Guns and Butter and Government Popularity in Britain

Guns and Butter and Government Popularity in BritainAuthor(s): Helmut NorpothSource: The American Political Science Review, Vol. 81, No. 3 (Sep., 1987), pp. 949-959Published by: American Political Science AssociationStable URL: http://www.jstor.org/stable/1962685 .

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GUNS AND BUTTER AND GOVERNMENT POPULARITY

IN BRITAIN HELMUT NORPOTH

State University of New York Stony Brook

Britain under the government of Prime Minister Thatcher provides a unique opportunity to probe the effects of both war and macroeconomic performance on government popularity. Monthly ratings for Thatcher and Conservative-party support (June 1979 to July 1985) are examined by way of Box-Tiao intervention models. The model that best captures the impact of the Falklands War of 1982 is of the gradual- temporary variety: popularity gains accrued through the three-month war shrink in a geometric fashion. Nevertheless, they prove to be worth over five percentage points for the Conservative party a year later, in the 1983 election. Macroeconomic performance, meanwhile, is found to have an asymmetric effect on government popularity, with unemployment strongly significant but inflation not significant at all. Apparently, the British public is punishing failure (on employment) while letting success (on inflation) go unrewarded. Qualifications of the positive effect of war and the negative effect of macroeconomic performance are suggested.

War and economics have few rivals when it comes to making or breaking governments. Many ob- servers take for granted that prosperity spells electoral success for those in power, and bad economic times, political doom. Likewise, military victory has long been thought to augur well for the popularity of political leaders, whereas defeat may cost them more than their popular support.

On the other hand, the question of victory or defeat may be moot. There are signs that popular support for a war being conducted wanes as the costs of war mount. U.S. public opinion on the wars in Korea and Vietnam drives home the lesson that war, if anything, is more likely to erode government support in the mass public than to boost it (Kernell 1978; Mueller 1973; Norpoth 1984). From World War I up to the Vietnam War, the

presidential party typically suffered severe losses at the polls after the United States went to war, win or lose. And in Britain the Conservative party lost the general election of 1945 despite the triumph over Germany only a few months earlier.

Like war, the economy, too, may be confronting political leaders with a losing, not a winning, proposition. While bad economic times appear to erode popular support for political leaders, good times may be doing little to boost it. Such an asymmetric effect of economic performance emerges in some studies of congres- sional elections (Bloom and Price 1975; Kernell 1977) and presidential popularity (Lanoue 1986; Mueller 1973). Prosperity, according to this school of thought, has come to be expected by the public. A government presiding over it is doing its job and will thus be judged by other,

AMERICAN POLITICAL SCIENCE REVIEW VOL. 81 NO. 3 SEPTEMBER 1987



American Political Science Review Vol. 81

noneconomic criteria. An economic slump, on the other hand, makes the economy an "issue," with blame falling on the government in office. Voters are seen as primarily concerned with the negative side of economic performance. They punish failure but do not reward success.

Great Britain under the government of Margaret Thatcher provides a special opportunity to test those hypotheses about war and economic performance. In April 1982, Argentina and Britain went to war over the Falkland Islands (Malvinas), a war that ended with Argentina's sur- render in mid-June (for accounts, see Hastings and Jenkins 1983). To be sure, in the short run this war does not seem to have diminished public support for the Thatcher government (Clarke, Stewart, and Zuk 1986; Dunleavy and Husbands 1985; Mishler, Hoskin, and Fitzgerald 1986; Worcester and Jenkins 1982). But that by itself does not prove that the war made a lasting impression on the public and paid electoral dividends for the governing party.

The Falklands War occurred amidst a wrenching economic upheaval in Britain brought on by the Thatcher government (King 1986; Newhouse 1986; Riddell 1985). While inflation was slowing, unemployment rose to Depression-like levels. This set of economic outcomes presented the public with a dilemma: reward the government for the relative success on inflation, or punish it for its failure on unemployment? The public's dilemma, on the other hand, gives us an opportunity to probe for the "asymmetry" of economic effects. (For studies on economic voting in Britain, see Alt 1979; Butler and Stokes 1969; Goodhart and Bansali 1970; Hibbs, Rivers, and Vasilatos 1982; Miller and Mackie 1973; Whiteley 1986; Yantek 1985).

