Do Eton and Oxbridge graduates make better prime ministers? That’s what research seems to suggest, with a new paper arguing that upper-class political leaders are less likely to run large budget deficits than their working-class counterparts.
Bernd Hayo and Florian Neumeier, from the Philipp University of Marburg in Germany, analysed data from 21 OECD countries between 1980 and 2008, and found that the socio-economic status of political decision-makers such as prime ministers and presidents ‘is an important determinant of fiscal budget decisions’.
In particular, when the head of government had previously held a blue-collar job, the country’s deficit (as a percentage of its GDP) was approximately 1.6 percentage points higher than when there was a leader with an academic background at the helm.
‘Over time, this effect increases to almost 12 percentage points,’ the paper said. ‘Thus, the impact of personal status on fiscal deficits is not only statistically significant but also economically substantial.’
What this really seems to represent is in fact the likelihood that those who have held blue-collar jobs join left-wing parties, which tend to run bigger deficits, and contrarily that wealthy professionals tend to join right-wing, more deficit-conscious parties.
According to the study, this difference is because people with lower socio-economic status have a shorter-term horizon and tend not to anticipate the impact that their behaviour could have in the future. Hence, according to the study, they are more prone to incurring debt, whether it’s private or public.
But there are several issues that the paper, which is likely to cause outrage in a country still obsessed with class, ignores.
First, even conceding that the prime minister’s status can affect his fiscal policy, to what extent can it do so? Does it have more influence than the world economy? And does the background of other senior officials such as the chancellor of the Exchequer or the governor of the Bank of England count as well?
In addition, there are several things prime ministers have to worry about and keeping the budget in order is only one of them. (In fact, some economists don’t even think that running a deficit is necessarily harmful and suggest that increasing it during a recession can kick start growth.)
Maybe that’s why the paper’s argument doesn’t seem to apply to two of the three British prime ministers analysed in the paper. The research, in fact, found that Tony Blair, who was educated at Fettes College and Oxford, was more debt-tolerant than his predecessor John Major, who left school when he was sixteen and never attended university.