Kiel-based economist Robert Gold is one of the country’s most renowned researchers on populism. We spoke with him about the failed attempt to prevent Donald Trump’s re-election by investing in left-behind regions.
Forum: Robert, one of the well-established research findings is that populists are more likely to be elected in regions suffering from structural disruptions than elsewhere. The US government under Joe Biden therefore invested specifically – via the Inflation Reduction Act through 2024 – in regions that had been particularly weakened by structural disruptions such as the China shock. Trump still won nonetheless. Was the diagnosis wrong?
Robert Gold: It has helped the regions’ growth prospects. But it clearly did not help the Democrats’ election result: in the regions receiving support, voters did not, in any case, vote more strongly for the Democrats in the 2024 presidential election. It is different in Europe, by the way, where we found that increased regional investment can help ensure that fewer people vote for populist parties.
Forum: So there is no measurable effect at all?
Robert Gold: There is no systematically clear effect, neither positive nor negative. To date, there is ultimately no measurable relationship between Inflation Reduction Act investments and election results at county level in the US.
Forum: How can that be, if the empirical evidence actually seems relatively clear that populists were elected disproportionately in the regions that lost out? What are the possible explanations?
Robert Gold: First of all, one would assume that investments in regional development should help break the trend towards populism. And there is indeed empirical evidence in that direction for other countries. Why it has not, or not yet, worked in the US could have various reasons. The first is that the Inflation Reduction Act was not a targeted regional support programme. The fact that structurally weak regions benefited was more of a side effect. The programme was strongly aimed at promoting the transition to green technologies.
It must also be said that the programme was launched relatively late and, by the time of the election, not many investments had actually been implemented. Many voters certainly knew that investments were planned, but they had not yet really been able to experience the effects by election day. In addition, the last election in the US was very strongly dominated by inflation, which had surged at the same time, and compared to that, the issue of regional development presumably had less influence on actual voting decisions.
Forum: There has been a lot of discussion about the impact of inflation on Donald Trump’s election. Is there now sufficient empirical evidence that the inflation surge actually has a direct impact on voting decisions and also on the election of populists?
Robert Gold: Yes, there has in fact long been robust evidence that inflation and economic hardship in general influence voting decisions. In particular, governing parties are punished when inflation is high.
What is interesting is that, in recent times, populist parties in particular have benefited, rather than just any opposition parties. There is a very relevant recent paper by our colleagues Federle, Mohr and Schularick showing that sudden-onset inflation, i.e. inflation shocks, does not simply cause the governing party to lose popularity, but that people switch to populist parties. One reason for this is likely that sudden inflation above all fuels uncertainty among people. Across a wide range of studies, we now know that uncertainty and the fear of losing control are important factors in the rise of populists.
Forum: But that still does not prove that regional investment, conversely, has a mitigating effect on discontent and the feeling of loss of control. Are there other factors that counteracted it?
Robert Gold: With regard to regional investment, it should be said that the mechanism by which such investment reduces support for populist parties does not primarily operate through direct economic benefits for voters. Rather, people in left-behind regions often feel that the political system no longer benefits them and that political elites only look after their own interests. These people need to regain trust in the political system – and that happens when meaningful regional policy is made for these regions.
I believe that in the US, Donald Trump’s strong voter base, which had hoped for a return of the old industries, also had a certain ideological problem with the fact that many Inflation Reduction Act investments flowed into green technologies. There was a certain mismatch: to improve election results through regional policy, voters must be reached not only economically, but also emotionally. The Inflation Reduction Act’s objective, in particular promoting green technologies, may have run counter to this effect.
Forum: How likely is it that the Biden-era investments will continue to have an effect – and only show their impact in upcoming elections, for example in the midterms in November?
Robert Gold: That is an interesting question, which we will also pursue further. Overall, I believe there is still a great deal of research needed on which policy measures are actually suitable for reducing support for populism.
Especially for the US, it remains an exciting question whether the investments being made there – and whose economic impact largely only unfolded after Donald Trump’s election – might nevertheless, in the long term, lead people to regain trust in the effectiveness of the democratic system and then, in future, be less inclined to give their support to populist candidates.
Forum: If you follow the debate about AfD populism in Germany, you get the impression that arguments are often very superficial. Are there nevertheless indications that the idea of cushioning structural ruptures with proactive regional policy is being recognised – or is this still very underdeveloped in Germany?
Robert Gold: My impression is that it has indeed reached politics that structural change is not only an economic problem – that, under the impression of structural weakness, more populists are elected and trust in the democratic system is lost.
However, in my view, the measures that some politicians develop for this are often still very crude. There is still a strong notion that any kind of investment in weak regions should help break this trend towards populism. Much more important, however, seems to be designing proactive regional policy in such a way that the reasons for structural weakness in the regions are acknowledged and that efforts are made over a much longer term to open up new growth and development potential for these regions.