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Research Institute
2018 Davos Edition
The Future of Politics
Introduction
It is no coincidence that we have chosen “The “If the institutions of constraint, law and democracy
Future of Politics” as the leading theme for this are weak, the system tends toward dictatorship; if
Davos special report. Throughout the past decade, the state is weak or ineffective, it fails to deliver on
the Credit Suisse Research Institute, our bank’s behalf of its citizens.”
in-house think tank, has been following a range What we further examine are market reactions
of global developments and has contributed with to the changing political environment. Recently,
original data and in-depth research to numerous international markets have proved quite resilient
debates around pressing economic issues. At the to individual geopolitical events. Nonetheless,
occasion of this year’s World Economic Forum, it is the consequences of the rapidly evolving political
timely for us to consider the very framework of our ecosystem are likely to be substantial going forward.
societies: liberal, democratic international order. The reversal of globalization in favor of regionalism
In a series of reports authored by leading experts will particularly benefit sectors focused on regional
from both within and outside Credit Suisse, we trade. Populist policies will likely lead to further
present current research around, among others, monetary tightening. Ultimately, straightforward
voter decision-making in a digital age and policy asset allocation models that have performed well
failures leading to the current rise in populism. We so far and that saw credit and equity asset classes
further explore the impact of the changing political significantly outperform, are now unlikely to produce
environment on capital markets, addressing several similarly satisfactory results.
topics for investors to consider. This year’s World Economic Forum follows
A particularly important theme this year, which the leading theme “Creating a Shared Future
several of our experts take up in their contributions, in a Fractured World” and makes a point for
is the political and social volatility across the world, international collaboration as a means of solving
alongside the moderate prospects for the spread of critical global challenges. Against this background,
democracy going forward. As predicted by Samuel I hope our publication encourages critical thinking
Huntington in 1965, we increasingly find cases about the path and the prospects of our societies,
where social modernization spreads faster than as well as the alternatives ahead of us. I wish you
political or institutional modernization. As a result, a most inspiring read!
new tensions arise between society and the state
and we see the number of new democracies stall
as of the mid-2000s, following a downward path
since. Modern democratic states have established Urs Rohner
valuable principles, including a distinction between Chairman of the Board of Directors
public and private space, as well as service for the Credit Suisse Group AG
public. As Francis Fukuyama states in his chapter:
02 Introduction
04 Outlook for liberal democracy
The Rt Hon Sir John Major KG CH
Prime Minister of the United Kingdom
(1990 to 1997)
07 The rise of populist nationalism
Dr. Francis Fukuyama
Senior Fellow at Stanford’s Freeman Spogli
Institute for International Studies and
Professor, by courtesy, of Political Science
14 Voter misbehavior: How behavioral
insights can help understand voters
Prof. Michael M. Ting
Professor of Political Science and Public
Affairs at Columbia University
21 Globalization and politics
Michael O’Sullivan
Chief Investment Officer for International
Wealth Management at Credit Suisse
27 The 85 World
Afshin Molavi
Senior fellow at the Foreign Policy Institute
of the Johns Hopkins University School of
Advanced International Studies
33 Long-term planning versus the
“vision thing”
Michael O’Sullivan
Chief Investment Officer for International
Wealth Management at Credit Suisse
Krithika Subramanian
Macro-strategist at the CIO International
Wealth Management Office at Credit Suisse
39 The impact of political trends on
capital markets and investment
Robert Parker
Chairman of the Asset Management and
Investors Council
47 An outlook on global politics
Prof. Nicholas Burns
Professor at Harvard University and a
former US Under Secretary of State
52 References
53 About the authors
Cover photo: Shutterstock, Lasko niroworld
54 General disclaimer / Important
information
For more information, contact:
Richard Kersley, Head Global Thematic Research, Credit
Suisse Investment Banking,
richard.kersley@credit-suisse.com, or
Michael O’Sullivan, Chief Investment Officer,
Photo: Shutterstock, qvist International Wealth Management, Credit Suisse,
michael.o’sullivan@credit-suisse.com
The Future of Politics 3
Outlook for liberal democracy
Until the beginning of this century, politics seemed headed towards a democratic future, as more
countries adopted – in full or in part – the basic tenets of democratic process. The progress was jerky
and uneven, but continuous: it seemed that Western-style liberal democracy was, albeit slowly, on its
way to becoming the political system of choice for an ever-widening part of the world. In the last 15
years, all that has changed.
The Rt Hon Sir John Major KG CH
Prime Minister of the United Kingdom (1990 to 1997)
In many countries, I see a distaste for politics that themselves for the manner in which they govern.
runs deep, and that is a danger to democracy. What Today, we have a disillusioned, disinterested,
is democracy? It is surely more than electing a preoccupied or (in some cases cowed or misled)
government through a universal franchise. Elections electorate shrugging its shoulders and turning away
are an expression of democracy, but the ballot box from politics. In such a climate, democracy faces
alone is insufficient. a threat from the rise of nationalism. This is not
My worry is that democracy is in retreat, stifled theoretical: in many countries it is a reality. In others,
by its own virtues. Democracy operates on consent. a clear and present danger.
That being so, it is slower to make decisions than In the democratic West, we have come to
autocracy or outright dictatorship. Democracy must believe that our liberal, social and economic model
cajole. Must persuade. Must seek consensus. Not of democracy is unchallengeable. It is not. Last year
so autocracy. This can make autocracy seem more – as the United Nations has reported – 67 countries
efficient than democracy, more decisive, more able suffered a decline in political and civil liberties, while
to deliver its promises, more swift to act in crises. only 36 had gains. What has happened there can
The rise of non-democratic China to economic happen elsewhere. Over 20 democracies have
super-stardom is one of the great stories of history, collapsed during the last two decades, and there
but there is a price to pay for its success. The price is widespread public dissatisfaction in many others.
is a lack of personal freedom for the masses.
The heart of democracy
At the heart of true democracy is liberty under “My worry is that democracy is in
the law. Democratic government must be freely retreat, stifled by its own virtues”
elected, for a fixed period, in a universal franchise,
untainted by coercion. There must be checks and
balances to its authority. The rule of law must apply.
