People vote with their wallet. But most are clueless about economic concepts. Do they cast votes based on misconceptions about money?
A man shrugs in confusion against a blackboard covered with economic terms. (Photo illustration by News Decoder)
This article was produced exclusively for News Decoder’s global news service. It is through articles like this that News Decoder strives to provide context to complex global events and issues and teach global awareness through the lens of journalism. Learn how you can incorporate our resources and services into your classroom or educational program.
At the ballot box, most of us rank putting food on the table ahead of more abstract issues such as foreign policy. But this year, our economic views have the potential to affect more than our well-being — they could trigger profound changes in the geopolitical landscape.
That’s because with votes scheduled in more than 80 countries, 2024 will go down in history as the biggest election year ever — and a test for democracies everywhere.
By the end of December, some four billion people will have had an opportunity to cast a ballot in elections that will affect more than half the world’s population. Some of these votes have happened already; many of the most consequential are still ahead. Some will be free and fair; some tightly controlled with foregone conclusions.
And from Sri Lanka to South Africa, the United Kingdom to the United States, the economic future is a major concern for voters, who are worried by issues such as stubbornly high prices and housing availability.
According to a 29-nation public opinion survey released by pollster Ipsos in February, 60% of people believe their country is headed in the wrong direction. And since electorates unhappy with the status quo tend to seek change, more and more are flocking to parties on the political extremes.
When politics and economics collide
It was runaway inflation that late last year led Argentinians to choose far-right TV personality-turned-politician Javier Milei as its next president.
And in the Netherlands, that model of progressivism, even anti-immigrant candidate Geert Wilders was surprised when the electorate awarded his Party for Freedom (PVV) the lion’s share of seats in November’s snap election. Those who backed him said they were struggling to make ends meet in a housing and cost-of-living crisis.
But how much do the world’s voters actually know about what drives their economies? And more importantly, whether the politicians vying for their support have the capacity to deliver on promises of prosperity?
These are more crucial questions than ever this year, particularly for young voters who will have to live with the consequences for decades to come.
Consider that the United States is enjoying the strongest economy of the seven nations in the economic forum of world leaders known as the G7. But even there, voters remain gloomy about the state of their economy.
Economic fears during an economic boom
Analysts have offered theories to explain this contradiction: persistently high prices, the growing gap between rich and poor, “shrinkflation” — companies offering less value for money — and an increasing tendency for the U.S. news media to amplify bad economic news while downplaying the good.
Or maybe the culprit is poor economic understanding. According to a survey of 2,000 randomly selected Americans conducted for the Financial Times news organisation in December 2023, an overwhelming majority of people believed — mistakenly — that the economy was not only deteriorating but that they were worse off than 30 years ago.
Economic knowledge is hard to gauge on a global basis. There are several yardsticks of financial literacy — whether an individual knows enough to make sound financial decisions. Measures of economic literacy, which encompasses an individual’s understanding of the broader context and its impact on them and others, are even harder to come by.
(Test your economic knowledge with a quiz at the end of the article.)
And yet it has been clear for a long time how essential it is for both individuals and society that voters have a basic economic grounding. As the Nobel Laureate George Stigler wrote back in 1970: “The public has chosen to speak and vote on economic problems, so the only open question is how intelligently it speaks and votes.”
Financial literacy expert Annamaria Lusardi, senior fellow at the Stanford Institute for Economic Policy Research and founder of the Journal of Financial Literacy and Wellbeing, last year conducted an exploration of financial and economic knowledge in 16 countries across Europe, Latin America, North America and Asia.
“The findings are not good: the knowledge of people around the world, including countries belonging to the G7 bloc, is very low — and too low to expect people (to be able to) make informed decisions,” Lusardi said. “Knowledge is particularly low among the young, for whom decisions can be even more consequential, and those with low income or education, who could be targeted by ‘fake news’.”
Lusardi said research makes it clear that financial and economic awareness can affect voting behaviour and policy outcomes. “In other words, financial and economic literacy is important for the workings of our democracies,” she said.
A more informed electorate
Financial and economic literacy allows voters to ask better questions of those seeking their support and to weigh campaign trail promises more accurately. It can also help them recognize — and accept — an important truth: that modern economies are far too interdependent to be wholly under the influence of any one party or individual politician.
Take inflation — the pace at which prices are rising in a given country.
In the aftermath of the pandemic, prices surged across the globe due to a range of factors from pent-up consumer demand to the impact of war and climate change on the output of food and energy.
When inflation began to slow in the early months of this year, some leaders boasted that they had been instrumental in applying the brakes.
The reality? The moderation is more down to interest rate increases by central banks and falling energy prices than to government policies; just as global factors were more to blame than individual leaders for the jump.
Perhaps most importantly, understanding what’s really going on in the economy can help protect us against propaganda and disinformation, which in the age of artificial intelligence poses a clear and present danger to today’s democracies.
The discipline of economics is commonly known as the “dismal science“. But if we want to make wiser choices at the ballot box, perhaps it’s time we all listened a little more closely to what those practitioners of the dismal science have to say about the present and the future.
Questions to consider:
- What is financial and economic literacy?
- How can economic ignorance affect who ends up in power?
- Should economics be taught in high school? Why?
Sarah Edmonds is a former Reuters journalist who has worked in seven countries on three continents, variously as a financial markets and economics correspondent, news editor, bureau chief and news operations manager.
Read more News Decoder articles about economics: