Europeans are feeling less positive about the EU.
And, at the same time, political instability within European countries appears to be on the rise.
In a recent report to clients, Goldman Sachs shared two interesting charts on the bubbling situation in Europe.
The first chart, on the left, shows that the percentage of respondents in various European countries who have a very favourable or somewhat favourable view of the EU has fallen over the last decade.
And the second, on the right, shows that the political instability index has increased among various EU members. (The index, which is a standard measure of political instability among political scientists, takes the sum of change in vote totals per party from election to election divided by two.)
Notably, the growing political instability and dissatisfaction with the EU seem to be at least partially correlated with globalization and economic stresses.
In the same Goldman Sachs report, David Brady, a political science professor at Stanford University, explained just how all of this was related:
“The simple answer is globalization and technology. Specifically, our research has shown that political instability has corresponded with a decline in the share of industrial or manufacturing employment. The sharp loss in manufacturing jobs over the last several decades due to technological advances and offshoring substantially cut the number of industrial workers, who had dominated the political landscape for most of the 20th century.”
And the populist, anti-establishment parties have resonated with people who have been hit by globalization and automation. He continued:
“And in multi-party systems, opposition to globalization and the free flow of immigrants shifted votes to movements like FN or the People’s Party in Denmark, while parties like Syriza in Greece or Podemos in Spain have drawn support on anti-austerity platforms.”
As for some of the real-world examples, in a great article for The Globe and Mail on the Brexit campaign being “just one symptom of angry nationalism,” Mark MacKinnon spoke with John Curtice, Britain’s top expert on polling and public opinion, who noted that the divide between the Remain and Leave groups is “between the winners and losers of globalization.”
As MacKinnon wrote in the article:
“Those in the Remain camp are younger and more cosmopolitan, and often have the education and the skill sets to compete in a borderless world — people who don’t need to worry about losing their jobs to someone willing to work for less. The Leave camp, meanwhile, is older, less educated and more worried by the changes they see happening in British society.”
Relatedly, The Economist recently shared a chart comparing the percentage of native- and foreign-born people 15 or older with tertiary, or college-level, education in various OECD countries. The data are from 2011, but it’s notable that members of Britain’s foreign-born population were more likely to have a tertiary education, which – excluding any prejudices employers might have toward migrants – suggests that less-educated native-born Brits might get bumped out of better jobs.
Plus, although it’s certainly not a perfect comparison, we’re seeing something similar in the US as American workers who have been economically burned by globalization have increasingly supported protectionism and populist candidates such as Donald Trump and Bernie Sanders.
As for what this means in the long-run, analysts have been arguing that we could be looking at continued political uncertainty and limited coordination in Europe in the longer run.
Again, here’s Brady (emphasis ours):
“Since no party, country or leader has discovered the policy path to achieve economic growth while mitigating the ills that go along with it, I think political uncertainty and instability will continue to grow. And with that will come more dissatisfaction with and distrust of government, as well as continued polarization and gridlock. Of course, the most direct economic consequence of political instability is policy uncertainty, which amounts to a major impediment to investment. Beyond that, one can envision a self-reinforcing cycle in which political instability reduces the likelihood of a coherent economic policy agenda, which in turn perpetuates the low growth and income equality that fuel political instability in the first place. Our research has shown that countries with below-average economic performance have experienced the most electoral volatility, which is not surprising.”
Get ready for a bumpy ride.