“Take back control”? The effects of supranational integration on party-system polarization

Advanced liberal democracies have entered a period of political turbulence where the processes of economic globalization and supranational integration are affecting the core of domestic government and politics by creating deep fissures in cabinets, parties, and society at large. Evidence abounds of trends such as party-system dealignment and weakening of partisanship throughout the latest era of globalization (Przeworski 2019). “Brexit” in the UK, Trump’s victory in the US, and the contemporaneous rise of right-wing nativist populism in the European “North” and left-wing redistributionist populism in the European “South” can all be viewed through the same prism of a populist backlash against the “straitjacket” of economic globalization and political integration (Algan et al. 2017; Autor et al. 2017; Colantone and Stanig 2018; Guiso et al. 2017; Rodrik 2017). Effectively, the common thread that connects all these electoral results is that of increasing party-system polarization and party extremism stemming from the increasing “sovereignty costs” of supranational integration and economic interdependence (Copelovitch and Pevehouse 2019).

Political scientists have shifted their attention to the study of political polarization because, even if policy outcomes remain the same, higher polarization implies heightened political uncertainty for citizens – albeit together with better defined political platform choices – as well as increased political country risk for foreign investors (Beazer and Blake 2018). With polarization, legislative politics become increasingly adversarial, (coalition) governments more unstable, and policy outputs potentially more volatile. What is more, domestic political instability may trigger a backlash against international unions and organizations – such as the European Union (EU) – as increased polarization along the pro/anti- integration axis may generate negative political spillovers for supranational governance: policy deadlock, the rise in the political implementation costs of policy reforms, the undermining of public support (Bearce and Jolliff Scott 2019), or even the political unraveling of the integration process itself (Hobolt and de Vries 2016; Obermeier 2018).

Political polarization may manifest itself at various stages of the domestic political process: in elections (Cox 1990), the government formation process (Indridason 2011), legislative bargaining (McCarty et al. 2006), and political communication (Prior 2013).¹ In the context of US politics, political polarization is tantamount to the ideological differentiation between the two main congressional parties (Layman et al. 2006). However, when it comes to parliamentary multi-party systems, the concept of polarization is not as straightforward in terms of measurement as it needs to account for both ideological differentiation (also in the form of political extremism) and party fragmentation, whereby niche groups of extremist ideologues may splinter off from larger office-seeking parties (Ezrow 2010).² In both contexts, much of the existing literature has studied the effects of constitutional rules and institutions, such as the (dis)proportionality of the electoral system (Calvo and Hellwig 2011; Curini and Hino 2012; Dow 2011; Ezrow 2008; Iaryczower and Mattozzi 2013; Matakos et al. 2016), gerrymandering (McCarty et al. 2009), and primary elections (Hirano et al. 2013), on party-system compactness, polarization, and extremism.

We focus instead on how extraneous policy rules and constraints – stemming from a country’s level of political integration within regional blocs in addition to its economic integration within global markets³ – affect party-system polarization and party-level platform divergence within the context of electoral competition. To illustrate our argument, we choose to focus on the EU as a preeminent example of a regional experiment in supranational integration that has given rise to a thick web of policy rules and regulations effectively constraining policy-making at the national level (sovereignty costs). In theorizing about this relationship, we highlight the trade-off between the “inputs” of democratic representation and the “outputs” of material compensation (Frieden 2019) as the key determinant of the effects of supranational integration on domestic party systems.⁴ More specifically, we show that a polarization backlash may ensue at the point where the “output legitimacy” of an open and supranationally bound domestic political system is not sufficient to counterbalance the inevitable loss of democratic responsiveness caused by externally imposed constraints on its domestic sources of “input legitimacy”.

