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Economics and democracy - Where economic power goes, political power will

2017-11-09 13:32:16

rlp

Less equal societies may become less democratic

BACK in 1992, in his book "The End Of History and the Last Man", Francis

Fukuyama argued that liberal democracy had triumphed. The return of

authoritarianism in Russia, and the growing power of absolutist China, has

undermined the argument at the geopolitical level. And events in recent years

have caused questions on the ability of liberal democracy to flourish in some

countries where it seemed established. The new nationalists that have emerged

in Turkey, Poland and Hungary tend to regard disagreement with their policies

as unpatriotic and are quick to brand opponents as being in the pay of foreign

powers.

What used to be called "the Whig theory of history" saw civilisation steadily

moving in a more open, liberal direction. In the late 19th century and early

20th centuries, countries became more democratic, first allowing most men and

then women to vote. There were setbacks in the 1920s and 1930s with the

emergence of fascism and, of course, the imposition of communism in eastern

Europe and China after the Second World War.

But in a broad swathe of the world - North America, western Europe, Australasia

and Japan - democracy seemed well established. And that democracy was

accompanied by the growth of welfare states, higher taxes on the wealthy and a

general decline in inequality. The period from the 1940s to the 1980s was known

as the "Great Compression". The collapse of the Soviet Union in 1989-1991

brought a range of new countries into the sphere; Latin America also moved in a

democratic direction.

But all was not completely well, as I outlined in a 2013 book "The Last Vote".

The respect held by voters for politicians fell sharply; turnout (and party

membership) also dropped. People became both cynical and complacent about

democracy. Cynical in the sense that they felt politicians were all the same;

complacent in that they did not really fear the loss of their rights. The

financial crisis that began in 2007 has, by creating an additional degree of

voter dissatisfaction, further undermined democracy.

If we go back to the growth of democracy in 19th century Britain, one can see

the gradual extension of the franchise through the reform acts; broadly

speaking to the middle classes in 1832, to the better-off urban workers in

1867; agricultural workers in 1884; and to all other men (and women over 30) in

1918. As those classes joined the electorate, parties tailored their policies

to appeal to them. Education for children after 1870, for example and old age

pensions in 1909. The emergence of the welfare state and managed economies

after 1945 arose from the demands of working-class voters and were also seen by

the better-off as a price worth paying for avoiding either fascism or

communism.

In that sense, then, it might seem as if economic power followed political

power; once given the vote, ordinary people backed policies that would

redistribute income in their favour. But what if the sequence of events was

reversed? The economic power of the middle classes helped get them the vote in

1832; the power of industrial workers, though strike action, earned them the

vote later on; the mass mobilisation of women in the First World War turned

into female suffrage. Citizens demanded the political status to match their

economic power.

By the same extension, then, we could see the rise of inequality since 1980s

and the threats to democracy as two sides of the same coin. The wealthy used

their economic power to fund politicians and bend the legislative agenda in

their interest; the decline of manufacturing industry and trade unions in the

west weakened the economic power of workers. The wealthy are more likely to

vote and far more likely to have their voice heard. In his book "Unequal

Democracy", Larry Bartels compared the voting patterns of US senators with the

view of their voters, by income. He found that the views of those in the upper

third of the income distribution received 50% more weight than those in the

middle third. The view of those in the bottom third received no weight at all.

Senators did not meet these people socially, or at fund-raisers.

The potential feedback process is clear. The rich back politicians, allowing

the latter to pass policies that favour the wealthy, giving them more money for

political funding. The poorest voters are appeased with nods to cultural

issues, as Thomas Frank argued in "What's the Matter with Kansas?". The rise of

populism will not redress the balance; Donald Trump's cabinet, packed with

billionaires, is pushing for a tax-cutting package that will mainly help the

rich. The main economic impact of Brexit so far has been a squeeze on real

wages thanks to a fall in the pound.

Admittedly, the immigration issue does not fit easily into this template.

Business owners tend to favour liberal immigration rules so they can attract

the best workers. Still, note that those on the right may favour restrictions

on movement of people but not on the movement of their capital.

Perhaps we are not heading to the totalitarian nightmare pictured in George

Orwell's "1984". But we could be moving close to the Roman model, under which

in theory the system allowed for expression of the popular will, but in

practice, rule by the rich occurred. The masses were kept happy with "bread and

circuses"; the modern equivalent being junk food and reality TV shows.