A year ago, the eurozone was the main high income area facing political challenges. Now the focus is on the US and UK.
Eurozone political developments have been favorable. Brexit has seen European sentiment rise among most members. The populist-nationalist have been turned back at nearly every opportunity. After struggling for the past year to govern Rome, the EMU-skeptic Five Star Movement in Italy was dealt an important setback in the first round of local elections held over the weekend. Macron appears to set to have a large majority in the next French parliament. Sarkozy and Hollande were elected as reformers, but both failed to reinvigorate the French economy. There is a sense of optimism with Macron and the seeming realignment of French politics.
A more robust France, coupled with what appear to be the likely fourth term for German Chancellor Merkel, could strengthen Europe is profound ways. It could not happen at a more opportune time. The UK’s exit from the EU, the push back from eastern and central Europe, and perceptions that the US is a less reliable partner than in the past is spurring some soul searching in European capitals. A robust French economy that meets the Stability and Growth Pact commitments would help overcome the current paralysis of European integration.
To be sure, challenges remain. Catalonia’s pursuit of a referendum on independence later will force a confrontation with Madrid. Austria and Finland face challenges from the anti-immigration and anti-EU forces. Italy will likely hold elections in around a year’s time, which gives the Five-Star Movement time to readdress internal fissures.
American and British politics stand out. It is not so much that the populist-nationalist party won. It was more the case that the center-right party of the two party system adopted the rhetoric of the populist-nationalists. As we have noted, education seemed like the single best predictor of voter behavior. Although education and income tend to be correlated, some analysis (see Nate Silver, fivethirtyeight.com) found in areas in which the correlation broke down; education was a better predictor than income in the US.
The Economist reported last November another important variable: Health. It found that county-level data on life expectancy and health issues (e.g., prevalence of obesity, diabetes, alcohol consumption and physical exercise) could explain 43% of Trump’s gains over Romney’s performance in 2012. Education was able to account for about 41% of Trump’s relatively better showing.
Of course, there is an overlap. In the United States, a large number of non-college educated whites tend to rank low in public health measures. However, the Economist argues that even when other demographic factors (e.g. education, age, gender, income, marital status, immigration, and employment) are controlled for, the relationship (health and voting preference) remains statistically significant. The Economist puts it baldly: “…the better physical shape a county’s residents are in, the worse Mr.Trump did relative to Romney.”
This interpretation suggests that in addition to the lack of productivity and disparity of wealth and income, that the public health crisis may be an under-appreciated political and economic force. In 2015, Nobel-prize winning economist Deaton showed that the mortality of middle-aged, less educated white citizens had been rising since the 1990s, while it was falling for Hispanics and African-Americans. Some commentators have linked the deterioration in public health to broad economic changes.
The US has a less development national health care system than the UK or Continental Europe, and a weaker social safety net in general (the basket of goods American citizen receive from the state is smaller than the European basket). However, the same broad pattern appears in the UK and French elections.
The Financial Times notes that people in poor health swung toward the center-right candidates in France and the UK. The Great Graphic from the Financial Times plots health and voter preferences in the UK. In France, Macron did better when life expectancy was longer. There is growing research that uses public health as a proxy for pessimism and low well-being with important economic and political implications.