The judiciary must be independent, and there must Across Europe, nationalism has gained more
be a free media, an independent academia, and than a foothold. It begins with a populism that
a functioning opposition free to oppose without masquerades as patriotism, but morphs into
sanctions. Only then can freedom of speech and something far less attractive. In many countries,
action be protected. nationalist parties have significant support. They can
But these attributes are merely the trappings attract true patriots – but are also a political vehicle
of democracy. Democracy in action is more than for those who flavor that patriotism with xenophobia.
satisfying the material demands of the majority, or Nationalism is authoritarian. It turns easily
honoring the promises of an election manifesto. towards autocracy or – at worst – outright
Democratic government must govern for the future dictatorship. Nationalists hide their threat under
as well as the present. A governing party must an exaggerated love of country, an unthinking
govern for political opponents who did not vote for patriotism: “my country, right or wrong.” Its leaders
them – and may never do so. It must govern for view other countries – and sometimes other races –
the unborn, and the country they will inherit. For as inferior. Nationalism is suspicious of foreigners.
minorities. For the wider international community. It accuses immigrants of “stealing jobs” or, in some
And all governments have a responsibility to other way, undermining the indigenous population.
4 The Future of Politics
Nationalism versus patriotism
There is a great difference between nationalism
and patriotism. Patriotism is more than pride in
country. A mature patriotism concerns itself with
the condition of the people, as well as the prestige
of the country. Such a patriotism worries about
deprivation, opportunity and incentive. It asks itself:
how can we spread our wealth and opportunity
more evenly around our country? And it is as
concerned with the growth of food banks as it is
with a shortage of aircraft carriers.
The financial crisis – less security, low or
no growth, and rising taxes – has created public
dissatisfaction with the old, albeit fallible, politics.
Anger about its shortcomings replaces cool
dispassionate judgment. Despair gives a credibility
to promises of easy solutions when – in truth –
there are none.
“Politicians must understand
that government is primarily
about individual lives”
Our social and economic liberalism may be
fallible, but it is not some “mish-mash of woolly
headed do-gooders.” It protects individual liberties
and human rights. It promotes market freedoms,
ownership of property, and freedom of movement.
We dare not take these familiar values for granted.
We need to celebrate them, protect them and
practice them: politics must not become a
playground for demagogues.
Politicians must understand that government
is primarily about individual lives – people’s hopes
and fears, and their ambitions for themselves and
their families – not simply a competition between
competing political philosophies. Politicians must
subject policy to one over-riding test: how will its
implementation actually affect the people?
Politics has gone awry, but it can recover,
provided the causes of its fall from grace are
understood – and acted upon.
I, for one, am optimistic they will be. ■
Photo: Shutterstock, can balcioglu
The Future of Politics 5
6 The Future of Politics Photo: Shutterstock,
The Future of Microgen
Politics 6
The rise of populist nationalism
The world experienced a political earthquake in the year 2016 with the British vote to leave the Euro-
pean Union in June and the election of Donald Trump as President of the United States in November.
These events were the culmination of a longer-term trend away from the postwar liberal international
order, one that had been building for at least a decade earlier, and marked the rise of a new form of
populist nationalism. A critical question for the future concerns whether this is merely a “democratic
recession,” in the words of political sociologist Larry Diamond, or marks a longer-term downturn in
the fortunes of liberal democracy worldwide.
Francis Fukuyama
Senior Fellow at Stanford’s Freeman Spogli Institute for International Studies and Professor, by courtesy, of Political Science
The liberal international order countries that are open to trade and investment will
all grow richer in the aggregate, and this is exactly
The changes that occurred in 2016 need to be
what happened over the past two generations.
placed in the context of the liberal international
Between 1970 and the financial crisis of 2008,
order that has existed up to then. There are two
global output increased fourfold, leading to the
components of this order, economic and political.
creation of unimaginable amounts of new wealth. For
The economic institutions consist of a series of
countries in the developing world that participated
agreements promoting an open global economy.
in this system, hundreds of millions of people were
These include the General Agreement on Tariffs and
raised out of poverty and new middle classes began
Trade (GATT) which evolved into the World Trade
appearing in China, India, Latin America and sub-
Organization (WTO), and regional arrangements like
Saharan Africa.
the European Union (EU), the North American Free
Trade Agreement (NAFTA), and the like. These
economic structures were designed to promote
the free movement of goods, services, capital and “Between 1970 and the financial
people across international borders in a free trade
regime that would expand markets and prosperity
crisis of 2008, global output
for everyone who participated in it. Other bodies like increased fourfold, leading to the
the G-7 and the G-20 were intended to promote creation of unimaginable amounts
cooperation in specific areas like monetary policy. of new wealth”
The political institutions were built around a
series of security alliances binding the USA to a
number of countries. These alliances include the
North Atlantic Treaty Organization (NATO) and the The stability and prosperity of this system was
bilateral security pacts between the USA, Japan, highly conducive to the spread of democracy around
South Korea and the like. In addition, there were the world. In 1970, perhaps 35 of the world’s
further regional agreements like the Organization countries could qualify as electoral democracies;
for Security and Co-operation in Europe (OSCE), the number had risen to nearly 120 by the year
the Council of Europe, the Association of Southeast 2005. This constituted what political scientist
Asian Nations, and others that were designed to Samuel Huntington labeled “Democracy’s Third
promote stability and political coordination. Wave” in 1991, beginning with the democratic
Underlying both the economic and political transitions in Southern Europe in the early 1970s,
components of the liberal international order was and accelerating dramatically by the fall of the Berlin
the USA as the world’s dominant liberal democracy. Wall and the return of most of Latin America to
The USA was instrumental in creating both the rule- democracy by the end of the 1980s.
