Political and Economic Consequences of Norms Unravelling: Evidence from Europe’s Darkest Hour
Paper Session
Sunday, Jan. 3, 2021 3:45 PM - 5:45 PM (EST)
- Chair: Robert Gibbons, Massachusetts Institute of Technology
J’accuse! Antisemitism and Financial Markets in the Time of the Dreyfus Affair
Abstract
This paper studies discrimination in financial markets in the context of the "Dreyfus Affair" in 19th century France. We analyze the market performance of firms with Jewish board members during this historical episode. Building on empirical evidence and a model with antisemitic and unbiased agents, we show how investors betting on firms with Jewish connections earned higher returns during the media campaign organized to rehabilitate Dreyfus, the unfairly accused Jewish officer at the center of the Affair. Our paper provides novel evidence that discrimination can affect stock prices and create rents for some market participants. While these rents may attract betting against discriminators, the uncertainty surrounding discriminatory beliefs can limit the extent of arbitrage and allow discrimination to survive in the long run.Heroes and Villains: The Effects of Combat Heroism on Autocratic Values and Nazi Collaboration in France
Abstract
To what extent can heroes coordinate and legitimize otherwise strongly- proscribed and potentially repugnant political behavior? In this paper, we exploit the purposefully arbitrary Noria rotation of French regiments to measure the legitimizing effects of heroic human capital, gleaned through exposure to the pivotal Battle of Verdun under General Philippe Pétain in 1916. We wed this with a unique newly declassified dataset of 97,242 individual collaborators with the Nazis collected by French army intelligence in 1945 to show that, during the Pétain -led Vichy regime (1940-44), municipalities that raised troops that served under Pétain at Verdun later housed more collaborators with the Nazis than otherwise similar municipalities. Individuals from these municipalities were 5% more likely to join Fascist political parties or paramilitary groups that conducted the internal repression of the regime against Jews and resistants, or to directly join German military units. We interpret these results as reflecting the role that Verdun played in generating both credentials for leadership and organizational capacity that legitimized otherwise proscribed values, forging political identities that proved durable in explaining the Left-Right divide in France throughout much of the post-war period, and that were particularly salient in times of social and political crisis.War, Socialism, and the Rise of Fascism
Abstract
The recent ascent of right-wing populist movements in many countries has rekindled interest in understanding the rise of fascism in inter-war years. We argue that there was a strong link between the surge of support for the Socialist Party after World War I and the subsequent emergence of Fascism in Italy. We first develop a source of variation in Socialist support across Italian municipalities in the 1919 election based on World War I casualties from the area; these casualties are unrelated to a battery of prewar political, economic and social variables and had a major impact on Socialist support. This boost to Socialist support led to greater local Fascist activity as measured by party branches and political violence, and to larger vote share of the Fascist Party in the 1924 election. We validate our economic mechanism by exploiting variation in rainfall that led to a very bad harvest and economic hardship in parts of Italy in 1920 and increased Socialist support; the rainfall-induced variation in Socialist support leads to similar effects on the Fascist vote in the 1924 election. The increase in the Fascist Party’s vote share was not at the expense of the Socialist Party and came from right-wing parties, supporting our interpretation that center-right and right-wing voters coalesced around the Fascist Party because of the “red scare”. Landlord associations and greater presence of local elites were important in the early uptick in Fascist activity. We further find that local Fascist activity is associated with greater likelihood of Italian Jews being deported from the area to concentration camps. Finally, the rise of the Fascist Party triggered by the red scare led to lower vote share for Christian Democrats after World War II and to higher vote share for left wing and extreme left and right-wing parties.Discussant(s)
Saumitra Jha
,
Stanford University
Marc Sangnier
,
University of Namur
Hans-Joachim Voth
,
University of Zurich
Benjamin Marx
,
Sciences Po
JEL Classifications
- P0 - General