Austerity brings extremism: why the welfare state is the key to understanding the rise of Europe’s far right

This post was originally published in the Huffington post.

The recent Greek election has resulted, once again, in a coalition government between the far left Coalition of the Radical Left (SYRIZA) and the far right Independent Greeks (ANEL). What has attracted less media attention so far, however, is the striking result for the neo-Nazi Golden Dawn which increased its share of the vote from 6.28 to 6.99%, gaining 18 seats in a parliament of 300, and remaining third strongest party. This indicates that the Golden Dawn remains a considerable presence in Greek politics since its first entry in the Greek parliament in 2012. And, it is a striking result for a party that is not only extreme, violent, and espouses Nazi ideology, but is also currently on trial for maintaining a criminal organization. Only a couple of days prior to the election, the party’s leader publicly accepted “political responsibility” for the murder of left-wing activist Pavlos Fyssas.

But the rise and resilience of far right parties is not confined to Greece. While neo-Nazism is indeed a more isolated phenomenon, the far right more broadly- i.e. parties that centre their attention on nationalism and xenophobia – is becoming increasingly popular across Europe. In the 2014 European Parliament elections, four far right parties received more than 20% of the votes cast: Austria’s FPÖ, Denmark’s DF, Britain’s UKIP and the French FN. Several others received over 10% of the votes cast including the Dutch PVV, the True Finns, and Hungary’s Jobbik. A number of these parties are also faring quite well in their domestic electoral arenas, for instance the French FN in 2012, the Austrian FPÖ in 2013, and the DF in Denmark as well as UKIP in the UK in 2015.

The most popular explanation for the rise of the far right in Europe is the on-going economic crisis. This answer has both historical and theoretical appeal. Historically, the rise of Nazism in interwar Europe followed the 1929 major financial crash. Theoretically, economic crises are associated with the rise of the far right because the dispossessed are more likely to punish the mainstream and opt for extreme or anti-establishment parties.

But the crisis is, at best, only part of the story. Unemployment rates do not correlate with levels of far right support. While Greece, which does have high levels of unemployment and suffered greatly from the crisis, did experience the rise of the Golden Dawn, other countries that have suffered from the crisis including Spain, Portugal and Ireland have not experienced a similar rise: Spain 2000 and National Democracy (DN) have remained marginal in Spain, the same is the case for the Portuguese National Renovator Party (PNR), and there is no far right party in Ireland. On the other hand, countries that have not experienced the worst of the crisis and generally have lower levels of unemployment, such as Britain, France, and Denmark, are experiencing a rise in far right party support.

The problem with this explanation is therefore that it is not consistent with patterns of far right party performance across Europe. This is because it is missing a crucial piece of the puzzle: welfare state policies mitigating the risks and costs that an economic crisis imposes on individuals. Ironically, it seems that welfare cuts, employed to tackle Europe’s economic crisis, are to blame for a broader political crisis, where the far right is flourishing.

In other words, austerity breeds right-wing extremism and this why: The link between an economic crisis and far right support is the labour market insecurity experienced by the middle class. When a crisis hits, those who have a job fear that they will lose it. Those who don’t have a job (or those who do lose it) fear that they will have no safety net or alternative means of subsistence. The greater the risks and costs of unemployment arising from the crisis the greater the insecurity. And in turn, the greater the insecurity, the greater the likelihood for people to punish the mainstream and reward far right parties.

One reason is that these parties pledge to limit foreigners’ access to jobs, thus appearing to be responding to increasing insecurity. Another is that these parties’ authoritarian vision of order is appealing in a context where economic malaise is having a disorderly effect on people’s lives. Finally, far right populist rhetoric is appealing because mainstream parties take the bulk of the blame both for the crisis itself and for inadequate policy responses to it.

The welfare state, therefore, is the key to understanding the rise of the far right as well as its varied performance across Europe: The extent of insecurity that people experience as a result of the crisis is largely determined by how protective welfare state institutions are. People fear losing their jobs less when job dismissal regulations protect them from redundancy. And those who do lose their jobs suffer less from this loss when unemployment benefits are more generous. A rise in unemployment, therefore, is morel likely to lead to far right party support when job dismissal regulations are low and unemployment benefits not generous.

This helps explain what happened in Spain and Portugal where unemployment has increased but the far right has not emerged. Both countries have high unemployment benefit replacement rates, and job dismissal regulations for those in permanent contracts are also comparatively high. By contrast, Greece and the UK, which have seen their far right party support increase, have much lower replacement rates. The UK also has one of the lowest employment protection legislations in Western Europe.

Welfare state policies are the link between economic crisis, unemployment and far right party support. Welfare cuts have increased the insecurity of the European middle classes that are being hit by the economic crisis. This matters because of the implications it has for policy. By reversing austerity, which results in welfare cuts and increases insecurity, we can limit the appeal of right-wing extremism.