based free-trade regime and the security alliances
in response to the Cold War and, currently, the End of an era
struggle against international terrorism. We are now in a period, however, where many of
This international liberal order worked exactly as these trends have been reversed. In Europe, a
advertised. Conventional trade theory tells us that number of right-wing anti-EU parties have appeared
The Future of Politics 7
Photo: Shutterstock, vchal
such as Marine Le Pen’s Front National in France or like Russia and China appeared on the scene that
Geert Wilder’s Party for Freedom in the Netherlands. did not accept the legitimacy of the American-
The threat from the UK Independence Party (UKIP) led order. Turkey under President Tayyip Recep
succeeded in prompting Prime Minister David Erdogan has systematically sought to concentrate
Cameron to call the Brexit referendum and shifted power in the executive and curb opposition to
his Conservative party to the right. In Germany, the the president’s rule. These setbacks have been
anti-immigrant Alternative for Germany (AfD) party described by Larry Diamond as a “democratic
gained representation in the Bundestag for the recession”1 as authoritarian countries have gained
first time in September 2017, receiving just under in confidence and countries thought to be in
13% of the vote. In the USA, President Trump transition to democracy have started slipping back
has withdrawn from the Trans-Pacific Partnership into authoritarian practices.
(TPP) and the Paris Accords on Climate Change, What was perhaps most surprising, however, was
denounced NAFTA, and threatened to impose the regression that occurred within the democratic
punitive tariffs on China. world itself. Within the EU, new governments
appeared in Hungary in 2011 and Poland in 2015
that set forth on explicitly nationalist agendas: the
former’s Prime Minister Viktor Orban stated that he
“The number of new democracies was seeking to build an “illiberal democracy,” and
stopped increasing in the mid- understood Hungarian national identity in strictly
2000s and began to decline” ethnic terms, while the latter undertook a broad
assault on the Polish judiciary and independent
media. Both countries had made an early transition
The consensus behind globalization as a positive to democracy after the collapse of Communism; both
force and the hope that institutions promoting closer were regarded as having successfully consolidated
international cooperation would steadily strengthen their democratic systems during the 1990s.
(e.g. Europe’s aspiration for an “ever closer union”) How do we characterize these changes and
have dissipated and been replaced in a number of what are the larger forces driving them? We need to
countries with a new emphasis on national sovereignty. begin with some definitions.
During his speech to the UN General Assembly in
September 2017, Donald Trump repeated the word Democracy and populism
“sovereignty” twenty-one times. This would not be Liberal democracy can be seen as a political system
surprising coming from a Chinese or Russian leader, that joins three distinct elements. The first is a state
but is hardly typical of a US president. that concentrates and uses power to defend the
The number of new democracies stopped
1. Facing Up to the Democratic Recession. Larry Diamond.
increasing in the mid-2000s and began to decline;
Journal of Democracy, Volume 26, Number 1, January
qualitatively, large new non-democratic players 2015, pp. 141-155
8 The Future of Politics
nation from foreign and domestic threats, as well as A second characteristic has to do with the
enforce the law and delver basic services to citizens. definition of the “people” who are the basis for
A modern state is one that is impersonal and makes a legitimacy: many populist regimes do not include
clear distinction between public and private; the state the whole population, but rather a certain ethnic or
exists not for the self-enrichment of the rulers but for racial group that are said to be the “true” people.
public benefit. The second institution is the rule of law, Thus Viktor Orban in Hungary has defined Hungarian
ideally a system of transparent laws that are binding national identity as based on Hungarian ethnicity,
not just on ordinary citizens but on the most powerful something that would exclude non-Hungarians
political actors in the society. And finally, institutions living in Hungary, and include the many Hungarians
of democratic accountability such as free and fair living in surrounding countries like Slovenia or
multiparty elections seek to ensure that governments Romania. Prime Minister Narendra Modi in India
are accountable to as broad a part of the population as has similarly been trying to shift the definition of
possible and not just to the elites that run it. Indian national identity from the inclusive liberal one
Liberal democracy is therefore a balance established by Mahatma Gandhi and Jawaharlal
between the power-generating and power-deploying Nehru to one based on Hinduism. Sarah Palin,
institutions, the state, the rule of law and democratic a precursor of Donald Trump, once defined “real
accountability, which are fundamentally institutions Americans” as those like herself coming from small
of constraint. If the institutions of constraint, law towns and rural America, which seemed to exclude
and democracy are weak, the system tends toward the diverse populations living in big cities like Los
dictatorship; if the state is weak or ineffective, it fails Angeles or New York.
to deliver on behalf of its citizens.
What is distinctive about the new populist
nationalist regimes that have appeared is that “Populist leaders tend to
leaders are using the third pillar, democracy, to develop a cult of personality
weaken or undermine the first two pillars of state around themselves”
and law. That is, they use the legitimacy conferred
by democratic elections to corrupt the state and use
it for their own private purposes, and seek to evade
or otherwise undermine the rule of law. A third definition of populism has to do with the
style of leadership. Populist leaders tend to develop
a cult of personality around themselves, claiming
the mantle of charismatic authority that exists
“Leaders are using the third independently of institutions like political parties. They
pillar, democracy, to weaken or try to develop a direct and unmediated relationship
undermine the first two pillars of with the “people” they claim to represent, channeling
state and law” the latter’s hopes and fears into immediate action. It is
typically coupled with a denunciation of the elite who
make up the existing institutions. This claim to directly
represent popular wishes is what then legitimates the
In 2016, the Law and Justice Party in Poland
leader’s efforts to undermine institutions that would
launched a campaign against the Polish judicial
limit his or her power.
system, demanding the retirement of most sitting
These three definitions allow us to distinguish
judges and seeking to replace them with others
between the different movements that have been
sympathetic to the party. The Fidesz party in
given the label “populist” in the past. Latin American
Hungary has used its legislative supermajority to
populists like Hugo Chavez or Nestor and Cristina
push through a series of constitutional changes
Kirchner emphasized popular but unsustainable
that reduce the independence of various checking
social programs, and tried to create personality cults
institutions. All of these regimes claim the mantle
around themselves. They did not, on the other hand,
of democracy, but do not maintain the balance
entertain a restrictive definition of national identity.
