Nurturing Grounds for Populists

Nurturing Grounds for Populists

When more and more shops in city centres close, social meeting points also disappear. This raises questions about the political consequences of rundown pedestrian areas.

By Thiemo Fetzer, Jacob Edenhofer, and Prashant Garg

The following article first appeared in Frankfurter Allgemeine Zeitung on 7^th April 2025 and has been translated from the original German.

Since the Brexit referendum and the election of Donald Trump in 2016, it has been clear that regional economic inequalities are of politically central importance. Even after the federal election, there is still much discussion about "places that don't matter" – regions that are not only economically marginalized but whose interests have long been neglected socially, in the media, and politically. The Alternative for Germany (AfD) party was successful, as it had been in previous elections, particularly in eastern Germany, where the regional economic decline is a persistent issue in many areas. Many signs of this decline are the result of structural change. Online retail has pushed traditional brick-and-mortar stores into decline, which has led to the thinning out of local shopping streets and the disappearance of important social meeting points. This raises the question of whether the locally concentrated economic decline can provide fuel for populist forces.

In a new study, we examine this question based on newly available data on vacant stores in the pedestrian zones of English municipalities. Our analysis shows that an increased vacancy rate is significantly correlated with a rise in support for the right-wing populist United Kingdom Independence Party (UKIP). Specifically, we find that a 10 percentage point increase in vacancies is associated with an average increase in UKIP’s vote share of nearly two percentage points. A striking example of this is the constituency of Hartlepool: once part of the traditionally Labour-dominated "Red Wall" in northern England, almost 70% of voters in this area supported Brexit. Between 2009 and 2019, the proportion of vacant stores tripled from just under 7% to around 22%. In parallel, UKIP achieved a significant vote share of nearly 30% in the 2015 general election.

It is also important to note that this correlation is not driven by those directly affected – i.e., those at higher risk of unemployment – but by those indirectly affected. These indirect effects manifest in various ways: fewer vibrant social gathering points also lower the property value of centrally located homes. Although the data quality is not sufficient to conclusively establish a causal relationship, further studies building on our work suggest a causal interpretation – and the empirical findings fit seamlessly into the broader social science literature. In the UK, for example, it is well-documented that the disappearance of other important forums for social interaction, such as pubs or "youth clubs," was exploited by UKIP. The decline of social forums increases the likelihood that indirectly affected individuals will turn to right-wing populist parties.

In light of these findings, two questions arise: Why are indirectly affected people particularly susceptible to right-wing populist offerings? And what economic policy measures can reduce discontent in economically weak regions in the short term and contribute to revitalisation in the long term? The research does not provide clear answers. The following should therefore be understood as an exploratory attempt at an answer. First, regarding the reasons. Our attempt at an answer is based on the logic of interregional envy. Despite the overall negative effects of Brexit – such as its economic consequences – populist offerings can be attractive to economically weak regions if they perceive prospering, mostly urban, regions as benefiting more than they are. In a study with two other co-authors, we show that Brexit had exactly this effect. However, this logic is more plausible for indirectly affected individuals than for those directly affected. The former only have to accept the relative status loss of their region but do not have to cope with the (expected) material losses associated with higher risks of unemployment, as the latter do. Therefore, they can afford the costs of populist economic policies more easily. Populist offerings, in this sense, are a luxury good mainly consumed by economically secure, locally rooted people in marginalised regions. Times of stagnation, in which people perceive policies as a zero-sum game, can amplify this effect.

In the debate about economic policy countermeasures, the interplay of short- and medium-term politics is often neglected. Calls for large investment projects, whose benefits will only be visible in the long term, ignore short-term political realities. Those who do not deliver quickly and visibly will be voted out – and without power, no investments, no matter how meaningful and important they are. The findings suggest that in the short term, politics should focus on visible improvements in public spaces, such as the revitalisation of pedestrian zones. The economic return of such measures may be limited, but they can serve as political insurance for long-term meaningful regional and macroeconomic strategies. The contours of a sustainable long-term strategy for dealing with regions in decline remain unclear – not least because of scientific uncertainty about the extent to which large regional investment programs can reduce the appeal of populist movements. While recent research provides encouraging findings, these should not obscure the conflicting objectives that are becoming more urgent due to the impending structural change in Germany. Central to this is the question of what level of regional mobility is economically sensible and politically feasible – especially in an aging, digitally underdeveloped society. Improved digitalisation could help politically defuse this issue. The "Working from Home" revolution offers opportunities to revitalise rural areas but also comes with other risks.

• Thiemo Fetzer is a professor of economics at the University of Warwick and CAGE Theme Leader, Jacob Edenhofer is a doctoral student at the University of Oxford, and Prashant Garg is a doctoral student at Imperial College London.
• Read the full research paper: Local Decline and Populism