This paper examines the effects of the split macroeconomic performance and the Falklands War on the popularity of Prime Minister Thatcher and her party by way

of an "intervention analysis" with monthly data from June 1979 to July 1985 (Box and Tiao 1975; Hibbs 1977; Lewis- Beck 1986; McCleary and Hay 1980).

The Faildands and Thatcher's Popularity

An event like the Falklands War may leave a mark on government popularity in two ways. First, it may either lead to a permanent shift in the level of support or just make a temporary impression. Cer- tain international events have been noted to generate "rally-around-the-flag" reac- tions (Brody 1986; Kernell 1978; Mueller 1973; Norpoth 1984). A boost in popularity is followed by erosion to the preinter- vention level. Second, the onset of the intervention impact may be abrupt or gradual. It may take some time for the intervention to register with the public. Thatcher's popularity leading up to, and following, the Falklands crisis is depicted in Figure 1.

The four intervention models have been estimated with an error (noise) specification that assumes a first-order autoregressive (AR) process. This AR(1) specification emerges from an analysis of Thatcher's popularity in the time period prior to the Falklands War (Box and Jenkins 1976; McCleary and Hay 1980). For now, we assume that the prime minister's popularity at any given time is a function of a long-term component approximately captured by the overall mean, plus short-term oscillations due to the impact of the Falklands War, autoregressive noise, and "white noise."

The results of the estimation of the various models are presented in Table 1. The abrupt-permanent model receives some support, as indicated by the significant estimate for April. Thatcher's popularity, according to this model, rose in April of 1982 to an equilibrium six points higher than before. The findings of the

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1987 Government Popularity in Britain

Figure 1. Satisfaction with Thatcher's Job as Prime Minister

25 3500

20 3000

Unemployed K

z 15- 2500 0

I- ~~~~~~~~~~~~0 ,< 10 - 2000 , z X

Inflation Z 5 1500

0 1000 1979 1980 1981 1982 1983 1984 1985

Table 1. The Falilands and Thatcher's Popularity

Models of Intervention Temporary

Permanent Abrupt Gradual

Variable Abrupt Gradual April May June April-June April-May May-June

Constant -3.6 -6.3 -3.2 -4.3 - .36 -4.8 -4.6 2.0 (2.6) (3.2) (2.6) (2.2) (2.9) (2.4) (2.3) (2.8)

April 1982 6.3 6.4 7.9 - - 4.5 4.8 -

(2.8) (3.2) (3.2) (2.8) (2.8)

May 1982 - - - 15.9 - 14.7 15.0 14.2 (2.8) (2.8) (2.8) (2.7)

June 1982 - - - - 5.5 3.5 - 9.6

(2.8) (2.9) (3.0)

Rate - .44 .98 .96 - .05 .95 .95 .48

(.30) (.03) (.02) (.50) (.02) (.02) (.18)

AR(j)a .83 .85 .81 .80 .89 .82 .82 .93 (.07) (.07) (.07) (.07) (.05) (.06) (.07) (.05)

SERb 3.3 3.2 3.3 2.9 3.4 2.8 2.8 2.8

QC 19 20 19 25 18 22 26 20

Note: These results were obtained with BMDP2T. Standard errors for parameter estimates are in parentheses. Estimates more than twice as large as their standard errors are significant at the .05 level. aFirst-order autoregression specification for noise. bStandard error of residuals. cThe Ljung-Box test of model adequacy; with 19 degrees of freedom, none of the Q estimates is statistically significant at the .05 level. Source: Market and Opinion Research International, June 1979-July 1985 (74 monthly observations; for three missing values, Gallup data used).

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gradual-permanent model are less com- pelling, by contrast. The rate-of-change parameter turns out to be insignificant.

