see how much of it corresponded to debt troubles. This is an application of the “differences in differences” approach often used by social scientists.

Ultimately the data showed that between 2006 and 2010, as debt increased relative to income within Hungarian zipcodes, voting by those residents shifted toward the far right. Specifically, for a given 10-percentage-point increase of debt to income, the far-right vote share in that area increased from 1.6 to 3.0 percentage points. Overall, spikes in foreign-currency debt during this time account for a 3-percentage-point increase in the far-right vote share nationally, or 20 percent of the change in the vote. This shift has persists today. 

One of the key facets of this political dynamic, the scholars note, is that many households were in debt in foreign currency, often to foreign lenders. Jobbik, at the time, had a highly nationalist platform; it was also the most aggressive party in terms of campaigning on relief measures from foreign-held debt, while Hungary’s mainstream parties were more vague about the issue.

“Populist parties like to exploit divisions or cleavages in society between the ‘good’ ordinary people, and the elites or foreigners or any kind of outside threat that they [populists] can create. Conflict between debtors and banks seems to have been a particularly fruitful way for them to do that,” Verner says. “I think that helps us understand why they’ve been successful, particularly after financial crises.”

To be sure, many things could influence regional and local shifts in political orientations. With that in mind, Verner and Gyöngyösi examined other potentially influential factors such as historically extremist attitudes, immigration patterns, local employment changes, financial literacy, and house-price shocks. Ultimately they found the relationship between debt holding and the rightward shift was robust even regardless of other factors.

“They [voters] were potentially open to something new,” Verner says. “And that something new was a much more radical party.”

More than a debt crisis

In Hungarian politics, the partially debt-driven rise of Jobbik comes with a twist. The party did not gain power. But its nationalist rhetoric and positions gained traction with enough voters to make them more salient in politics; over the last decade, Hungary’s current ruling party, Fidesz, has outflanked Jobbik on the right in many regards while drastically consolidating power. In this sense the mainstreaming of certain kinds of politics can be a profoundly important effect of an economic crisis.

“If you look at times of major financial distress, financial crises, they’re often associated with political upheaval,” Verner reflects, including “more political polarization, loss of [support for] the center establishment parties toward more fringe or nonestablishment parties, and a shift in support for far-right populist parties.”

That has happened in various forms throughout modern history, Verner observes. The new research suggests, he adds, that people should start to regard the effects of the 2008-09 crisis in the same way.

“One of the key legacies of the 2008 crisis was the rise of populism, and one of the places that was most pronounced was Hungary,” Verner says.

In this sense, what has often been described narrowly as a crisis of finance institutions was much broader, and has helped fuel political changes. Government officials and political observers everywhere should be aware, Verner thinks, that a debt crisis can become much more than a debt crisis.

“One of the implications is that how we design and regulate our financial system and the types of financial products we make available to consumers can have really far-reaching effects,” Verner says. “Not just for the economy but even for broader society and how we organize ourselves, our political systems, and what types of policies we put in place.”

Adblock test (Why?)

728x90x4

Source link

Related Topics:
Continue Reading

Politics

‘Disgraceful:’ N.S. Tory leader slams school’s request that military remove uniform

Published

5 days ago

 on

November 8, 2024

By

 

HALIFAX – Nova Scotia Premier Tim Houston says it’s “disgraceful and demeaning” that a Halifax-area school would request that service members not wear military uniforms to its Remembrance Day ceremony.

Houston’s comments were part of a chorus of criticism levelled at the school — Sackville Heights Elementary — whose administration decided to back away from the plan after the outcry.

A November newsletter from the school in Middle Sackville, N.S., invited Armed Forces members to attend its ceremony but asked that all attendees arrive in civilian attire to “maintain a welcoming environment for all.”

Houston, who is currently running for re-election, accused the school’s leaders of “disgracing themselves while demeaning the people who protect our country” in a post on the social media platform X Thursday night.

“If the people behind this decision had a shred of the courage that our veterans have, this cowardly and insulting idea would have been rejected immediately,” Houston’s post read. There were also several calls for resignations within the school’s administration attached to Houston’s post.

In an email to families Thursday night, the school’s principal, Rachael Webster, apologized and welcomed military family members to attend “in the attire that makes them most comfortable.”

“I recognize this request has caused harm and I am deeply sorry,” Webster’s email read, adding later that the school has the “utmost respect for what the uniform represents.”

Webster said the initial request was out of concern for some students who come from countries experiencing conflict and who she said expressed discomfort with images of war, including military uniforms.

Her email said any students who have concerns about seeing Armed Forces members in uniform can be accommodated in a way that makes them feel safe, but she provided no further details in the message.

Webster did not immediately respond to a request for comment.

At a news conference Friday, Houston said he’s glad the initial request was reversed but said he is still concerned.

“I can’t actually fathom how a decision like that was made,” Houston told reporters Friday, adding that he grew up moving between military bases around the country while his father was in the Armed Forces.

“My story of growing up in a military family is not unique in our province. The tradition of service is something so many of us share,” he said.

“Saying ‘lest we forget’ is a solemn promise to the fallen. It’s our commitment to those that continue to serve and our commitment that we will pass on our respects to the next generation.”

Liberal Leader Zach Churchill also said he’s happy with the school’s decision to allow uniformed Armed Forces members to attend the ceremony, but he said he didn’t think it was fair to question the intentions of those behind the original decision.

“We need to have them (uniforms) on display at Remembrance Day,” he said. “Not only are we celebrating (veterans) … we’re also commemorating our dead who gave the greatest sacrifice for our country and for the freedoms we have.”