between state, law and democracy that true liberal
The same could be said of Thaksin Shinawatra
democracy demands.
and his sister Yungluck in Thailand: they promoted
Three characteristics of populism redistribution programs for poorer rural Thais but did
There is no consensus among political scientists as not have the same restrictive view of Thai identity as
to the definition of populism, but there are at least their yellow shirt opponents.
three characteristics that have been associated Leaders of the Brexit movement, by contrast,
with the term. The first is a regime that pursues did not stress an economic program, nor did they
policies that are popular in the short run, but have a single charismatic leader. But they did appeal
unsustainable in the long run, e.g. price subsidies to anti-immigrant cultural fears and traditional British
or expansive social services. This characterized the identity, as well as the discontent about economic
regime of Hugo Chavez in Venezuela, who used oil dislocation. Viktor Orban fits all three definitions:
revenues in flush times to fund a series of social he has tried to protect Hungarian savers from
programs for the poor that collapsed when energy “predatory” European banks, he has a restrictive
prices fell. definition of “the people” and he would certainly
The Future of Politics 9
Photo: Shutterstock, stock_photo_world
like to be considered a charismatic leader. It is not telling us that all countries participating in a free
clear whether Vladimir Putin fits any but the last trade regime will be better off in the aggregate also
of the three definitions: he has been cautious on tells you that not every individual in each country will
expansive social programs and, while stressing be better off. The widely taught Heckscher-Ohlin
Russian identity and traditions, he claims that trade model (developed by Swedish economist Eli
tradition is not necessarily restrictive in ethnic terms. Heckscher and Bertil Ohlin) suggests that low-
He has certainly built a cult of personality around skilled workers in rich countries will lose out to
himself, although it is hard to argue that he is an similarly skilled workers in poor ones, which has in
outsider seeking to overthrow the entire elite. The fact been happening in many industrialized countries
same can be said about India’s Narendra Modi and with the rise of China, Mexico and other developing
even China’s Xi Jingping: they have both become countries. According to a recent IMF study2, some
popular by attacking the existing elite, although they 50% of Americans are no better off in terms of real
themselves are very much part of that elite. income than they were in 2000; many more of those
It should be noted that Donald Trump seems in the middle of the income distribution have lost
to fit all three definitions. During his campaign, ground than have moved up the economic ladder.
he focused on topics such as trade protectionism, In the USA, this relative economic decline of the
while keeping hands off social programs like middle or working class has been associated with a
Medicare and social security. Also, he has sought number of social ills, like increasing rates of family
an unmediated relationship with his core supporters: breakdown or an opioid epidemic that claimed more
when accepting the Republican nomination in 2016, the 60,000 lives in 2015.
he said “I alone understand your problems,” and “I The second source of populism is political.
alone know how to fix them.” Liberal democracies invite popular participation and
over time tend to proliferate rules that complicate
Why populist nationalism now? decision-making. When such political systems
combine with polarized or otherwise severely
There are three reasons why we are seeing the
divided publics, the result is often political paralysis,
rise of populist nationalism in the second half of the
which makes ordinary governing very difficult. India
2010s: economic, political, and cultural.
The economic sources of populism have been 2. Ali Alichi, Kory Kantenga, Juan Solé, “Income Polariza-
widely noted and discussed. The same trade theory tion in the United States,” (Washington, DC, IMF Working
Paper WP/16/121)
10 The Future of Politicsunder the previous Congress Party government and were not being adequately recognized by the
was a striking example of this, where infrastructure political system. Such people can make economic
projects and needed economic reforms seemed demands, but they tend to interpret their loss of status
beyond the government’s ability to deliver. culturally as well: they used to constitute the group
Something similar occurred in Japan and that defined national identity, but were now being
Italy, which often seemed paralyzed in the face displaced by newcomers who were being given unfair
of long-term economic stagnation. One of the advantages over them. This reinforces the tendency
most prominent cases was the USA, where an to scapegoat immigrants and foreigners as agents
extensive set of constitutionally mandated checks of this change. In this respect, economic motivation
and balances can be seen as a “vetocracy,” i.e. the overlaps substantially with cultural concerns, and in
ability of small groups to veto action on the part of many ways cannot be distinguished from them.
majorities. This is what has produced a yearly crisis This is what has made immigration such a
in Congress over passing a budget, something that powerful issue in driving populist nationalism.
has not been accomplished under so-called “regular Rates of immigration have in fact become very
order” for at least a generation, and has blocked high in Europe and the USA, and concerns over
sensible reforms of health care, immigration, and rapid cultural change have motivated many voters
financial regulation. to support populist parties and leaders even if they
have felt themselves to be under direct economic
“Would-be strong men” threat. In many ways, questions of identity –
This perceived weakness in the ability of democratic language, ethnicity, religion and historical tradition
governments to make decisions and get things done – have come to displace economic class as the
is one of the things that set the stage for the rise of defining characteristic of contemporary politics.
“would-be strong men” who can break through the This may explain the decline of traditional center-
miasma of normal politics and achieve results. This left and center-right parties in Europe, which
was one of the reasons that India elected Narendra have lost ground steadily to new movements built
Modi, and why Shinzo Abe has become one of around identity issues.
