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Business Cycles, Electoral Cycles. Toward A Theoretical Frame Of Interaction

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  • BOGDAN-LUCIAN DOSPINESCU

    (Romanian Academy SCOSAAR)

Abstract

The idea of cyclical movement of a system: be it political, economic, institutional, is one of the constants of critical thinking. In this sense, there is a natural cyclic movement that cannot be avoided (only amplified or diminished) and is connected with the nature of these systems. The economy follows a cyclical movement; a period of growth follows a period of decline, and so on. So does popularity for political parties or leaders. In this paper, I explore the links between the business cycles and electoral cycles. For this purpose, I introduce the concept of electoral perception cycles. My hypothesis is that popularity of political parties and leaders follow a cyclical evolution, both on short and long term. I show how perception cycles can impact the “political business cycle theory”. There is great interest in political science literature for the factors that influence the fluctuations in Presidents’ popularity, especially from United States. However, very little has been said about Romania’s case. I investigate the hypothesis of electoral perception cycles looking at the popularity of former president Traian Basescu, over his two terms. The variable used to measure popularity is favorability, measured in national surveys, done face to face, on representative samplez, of around 1000 subjects. I’ve correlated the fluctuations in favorability over time, with key public events or political decisions taken by Traian Băsescu. The main findings are as follows. Firstly, there are significant short term fluctuations (short term perception cycles) and they are correlated with major events on the agenda. I would point the following key moments: 1. The referendum for dismissal of the President in May 2007 – Traian Băsescu’s favorability increased by 7 percentage points; 2. The referendum for unicameral Parliament with 300 MPs in the fall of 2009. Coupled with victory in the presidential election, it lead to an increase of 10 percentage points in favorability; 3. Summer-Autumn of 2008, the promise of doubling teachers’ wages (the law passed in Parliament and was supported by the President in a series of public appearances) associated with an increase of 6 percentage points; 4. Summer of 2010, the moment when the President announced the 25% cut in wages and the increase in VAT to 24%. This lead to a huge 19 percentage points drop. A key finding is the fact that all these events that produced “rally around the flag effects” are issues on the domestic agenda. None is linked with international crisis, as the classic theory proposed by scientist John Mueller postulates. Secondly, as it’s the case with popularity of US Presidents, there is a contraction period in both terms. Important to point out the fact the contraction is visible also in the first term, when the economy had improved. In building on the results of this paper I would focus on the impact short term perception cycles have on the strategy leaders employ regarding handling the economic agenda. Going back to Anthony Downs and his thesis that "parties formulate public policies in order to win elections rather than win elections to formulate policies"; we have to ask ourselves if the causality advanced within the confines of the “business cycle theory” is such straight forward as it was proposed; meaning that leaders in power will try to impose a “business cycle” where the benefits for the public are seen near the elections and base their strategies on winning the elections on this. The data presented here, shows that such a strategy is not enough and we have to take into account short term strategies, including taking economic measures aimed at boosting short term support, when elections are approaching. If we have spikes in popularity after positive events surrounding decisions taken by leaders in Government, then we have to take into account that parties will favor short term policies, instead of going for the medium term policies described by Nordhaus, among others.

Suggested Citation

  • Bogdan-Lucian Dospinescu, 2015. "Business Cycles, Electoral Cycles. Toward A Theoretical Frame Of Interaction," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 0, pages 170-177, July.
  • Handle: RePEc:cbu:jrnlec:y:2015:v:special:p:170-177
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    References listed on IDEAS

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    1. Mueller, John E., 1970. "Presidential Popularity from Truman to Johnson1," American Political Science Review, Cambridge University Press, vol. 64(1), pages 18-34, March.
    2. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65(2), pages 135-135.
    3. Bartels, Larry, 2005. "Economic Inequality and Political Representation," Papers 08-11-2005, Princeton University, Research Program in Political Economy.
    4. Alberto Alesina & Nouriel Roubini & Gerald D. Cohen, 1997. "Political Cycles and the Macroeconomy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510944, April.
    5. J Tyson Chatagnier, 2012. "The effect of trust in government on rallies ’round the flag," Journal of Peace Research, Peace Research Institute Oslo, vol. 49(5), pages 631-645, September.
    6. Jula, Dorin, 2008. "Economic Impact of Political Cycles – The Relevance of European experinces for Romania," Working Papers of Institute for Economic Forecasting 081101, Institute for Economic Forecasting.
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