NDP Leader Claudia Chender said that while Remembrance Day is an important occasion to honour veterans and current service members’ sacrifices, she said she hopes Houston wasn’t taking advantage of the decision to “play politics with this solemn occasion for his own political gain.”

“I hope Tim Houston reached out to the principal of the school before making a public statement,” she said in a statement.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Politics

Saskatchewan NDP’s Beck holds first caucus meeting after election, outlines plans

Published

5 days ago

 on

November 8, 2024

By

 

REGINA – Saskatchewan Opposition NDP Leader Carla Beck says she wants to prove to residents her party is the government in waiting as she heads into the incoming legislative session.

Beck held her first caucus meeting with 27 members, nearly double than what she had before the Oct. 28 election but short of the 31 required to form a majority in the 61-seat legislature.

She says her priorities will be health care and cost-of-living issues.

Beck says people need affordability help right now and will press Premier Scott Moe’s Saskatchewan Party government to cut the gas tax and the provincial sales tax on children’s clothing and some grocery items.

Beck’s NDP is Saskatchewan’s largest Opposition in nearly two decades after sweeping Regina and winning all but one seat in Saskatoon.

The Saskatchewan Party won 34 seats, retaining its hold on all of the rural ridings and smaller cities.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Politics

Nova Scotia election: Liberals say province’s immigration levels are too high

Published

6 days ago

 on

November 7, 2024

By

 

HALIFAX – Nova Scotia‘s growing population was the subject of debate on Day 12 of the provincial election campaign, with Liberal Leader Zach Churchill arguing immigration levels must be reduced until the province can provide enough housing and health-care services.

Churchill said Thursday a plan by the incumbent Progressive Conservatives to double the province’s population to two million people by the year 2060 is unrealistic and unsustainable.

“That’s a big leap and it’s making life harder for people who live here, (including ) young people looking for a place to live and seniors looking to downsize,” he told a news conference at his campaign headquarters in Halifax.

Anticipating that his call for less immigration might provoke protests from the immigrant community, Churchill was careful to note that he is among the third generation of a family that moved to Nova Scotia from Lebanon.

“I know the value of immigration, the importance of it to our province. We have been built on the backs of an immigrant population. But we just need to do it in a responsible way.”

The Liberal leader said Tim Houston’s Tories, who are seeking a second term in office, have made a mistake by exceeding immigration targets set by the province’s Department of Labour and Immigration. Churchill said a Liberal government would abide by the department’s targets.

In the most recent fiscal year, the government welcomed almost 12,000 immigrants through its nominee program, exceeding the department’s limit by more than 4,000, he said. The numbers aren’t huge, but the increase won’t help ease the province’s shortages in housing and doctors, and the increased strain on its infrastructure, including roads, schools and cellphone networks, Churchill said.

“(The Immigration Department) has done the hard work on this,” he said. “They know where the labour gaps are, and they know what growth is sustainable.”

In response, Houston said his commitment to double the population was a “stretch goal.” And he said the province had long struggled with a declining population before that trend was recently reversed.

“The only immigration that can come into this province at this time is if they are a skilled trade worker or a health-care worker,” Houston said. “The population has grown by two per cent a year, actually quite similar growth to what we experienced under the Liberal government before us.”

Still, Houston said he’s heard Nova Scotians’ concerns about population growth, and he then pivoted to criticize Prime Minister Justin Trudeau for trying to send 6,000 asylum seekers to Nova Scotia, an assertion the federal government has denied.

Churchill said Houston’s claim about asylum seekers was shameful.

“It’s smoke and mirrors,” the Liberal leader said. “He is overshooting his own department’s numbers for sustainable population growth and yet he is trying to blame this on asylum seekers … who aren’t even here.”

In September, federal Immigration Minister Marc Miller said there is no plan to send any asylum seekers to the province without compensation or the consent of the premier. He said the 6,000 number was an “aspirational” figure based on models that reflect each province’s population.

In Halifax, NDP Leader Claudia Chender said it’s clear Nova Scotia needs more doctors, nurses and skilled trades people.

“Immigration has been and always will be a part of the Nova Scotia story, but we need to build as we grow,” Chender said. “This is why we have been pushing the Houston government to build more affordable housing.”

Chender was in a Halifax cafe on Thursday when she promised her party would remove the province’s portion of the harmonized sales tax from all grocery, cellphone and internet bills if elected to govern on Nov. 26. The tax would also be removed from the sale and installation of heat pumps.

“Our focus is on helping people to afford their lives,” Chender told reporters. “We know there are certain things that you can’t live without: food, internet and a phone …. So we know this will have the single biggest impact.”

The party estimates the measure would save the average Nova Scotia family about $1,300 a year.

“That’s a lot more than a one or two per cent HST cut,” Chender said, referring to the Progressive Conservative pledge to reduce the tax by one percentage point and the Liberal promise to trim it by two percentage points.

Elsewhere on the campaign trail, Houston announced that a Progressive Conservative government would make parking free at all Nova Scotia hospitals and health-care centres. The promise was also made by the Liberals in their election platform released Monday.

“Free parking may not seem like a big deal to some, but … the parking, especially for people working at the facilities, can add up to hundreds of dollars,” the premier told a news conference at his campaign headquarters in Halifax.

This report by The Canadian Press was first published Nov. 7, 2024.

— With files from Keith Doucette in Halifax

Source link

Continue Reading

Trending