Economics for Muggles: Green parties in Europe

It isn't easy being a Green party

Photo by Karsten Würth on Unsplash

“It’s the economy, stupid”. So goes the saying in American politics. In other words, voters care about the economy more than anything else. Word to the wise to any governing party: if there’s an election during a recession you’re probably going to lose. Voters tend to credit a ruling party with positive economic outcomes and blame the ruling party for negative ones. Hold an election during an economic boom, and it’s hard to lose. Hold one during a crash, and it’s hard to win.

Now part of this is fair and part is unfair. Obviously a governing party can influence the economy. People elect leaders because of their economic platforms and expect results. That said, part of the economy is firmly outside of any leader’s control. Woe to any political leader that is up for reelection when oil prices are spiking - this is thought by some to have doomed Jimmy Carter’s 1980 reelection campaign. This is unfortunate because neither the president, nor any other individual, controls oil prices.

Although most agree that the economy affects elections, the size of the effect is fiendishly difficult to tease out. Why? Because while the economy can affect politics, politics can also affect the economy. Take the United States for example. Every president since Millard Fillmore (lucky number 13!) has been either a Republican or Democrat. Thus, every economic policy can be blamed on or credited to one of the two parties. For an economist, this means assigning causality isn’t easy. One can’t just compare economic growth to election results because while economic growth affects election results, election results affect economic growth. In fact, both mechanisms have a name. When economic growth influences elections, it’s called the Voter Popularity (VP) Function. When elections affect economic growth, it’s called the Political Business Cycle (PBC).

This is called reverse causality, and it makes assigning cause and effect difficult. Take, for example, the relationship between nutrition and wealth. It would be easy to say, “I think better nutrition will improve people’s wealth. Therefore, I can gather data and compare nutrition to wealth and document the relationship.” There is certainly a causal story here. People who are better nourished will be able to exert more physical effort and have increased cognitive abilities relative to those that are malnourished. The problem is that while nutrition affects wealth, one could just as easily say, “I think higher wealth improves people’s nutrition.” That is, those that have higher wealth levels will be able to afford more and better food, thus reducing their chances of being malnourished. Anytime A affects B, but B also affects A, reverse causality exists. For econometric reasons beyond the scope of this article, this means that a researcher can’t just compare A to B and find an effect.

So determining the effect of the economy on political parties is difficult. In the US there are only two political parties, so assigning cause and effect is impossible. But in Europe, there are many political parties. Individual European countries will often have half a dozen parties contesting a single election. Most notably, almost every European country has a Green party.

Green parties are political parties that focus on, you guessed it, the environment. They are concerned with climate change and deforestation and, unfortunately, nuclear power. Almost all Green parties are to the left of center, so they have taken up an array of other platforms that are generally pro-government. European Green parties are unique in that almost every country has one, but a European Green party has never won an election outright. They have taken part in ruling coalitions, but they have never won a majority of votes. Only several Green party politicians have ever been elected prime minister.

This creates an opportunity. Because while the economy could affect Green party outcomes, it is less likely that Green parties can affect the economy. Of course there is some influence; Green party politicians vote for laws and sit in cabinets, but their influence will be slight compared to a party that regularly wins elections. Also, the fact that most European countries have Green parties meant that a large number of elections could be compared to one another. It would be difficult to find a consistent result looking at just 15 elections in one country - the sample size isn’t large enough. By using Green parties, hundreds of elections can be used.

A coauthor and I assembled a dataset of all the elections since 1992. This is the year that countries East of the Iron Curtain first had competitive elections. We linked each election result to economic conditions at the time of the poll. Using basic regression analysis, we then compared what happened to Green parties during elections when the economy was growing to what happened to Green parties when the economy was shrinking. The full paper is here.

The results were what we expected. When the economy is growing, Green parties perform better. Specifically, a one-percent increase in GDP corresponds to a 0.64 percentage point increase in the Green party vote share. This might not sound like much, but given that Green parties usually don’t win much of the vote, it is the equivalent of a 10 percent bump. We believe the mechanism is simple. When the economy is growing and people have jobs, they care about the environment. Thus, they are more likely to vote for a Green party. When the economy is shrinking and people are concerned about their future, then the environment isn’t as important. Thus, voting for a Green party can be seen as a type of luxury good.