Japan’s longest-serving prime ministers. Vladimir
Putin’s rise as a “strong man” came against the What the future holds
background of the chaotic Yeltsin years. And, finally,
For those who believe that liberal democracy
one of Donald Trump’s selling points was that, as a
constitutes the best form of government, the
successful businessman, he would be able to make
rise of populist nationalism is a very worrying
the US government functional again.
phenomenon. The last time this happened in
the 1930s, the Great Depression was deepened
and prolonged by punitive tariffs and competitive
“There have been major policy devaluations, while Europe eventually plunged into
failures by elites in both America World War II. The central question is then whether
and Europe” the current trend is actually just a democratic
recession from which the world will eventually
recover, or whether the forces visible today will
strengthen and threaten liberal democracy as a
Moreover, there have been major policy failures form of government in more countries.
by elites in both America and Europe. The USA Answering this question is not a matter of
embarked on two unsuccessful wars in the Middle empirics or simple trend projection. Leadership
East in the 2000s and then experienced the biggest and a variety of exogenous factors like the sudden
recession since the Great Depression of the 1930s. appearance of military conflict or a new financial
The EU created a monetary union around the euro crisis will affect outcomes, as will decisions taken
without a corresponding way to unify fiscal policy, by individual leaders. Here we can only make a
leading to the Greek debt crisis. And it created limited series of observations to support the case
the Schengen area and a host of other rules that we are in a recession rather than a full-scale
liberalizing the movement of people within Europe depression, and that the world will not descend into
without establishing a credible mechanism for a 1930s-style cataclysm.
controlling its outer borders. While laudable from an First, the solutions proposed by populist
economic and moral standpoint, internal freedom of nationalists to the social problems they face are likely
movement became problematic in the absence of to be self-defeating. Latin America experienced its
such controls. This turned into a legitimacy crisis in populist wave about 10–15 years before Europe and
the wake of the mass migration triggered by the the USA with the rise of Hugo Chavez. Chavismo
Syrian civil war in 2014. has left Venezuela in ruins, but has also had a useful
The final driver of populist nationalism is cultural. minatory effect on other countries in the region
Many years ago, Samuel Huntington pointed out that do not want to follow it into long-term decline.
that the most dangerous socio-economic class was Argentina, for example, flirted with populism for a
not the poor and marginalized, who often lacked the decade under the Kirchners, but has since reverted
time and resources to mobilize, but rather middle to a more sensible centrist government and is
classes who felt they had lost ground economically recovering economically and politically.
The Future of Politics 11A second reason for hope is the fact that come under attack from President Trump, but have
institutions in existing liberal democracies are stood up fairly well until now.
much stronger than they were in the 1930s. Finally, there are policy steps that elites in
There has been a great deal of social learning in Europe and the USA could take that would mitigate
the subsequent years; contemporary Germans, for some of the underlying drivers of populism. Many
example, are still aware of the threat that fascism observers have suggested a raft of economic policy
posed to their society. While populist parties have measures that could lessen economic inequality and
made significant gains, they have not yet displaced shore up existing middle classes. All of this is to the
the mainstream ones; in France, for example, they good and necessary given the technological forces
have been displaced by Emanuel Macron’s new driving inequality.
centrist movement. The checks and balances of the
US constitutional system were designed in many
ways to limit the damage that a “would-be Caesar”
would pose to republican government. Those “There are policy steps that elites
checks – the courts, federalism, the substantial in Europe and the USA could take
powers vested in Congress, the decentralized that would mitigate some of the
nature of the executive, and the media – have all
underlying drivers of populism”
But fewer people have sought to address
the cultural anxieties that are equally powerful
sources of populist discontent. This would involve
elites accepting the idea that states are territorial
jurisdictions that have the right – indeed, the
obligation as liberal democracies – to maintain
control over their borders. For an entity like
the EU, this would mean getting serious about
control over its external borders. For Europe, it
would mean acceptance of the fact that individual
countries, as well as the EU as a whole, can
legitimately take decisions regarding the speed
and pace of immigration. For its part, the USA
has been avoiding confronting serious immigration
reform, which would inevitably involve balancing
stronger enforcement of existing immigration
laws with a path to citizenship for most of the
11 million undocumented aliens already in the
country. At the same time, there needs to be a
recognition that national identity is an important
component of democratic self-government, and
that identities need to be adjusted to meet the
requirements of societies that have become de
facto multicultural.
One of the advantages that democracy has
over authoritarian government is its ability to make
course corrections and hold accountable leaders
who make bad policy mistakes. The future of
democratic government in both Europe and North
America will very much depend on how their
political systems adapt to the large social forces
Photo: Shutterstock, Guillaume Destombes
that have been unleashed by globalization and
technology. ■
NOTE: The views expressed here are those of the
author and do not necessarily represent or reflect the
views of Credit Suisse
12 The Future of PoliticsPhoto: Shutterstock, Guillaume Destombes The Future of Politics 13
Voter misbehavior: How behavioral
insights can help understand voters
Recent events have brought many questions about voters’ influences and motivations to light.
Despite some evidence of voter rationality, the gaps left by “homo economicus” in the electoral
setting remain conspicuous. Behavioral economics can provide psychologically grounded expla-
nations for these quirks in voter behavior. Understanding how citizens approach voting is of vital
importance to the endeavor of improving electoral processes.
Michael M. Ting
Professor of Political Science and Public Affairs at Columbia University
Humans are quirky decision-makers. This Rationality and voting
seemingly banal observation has generated intense
The notion that voters may fall short of the rational ideal
interest among academics, policymakers and
is hardly new to election researchers. The disciplines
managers in recent years. The reason, perhaps,
of political science and economics largely evolved
is that generations of analysts were trained
independently throughout the 20th century and, as
to assume exactly the opposite. As countless
a result, political scientists never uniformly embraced
undergraduates have learned, economic theories
rationality as an analytical starting point. Instead, the
typically start from the assumption that individuals
study of voters has remained pluralistic, incorporating in
in markets or society are rational. Loosely
different corners elements of economics, psychology,
speaking, rational actors are not quirky: they both
and sociology (Diermeier 2015).
know their objectives and can calculate how best
to achieve them. This austere conception of homo
economicus remains the foundation of economic
inquiry today. “If consumers can make bad
Behavioral economics challenges this foundation
by recognizing a range of familiar decision-making
choices, then why would voters
flaws: we are often (among other things) inattentive, not do so as well?”
forgetful, impulsive, impatient, overconfident,
inconsistent, or simply bad at calculation. The
pervasive consequences of these flaws have now
achieved mainstream recognition (DellaVigna 2009, Observations of actual voter behavior in various
Madrian 2014). The 2002 and 2017 Nobel Prizes settings also support the idea that non-rational
in Economic Sciences recognized two of the field’s perspectives should be taken seriously. We
pioneers, Daniel Kahneman and Richard Thaler. are regularly reminded that many voters seem
Across the world, institutions such as the UK’s unprepared for the task of deliberating questions of
famed Behavioural Insights Team or “Nudge Unit” national leadership (Delli Carpini and Keeter 1997).