In the temporary domain, each of the two basic scenarios, abrupt and gradual, has been examined in several versions. For the abrupt-temporary type of intervention impact we have separately estimated effects for April, May, and June of 1982. The most convincing evidence is found for the May version, which sug- gests a boost of 16 points in May of 1982, to be reduced subsequently at the pace of 4% per month (100%-96%). By May 1983, a 10-point gain remains, according to the model estimates. Still, how does the fit of this temporary-impact model com- pare with that of the gradual-temporary- impact models?

Here, too, we have examined three versions. The April-May-June version assumes that the buildup of the Falklands effect was distributed over those three months while the alternatives either ex- clude the final month or the opening month. The May-June version assumes that the Falklands impact registered among voters only after a delay, whereas the April-May version assumes that no further gain in public support registered in June, the month of victory.

The May-June version can be quickly dismissed in light of the results presented in Table 1. The AR(1) parameter is prac- tically 1.0, which dooms the whole model. The April-May-June version is somewhat credible but fails to yield an impressive estimate for June. The inclu- sion of a June effect does not yield any benefit above and beyond what the April- May model, which excludes it, provides. We conclude that the Falklands War boosted Thatcher's popularity in' April and May of 1982, with the lion's share coming in May, but that these gains proved temporary. No substantial rise occurred in June, when Argentina capitulated.

Does this mean that victory did not

matter to the British public? that we would have found the same results in case of defeat? Of course not. The point is that victory was anticipated in Britain. The public had no doubts of victory, as shown by a Market and Opinion Research Inter- national survey in April 1982 ("How" 1982). Victory came as expected and the electorate apparently behaved in the man- ner of "rational expectations." No addi- tional reward accrued the government in public support over what had been given in April and May in the expectation of victory. Had the Thatcher government disappointed its public by either losing the war or being unable to bring it to a swift conclusion, public reaction might have been quite different. Most likely, the April-May boost would have evaporated at a much faster rate.

The Economy and Thatcher's Popularity

Rare are the opportunities for government leaders to capitalize on foreign- policy events to the degree apparently done by Margaret Thatcher in 1982. For the most part, it is domestic performance that matters for government popularity. Hardly any aspect of domestic performance has been more thoroughly scrutin- ized in this context than the state of the economy. Thatcher has closely tied her political fortunes to the economy by her attempts to wean the economy from much of its state tutelage (King 1986; Riddell 1985).

While many of her policies have af- fected some part of the British public, what is most visible to the general public is the change in overall unemployment and inflation, the two key concerns cited in public-opinion polls in response to the question about "problems facing the na- tion." As can be gleaned from Figure 2, under Thatcher these two macroeconomic indicators have moved in a classic

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Figure 2. Two Sides of British Economic Performance under Thatcher

100

65

55 z 0

45

35

25

01979 1980 1981 1982 1983 1984 1985

Phillips-curve fashion. While unemployment has surged to over three million the inflation rate has declined to roughly 5%.

How did those developments affect Thatcher's approval ratings? There prob- ably was a time when it would have been unthinkable for a prime minister to re- main in office with three million unemployed. How much popularity has it cost her? Has the decline of the inflation rate offset some or all of those losses? In modeling the way the economy influences the political judgments of the public, we assume a retrospective, incumbent- oriented calculus where the public relies on the most visible indicators of economic performance (Kramer 1971).

Specifically, we examine the effect that a change in unemployment and prices over a year may have had on public approval of government. The inflation rate is normally calculated this way, as a percentage change of the price index over a 12-month period. For unemployment, we proceed analogously, by taking the change in the number of unemployed over a year. These specifications are supported

by an examination of cross-correlations, which shows popularity ratings to be most strongly correlated with 12-month changes of unemployment and prices.

So defined, macroeconomic performance joins the Falklands intervention as modeled by the best fitting specification (the gradual-temporary, April-May version) and the autoregressive component as predictors of government popularity. The overall mean of the popularity series as adjusted by the constant again captures the long-term component of government popularity.

