Recent elections have ushered a slew of right-wing politicians into power in several developed countries—or in the cases of France and the Netherlands, brought them uncomfortably close. Rising inequality, the oft-cited issue motivating the “rise of the right,” can arguably be alleviated through government-led policies of redistribution.
Our piece Does Economic Redistribution Affect Economic Growth? found that in developed economies there is no correlation between redistribution and GDP per capita growth. Still, if such policies neither hinder nor spur growth, do they at least have the desired effect on inequality, as would be indicated by a lower Gini coefficient? 1 Looking at the past decade in a range of developed countries suggests that they generally do. 2 (Chart 1)
Notably, this simple observation becomes more complex when you look at individual countries. Poland is more redistributive than Japan, for example, yet exhibits a higher level of inequality. Similarly, Germany has substantially more inequality than the Netherlands despite nearly equal levels of redistribution.
If surging support for right-wing political candidates truly reflects a growing sense of being “left behind,” then those countries where inequality remains high or has worsened in the past decade despite government efforts to redistribute economic rewards should be those that experienced the greatest challenges from the far right. As in all matters having to do with inequality and redistribution, the relationship is not so simple. (Chart 2)
Most western countries have experienced a rise in the political far right irrespective of the extent of redistribution or whether redistribution is successful in reducing inequality. Germany is one of the most redistributive of the Western European countries with relatively low inequality, and yet the Alternative for Germany (AfD) party claimed 13.3 percent of Bundestag seats in 2017. France is also highly redistributive with relatively low inequality, but fended off a strong challenge from the National Front in the final election round.
Strikingly, some countries have actually increased their efforts at redistribution over the past decade and, yet, inequality has increased (Italy, Germany, and Poland). Other countries (France, Sweden, the United Kingdom, and the Netherlands) have been able to reduce inequality with redistribution. Redistributive policies in the United States, Canada, and Austria seem to have relatively little effect on inequality. Redistribution does not help fend off right-leaning parties; sometimes it doesn’t even have the desired effect of reducing inequality. (Chart 3)
Notably, the political right is rising in all of these countries except Japan and Canada, irrespective of the extent of efforts to redistribute income or whether or not those efforts are successful. It may be that Japan and Canada have political characteristics that are particularly inhospitable to right-wing parties.
Whatever the cause, political parties that are looking to resurrect economic redistribution and inequality as policy themes to win in upcoming elections should beware. The political landscape appears to be driven by forces that, though possibly linked to inequality, cannot be addressed through just redistribution. Looking at some of the successes of pro-free market economic policies under way in Japan and France, electorates may actually become hostile to traditional redistribution as a policy solution.
1 Solt, Frederick. 2016. “The Standardized World Income Inequality Database.” Social Science Quarterly 97. SWIID Version 6.1, October 2017.
2 Inequality is determined by the Gini index — a measure of inequality ranging from 0 to 100, where 0 = perfect equality and 100 = perfect inequality, where one person earns all the income in an economy. Redistribution is determined by the difference between the “market Gini Index” (pre-taxes and transfers) and the “net Gini index” (post-taxes and transfers). If a Gini index taking into account the effect of taxes and transfers is lower than a Gini calculated using just gross incomes, that represents redistribution. The bigger that difference in Gini, the more redistribution is present.
Login in below to access content exclusive to clients of The GailFosler Group.
Not a client yet? For more information on the benefits of becoming a client, please contact us.