Political Accountability and the Room to Maneuver

Thomas SattlerETH Zurich

sattler@ir.gess.ethz.ch

John FreemanUniversity of Minnesota

freeman@polisci.umn.edu

Patrick T. BrandtUniversity of Texas, Dallas

pbrandt@utdallas.edu

Meeting of the International Political Economy Society, Princeton, November 17-18, 2006

Introduction

• Most political scientists now agree that governments retain significant room to maneuver in a globalized economy.

• They assume rather than demonstrate that citizens are satisfied with policy choices and economic outcomes, i.e. political accountability exists in open democracies.

• We examine how much, if any, room to maneuver democratic governments actually retain.

• Political scientists demonstrate the importance of economic outcomes for political approval.

• Economists analyze effects of economic policy with no provisions of accountability.

• Both ignore the endogenous relationship between the polity and the economy.

Critique

A Genuine Political Economy Framework

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Method: Bayesian Structural VAR

Sample: United Kingdom 1981:11-1997:4, monthly

Variables are in Three Groups

Polity: Vote Intentions (VI); Prime Minister Approval (PA); Personal/Sociotropic Economic Expectations (PE/SE); Exogenous Electoral Counter

Policy: Domestic and Foreign Interest Rates (IR and USIR)

Economy: Domestic and Foreign CPI and Output (CPI and USCPI; IIP and USIIP); $/£ Exchange Rate (XR)

Method and Data

Posterior Model Fit Summaries for B-SVAR models

Model Fit

Model LogMDD

Bayes factorv.No

Accountability

Bayes factorv.

PolicyResponse

NoAccountability

8419

PolicyResponse

8432 13

Accountability 8478 59 46

UK Interest Rate Response to Politics

Political Responses to Exchange Rate and Interest Rate Shocks

Domestic Real Economy Responses to Policy Shocks

Political Responses to Real Economic Shocks

Electoral Counter Densities

• The accountability mechanism that we found works outside the real economy.

• Government capacity to shape real economic outcomes was limited in Britain from 1981 to 1997.

• Work in Progress: Analysis including British fiscal policy over the longer period to 2005:

- Which role does fiscal policy play for political accountability?

- How does delegation of monetary policy to the Bank of England in 1997 affect the government capacity to cope with globalization?

Conclusion