The results presented in Table 2, column 1, make a strong case for the effect of unemployment on Thatcher's approval ratings. Based on the estimate for unemployment given in Table 2, we would estimate that the rise in the number of the unemployed from 1.5 million in the mid- dle of 1980 to over 2.5 million one year later cost her roughly 10 points. By the same token, the drop in inflation from 20% to 5% has utterly failed to compen- sate for that loss. The parameter estimate for inflation in column 1 is minimal and

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nowhere near statistical significance. As the asymmetry hypothesis pre-

dicted, the relative success of Thatcher's economic policy (on inflation) went unrewarded whereas the failure (on unemployment) was punished. Confronted with two bits of key economic news, the public

took note of the negative bit and ignored the positive one in judging government performance. Perhaps it did so in the assumption that the decline of inflation simply restored a situation considered reasonably normal. By contrast, the rise of unemployment pushed this topic into

Table 2. The Falklands (Gradual-Temporary Impact), the Economy, the 1983 Election, and Thatcher's Popularity:

Estimates for Five Models

Models Variables 1 2 3 4 5

Constant -3.7 -5.3 -3.5 -3.5 -3.5 (1.9) (2.7) (1.1) (1.2) (1.1)

Falklands

April 1982 4.3 5.0 4.2 4.2 4.2 (2.6) (2.8) (2.6) (2.5) (2.5)

May 1982 14.5 15.2 14.5 14.5 14.5 (2.7) (2.9) (2.6) (2.6) (2.6)

Rate .93 .96 .93 .93 .93 (.03) (.02) (.02) (.02) (.02)

Inflationa .03 .16 - - - (.29) (.37)

Unemployment - .0112 - - .0112 - .0112 - .0112 (.003) (.0026) (.0026) (.0025)

Election 1983

June 1983 - - - 3.8 4.2 (2.1) (2.2)

Rate - - - - .41 -

(.39)

AR(1)c .60 .80 .60 .61 .60 (.10) (.07) (.10) (.10) (.10)

SERC 2.7 2.8 2.7 2.6 2.6

Qe 21 26 21 17 19

Note: These results were obtained with BMDP2T. Standard errors of parameter estimates are in parentheses. aMeasures the percentage change of the retail-price index since a year before; entered into the analysis with a lag of one month. bMeasures the change in the number of the unemployed (in 1000) since the previous year; entered into the analysis with a lag of one month. cFirst-order autoregressive specification for noise dStandard error of residuals. eThe Ljung-Box test of model adequacy; with 19 degrees of freedom, none of the Q estimates in the table above is statistically significant at the .05 level. Sources: Market and Opinion Research International, June 1979-July 1985 (74 monthly observations); for three missing values, Gallup data used; Economic Trends; Monthly Digest of Statistics.

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the public spotlight, where it endures as the number-one problem for government to solve. Another possibility is that the public did not regard the drop of inflation as a success since prices still kept going up at something like 3%-5%.

It might also be argued that the missing effect of inflation is an artifact. As Figure 2 pointedly illustrates, unemployment and inflation run in opposite directions. The two are strongly, if negatively, correlated with one another. So to the extent that one of the two accounts for variation in government popularity, it may deprive the other one of its rightful share. Is unemployment crowding out inflation in their competition to explain popularity? To check this possibility, we excluded unemployment from the analysis. How- ever, as shown in Table 2, column 2, inflation gets absolutely no help from this protective treatment. Its estimate gets neither larger (in the right direction) nor more significant.

As for the Falklands effect, the inclu- sion of unemployment in the analysis does it little harm. As before, the gradual- temporary specification yields a cumula- tive popularity gain in April-May of approximately 20 points, eroding at a rate of roughly 7% a month. This estimate changes little when what turns out to be a small and inconsequential effect of the 1983 election on Thatcher popularity is also taken into account (Table 2, cols. 4 and 5).

