Noah Barkin: Tax-hit voters can be very forgiving

Conventional wisdom says governments that slash spending and raise taxes are punished come election time, but a new academic study and early evidence from austerity-hit countries in Europe tell a different story.

The re-election of Latvia's government in early October showed how forgiving voters can be of politicians who demand huge sacrifices in times of crisis.

Prime minister Valdis Dombrovskis cut public sector pay by up to 50 per cent in a country rocked by recession and surging unemployment, but was returned to office by an electorate which believed he was only cleaning up a mess left by others.

Hide Ad
Hide Ad

Greek local elections earlier this month sent a similar message. Prime minister George Papandreou, who had threatened to call a snap general election if voters turned against his party, ended up snatching control of Athens and winning a better-than-forecast eight out of 13 regions.

In Ireland, prime minister Brian Cowen is clinging to a razor-thin majority and could be booted out within months.

But recent history suggests that leaders who introduce unpopular measures can avoid paying the ultimate price with voters, according to a paper by Harvard economist Alberto Alesina, Dorian Carloni of the University of California Berkeley and Giampaolo Lecce of New York University.

They looked at the ten OECD countries which have introduced the most severe austerity measures over the past 30 years, and found no evidence that the governments that implemented them suffered inordinately at the polls. In fact, the data showed they were less likely to encounter a voter backlash than the average incumbent.

"The evidence that governments which impose large fiscal adjustments are thrown out of office simply isn't in the data," Mr Alesina said.

The event that historical evidence shows would be most likely to push voters over the edge is a default.

A 2008 study by the International Monetary Fund showed that in 18 out of 19 countries that defaulted over the previous decade, the ruling parties lost the next vote.