The Electoral Consequences of Indebtedness under Austerity

Abstract

What are the political consequences of rising household debt in the context of fiscal austerity? Cuts in welfare benefits privatize social obligations as voters address ensuing financial shortfalls by borrowing money. I argue that debt re-commodifies individuals and shifts their electoral support from incumbents to opposition and anti-establishment parties by provoking feelings of political neglect, economic vulnerability, and strong emotional responses. I examine this argument by leveraging spatial and temporal variation in the rollout of Universal Credit, a large-scale welfare reform in the United Kingdom. Using fine-grained administrative data on unsecured debt, I demonstrate that fiscal austerity generated an increase in indebtedness, which lower support for the incumbent Conservatives and strengthened support for Labour and UKIP. I then use individual-level survey data to explore the mechanisms that link debt and political behavior. The results suggest that rising indebtedness increases the political costs of welfare retrenchment and creates new political cleavages.