The Faldlands War and the General Election of 1983

While the election of 1983 may have added little to Thatcher's own popularity, it gave her party a landslide majority in the House of Commons. How much did the electoral victory owe to the Falklands victory? This question cannot be simply answered by citing Thatcher's popularity gains and What remained of them a year

later. A leader's gains and losses do not automatically translate into gains and losses for the party. On election day, as Churchill sadly experienced it in 1945, "the British electorate tends to vote according to what a party represents rather than who represents the party" (Crewe 1981, 275). We have to ask, there- fore, whether the Conservative party gained in public support as the result of the Falklands War. And if so, what was left of that gain one year later, at election time?

As Table 3 shows, the Falklands War left a strong mark on the Conservative share (based on answers to the question, "How would you vote if there were a general election tomorrow?" and if no answer to this, "Which party are you most inclined to support?"). The model that best fitted Thatcher's popularity, however, does not suit her party equally well, as one can gather from the results in column 1. The April-May gradual- temporary specification of the Falklands intervention fails to confirm an effect for April and only yields one for May half as large. On the other hand, as columns 2 and 3 make clear, the Conservative party registered a substantial gain in June 1982.

At the same time, unemployment hits the party almost as strongly as its leader, while inflation again fails to matter. With unemployment included in the model, the gradual-temporary specification of the Falklands intervention (May-June version) yields a gain for the Conservative party of 11 points, as can be calculated from the results in column 3. This gain shrinks at a rate of 7% each month. By May 1983, when the House of Commons was dissolved, a five-point gain, according to our estimate, remained.

In order to predict, as it were, the Con- servative vote share in the 1983 election, we can, of course, avail ourselves only of information available in early June 1983. Reestimates of the model of Conservative support with just that information are

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presented in column 4. These estimates lead us to a forecast of 45.5% for the Con- servative party in the June 1983 election. That slightly overpredicts the actual party share of 43.5% but stays close to the boundary of one standard error.

Our forecast, based on the effect of

unemployment and the Falklands bonus plus Conservative base support, does no worse than most last-week polls, which overestimated the Conservative share by 2.5 points, on the average (Dunleavy and Husbands 1985, 81). The Falklands, according to our estimate, were worth be-

Table 3. The Falklands (Gradual-Temporary Impact), the Economy, the 1983 Election, and Conservative Party Support:

Estimates for Four Models

Models

Variables 1 2 3 4

Constant -2.3 -2.8 -2.3 -2.1 (1.0) (1.5) (1.0) (.9)

Falklands

April 1982 .8 - - (1.9)

May 1982 9.2 8.6 8.4 7.9 (2.0) (2.0) (1.9) (1.9)

June 1982 - 3.7 3.8 3.1 (2.0) (2.0) (2.0)

Rate .94 .94 .93 .945 (.03) (.04) (.03) (.038)

Inflationa - .11 - - (.23)

Unemploymentt - .0093 - .0090 - .0093 -.0100 (.0023) (.0024) (.0023) (.0021)

Election 1983 -1.9 - - - (1.7)

AR(1)C .67 .67 .68 .66 (.10) (.10) (.10) (.12)

SERd 2.0 2.0 2.0 1.9 Qe 18 12 14 12

Number of cases 74 74 74 48

Note: These results were obtained with BMDP2T. Standard errors of parameter estimates are in parentheses. aMeasures the percentage change of the retail-price index since a year before; entered into the analysis with a lag of one month. bMeasures the change in the number of the unemployed (in 1000) since the previous year; entered into the analysis with a lag of one month. CFirst-order autoregresive specification for noise. dStandard error of residuals. eThe Ljung-Box test of model adequacy; with 19 degrees of freedom, none of the Q estimates in the table above is statistically significant at the .05 level. Sources: Market and Opinion Research International, June 1979-July 1985 (74 monthly observations); for three missing values, Gallup data used; Economic Trends; Monthly Digest of Statistics.

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tween five and six percentage points to the Conservative party in June 1983. Without them, the party might have gained no more than 38% on election day. In the three-cornered race of 1983, given the desolate state of the Labour party and its unpopular leader, such a vote share might still have secured a majority in the House of Commons. But historically speaking, no party has won a majority with 38 points or less in Britain since 1945.