This piece is co-authored with Daphne Halikiopoulou. Daphne Halikiopoulou is Associate Professor in Comparative Politics at University of Reading. Tim Vlandas is Lecturer of Politics at University of Reading.  This piece builds on their argument in their co-authored piece Risks, Costs and Labour Markets: Explaining Far Right-Wing Party Success in European Parliament Elections forthcoming in the Journal of Common Market Studies.

The conservative victory and the welfare state: Here comes the pain

The Conservatives have won an unexpected majority. Now must come the cuts. Even Ian Duncan Smith is worried about the scale of the cuts promised. In this post I review the good, the bad, the ugly and unknown proposals that the conservatives have in stock for the welfare state. It’s an open question which ones they end up implementing and more crucially where they impose the pain of the non-specified cuts they promised in their manifesto.

The good

There may be some attempts to raise the purchasing power of low income workers. They want to raise the threshold beyond which workers start paying income tax to 12,500£. But whether this will on the net make low income workers better off depends crucially on where they cut welfare state spending further (see below). A downside is of course that this further erodes the government’s tax raising capacity. On minimum wages, they declared they would follow the recommendations from the Low Pay Commission to raise minimum wage to over $8 by the end of 2020. Again whether this will actually represent an improvement depends on the inflation rate over the next five years.

In addition to these uncertain improvements to the conditions of low income workers are two big spending promises. The first one concerns giving working parents 30 hours of free childcare for 3 and 4 years old, which they estimate will cost about £350 million. The second one is to protect the NHS by keeping it free at the point of use and increasing the NHS funding by an additional £8 billion by 2020. For the latter increase in spending to make the NHS sustainable will require additional ‘efficiency savings’ of 2% to 3% a year which are likely to be very difficult to achieve. So in all likelihood, the Conservatives will have to choose between a deterioration of quality or allocating extra spending.

Finally, two ambiguously positive proposals. First, they have promised that they would introduce a national postgraduate loan system for taught masters and PhD courses. This will not resolve much of the issues of university funding and access to undergraduate degrees, but fills a gap for postgraduate studies where access was hampered. Second, the benefit cap, which I discuss below in more detail, will not include the Disability Living Allowance.

The bad

In a context of austerity, the Conservatives are wasting tax revenues on the better off while cutting benefits on the worst off. This makes no economic sense and will likely depress the economy given the different marginal propensity to consume of different income groups: the poor will reduce their spending in response to lower benefits more than the rich will increase their spending in reactions to lower taxes. The net effect on aggregate demand, even in the absence of additional consolidation, will be negative.

Regarding benefits, they will freeze working age benefits for two years from April 2016 (except for maternity allowance, statutory maternity pay, statutory paternity pay, statutory adoption pay and statutory sick pay). Two groups are specifically targeted. First, EU immigrants: they plan to further restrict benefits (housing, JSA, etc) to EU jobseekers in the first four years. This may be consistent with EU law as long as the restriction applies to non-contributory benefits. However, studies have shown that immigrants bring more revenues than they cost so there seems to be little reasons to limit benefits on economic grounds. Second, 18-21 years old will be eligible to a less generous ‘Youth Allowance’ limited to six months and will also have less access to housing benefits.

The ugly

The three most problematicc proposals are the benefit cap, the undercutting of strikes and promotion of precarious contracts and sanctions for addicts. With respect to the first, they will lower the current benefit cap on the benefits that households can receive to £23,000 (from £26,000). In practice this will only hurt families that need it the most such as those with many children or those paying high rents.

Next, they want to rely on precarious contracts to break strikes by repealing the “nonsensical restrictions banning employers from hiring agency staff to provide essential cover during strikes”. This fundamentally undermines the right to strike as precarious contracts are likely less costly than the workers that are striking. Since those who strike are not being paid by their employers, strikes will no longer have any impact on employers.

Finally, those who refuse the “medical help they need” will see their benefits reduced. This concern both those addicted to drugs and the clinically obese. Assuming that at least some of these recipients would change their behaviour in response to the change, this still implies that some very vulnerable recipients that are not able to change their behaviour will lose benefits.

The known unknowns

Given that they have promised to protect Schools and international development, and that they will be spending more on the NHS and childcare, unspecified cuts are going to be large. In total the IFS estimates that they will have to cut £22.5 billion from departmental spending in ‘unprotected’ areas including defence, law and order, social care, and others. How much of this will be frontloaded in the first couple of years remains to be seen, but this will no doubt necessitate very drastic cuts.

In a post-crisis context where there is a heightened need for the welfare state there are very few policy domains that be cut without imposing significant hardships. As I’ve argued elsewhere, the many new challenges related to ageing and changing labour market structures would also require more rather than less welfare state spending.