The financial crisis of 2008 had global implications, but perhaps one of the most considerable was its impact in bolstering support for populist politicians. Research from MIT highlighted how people who succumbed to financial difficulty after the crisis became attracted to populist politics and politicians.
The researchers looked at the fortunes of Hungary’s Jobbik party and found that the right-wing populists gained a considerable amount of support after the crisis. Indeed, they believe that the financial crisis resulted in about 20% of the overall shift towards the right in Hungary at the time, with personal debt a particular fact, especially if it was foreign-currency denominated debt.
“The far right … [was] able to attract a number of voters, middle-class or even slightly higher than middle-class people, who had mortgages and otherwise probably wouldn’t have voted for the far right,” the researchers explain.
A lending boom
The researchers explain that Hungary underwent a lending boom in 2000, with many of those loans issued in foreign currencies. Indeed, by 2008, 60% of all household debt was in Swiss francs. Between September 2008 and April 2010, which was when national elections took place in the country, the forint depreciated by 23%, while household debt rose by 4%.
This period also saw a distinct rightward shift in Hungarian politics. Whereas the far right only secured 2.6% of the vote in 2006, this soared to 17% in 2010 and 20% in 2014. It transpires that a crucial factor of this development was the fact that debt was held in foreign currency and often to foreign lenders. This was often exploited by Jobbik.
“Populist parties like to exploit divisions or cleavages in society between the ‘good’ ordinary people, and the elites or foreigners or any kind of outside threat that they [populists] can create. Conflict between debtors and banks seems to have been a particularly fruitful way for them to do that,” the authors explain. “I think that helps us understand why they’ve been successful, particularly after financial crises.”
Shift to the right
Of course, while Jobbik didn’t rise to power themselves, they did nonetheless help to normalize nationalist rhetoric that has largely been adopted by the ruling Fidesz party, while they have also significantly consolidated their hold on power in that time. As such, the mainstreaming of nationalist politics has become a crucial consequence of the financial crisis.
This process has been something that has happened throughout modern history, and the researchers believe that the financial crisis should definitely be viewed in a similar light.
“One of the key legacies of the 2008 crisis was the rise of populism, and one of the places that was most pronounced was Hungary,” they explain.
As such, it’s important to broaden our perspective on the financial crisis and view it not just as an event that had profound financial implications, but also as something that has fundamentally affected the political landscape of the last 10-15 years.
“One of the implications is that how we design and regulate our financial system and the types of financial products we make available to consumers can have really far-reaching effects,” the authors conclude. “Not just for the economy but even for broader society and how we organize ourselves, our political systems, and what types of policies we put in place.”