have arisen to provide policy remedies. In a 2017 Pew Research Center study, only 60%
The fallibilities probed by behavioral economists of Americans surveyed correctly identified the UK
almost surely extend beyond the economic realm. as the country leaving the European Union, and
If consumers can make bad choices as a result of less than half could identify their own Secretary
their cognitive limitations, then why would voters of State.1 Generations of academic studies have
not do so as well? The present decade has seen supported the view that voters are not particularly
numerous upheavals – the Brexit vote, the Trump effective at optimizing their choices. For example,
administration, the rise of the far right in Europe voters respond only weakly to what incumbent
– brought about through the ballot box. In light politicians do in office (Erikson 1971). They are too
of these events, it is worth asking whether the willing to incorporate irrelevant information in their
insights of behavioral economics can help us to voting decisions (Leigh 2009), and resort to simple
understand voters too. This brief essay argues that decision heuristics in choosing whom to vote for
it can. Although it is by no means a comprehensive (Woon 2012).
survey, it aims to convey a sense of both the value 1. Survey details can be found at http://www.people-press.
added and the limitations of modern behavioral org/2017/07/25/from-brexit-to-zika-what-do-americans-
perspectives. know/, accessed December 10, 2017
14 The Future of PoliticsPhoto: Shutterstock, Jane Campbell
The very act of voting represents perhaps that is unlikely to be useful (Prato and Wolton
the canonical challenge to homo economicus in 2016). A classic argument is that rational actors
politics (Feddersen 2004). To see why, suppose can produce mass turnout if a sufficient number feel
that voters care about the election winner and the a sense of duty, or an intrinsic benefit from the act
cost of voting. Rational voters would then weigh of voting (Riker and Ordeshook 1968, Feddersen
the net benefits of voting, which imposes a cost, and Sandroni 2006). This motive no doubt explains
but raises the chances of victory for their preferred why some citizens vote, although it is hard pressed
candidates, and not voting, which is costless, but to account for the wide variations in turnout levels
raises the chances of a disappointing outcome. In that are evident across societies and over time.
an electorate of any reasonable size, the likelihood
that any single voter will be pivotal in determining the
election is vanishingly small. Thus if individual votes
are effectively irrelevant to the election outcome, “If individual votes are effectively
why should voters bother to show up? irrelevant to the election outcome,
This logic is of course at odds with the obvious why should voters bother to show up?”
fact that many voters participate in elections across
the globe. In the United States, where turnout is
comparatively low, 139 million, or about 60%
of the eligible population, cast ballots in its 2016 In fact, for all of their shortcomings, voters appear
presidential election.2 Even in elections that are to behave quite rationally in certain situations.
projected to be lop-sided, thousands, if not millions, Consider the question of which candidates voters
routinely cast ballots that they know will not affect support when they do decide to vote. If we posit that
the outcome.3 These observations do not necessarily voters are concerned primarily with public policies
reject a central role for rationality in voting. that benefit themselves economically, then most
For example, rather than reflecting an inability voters choose the correct candidate. In the USA,
to process information, uninformed voters might be lower income voters tend to favor Democrats, while
rationally unwilling to invest in acquiring information higher-income individuals lean toward Republicans
2. Data from the United States Election Project, http:// (Bartels 2006). Voters also commonly abstain, or
www.electproject.org/2016g, accessed December 10, “roll off,” in races that they are less informed about
2017 on the same ballot – even though they have already
3. This does not imply that no one should vote: in that hypo- paid the cost of showing up to the voting station
thetical situation, one person could then step in to determine
(Feddersen and Pesendorfer 1996).
the election unilaterally
The Future of Politics 15Thus it can be said that, in the aggregate, and Republican states, Perot performed similarly well
voters act consistently with their interests, and between the last polls and the election. However in
weigh in when they feel sufficiently informed about close states, Perot lost significant support, indicating
them. Some of the most intriguing tests of voter that many of his backers switched to one of the
rationality arise in situations where optimal decisions main candidates when the electoral stakes were
depend on other voters’ actions. For example, high (Burden 2005). The extent of strategic voting
turnout is consistently higher in elections that are is difficult to estimate, but recent studies suggest
close; i.e. when a vote is more likely to be pivotal that it is substantial (Hall and Snyder 2015).
(Franklin 2004). In some political systems, voters The overall assessment of voter rationality is
may also confront the prospect of strategic voting, therefore mixed. Treating voters as rational actors
or supporting a less preferred but more electable can be a useful shorthand for explaining how
candidate. Assuming that they care primarily about elections unfold, just as treating consumers as
policy consequences, supporters of a candidate rational actors can be useful for understanding
who will certainly lose should instead back their product markets. In both settings, there are limits
favorite “viable” candidate, if one exists. to what rational actors can easily explain. The
This situation arose during the 2000 US promise of behavioral economics is that it provides
presidential election, where the Reform Party psychologically grounded explanations for situations
candidate Ross Perot attracted a sizable following, where deviations from rationality are evident.
but had no chance of winning. In strongly Democratic One might contend that behavioral insights are
of limited use if the rational perspective on voters
remains a serviceable workhorse. However the
nature of political competition actually suggests
otherwise: in competitive party systems, differences
in turnout in a few states or electoral districts
can and sometimes do determine control of the
legislature or the presidency. Thus understanding
how even modest-sized groups of citizens approach
elections can be of critical importance.
Behavior, economics and politics
Which aspects of human behavior matter for
elections? The range of cognitive and judgmental
biases is vast (Rabin 1998), and moreover voters
and elections differ in some important ways from
the consumers and markets often studied by
behavioral economists. Notably, a vote provides
relatively little in the way of immediate consumption
benefits, and its effect is usually both minuscule
and dependent on the actions of many others. The
following six categories are a sampling of behavioral
quirks that have gained the most attention in the
voting environment.
