People feel more content with their governance if they feel that their economic circumstances are as comfortable as they could reasonably expect. Governments therefore have an incentive to try to ensure that the economy is healthy and that most people feel that they are receiving a fair share of the total wealth.
In a democracy, this incentive is very strong: it affects the likelihood of a leader being re-elected. Bill Clinton’s election in 1992 was widely attributed to his emphasis on the economy in that that campaign – but overall economic performance is not sufficient. CBS News on 15 January 2018, in a piece entitled Commentary: "It's the economy, stupid" could be trumped, reported that voters don’t support the President if they feel that they are personally worse off or that the division of wealth is unfair.
There are several factors that contribute to people's sense of economic well-being:
· Personal disposable income to spend as consumers;
· Employment availability, working conditions and job satisfaction;
· Prices and availability of goods and services;
· Living conditions, including environmental factors and quality of basic services;
· A feeling of economic security, including employment prospects and benefit provisions;
· Perceptions about economic fairness, although individualists and collectivists differ on what that means (2.2);
· Perceptions about whether people in other countries are doing better or worse.
Economic satisfaction is driven by all these factors: individually, in aggregate and in the relationship between them. Satisfaction may be susceptible to government 'spin' but it is essentially driven by the overall health of the economy and how its wealth is divided.
Governments in any political system need to avoid discontent and this makes them susceptible to economic pressures:
· As described previously, levels of government spend and taxation are politically sensitive (3.2.3.5). Some voters place a higher priority on reducing taxes, but others place more emphasis on better public services
· Companies can make political contributions (6.4.5), to pressurise politicians into pursuing policies that they want.
· They can also put economic pressure on politicians by threatening to reduce the number of people employed, or to relocate their activities entirely. A government needs the taxes they pay, and the employment they offer, so it has an incentive to create a business-friendly environment.
· People can withhold taxes. For example, the British population rejected the 'poll tax' in 1990 and rioted – as described in an Economist article on 25 September 2003: Council tax: Can't pay, won't pay.
A government’s incentive to deliver economic satisfaction to a majority of the population is an economic constraint upon its power. It cannot afford to ignore people's hardship. A parliamentary report, Rising cost of living in the UK, shows the extent of government concern in April 2022 for example.
(This is an archive of a page intended to form part of Edition 4 of the Patterns of Power series of books. The latest versions are at book contents).