Did Austerity Cause Brexit?

Abstract

This paper documents a significant association between the exposure of an individual or area to the UK government’s austerity-induced welfare reforms begun in 2010, and the following: the subsequent rise in support for the UK Independence Party, an important correlate of Leave support in the 2016 UK referendum on European Union membership; broader individual-level measures of political dissatisfaction; and direct measures of support for Leave. Leveraging data from all UK electoral contests since 2000, along with detailed, individual-level panel data, the findings suggest that the EU referendum could have resulted in a Remain victory had it not been for austerity. (JEL D72, F15, F60, H53, I38)

Macroeconomic Policy Beyond Brexit

“…The biggest macroeconomic policy failure I have discussed is austerity, and there is some evidence of links between austerity and the rise in UKIP, which helped influence both the decision to hold a referendum and the referendum result itself. 8 More generally, the links between economic stagnation and the rise of populism and xenophobia are clear. 9 Brexit will reduce future UK productivity growth, and therefore future UK living standards.…”

The Meaningful Votes: Voting on Brexit in the British House of Commons

“…Another approach to understanding why many voters supported Leave in the referendum is to study support for the United Kingdom Independence Party (UKIP)-a single-issue party that since the 1990s has campaigned for the United Kingdom to leave the European Union. Using within individual variation in exposure to welfare cuts, Fetzer (2019) shows that individuals were more likely to "feel close" to UKIP after they were affected personally by the government's austerity program. Insofar as UKIP support is a good proxy for how an individual voted in the 2016 referendum, the results suggest that austerity played a major role in bringing about the referendum result.…”

How Financialization Undermines Democracy

“…In 2009, once the immediate fallout was contained but a global recession was under way, the governor of the Bank of England, Mervyn King, undermined the UK Prime Minister's announced spending to stabilize the economy, voicing worries about confidence in the bond markets. King's wading into fiscal policy did not just jeopardize the gilt bond auction the following day, but his repeated interventions set British politics on a socially destructive austerity path, which arguably has contributed to the Brexit vote (Fetzer, ).…”

“…The recession in the wake of the GFC supported a surge in nationalism, fuelling politically authoritarian sentiments — the link between austerity and far‐right resentment is particularly well documented for the UK (e.g. Fetzer, ; Hoggett et al., ) and Greece (Ellinas, ; Koronaiou et al., ), but there is also evidence for CEE countries, especially Hungary (Johnson and Barnes, ). The crisis response cemented the popular perception that politicians and state institutions had failed the average citizen.…”