Via Ezra Klein, a very interesting academic paper by J. Lawrence Broz, political science professor at the University of California, San Diego. Professor Broz finds some striking correlations between financial collapses and the politics of the governments that bring them. Fancy that? And conservatives have been telling us for decades that it's just a natural cycle. Cycle? Yes. Natural? Not so much.
Financial cycles of boom and bust are as old as finance itself -- a fact that has led some observers to infer that human nature may be a fundamental cause of financial cycles. But “politics” also influences financial cycles by way of government policies and regulations. I argue that policies and regulations vary predictably with the partisan character of the government, creating a partisan-policy financial cycle in which conservative, pro-market governments preside over financial booms while left-wing governments are elected to office after crashes.
This is something I think most people who have been around awhile feel instinctively, so it's nice to see research backing it up.
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