Reinforcement learning
Compared to rational optimization, a less mentally
taxing approach to decision-making is to repeat
or “reinforce” actions that have a record of
satisfactory outcomes. For example, the choice
of a beverage or recreational activity might simply
be the consequence of accumulated positive
experiences with those alternatives. This classic
rule in the study of learning is known as the “Law
of Effect” (Bower and Hilgard 1981).
Photo: Shutterstock, Joseph Sohm
Reinforcement learning speaks directly
to the paradox of voter turnout. Under this
mechanism, voting occurs because it is more
often associated with “good” election results,
while not voting is associated with “bad”
outcomes. Reinforcement learners not only turn
out at high levels, but also collectively behave
like rational voters by voting at higher rates in
closer elections (Bendor, et al. 2011).
16 The Future of PoliticsThe Law of Effect suggests that voting is in some salient in memory (Kahneman and Tversky 1973).
sense habitual: once started, it is likely to continue. Salience is driven by unusual or dramatic events,
This idea has been supported by numerous studies or simply by recency. Media coverage can play
of real world voters. One such study leverages an important role in determining salience. Barber
the fact that local voting rates are affected by the and Odean (2008) show that individual investors
weather. When bad weather depressed turnout are more likely than institutional investors to buy
in one election, later elections (which were of based on prominent news coverage or unusual
course unaffected by the original bad weather) saw performance. On a more positive note, regular
reduced turnout as well, as more voters discovered reminders can successfully prompt recipients to
that staying home yielded satisfactory outcomes fulfill objectives such as making payments or saving
(Fujiwara, Meng, and Vogel 2016). (Karlan, et al. 2016). The troubling implication
for voters is that arbitrary cues might guide their
Overweighting small probabilities. decisions. In a study of elections in California, where
Humans are not by nature good statisticians. One ballots presented candidates in random order, minor
shortcoming is the tendency to over-estimate the parties did significantly better when they were listed
likelihood of very unlikely events, such as lightning first (Ho and Imai 2008).
strikes or winning a lottery (Kahneman and Tversky
1979). This can cause people to prepare excessively Confirmation bias
for small risks, or tempt them to seek untested Beliefs and predispositions also color the evaluation
medical treatments. Since lottery participants over- of facts. People readily accept evidence that
estimate their chances of winning, lottery-based supports their pre-existing beliefs, and reject
prizes can successfully induce various kinds of contrary evidence too easily. Thus, incriminating
good behavior, such as weight loss (Volpp, et evidence may have little effect on jurors who are
al. 2008). In an election context, citizens may convinced of a suspect’s innocence. In fact, rather
similarly have an inflated sense of their chances than forging consensus, new information can even
of determining the winner. This assessment could drive people with different beliefs farther apart.
then cause otherwise rational citizens to vote Concerning specifically political information, Taber
(Duffy and Tavits 2008). and Lodge (2006) show experimentally that people
seek confirmatory information while expending
Framing mental effort to reject contrary non-confirmatory
Winning a monetary prize brings some happiness to information. In turn, these tendencies increased
most, but losing an equivalent amount of money actually polarization in attitudes.
brings much more unhappiness. The reason is that
outcomes often matter not in isolation, but relative to a
reference point or frame. The reference point might be
one’s current wealth, but it may also be manipulated by “People readily accept evidence
clever marketing or persuasion. Around the reference that supports their pre-existing
point, people are loss averse; that is, losses are felt beliefs, and reject contrary
more sharply than gains. Additionally, which side of the
reference point one is on affects his or her attitude
evidence too easily”
toward risk. People are risk averse when considering
gains, but risk acceptant when considering losses.
Together, these ideas are known as prospect theory Confirmation bias raises questions about how
(Kahneman and Tversky 1979). voters have responded to the proliferation of news
Prospect theory has seen many applications in sources in the modern era. If consumers respond
the field. Saez (2009) manipulates framing to present to news providers, then better journalistic standards
contributions to tax-advantaged savings accounts in a might improve voter information. This informational
way that suggested lower losses; the avoidance of loss role is diminished if news sources must instead cater
aversion helped to increase investment take-up. Benartzi to consumer ideology. Both phenomena no doubt
and Thaler (1995) invoke loss aversion to explain occur, but a prominent study of newspaper coverage
the divergence in returns between equity and bonds. suggests a significant role for the latter (Gentzkow
In the electoral setting, prospect theory might affect and Shapiro 2010). Even more recently, the 2016
voter perception of the desirability of risky candidates. US election drew great attention to the rise of “fake
In particular, when times are good and voters frame news” websites, many of which supported the
election results as possible gains, incumbents benefit candidacy of Donald Trump. A new study estimates
from being better known and hence more appealing to that about a quarter of Americans visited such
risk-averse voters. By contrast, bad times favor more websites, and that these were predominantly Trump
risky challengers (Quattrone and Tversky 1988). supporters (Guess, Nyhan, and Reifler 2017).
Salience Social pressure
Not all information is evaluated evenly. Instead, Nearly a century ago, researchers at the Hawthorne
according to the availability heuristic, people often Works factory noticed that employees improved their
focus on the pieces of information that are most performance when they knew that they were under
The Future of Politics 17observation. The so-called “Hawthorne Effect” Ultimately, the relevant similarity between the two
illustrates how the social context of decision- making domains might be that consumers and voters both
matters. The desire to conform to social norms can make low-stake decisions with little direct aid from
lead to drastic differences in behavior as the level of outside experts. Such settings naturally allow non-
social pressure changes. As an example, Mas and rational behaviors to go unchecked.
