In The Volatility Curse, Daniela Campello and Cesar Zucco grapple, in a highly productive way, with questions of democratic representation in developing democracies. The result generalizes our body of theory of representation and makes key empirical contributions, both of which will be influential in the literature on voting, elections, and accountability across democracies.
As is too rarely the case, the authors laudably start from the premise that the advanced democracies are a special case and that the models built to study them necessarily must be generalized to encompass other regions of the world. In a most welcome advance on standard applications of disciplinary theory to developing democracies, they seek to account for anomalous patterns by elaborating an empirical indicator of structural effects that differentially impact domestic regimes depending on their mode of insertion in the international economy. While such structural analyses are a venerable tradition in scholarship on Latin America, Campello and Zucco are pathbreaking in subsequently developing how these structural constraints require modification of traditional microfoundational theories of economic voting in order to build a more general theory of democratic representation.
The authors conclusively demonstrate that in Latin American LSCEs (low savings commodity export economies), voters consistently fail to assess executive performance as theorized, thus severing the purported link between expected electoral sanction and politician incentives to use policy levers to improve general welfare. They label this phenomenon the volatility curse—the “incapacity to judge and compare [politician performance] based on the simplest heuristic for government com- petence—the economy” (23). Their further claim that this curse is the source of incentives for rent seeking and corruption is less well established, but at a minimum they have laid a strong foundation for this as a fruitful avenue for future research. What is incontestable is that Campello and Zucco have made an innovative and enduring contribution to our theoretical understanding of the relationship between voter decisionmaking, exogenous forces, and democratic accountability.
Campello and Zucco set out to establish their central thesis, that “in democracies that are exposed to strong economic volatility driven by exogenous economic conditions … the possibility of holding leaders accountable through economic voting is extremely limited” (3) by first demonstrating that in fact, economic voting is quite prevalent in Latin American LSCEs. At the same time, they argue that high- growth volatility, driven by factors exogenous to policymaking in these systems, sets a “structural ceiling on individuals’ capacity to extract information about incumbents [performance] from fluctuations in their material welfare” (53). They argue for “structural limitations to accountability, which are a function of a country’s economic structure and mode of integration into the world economy” (53). They then develop their structural variable designed to capture the effect of exogenous conditions, which they label GET (good economic times), which captures the degree to which commodity prices and financial flows drive economic booms and busts, as well as regular and irregular handovers of power in the region. This indicator in itself is a valuable contribution that will surely be used in a wide range of future studies seeking to understand the effects of external economic conditions on domestic economic and political outcomes.
The authors further build their case by convincingly demonstrating that structural conditions as captured by GET are a strong determinant of presidential re-election, vote share of incumbent-supported candidates, and vote swings as measured relative to the previous election. As the authors state, “these results suggest that voters do not discount presidents’ ‘luck’ when deciding whether or not to re-elect them” (122). In other words, presidents who govern in good economic times benefit from exogenous factors that are beyond their control, and those who govern in bad economic times are punished for the same factors over which they have no control, thus severing the link between voter approbation and politicians’ policy incentives. In order to bring more statistical power to bear, the authors apply the same analysis to presidential popularity, a dependent variable with far more observations than presidential elections. Their results are consistent with the conclusion that “citizens simply vote based on the economy, regardless of the fact that a significant portion of the economic performance is not attributable to incumbent governments. This is macrolevel evidence that voters are, in fact, misattributing responsibility for economic performance” (161).
What truly sets Campello and Zucco’s work apart is how they then investigate the underlying microfoundations of voter decisionmaking that translate these structural patterns into the political outcomes of interest. In order to ascertain what factors inhibit voters’ ability to discount exogenous factors and more accurately assess politicians’ performance, the authors conduct field experiments to investigate whether voters’ misattribution stems from lack of information, from an inability to employ simple rules of inference, or from “sticky” affective ties to political leaders. They ultimately find that all of the above inhibit voters’ ability to accurately assess the degree to which outcomes are a result of effective policymaking versus luck in drawing good versus bad exogenous conditions. Under conditions of the volatility curse, it is only a very small proportion of “sophisticated” voters who demonstrate the ability to use information and draw accurate inferences about politician competence.
In this outstanding piece of scholarship, the authors make a very strong case for how external shocks debilitate the feedback loop between voter sanction and politicians’ efforts to improve general welfare. But their claim that the volatility curse directly drives an incentive for politicians to ignore the competitive aspects of elections and move directly to shirking and engage in rent seeking and corruption is less plausible. Indeed, it seems too facile to move from the negative condition that economic voting fails as a mechanism for disciplining policy choices to the positive claim that this is what drives the specific policy choices that often fail to enduringly improve social welfare. And while the vast majority of the empirical work in this book is highly sophisticated and convincing, the evidence presented in this chapter is far more impressionistic.
While certainly beyond the scope of this book, the need for a positive model of what is driving policy choices in these systems is something the authors’ work points to. The authors have convincingly demonstrated that it is not the fear of voter sanction as posited by economic voting models, but there are clearly competitive forces at work in these elections that require better specification. Moreover, Latin American LSCE economies are not unique in being highly integrated into and buffeted by international economic forces. As Katzenstein (Reference Katzenstein2016) demonstrates, the small economies of Europe chose openness to the world economy, along with domestic institutions and policies that cushion the impact on social welfare. In addition, there is considerable literature on how political entrepreneurs facilitate their re-election by solving problems voters face in assessing performance, as in Ferejohn’s 1986 canonical piece on dimensionality.
Finally, as the authors point out, Chile has instituted policy changes (anticyclical fiscal laws) to cushion the impact of exogenous forces. It is certainly no accident that in the country considered the most consolidated democracy in the region, politicians have acted to mitigate the impact of exogenous shocks and thus improve voters’ ability to evaluate them on their performance. In sum, Campello and Zucco’s work not only has made an important contribution to how exogenous shocks require generalization of theories of representation and accountability. It also strongly suggests that there are key domestic institutional variables that drive variation in political entrepreneurs’ incentives to solve the problems voters face in evaluating their agents’ performance.
