Embedded Mistrust: Tensions between Austerity, Democratic Legitimacy and Backsliding

What is the role of fiscal austerity in the decline of democratic legitimacy? Traditionally and intuitively, fiscal austerity, or actions by the government to reduce the national deficit, is considered politically risky. Citizens could respond to these austerity measures by punishing the incumbent party electorally, voting for a fringe party, or turning away from democracy as a system. I argue here that in order to understand the impacts of austerity on citizen responses, previous scholarship has misspecified the problem, which accounts for the mixed findings in the literature. Rather than reacting against a certain party, they are losing faith in the system. After reviewing literature on embedded liberalism and the compensation hypothesis, I propose that austerity measures via spending cuts drive the decline in legitimacy due to a sense of increased vulnerability among democratic citizens to a volatile market. My empirical analysis, which draws from the World Values Survey, a fiscal reconsolidation dataset and the Quality of Governance dataset, yields mixed results to support the role of austerity in the decline of democratic legitimacy. While there is evidence to suggest there is a negative relationship between government spending cuts and citizens’ views of democracy, the inclusion of a variable that measures institutional quality within democracies cancels out the effect of austerity. This null finding is consistent with my hypothesis but merits further investigation.Master of Art