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Dev-Bank Wales MBO


7 March 2024

Is It Too Early to Talk About Elections?

Written By:

Edward Thomas Jones
Senior Lecturer in Economics
Bangor University



2024 will be a historic milestone for democracy. There will be more than 70 elections held this year across countries that are home to nearly 4.2bn people. 2024 marks the first instance where over half of the global population resides in countries poised to hold nationwide elections. Ballots will be cast from India to Iran, Mozambique to Madagascar. While some elections promise fresh new ideas and policies, others may reward the corrupt and incompetent and cement illiberal rulers’ position.

Vladimir Putin's victory in Russia's presidential election is almost certain, while Mexico will elect its first female president this year, with both leading contenders being women. The spotlight will be on the U.S. election, either for grim spectacle or potential consequences. It is hard to believe the most likely outcome is a rematch between two elderly candidates, Biden (81) and Trump (77), both of whom the majority of voters wish were not candidates.

People across the U.K. will finally have a chance to vote for who is Prime Minister. Rishi Sunak, the U.K.’s third Prime Minister in under two years, assumed the role having secured leadership through Conservative party members’ vote. The U.K. election must be held by January 2025 and the exact time people will get to visit the ballot box will be decided upon by Rishi Sunak. Within the Conservative party, many favour October as the best time to hold an election as that would allow inflation to abate and incomes to recover. However, Labour officials think the Prime Minister is more likely to want to align with the local-government elections in England, since a bad result in those elections would adversely impact the Conservatives general election campaign. After 14 years of Tory rule, most pundits believe that a Labour victory is most likely whenever the election is called.

The Conservative and Labour parties have dominated the U.K. political arena since the 1920s. Despite its imperfections, the country’s first-past-the-post electoral system tends to ensure robust parliamentary majorities for the party in power, which helps it implement its policies. As a result, political cycles become more pronounced as parties face either rewards or repercussions based on their performance.

A key concern for most voters, here in Wales and elsewhere, is the performance of the economy. The phrase “It’s the economy, stupid” was coined by James Carville, strategist of U.S. President Bill Clinton’s successful 1992 campaign against George Bush Snr. The quip was meant to bring voters back to the fact that the campaign was being held in the middle of a recession, which the Clinton team used successfully to unseat Bush. Over thirty years on, it remains good advice to political aides. Voters in the U.K. consider the economic performance of each party as a key factor in their political decision-making, with the Conservatives enjoy a clear advantage in the British perception of which party is best at managing the economy.

Assessing a political party’s influence on the economy is not a simple task. For instance, a recently elected government requires time to draft and implement its new policies, with time also needed to show their effects.  On the other hand, it could be argued that individuals and businesses adjust their behaviour before a government implements its policies.

Quarterly real GDP data from the Office for National Statistics can help us see the economic impact of the two parties. Between 1955 and 2023, the Conservatives have presided over 181 quarters while Labour has been in power for 95 (for a total of 276 quarters). The British economy faced many challenges during this period; the Suez Canal crisis (1956), oil crisis and stagflation (1973), the financial crisis (2007), Brexit, Covid-19, and the cost-of-living crisis to name just a few. The average quarterly real GDP growth over this period was 0.58%; that is, the U.K. economy grew on average 0.58% in each quarter between 1955 and 2023.

Since 1955, the Conservatives achieved a slightly higher average GDP growth per quarter (0.60%) than Labour (0.55%). However, this difference is statistically insignificant. In other words, a statistical test shows that there is no real difference in how the economy performs under the different political parties. Lags of various lengths can be included in the analysis to assess whether the economic performance of either party improves as a newly elected government is given time to implement its new policies. Even when including these lags, the results do not produce a clear winner. There have been many events after 2007 that have had a negative impact on the economy – some outside the control of the U.K. government. Even when excluding these events from the analysis, there is no significant result. In short, the economy grows at a very similar pace under both the Conservatives and Labour governments.

What about the Welsh economy?

A similar result is found for Wales: regardless of the party in power at Westminster, the Welsh economy grows at a similar pace. Data from the Welsh Government shows that the economy in Wales has grown by an average of 3.37% per year between 1999 and 2021. When Labour is in power at Westminster, the Welsh economy grew by an average of 3.68% per year while it grew by an average of 3.09% when the Conservatives were in power. A statistical test shows that there is no real difference in how the Welsh economy performs regardless of which party is in power at Westminster.

This (brief) analysis has only considered how the economy has grown and not how the wealth created through growth was distributed to different parts of society. Growing the economy is one thing, making sure all parts of society benefit from that growth is just as important. While the economy has grown at a very similar pace under both the Conservatives and Labour governments, the division of the wealth created may differ under the two different political parties.

While further analysis is needed to better understand the impact of the two political parties on the economy, the initial results raise an interesting question: who is actually in control of the economy? Changes in skills policy, infrastructure investment, planning reform, migration policy, and incentives around research and development can have a profound positive affect on the growth of an economy. Unfortunately for politicians, the impact of such policies will often only show up in the data a decade or so later. This is probably little comfort for those looking to be elected in 2024.


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