The State of Democracy

We all know what happened to the frog that failed to notice that the temperature of the water was rising until it was too late.  People in democratic states may face the same fate unless they take time from their everyday lives and pay attention to what is going on in the political systems of their countries.

Americans thought they were insulated from such worries.  After all, our government under Republican and Democratic administrations was the champion of liberal democracy around the world.  But while, we were busy admonishing others about the rules of democratic governance, our own democracy had started to erode.  Freedom House, an agency partly funded by the US government, has been taken the pulse of democracy around the world for a long time.  In its 2019 report, it reported that the quality of democracy in the US has been on the decline over the last 8 years.  Across the globe, the Freedom House finds that the quality of democracy has slipped over the past 13 years.  The Economic Intelligence Unit, an agency based in the UK, ranked the US 25th in quality of democracy out of 167 countries in 2018.  All three Scandinavian countries were in the top five places.  It was in 2016 the US slipped in the rankings from Full Democracy to Flawed Democracy.  According to EIU, of the 167 countries it ranks, 75 countries fall in the Full Democracy or Flawed Democracy category and another 39 countries are ranked as Hybrid Democracies.

Notwithstanding the usual criticisms all rankings draw, there is no doubt the sense that liberal democracy is slipping here and abroad has become more palpable in recent years. I believe there are three factors that appear to contribute the most to the decline of liberal democracy.  One is the feeling that “the system (i.e., democracy) is not working for me.”  In America, this sentiment is strongly correlated in intensity and time-wise with the growth of the lobby industry, starting in the 1970s.  A 2015 study found that large corporations and their associations spend $34 for every dollar spent by labor unions and public-interest groups.  The Supreme Court ruling on Citizens United has certainly expanded the influence of big money.  Moreover, the need of members of Congress to raise campaign funds keeps them farther and longer away from their constituents and their everyday concerns.

The second factor is the diminished opportunities for social and economic advancement.  For example, nine out of ten Americans born in 1940 made more money at age 30 than their parents made at the same age.  The ratio is now down to five out of ten for those born in the early 1980s.  Diminishing intergenerational mobility as well as the eye-popping income and wealth inequality feed into other populist sentiments driven by  economic trends.  Thus, societies that have experienced positive growth in the Human Development Index are more likely to be for global trade than societies that have stagnated in human development.   (And the evidence shows that while the HDI is rising in China, it is falling or stagnating in many parts of America.)

Finally, the third factor is the growing disregard for other people’s views and even their rights.  This tendency is usually fed by religious fanaticism, fear of diminished political control, and nativism (i.e., nationalism).

The sense among broad swaths of the population of a country that they are left out of the political decision-making process leads to political apathy and withdrawal.  The feeling of not sharing in the spoils of growth leads to populism.  And the disregard of other people’s rights and freedoms most often coupled with a feeling of victimhood or persecution leads such groups to seek protection by all means, even at the expense of constitutional rights.  All three sentiments can, and oftentimes are, exploited by parties or strongmen and demagogues, thus, contributing to the erosion of the rule of law and civil rights.  And this is exactly what we have seen happening around the world.

What should be a sobering warning to western democracies, and certainly to America which has traditionally vied for global influence, is the rising credibility of political systems that present themselves as alternatives to liberal democracy.  Consider, for example, the results of a recent survey conducted by the Global Network for Advanced Management among business students from 30 countries.  A majority of these students from developed (not including the US) and developing countries expressed the opinion that developing countries and emerging markets are looking more to China than to the US for guidance on how to organize the economy and society.  And the World Values Survey (a global organization of social scientists) found that in mature democracies the statement “It is essential to live in a democracy” was supported by 30 percent of millennials (those born after 1980) compared to 70 percent of respondents born around 1930.  This signifies the receding belief among younger people about democracy as a successful political system.

What escapes many of us is that over the millennia of recorded human history, democracy, and liberal democracy in particular, has been around for a relatively short period of time.  This is so because democracy is a fragile and demanding political system.  It is built on social trust and individual courage.  It takes both of these for those who lose a political contest to trust that they will not be treated badly in the hands of the winners.  Democracy endures when the constituents share common overarching values and ideas, the preservation of which offsets any potential loss from being in the opposition.

I am not alone in saying that this sharing in common values and ideas has been terribly fractured in America.  As two Yale Law professors, Amy Chua and Joe Rubenfeld, put it in an article in The Atlantic, “Americans on both the left and the right now view their political opponents not as fellow Americans with differing views, but as enemies to be vanquished.”

So, how do we step back from this point before it’s too late?  I would rather leave the task of answering this question to each one of us.

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Author: George Papaioannou

Distinguished Professor Emeritus (Finance), Hofstra University, USA. Author of Underwriting and the New Issues Market. Former Vice Dean, Zarb School of Business, Hofstra University. Board Director, Jovia Financial Federal Credit Union.

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