In our theoretical section, we provide an informal argument that first expounds this implicit trade-off between input and output legitimacy (or else representation vs. compensation) at the party-system level and then projects this trade-off onto the mixed incentives of parties strategically choosing a convergent or divergent policy platform in order to achieve the optimal balance between maximizing their chances of electoral success and minimizing their (ideological) “transportation costs”. More specifically, we build on Schneider’s (2019) findings with regard to the two distinct objects of electoral accountability in EU party systems: diffuse support for the project of European integration – which is arguably higher (lower) during times of growth and prosperity (recession and secular stagnation) – and spatial preferences for specific policies.⁵

To corroborate our theoretical argument, we use time-series cross-section data to examine the effect of a country’s legal status vis-à-vis the EU (formerly the European Community) – i.e., whether it is an associate member, a candidate member, or a full member – on its domestic party system. We control for the major treaties and time periods of European integration to account for the effect of deepening commitments, rules, and regulations as part of a shifting acquis. In accordance with our two-level theoretical argument, we conduct different empirical tests using two distinct panels: a first one at the party-system (country) level and a second one at the party level. Both of our empirical analyses highlight the non-monotonic effect of integration on party-system polarization and party-level extremism. In fact, the party systems in our sample tend to experience this “breaking point ” before the Global Financial Crisis and the EU’s “multiple crises” (i.e., debt, migration, populism, Brexit). In a similar vein as Frieden (2019), we show that the current state of affairs is simply the culmination of pre-crisis trends, while the recent crises simply exacerbate them further.

Moreover, by way of correcting for the potential endogeneity of integration decisions and post-treatment bias effects,⁶ we perform robustness tests using the synthetic control method (SCM) (see Abadie and Gardeazabal 2003; Abadie et al. 2010; and Abadie et al. 2015) that relies on non-EU member-states as counterfactual cases. This quasi-experimental comparative case study method also allows us to illustrate the explanatory power of our argument vis-à-vis alternative explanations for long-term trends in party-system polarization. All in all, we identify the behavior of parties and the characteristics of party systems as intervening variables that capture the underlying relationship between the input and output legitimacy of national democracies in a interdependent political and economic environment.

With this paper, we also seek to contribute to the literature on the convergence of national party systems and the transformation of electoral competition as a consequence of regional integration (Dorussen and Nanou 2006; Hix 2003; Hobolt and Tilley 2016; Mair 2000). Nanou and Dorussen (2013), for example, find that, because EU legislation limits the set of policies that parties can pursue once in government, the distance between parties’ positions has tended to decrease in policy domains where EU involvement has increased. We actually expand on their results by taking a systemic view of party-system polarization – thus obviating the need for an arbitrary distinction between mainstream and non-mainstream parties – and by deriving the conditions for both conditional convergence and divergence of party platforms. In this regard, the paper also contributes to the vast literature on spatial (voting) models of party competition, which tends to focus on the electoral consequences and long-term impact of parties’ ideological shifts (see, e.g., Adams and Somer-Topcu 2009; Ezrow2005, 2008; Hellwig 2012; Karreth et al. 2013; Williams 2015), but does not always address the question of why they move to the center or to the margins.

In what follows, we first provide a theoretical discussion of the trade-off faced by advanced liberal democracies between input and output legitimacy in the face of political (and economic) integration. We then delve into that trade-off at the party level by elaborating on the theoretical mechanism of ideological transportation costs and showing that binding policy constraints will induce platform convergence up to the point where internal pressures for representation and input legitimization by partisan militants and core voters will cause divergence back towards the party’s intrinsic ideology. Subsequently, we apply our argument to the EU context, test the theorized effects of European integration on European parties and party systems using different measures of party-system polarization and party-level extremism, and present strong evidence confirming our hypothesized non-monotonic relationship between supranational integration and party-system polarization. Finally, we conduct some robustness tests using the synthetic control method and proceed to discuss some comparative case studies. Alternative robustness tests are presented in the Online Appendix available on the Review of International Organizations’ website.

