The Role of Firms in the Rise of Anti-System Politics

Starting from the idea that workplaces matter, this paper presents a meso-level explanation for the rise of anti-system political behavior. It relates recent findings in labor economics showing that firms have strong and increasing independent effects on the structure of opportunities, wages, and benefits in geographically bounded labor markets with relational inequality theory. By focusing on the effects that low-road firm strategies have on economic trajectories and expectations of workers and business, this paper proposes a novel approach for explaining the rise of far-right anti-system parties in Western Europe that seeks to reconcile and bridge the gaps in the economic and cultural explanations of this phenomenon. Organizational changes in production and firm strategies have reshuffled both the amount and quality of opportunities as well as who can access them. I sustain that low-road firm-level strategies and their interaction with local production profiles are likely to produce these effects independently of macro trends that the literature associates with the rise of anti-system parties. The switch to low-road firm strategies has effects through two channels that can feed "loose" anti-system coalitions. First, it moves workers to a lower relative position, as wage-rents decrease and within firm-inequality increases. Second, it decreases rents and market shares and drives out of business firms with more traditional employment strategies. To test these claims, I use the expansion of large retail stores in the economically successful regions of Italy’s North, where small shops and craft production were dominant, as a test case of an exogenous entry of firms with different internal strategies. Retail is a typical sector where chains have led to low-road employment strategies, declining rents, and the breakup of local economic complexes, even while productivity increased. Exploiting a national rule enacted in 1998 (the Bersani Law) that allowed regions to set different limits to large retail stores in their provinces, I present a differences-in-differences design to identify the political effects of retail store liberalization in the period after the rule was introduced. Using a panel of municipality-level vote shares I find that a higher level of liberalization to the entry of large retailers leads to a large and significant increase in the Lega Nord vote share. In addition, using an individual-level panel survey fielded in 2001 and 2006 I find that, after controlling for respondent and time effects, time-varying provincial-level economic conditions, and region-time effects, within Northern Italy, respondents based in provinces that were assigned higher levels of retail liberalization in the post-treatment period are significantly more likely to report negative individual and sociotropic evaluations of the economic situation, to express higher distrust towards the government, and to be more likely to have voted for the Lega Nord. The effects are larger among small business owners and autonomous workers, showing the effects run partly through the negative impact large retail stores have on the local petty bourgeoisie. The results support the hypothesis that low-road firm strategies can feed anti-system politics even in contexts where macro-level economic trends would not predict it.