Moretti (2009) examined the physical placement
of workers in a supermarket, where some workers The candidate’s perspective
could observe their peers, but otherwise had no
Candidates for office normally appeal to voters
interaction. Their study found that low-productivity
by offering some combination of ideological
workers performed significantly better when they
affinity, beneficial policies or common personal
were observable by high-productivity workers, but
characteristics. These might be considered appeals
not when they were in the position of observing
to rational decision-making, in much the same
high-productivity workers.
way as competing firms advertise product features
In a society where social norms favor voting, this
to consumers. The fact that voting decisions are
result has a potentially important implications. In a
also driven by non-rational considerations gives
large field study of 2006 Michigan primary election
candidates an additional set of campaign incentives.
voters, Gerber, Green, and Larimer (2008) examined
While academic research connecting behavioral
the impact of several get-out-the-vote interventions.
economics with campaigns tactics is nascent, the
Households who received no treatment turned out at
above-mentioned behavioral quirks can help to
a rate of 29.7%, but for those receiving a reminder to
explain some common campaign tactics.
vote that mentioned that they were being studied, the
rate increased to 32.2%. To increase social pressure
Cultivating voters
even further, other households received a listing of Under reinforcement learning, voting produces a
their past voting records (i.e. whether they voted, feedback effect: as long as a citizen is not generally
not whom they voted for) along with those of their disillusioned with election results, the simple act
neighbors. Recipients of this treatment turned out at of voting will increase his/her future propensity to
a rate of 37.8%. vote. The implication for parties and candidates is
The list of behavioral applications to politics is that early political experiences matter for building
still growing; recent efforts have scrutinized other support. The benefits of mobilizing low-turnout
phenomena such as impatience (Lizzeri and Yariv groups, such as younger and Latino voters in the
2017) and overconfidence (Ortoleva and Snowberg United States, therefore extend beyond the next
2015). Collectively, this body of work is obviously election cycle.
quite diverse, but its overall theme might be that Next, the research on social pressure in decision-
many of the most prominent behavioral quirks are making suggests that candidates have much to gain
as relevant to politics as they are to economics. from engaging organizations that are rich in social
Photo: Shutterstock, Nutthaseth Van
18 The Future of Politicsinteractions, such as churches and unions. One While the implications for the effectiveness of
recent American example is the advent of “Souls to democratic governance may seem unsettling, two
the Polls” efforts that shuttled voters from Sunday caveats are in order. First, the very competitiveness
services at African-American churches to polling of elections in most democratic societies implies
stations (notably, African-American voting rates are that any tactical advantages that benefit one party –
similar to those of white Americans). In addition to behavioral or otherwise – are likely to be transient.
possibly reducing voting costs, the social setting An analogy from marketing is apt: a new technique
of these activities creates openings for citizens to to lure customers may boost a company’s fortunes
experience both explicit and implicit peer pressure. in the short run, but this advantage will dissipate as
Since citizens must actually have someone to the innovation diffuses across the industry.
vote for, these arguments further imply that a party Second, voters are not entirely helpless. They
should run candidates even when its prospects for may stay home or choose the wrong candidate,
victory are dim. National parties generally do this. but many actors are motivated to reverse these
In this century, most elections for the 435 seats temptations. Political parties, for example, provide
in the US House of Representatives have been crucial assistance by associating informative
uncompetitive, with the winner capturing at least brands to candidates and policies. Politically liberal
60% of the vote. However in 2016, 53 such races, voters might not understand the nuances of every
or over 12%, went uncontested by one of the major candidate or policy, but rather than being vulnerable
parties. Although there was certainly little short- to manipulation they often use party labels as cues
run benefit from nominating a candidate in these to guide their choices. In one set of experiments,
contests, the cultivation of friendly voters would Druckman (2001) eliminated framing effects by
benefit parties over the longer term. attaching party labels to policy proposals. Thus,
the competitive environment provides at least some
Campaign messages incentives to offset voter misbehavior.
The framing of election messages can affect
how voters perceive candidates, and negative Conclusions
campaigns have become a pervasive feature of
In The Republic, Plato famously argued that citizen
election advertising. Why would candidates choose
incompetence rendered democracy an undesirable
to accentuate their opponents’ scandals, lack of
form of government. While this argument would
character, or poor performance in office over their
have few takers in modern, advanced democracies,
own selling points? One channel might be loss
recent events have brought to the forefront
aversion. As in other decision-making domains,
questions about how individuals process information
negative news in politics produces stronger
and make voting choices. Simultaneously, the field
reactions than positive news, thus giving campaigns
of behavioral economics has steadily transformed
incentive to focus on the negative (Soroka and
the study of economic decision-making. These
McAdams 2015).
developments join a long-standing tradition of
voting research by political scientists. The result has
“Negative news in politics been an emerging agenda for exploring the political
economy of voting. Despite some evidence of voter
produces stronger reactions rationality, the gaps left by “homo economicus” in
than positive news” the electoral setting remain conspicuous. For both
researchers and practitioners, behavioral economics
is therefore a natural fit for analyzing voting.
Given the rise of policy prescriptions that
According to the availability heuristic, voter
address behavioral anomalies in various settings,
perceptions of politicians will not be driven by
it is worth asking whether behavioral insights can
even-handed assessments of their resumes or
also be applied to improve voting. For this to occur,
achievements in office. This elevates the likelihood
however, there needs to be broad consensus on
that certain types of events – salacious scandals
society’s objectives. Somewhat paradoxically, it is
and terrorism stand out as examples – become
unclear how rational citizens should be. Voting is
campaign issues. Media coverage may amplify these
widely viewed as a socially beneficial form of political
tendencies. The coverage of the 2016 US elections
participation, even if the best course of action for
was notable for its overwhelming focus on scandals as
a rational citizen might very well be to stay home.
opposed to policies (Patterson 2016). The heuristic
Yet, at the point of choosing among candidates, we
also means that voter attention will be biased toward
worry about the consequences of irrationality, given
more recent events. Facing these biases, incumbent
the immense social stakes of elections. The zero-
politicians might work on policies that are complex or
sum nature of elections further implies that mistakes
difficult to observe out of the glare of an imminent
have direct beneficiaries. Achieving consensus in
election, and switch to activities that produce more
this very complex environment is a tall order. ■
obvious results as elections approach.
Many features of modern election campaigns
NOTE: The views expressed here are those of the
can divert voter decision-making away from a sober author and do not necessarily represent or reflect the
reflection on the relative merits of the candidates. views of Credit Suisse
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