In the current era, politics is no longer “business as usual” and that applies not just to the supply side of electoral competition and policy formation but also the demand side of partisanship and electoral behavior (Guiso et al. 2017). Recent electoral contests in Western Europe, Latin America, and the US showcase the “political limits of globalization” (Acemoglu and Yared 2010; Rodrik 2012) and the fragility of the modern liberal world order. Arguably, the key factor that has introduced “noise” and unexplained volatility into the post-war paradigm of output legitimacy and “embedded liberalism” (Ruggie 1982) has been the corrosive effect of globalization on democratic politics in the form of heightened sovereignty costs (Copelovitch and Pevehouse 2019).

Output legitimacy effectively pertains to the notion that a democratically elected government should “care for the common good” by pursuing economic efficiency and material prosperity. As such, it can potentially come at the expense of so-called input legitimacy, which amounts to a government’s need to “carry out the will of the people” through representative democratic processes and institutions (Scharpf 1999). The two may be at odds when a government decides to pursue a policy that in its own assessment would produce the best functional outcome for society as a whole – even if the electorate would opt for a different policy direction –, resulting in a tension between efficiency and democratic representation (Eichengreen and Leblang 2008).⁷ Policy responses to the recent Global Financial Crisis and the Eurozone Debt Crisis accentuated the growing incongruence between the democratic functions of “representative” government “by the people” and those of “responsible” government “for the people” (Mair 2009). Executive dominance now seems to characterize the predominant current of politics in advanced democracies as incumbents have come to prioritize the pursuit of economic outputs over political inputs (Scharpf 2011). In contemporary democracies, responsible (or output-oriented) government has taken prevalence over representative (or input-oriented) government, thus fueling the rise of populist parties that claim to still represent the “will of the people” but rarely deliver, as opposed to mainstream parties that take responsibility but no longer seem to voice their voters’ concerns (Caramani 2017).

The output legitimacy of the post-WWII liberal economic order emanated from a long period of prosperity and economic growth as well as the establishment of efficient compensation mechanisms of social welfare for those left behind (Burgoon 2001; Walter 2010). National politicians were able to steadily craft a well-entrenched consensus over the desirable levels of integration within supranational governance structures and openness to global markets whilst at the same time allowing enough room for traditional left-right political vacillation within moderate levels of polarization. As countries started to integrate further both politically and economically, the menu of feasible and credible policy platforms became increasingly constrained by the exigencies of economic openness and supranational integration (sovereignty costs), thereby limiting the sources of input legitimacy and democratic representation. In other words, the pursuit of efficiency by means of economic integration, open borders, and rule harmonization started to trump popular demands for democratic institutions of regulation, stabilization, and social protection (part of the traditional agenda of the socialist left) and undermine ethnic homogeneity and national self-determination (part of the traditional agenda of the nationalist right). The rise in capital mobility and the concurrent emergence of a certain market-enforced discipline and orthodoxy in macroeconomic policy in the form of the “Washington Consensus” and the “Golden Straitjacket” began to crystallize the informal (soft) constraints of economic interdependence on the mainstream policy spectrum (Mosley 2005). In addition, by joining (or aligning with) international organizations and unions like the EU, the European Monetary Union (EMU), and the World Trade Organization (WTO), countries committed to formal (hard) policy constraints that truncated their domestic policy space (sovereignty costs), limited what parties could credibly promise in elections and deliver in government and, thus, curtailed their “room to maneuver” (Hellwig 2016; Kosmidis 2018).

For as long as domestic political systems remained embedded within a broader liberal democratic consensus the enhanced output legitimacy of liberal democratic politics induced parties to keep converging towards a set of policy inputs as circumscribed by the extraneous policy constraints of political feasibility, economic orthodoxy, and formal international commitments – albeit at the expense of unfettered democratic responsiveness. Eventually, however, this failure of representation came to be compounded by a failure of compensation for a large part of the population, a trend that was further exacerbated by the devastating effects of the Global Financial Crisis and the Eurozone Debt Crisis on the economy and the welfare state (Frieden 2019). There came a point in a number of advanced industrial democracies where populist leaders (of both the redistributionist left-wing and the nativist right-wing types) inveighing against the globalism of liberal elites and supranational bureaucrats started to gain in popularity and a populist anti-globalization agenda started to emerge as a credible alternative to the “there-is-no-alternative” (TINA) politics of globalization.

