Pundits and political scientists were surprised when Donald Trump and Senator Bernie Sanders emerged as viable candidates for the Republican and Democratic US presidential nominations—and won decisively in the New Hampshire primary. Both the reality TV star and the self-proclaimed “democratic socialist” espouse views considered extreme by the political establishment: Trump has proposed deporting 11 million undocumented workers and building a wall on the Mexican border, while Sanders has proposed making public college free and raising taxes as high as 77 percent on the top earners.

But perhaps pundits should have anticipated these candidates, or ones like them. Financial crises routinely lead to political polarization, according to Princeton’s Atif Mian, Chicago Booth’s Amir Sufi, and the University of British Columbia’s Francesco Trebbi.

The researchers used a comprehensive data set of financial crises built by Carmen M. Reinhart and Kenneth S. Rogoff of Harvard University, then tracked voter attitudes documented in the American National Election Studies data file and the World Values Survey, which tracks voters’ ideological preferences internationally.

They find that in all 70 countries sampled by Reinhart and Rogoff, increased voter polarization proved a common feature. The fraction of political moderates declined after banking and currency crises, and the share of extremists rose in seven out of eight cases.

“After a crisis, governments have to rely on weaker coalitions, oppositions grow larger and more fragmented, and overall political disintegration becomes the norm,” according to Mian, Sufi, and Trebbi.

It’s not hard to find examples in the wake of the 2007–10 financial crisis. In the United States, intense partisanship turned to gridlock with President Obama in the White House and Republicans leading Congress, notably during the debt-ceiling showdown of 2011. Congress is the most divided it’s been in decades. The 2016 presidential election is just another manifestation of the polarization. In Europe, the eurozone crisis resulted in the rise of extreme parties including the National Front in France and Golden Dawn and Syriza in Greece. The UK’s Labour Party last year elected Jeremy Corbyn, a radical socialist, as its leader.

Banking crises inherently put people at odds, explains Sufi. Every debt contract has a creditor and a borrower—and in a lending-related crisis, one of those parties has to take a loss. In the US, the public groups that formed during the crisis echoed this banking divide, as the Tea Party aligned with creditors, while Occupy Wall Street stuck up for borrowers.

The banking-crisis narrative has evolved since 2010, and today’s polarization is somewhat more nuanced, Sufi says. “It does strike me that the underlying core angst driving the campaign of both Bernie Sanders and Donald Trump are ironically the same—they’re directed at different parts of the establishment, but they’re both basically making a claim, which is, ‘These people don’t listen to us; they listen to special interests.’”

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