Patrimony at Risk: Market Uncertainty and Right-Wing Voting

• Author: Anton Brännlund
• DOI: http://doi.org/10.1177/00104140211060267
• Published date: 01 September 2022
• Date: 01 September 2022
• Subject Matter: Articles

Article

Comparative Political Studies

2022, Vol. 55(11) 1877–1909

© The Author(s) 2022

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DOI: 10.1177/00104140211060267

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Patrimony at Risk:

Market Uncertainty and

Right-Wing Voting

Anton Br¨

annlund

1



Abstract

The current literature suggests that f‌inancial assets push investors to vote for

conservative parties given that right-wing policies are said to generate higher

returns. Another popular argument is that wealth reduces demand for welfare

spending given that private assets can be used as a substitute for social

benef‌its. What I ask in this study is if asset owners always support right-wing

parties and a trimmed welfare state. I argue that owners of f‌inancial assets

become less tempted by free-market policy offerings when there is uncertainty in

f‌inancial markets. The dot-com bubble, the f‌inancial crisis, and most recently the

massive impact on f‌inancial markets of the coronavirus show that savings can

evaporate in a matter of days. I show that the support for right-wing parties

decreases in areas with much f‌inancial assets under such conditions.

Keywords

Political economy, political parties, elections, public opinion, and voting

behavior, economic policy

Introduction

Much of the heightened emphasis in recent years on f‌inancialization and

f‌inancial risk can be attributed to the great f‌inancial crisis of 2008 and the

1

Uppsala Universitet, Uppsala, Sweden

Replication materials and code can be found at Br¨

annlund (2021).

Corresponding Author:

Anton Br¨

annlund, Uppsala Universitet, Gamla Torget 6, Uppsala 751 05, Sweden.

Email: anton.brannlund@statsvet.uu.se

consequent debt crisis in Europe. The debate on this has mostly centered on

the cost of the massive bailouts for the f‌inancial sector and how f‌inancial

institutions have become a systemic risk due to them becoming too big to fail.

However, f‌inancial risk affects individual citizens as well—especially as

governments are encouraging citizens to take more responsibility for their

retirement (Erturk et al., 2007;Hassel et al., 2019). Such policies generate

exposure to market risks, which is troublesome, given that private savings do

not cope with market risks as well as public alternatives do (Barr & Diamond,

2010). Hence, the process of overall f‌inancialization has been forcing many

households to formulate their own risk-management strategies.

Against this background and given the long tradition of research on the

relationship between economic vulnerability and opinions on economic policy

(e.g., Cusack et al., 2006;Helgason & M´

erola, 2017;Milita et al., 2019;Rehm

et al., 2012;Vlandas, 2019), we would expect extensive research on how

changes in f‌inancial market risk affect both policy attitudes and voting be-

havior. Surprisingly, however, little work has been found to be done in this

area. In the end, after all, citizens who make investments—thereby lowering

their current disposable income—do so in the hope of achieving greater

welfare for themselves over their lifetime. However, people who invest also

risk losing their money. Therefore, asset owners must take action accordingly

to protect themselves from increased market risks, which can turn their assets

into liabilities. The purpose of this study is to f‌ill the aforementioned gap in the

literature on patrimonial voting and investigate how variations in market risk

affect voting behavior.

Traditionally, when considering the interplay between f‌inancial markets

and politics, researchers take how government action affects market per-

formance as their point of departure. For example, free-market policies are

said to be vital for increasing returns in asset markets (see Ferrara & Sattler,

2018, for a review). Therefore, according to scholars of patrimonial voting, the

possession of risky assets shapes voting behavior: Stocks, private equity, and

other f‌inancial assets push investors to vote for conservative parties, in the

expectation that right-wing policies will generate higher returns (Foucault

et al., 2013;Stubager et al., 2013;Lewis-Beck et al., 2013).

On the other hand, this stringent view of asset prof‌iles has been criticized.

For instance, Persson and Martinsson (2018) offer an argument that considers

asset value rather than risk prof‌ile. That is, owners of both real and f‌inancial

assets lean to the right (if they are wealthy enough) because government

policy affects both f‌inancial and real-estate markets. However, more quasi-

experimental studies have found that it is housing rather than f‌inancial wealth

that works as a predictor of right-wing voting (Ahlskog & Br¨

annlund, 2021).

The question is why these results differ so much. Some scholars simply

suggest the effect of asset ownership is dependent on political and institutional

contexts (Quinlan & Okolikj, 2019;Hellwig & McAllister, 2019). I, on the

1878 Comparative Political Studies 55(11)

other hand, seek in this study to scrutinize these inconsistencies by conducting

a clearer discussion of market risk.

That is, I will challenge the common argument that citizens who invest in

assets can automatically be expected to support free-market policies and a

trimmed welfare state. As market risks f‌luctuate over time, investors risk

eroding lifetime savings in just a few days when asset prices depreciate. What

I ask here is whether asset owners will still f‌ind free-market policies appealing

when their own savings are at risk. Whereas previous studies have focused on

the risk prof‌iles of different asset classes, I focus on changes in market risk

exposure over time. Such temporal variation in market risk implies that some

elections will take place under f‌inancial stress. My proposition is that investors

may defect from right-wing parties when they expect to lose money on their

investments.

To test this argument, I examined the impact on voting across electoral

districts in local elections in Sweden. Local jurisdictions in Sweden are a good

testing ground for this hypothesis because these governments have little

inf‌luence over f‌inancial markets or taxation on wealth. This inability to tax

asset owners, together with the rich variation in the political coloring of

different local governments, allows me to estimate a more general effect of

market risk on voting. That is, we f‌ind both left-ruled municipalities and right-

governed ones, and the political conf‌lict tends to be about the size of the local

government.

In the course of my investigation, I discovered that when the degree of

market risk goes up, support for right-wing parties decreases in areas with

large holdings of f‌inancial wealth. This effect appears in both left- and right-

ruled municipalities. These results contrast with those found in recent research

and suggest that the relationship between asset wealth and voting is more

ambiguous. My argument, based on these f‌indings, is that scholars need to

think about market risk and market sentiments. That is, we need to ac-

knowledge the uncertainty of asset markets, as in the end, investing is about

expectations of future welfare.

Theory and Literature Review

Traditionally, political parties have mobilized different social groups. Parties

of the right have been said to attract citizens from the middle and upper

classes, with a promise to keep a tight lid on inf‌lation. Parties on the left, on the

other hand, have been said to appeal to working-class voters with a promise to

ensure full employment at the cost of a higher rate of inf‌lation (Alesina, 1987;

Hibbs, 1977). This idea goes back to the post-war Keynesian era which was a

time when economic stabilization was pursued through state-led interventions

in the economy. Conversely, during the era of f‌inancial liberalization, which

began in the mid-1970s, new political cleavages emerged as governments

Br¨

annlund 1879