In other words, there appears to exist a “breaking point” beyond which the overall level of output legitimacy of an open and liberal democratic system is not sufficient to compensate for the loss in input legitimacy and responsiveness, thus causing a democratic backlash in the form of increased party-system polarization. The implicit trade-off between political inputs and economic outputs gets reassessed, thus giving rise to a sort of political atavism by established left- and right- wing parties reverting to their ideological roots or the emergence of new parties on the extremes of the ideological spectrum. This is due to the heightened pressure for popular representation by an increasingly disenfranchised and disenchanted part of their core electorate and the unwieldy nature of policy compromises necessary to maintain a country’s liberal orientation.

This threshold point may be brought about by stochastic shocks to the aggregate welfare benefits of integration (e.g., in the context of capital account liberalization and financial crises), excessive constraints on the core democratic functions and policy sovereignty of a country, or both. Countries further integrated within global markets (mostly due to the small relative size of their domestic markets) and systems of supranational governance (often due to the political spillovers generated by the unfettered flows of capital, people, and ideas) will be subject to narrower constraints on their domestic sources of input legitimacy. However, higher levels of integration also imply higher exposure to exogenous macroeconomic shocks and risks (Kim 2007), i.e., more noise in their political system’s overall level of output legitimacy. Therefore, as countries integrate further both economically and politically, they become more likely to move beyond the aforementioned breaking point and experience heightened political volatility and democratic instability in the form of increased party-system polarization.

The ensuing backlash towards more extreme core electoral platforms – now effectively incompatible with the country’s policy constraints – will render the pro-/anti- globalization dimension of electoral competition much more salient. Since the rise in platform polarization may run counter to the policies imposed by the “Golden Straitjacket” of economic globalization and political integration, then the expediency of continued membership in international organizations and the desirability of a country’s overall liberal orientation may be called into question, thereby further politicizing the pro-/anti- globalization axis (Kriesi 2016). Therefore, even if actual policy outcomes and existing integration trends are not to be severely affected by the rise in platform polarization, they still become increasingly tenuous and fragile.

As we will proceed to demonstrate empirically, we also claim that political integration by means of rules harmonization and policy coordination generates quantitatively and qualitatively distinct effects on national party systems vis-à-vis economic globalization, i.e., current and capital account openness writ large. Whereas economic globalization generates “narrow-but-strong” informal constraints – such as for example the Mundell-Fleming “impossible trinity” of monetary independence, financial openness, and exchange rate stability –, political integration produces “broad-and-strong” formal constraints on macroeconomic (monetary, fiscal, and trade) policy targets. There is often an explicit (hard) process of rule enforcement and policy censoring that comes about with political integration while, on the other hand, the constraints imposed by economic openness tend to be fuzzier (soft). Moreover, political integration often subsumes economic integration since supranational integration amounts to the deepening of economic relations among regional partners that are already assumed to be “natural trading partners” (De Nardis and Vicarelli 2003; Micco et al. 2003). Finally, with political integration one can actually put a face on those external sources of output legitimacy, which in turn also makes it easier for domestic actors to shift blame onto them (Schneider 2019); even so, political trust can be rather easily rebuilt among national politicians (and their successors). On the other hand, markets are impersonal and the loss of market confidence can be abrupt and very durable.

In this section, we further develop our theoretical argument with regard to the relationship between the scope of supranational policy constraints imposed on multi-party parliamentary democracies and their party-system polarization (extremism).⁸ In order to do so, we extrapolate from the party-system level onto the party level and elaborate on the strategic trade-off faced by parties in the electoral arena between responsibility and responsiveness.

