Globalization, Inequality, and the Fate of Extreme Right- and Left-wing Parties

• In Event: Populism and Extremism on the Rise: Why, How, Who?

Abstract

Although scholars largely agree on the economic consequences of globalization, their results seem to conflict in various aspects of the political consequences. Many scholars argue that globalization with intensified levels of international trade and investment causes the left-wing parties to expand redistribution policies to support laborers in order to stay in power (Cao et al. 2007; Hibbs 1977), while others argue that left-wing parties lose the ability to push redistribution policies, because globalization limits their policy options and weakens the power of labor unions (Kaufman and Segura-Ubiergo 2001; Murillo 2001; Levitsky 2003). Yet, others argue that there is no direct relationship between globalization and partisan preferences of welfare policies (Meltzer and Richards 1981) or that the relations between government ideology and welfare policies are more complex and nuanced (Hwang and Lee 2014).

One aspect of globalization that has received relatively little attention is the role that income inequality plays in explaining party politics. We believe that inequality is a key factor that is at the center of the causal mechanism. To be sure, Ha (2012) examines the link between globalization, ruling party ideology, and inequality. However, income inequality is treated as the dependent variable in her study and does not address how inequality as a causal factor influences party politics.

The purpose of this study is to examine inequality as a key causal factor of party politics. We focus on the effects of globalization on party politics through its impact on inequality. As Buchholz et al (2009) demonstrate, inequality is magnified by globalization. Although globalization is expected to create centrifugal effects in party systems as inequality grows, we argue that, in the post-Soviet political environment, globalization promotes extreme right-wing parties. Economic globalization creates space for political entrepreneurs to capitalize on the inability of the existing parties to satisfy their supporters. Left-wing parties are expected to cater to an increasing demand for addressing rising inequality by expanding welfare policies, while extreme right-wing parties can use the opportunity to strengthen their power by connecting negative sentiments on inequality to agendas such as immigration, liberalization, or regional economic integration. However, since communism is not a popular choice after the collapse of the Soviet Union, discontent with inequality is more likely to mobilize voters to support extreme right-wing parties.

In a panel data analysis of OECD countries from 1980 to 2015, we examine the effects of globalization on the rise of extreme right- and left-wing parties through its impact on inequality. Our study controls for the possible reciprocal relationship between inequality and party politics, as Ha’s study suggests a two-way relationship between inequality and ruling party ideology. The results show that, as the level of income inequality increases as a consequence of trade/financial liberalization, extreme right -wing parties gain political support in general elections in OECD countries, while it exhibits little effects on left-wing parties.

Authors

• Misa Nishikawa, Ball State University

• Wonjae Hwang, University of Tennessee