Study: Financial crises are associated with greater polarization

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tags: election 2016, Bernie Sanders, Trump

Amir Sufi is Bruce Lindsay Professor of Economics and Public Policy at Chicago Booth. Amir is a co-author of House of Debt. Twitter: @profsufi

The historian Joseph J. Ellis describes the early days of the United States as “a decade-long shouting match” characterized by “shrill, accusatory rhetoric, flamboyant displays of ideological intransigence, intense personal rivalry, and hyperbolic claims of imminent catastrophe.” In more recent times, the Vietnam War and Watergate deeply divided the country, and the administrations of Presidents Bill Clinton and George W. Bush were marked by sharp partisan conflict.

But while political polarization has been all-American since the start of the US, its current upswing threatens to make it the worst in history. Sharp divisions between Republicans and Democrats have created gridlock in Washington, DC, between the president and Congress and within Congress itself. The political scientists Christopher Hare, now at University of California, Davis, and Keith T. Poole of the University of Georgia write that “the level of polarization in Congress is now the highest since the end of the Civil War.”

The latest manifestation of this polarization has been the presidential primary race, defined by the emergence of real-estate magnate and reality-TV star Donald J. Trump on the right, and Senator Bernie Sanders on the left. Both Trump and Sanders espouse positions that only recently would have been way out of the mainstream—such as deporting 11 million undocumented immigrants (Trump) and providing free public college tuition for all (Sanders). The strong, durable support both candidates receive illustrates how polarized US politics has become. ...

Polarization in Congress has increased steadily over the past four decades, but our research suggests that it rose more sharply after banking crises and market crashes. And this pattern extends beyond the US: after financial crises, polarization among voters was common across all 70 countries sampled in the Reinhart-Rogoff data set.

We also took data from about 250,000 individual interviews from 60 countries, in which respondents described their political ideologies, and we matched that with Reinhart and Rogoff’s pre- and postcrisis indicators to construct a picture of people’s ideological tendencies five years before and after financial crises.

Our conclusion: financial crises tend to radicalize electorates. After a banking, currency, or debt crisis, our data indicate, the share of centrists or moderates in a country went down, while the share of left- or right-wing radicals went up in most cases.   

Read entire article at evonomics

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