Each party is associated with a core ideological position in the left-right spectrum and runs on a certain platform within a strategic game of electoral competition. On one hand, parties care about maximizing their vote share, which may be regarded as a rough – but fair – approximation of the probability that they enter government and, hence, their ability to acquire office rents.⁹ On the other hand, parties also seek to minimize the costs incurred by proposing a platform away from their core ideological position. These are essentially “transportation” (communication) costs that parties must incur in order to re-brand themselves and sell their new policy program to their voters or otherwise to appease their more militant ideological factions,they are, thus, strictly increasing in the distance between the proposed platform and the party’s core ideological position.¹⁰ Based on the above, we effectively assume that party behavior is driven by both office-seeking incentives of vote-maximization and electability and ideological motives of responsiveness and rhetorical consistency with core party positions.¹¹

In an unconstrained policy environment non-centrist parties face the following trade-off: moving towards more moderate (centrist) positions increases not only their vote share and, hence, their expected office rents but also their transportation (communication) costs. That is, in the absence of any other changes in the institutional set-up (e.g., changes in the electoral rule), the degree of policy convergence towards the center will depend on the relative size of the spoils of office (centripetal force) and the transportation costs (centrifugal force). Thus, this trade-off will be reflected by some limited convergence towards the center of the policy space up the point where spatial transportation costs net of vote share gains are zero (see Fig. 1).

But what happens when additional policy constraints are imposed as a result of a country’s participation in supranational integration schemes (in addition to its overall level of economic openness)? Are the incentives faced by extreme parties to converge towards the center of the policy spectrum amplified or mitigated? To answer this question, we need to shed more light on the mechanism at play. Membership in an international organization such as the EU can impose hard constraints on the domain of permissible domestic policies (e.g., in the form of harmonization of taxation and welfare spending) and effectively limit national governments’ “room to maneuver” (Hellwig 2016). We assume that the constrained set excludes policies too much to the left or the right of the policy spectrum. How will then extremist parties behave if those restrictions start to bind (i.e., if the policy platforms that they would have proposed in an unconstrained environment fall outside the permissible policy space)? Will they further converge towards the center in order to abide by the constraints or will they continue to advocate their core policies in the knowledge that they are not compatible with the country’s overall level of political (and economic) integration?

In accordance with our theoretical distinction between inputs and outputs, we purport that when the electoral policy space is constrained, parties effectively compete along two dimensions: the traditional left-right ideological spectrum (representative inputs) and a second (binary) dimension that captures whether a party runs on an electoral platform that is compatible with the supranational union’s rules and regulations (responsible outputs). We assume that while positioning along the traditional input-related dimension of electoral competition generates spatial benefits and costs in terms of vote share and transportation costs, posturing along the second output-related dimension generates orthogonal valence (popularity) payoffs as a function of the overall output legitimacy of the party system and the country’s extant level of political (and economic) integration. When output legitimacy is high, a party that proposes a responsible electoral platform that complies with the constraints imposed by supranational bureaucrats (and markets) will be rewarded with a high positive valence (popularity) payoff; when output legitimacy is low, the corresponding payoffs will also be low. By contrast, a party that chooses to ignore international commitments (and economic orthodoxy) by proposing extreme non-permissible policy platforms will forgo those valence payoffs. In other words, this formulation of preferences (a simplification of a standard valence model) introduces a potential trade-off between responsibility in terms of respecting the exigencies of political (and economic) integration – thereby enhancing the party’s electability and international credibility – and responsiveness in terms of pandering to core voters’ and militants’ ideological preferences – thereby exhibiting rhetorical consistency and ideological purity.

Therefore, when it comes to their electoral strategy, parties face the dilemma of whether to propose a policy platform on the boundary of the constrained policy space or stick with their unconstrained platform proposal; anything in-between would effectively amount to a strictly dominated strategy. Clearly, non-centrist parties’ decision to converge or not will depend on (a) the tightness of such constraints on the domestic sources of input legitimacy and (b) the overall level of output legitimacy of a party system subject to a given level of supranational integration. On one hand, the tightness of the constraints creates centrifugal incentives by raising the transportation cost of convergence while, on the other hand, higher output legitimacy creates centripetal incentives by raising the valence (popularity) benefits of advocating a moderate platform that is tangentially compatible with the country’s international commitments. Therefore, any shift away from the optimized unconstrained trade-off between vote share maximization and transportation cost minimization will only occur if and only if the orthogonal valence benefits of advocating integration-friendly policies (and the corresponding gain in votes) outweigh the additional ideological transportation costs imposed by binding supranational policy constraints. Figure 1 below provides a graphical demonstration of the argument in the case of a left-wing party.

