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 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. 

Source: economist
Where economic power goes, political power will follow