Conclusions The Falklands War may have had little

strategic and international significance- the Argentinian writer Borges dismissed it as "two bald men fighting over a comb" (cited in Theroux 1984, 47)-but it stirred the British public as few events before. Of the four intervention models considered, the one that best captures the war's impact on government popularity is of the gradual-temporary variety. A surge of popularity is followed by a decline. It must be stressed, however, that what is gained in essentially two months is not gone in another two months. Though "temporary" in a technical sense, the impact erodes so slowly that it pays a handsome electoral dividend for the governing party a year later. Even two years later traces of a Falklands effect can still be detected.

Unlike other wars, the Falklands War thus did not undermine the popularity of the incumbent government. One reason, to be sure, was that Britain won the war; another, that it was provoked to take military action by what most Britons considered a blatant act of aggression. Fur- thermore, it allowed Thatcher to demon- strate her blend of decisiveness and per- severance (Hastings and Jenkins 1983, 355-56; Newhouse 1986, 75). As for the press, the chauvinistic tabloids as well as the sophisticated Times by and large supported Britain's role in the war. In order-

ing the military recapture of the Falk- lands, Thatcher could even count on broad support from the opposition benches.

Still more important perhaps, the war was brief and cost relatively little by com- parison to other wars. It was over before its costs were felt by the public. The boost in Thatcher's popularity actually crested before the conclusion of the war. A pro- tracted war with mounting casualties, we suspect, would have chipped away that boost quickly enough to leave her with little in the short run.

The successful handling of the Falk- lands War relieved the heavy pressure on government popularity exerted by macroeconomic conditions. Confronted under the Thatcher government with a rising tide of unemployment and an ebbing away of inflation, the British public was found to key on the negative side of economic performance. Public support for Thatcher and her party proved sensitive to unemployment but not to inflation. In this instance, then, it seems that the public punished its government for failure but refused to reward it for success.

While this finding lends support to the asymmetry hypothesis of economic effects, certain qualifications are in order. First, the inflation "success" is limited, falling short of eradicating rising prices. Perhaps zero inflation would have registered significantly in government support. Second, bringing down inflation may not yield any palpable gains for most people, although rising inflation is felt as a loss. It may be different for employment, where the gains and losses are more immediately felt by individuals. Furthermore, the rise in unemployment under Thatcher reached unprecedented postwar heights and went far beyond what might seem appropriate as a cost for curbing inflation.

It must be noted with a touch of irony that the Thatcher government set as its top economic priority the fight against in-

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flation while eschewing responsibility for unemployment, leaving that for the private sector to handle. Viewed from that perspective, the public's reaction is not only ungrateful but also unfair. The public is punishing the government for failing to deliver what the government did not promise to deliver, namely full employment, while refusing to reward it for progress on inflation, where the government had made a pledge. No doubt, the public has not much shared the government's economic priorities, and Thatcher has resisted reordering them. It is perhaps this refusal that has especially irked the public and produced the asymmetric response to economic performance found in this analysis.

Note I am grateful to Robert Worcester, director of

Market and Opinion Research International (MORI) in London, for making available to me the data on British-government popularity and party prefer- ences analyzed in this paper. For the few time points (June, July, and December 1979) for which no MORI data existed, the corresponding Gallup data were substituted. Of course, neither MORI nor Gallup bears any responsibility for the analyses and inter- pretations of these data. The data on unemployment come from the monthly reports, Economic Trends. The specific measure of unemployment used here is "registered wholly unemployed, seasonally adjusted, in the United Kingdom." The data on the retail-price index, on which the inflation index is based, come from the Monthly Digest of Statistics. For comments on earlier drafts of this paper I am indebted to Robert Worcester, Sam Kernell, Kathy Frankovic, John Mueller, Friedheim Meier, and Jorgen Rasmussen.

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Helmut Norpoth is Professor of Political Science, State University of New York, Stony Brook, NY 11794.

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Documents

Guns and Butter and Government Popularity in Britain