Clearly, the larger the electoral benefit of conforming to the rules and regulations of the international organization, the slacker the responsibility-responsiveness trade-off, allowing conditional platform convergence to be sustained even as integration deepens further and policy constraints become tighter. However, there is a threshold value of the slackness of supranational constraints (input legitimacy) as a strictly decreasing function of the valence benefits of pro-membership policies (output legitimacy) beyond which the costs of convergence to more moderate and responsible positions can outweigh the benefits for non-centrist parties (while moderate parties will converge towards centrist TINA policies even further).¹² If, as argued earlier, we take the valence (popularity) benefit to be stochastic, then we should expect countries subject to narrower constraints of integration (due to small size, explicit policy conditionality, or lack of political clout in the policy-formation process) and exposed to more volatile macroeconomic shocks or business cycles to be more prone to go past this breaking point. This result can be summarized in the following two hypotheses, one at the party-system level and one at the party level:

In sum, our results shed light on how the process of supranational integration and the relative levels of input and output legitimacy of a domestic party system expose parties to a substantive trade-off between responsibility in terms of abiding by the country’s international commitments and responsiveness in terms of truly representing the ideological preferences of core voters and party activists. Relatively low levels of supranational integration with relatively slack policy constraints (i.e., low sovereignty costs) intensify the process of electoral platform convergence and reduce party-system polarization (extremism) since extreme parties’ gain in valence benefits (and possibly vote share) is high enough to compensate for their loss in terms of transportation (communication) costs. Yet, as the level of integration exceeds a certain threshold value and these policy constraints become tighter (i.e., high sovereignty costs), the situation can backfire leading to a reverse trend of platform divergence and increasing polarization. Simply put, the corresponding loss in responsiveness (as proxied by the increase in transportation costs) associated with further platform convergence to the union’s acquis becomes too high relative to the valence gains of responsible posturing so that non-centrist parties are better off proposing a policy platform that reflects their ideological roots and caters to their core electoral constituency. This dynamic in electoral party behavior gives rise to the following non-monotonic relationship: while at first the tightening of relatively permissive supranational constraints is expected to lower party-system polarization (extremism), eventually ever closer integration and extremely narrow constraints are all else equal bound to generate increasing levels of party-system polarization (extremism). This is the key prediction of our theoretical analysis, which we set out to test in the following section.

Although we have been focusing so far on the convergence and divergence of electoral party platforms, we still expect government policy to remain at the pro-integration center of gravity of the left-right spectrum – whether that be the position of the median party, the parliamentary mean, or the expected dominant party selected to form a government (Merrill and James 2007). Nevertheless, from the point of view of moderate voters, market participants, and even supranational principals – and for any degree of risk aversion –, there is a clear welfare ranking among mean-preserving electoral outcomes with respect to other moments of the distribution such as policy variance. For any generic specification of the government and policy formation process in parliamentary multi-party systems, platform convergence by non-centrist parties will generally imply less policy variance, and vice versa. Therefore, platform convergence and decreasing party-system polarization as a result of moderately increasing levels of integration imply decreasing policy variance, increasing government stability, but also lower responsiveness to the ideological preferences of extreme voters. However, once the non-monotonic (positive) effect of ever deeper levels of integration and tighter supranational constraints on party-system polarization (extremism) kicks in, we would then expect higher policy variance, increasing government instability, but also higher levels of democratic responsiveness across the spectrum of voters.

In this section, we seek to probe our hypotheses on the non-monotonic relationship between supranational integration – insofar as it comes with extraneous constraints on the set of permissible domestic policies – and party-system polarization in the context of European multi-party parliamentary democracies. No other region has integrated politically further than Europe – albeit exhibiting at the same time substantial levels of political and economic diversity – which renders it a most suitable and empirically rich setting for a cross-sectional and intertemporal study of the hypothesized relationship.

The European integration process progressed by leaps and bounds on the basis of its output legitimacy as a successful technocratic project generating growth and stability across Europe. Especially during the early years of the Single Market and the euro (late ’80s to early ’00s) governments seemed secure in the output legitimacy of the multi-layered European structure as it was perceived as a bulwark of economic stability and sustained growth. Output-driven notions of democratic accountability and economic voting allowed moderate pro-EU parties to reap the valence benefits of EU membership and trust in EU institutions.

At the same time, the broadening and deepening of the supranational integration process – through successive intergovernmental EU treaties – reshaped the contours of domestic electoral competition by tying a number of policy areas together as part of the deeper commitments of EU membership, shrinking the degrees of freedom of electoral competition, and constraining the range of permissible and internally consistent policy platforms. Such hard constraints on the traditional left-right policy spectrum stemmed from (i) formal or informal intergovernmental commitments of EU or EMU membership (e.g., the fiscal coordination mechanisms of the Stability and Growth Pact, the European Semester, and the Fiscal Compact), (ii) enhanced monitoring and enforcement mechanisms (e.g., the Six-Pack and Two-Pack regulations), (iii) the hard process of compliance, transposition, and implementation of EU rules and directives (e.g., the Excessive Deficit Procedure governed by Article 126 of the Treaty on the Functioning of the European Union, Article 7 of the Treaty of the European Union, or the European Court of Justice), and (iv) (more recently) high-powered bailout conditionality agreements, such as the Memoranda of Understanding between the European Commission (EC), the European Central Bank (ECB), and the International Monetary Fund (IMF) (collectively known as the European Troika) and the indebted countries of the European South.

As of late, however, this technocratic process of “integration by stealth” (Majone 2005) has come under intense scrutiny as a result of stagnating labor productivity, sustained austerity, rising unemployment and debts levels, Brexit, and growing levels of third-country immigration. These “multiple crises” have sapped the EU’s output legitimacy without so far having triggered any significant counterbalancing measures enhancing the Union’s so-called input legitimacy. The prevalence of “emergency politics” (White 2013) and the institutional power transfers towards national and supranational executives that took place in response to the Eurocrisis (Bauer and Becker 2014; Rittberger 2014) have prioritized economic outputs at the expense of political inputs. Schmidt (2013) captures this nicely by pointing towards a precarious political imbalance: whereas output legitimacy (or “governing for the people”) has largely come to reside at the European level – i.e., the main locus of “policy without politics” –, input legitimization (or “governing by the people”) still takes place primarily at the domestic level – i.e., the main locus of “politics without policy”. This structural disconnect between those (supranational) institutions that determine policy and those (national) institutions that shape politics has given rise to the EU’s so-called “second-order democratic deficit” as deeper political and economic integration has come to be associated with the populist backlash and the “hollowing-out” of national democracy (Konstantinidis and Treurniet 2018).

Throughout the post-WWII era and all the way into the early 2000s the inherent tensions between globalization and national democracy (Rodrik 2012) appeared to be bottled up within a broader liberal democratic consensus with regard to the efficiency merits of economic interdependence, political integration, and technological advancement. In recent times, however, many advanced liberal democratic systems seem to have experienced a breaking point beyond which many of these trade-offs have become politicized, thereby juxtaposing the previously unchecked forces of globalization and integration against the counter-forces of nativism and illiberalism and polarizing public discourse around stark political dilemmas between populism and pragmatism, democracy and technocracy (Habermas 2015; Caramani 2017). Such tensions manifest themselves in the widening spatio-temporal gap between capital markets and democratic politics, the growing disparities between sources of input and output legitimacy, and the tightening trade-off between responsibility and responsiveness.

In this paper we postulated that one of the principal manifestations of this degenerative process is party-system polarization in the electoral arena. We theorized the relationship between integration and polarization both at the party-system level with the trade-off between political inputs (representation) and economic outputs (compensation) and at the party level of electoral competition with the responsibility-responsiveness trade-off between net spatial transportation (ideological) costs and orthogonal valence benefits. We showed that while rapid integration in the form of tightening policy constraints may initially speed up ideological convergence across the spectrum, there is a threshold level in the slackness of supranational constraints beyond which they can have the opposite effect and backfire in terms of extreme platform polarization. This non-monotonic relationship was borne out by our empirical analysis of party-system polarization and party-level extremism in European parliamentary multi-party systems. We found a negative and statistically significant effect of integration on party-system polarization and party extremism during the earlier phases of the European project, when the integration process centered around areas of “low politics” (e.g., energy, trade, common market regulation). However, we also found strong evidence of a reversal of that process of ideological convergence during those later stages of European integration marked by the broadening and deepening of the EU’s scope of policy competences.

Our empirical results also seemed to suggest that this “paradigm shift” had been underway well before the deeply recessionary effects of the Global Financial and Eurozone Debt Crises were felt. As a result of the persistence of austerity policies, rising debt burdens, stagnating labor incomes, bank bailouts, and the augmenting incidence of taxation on unskilled labor among other factors, issues such as income inequality, social justice, national identity, and the design of economic, financial, and political globalization have long been part and parcel of the core political agenda of democratic politics. Moreover, the surge in migration flows has for some time now rekindled the rise of nativism and identity politics against the multiculturalism of most advanced liberal democracies (Rodrik 2017).

Our work helps better understand the potential repercussions of unfettered crisis-ridden globalization coupled with political volatility and polarization. As long as the locus of democratic inputs remains at the national level, then basic questions of job (in)security, social protection, income inequality, and national identity will keep roaring back to the forefront of politics in advanced liberal democracies. We should, therefore, no longer be surprised by the political success of populist candidates advocating trade protectionism, immigration restrictions, and retrenchment from global policy coordination agreements on issues such as financial regulation, tax policy, defense, and climate change. Moreover, we should expect national elections to function less effectively as a way of translating citizens’ preferences into government policy as a result of the growing incongruence between input-oriented representative and output-oriented responsible government.

While other papers in this Special Issue study the implications of the rise of populism for the stability of the liberal international order, we reverse the question and show how the design and overall effectiveness of institutions of global governance and supranational integration create “second-image-reversed” effects upon domestic democratic politics (Gourevitch 1978). Although we do not explicitly derive the conditions for withdrawal from a supranational organization with high sovereignty costs, we argue that increased party-system polarization in the form of ideological extremism, nativist populism, and nationalist anti-globalism (especially in key member-states) may irrevocably sap the political consensus underpinning the liberal international order.

Hence, our findings have wide-ranging normative implications about the political feasibility of the policy centralization process and the sequencing of economic and political integration especially in the European context. The EU’s “multiple crises” (namely, the euro crisis, the migration crisis, Brexit, and the populist backlash) have highlighted the complex nature of economic interdependence and cross-border policy spillovers. On one hand, the emergency politics of crisis management, predominantly driven by considerations of output legitimacy and policy coordination, have led to a power shift towards unelected and unaccountable executive bodies both at the national and European levels. On the other hand, there is a backlash of growing popular demand for input legitimization in the form of national “beggar-thy-neighbor” solutions, often voiced (and in some cases put into effect) by populist and nationalist politicians.³⁸

Europe, therefore, finds itself at a crossroads whereby any further pursuit of efficiency-oriented policy centralization will have to be cushioned by institutional structures of democratic responsiveness and representation. However, this conundrum cannot be overcome as long as these mechanisms of input legitimization reside at the level of the nation-state. As Habermas (2015) argues, the only way to break free of the current input-output trade-off seems to be by reinstating democracy at the European level and infusing supranational institutions with direct mechanisms of democratic legitimization.