The twin threats to democracy
The west seems to be heading for plutocracy or gridlock
Democracy is facing its greatest threat in nearly a century. I have been worried about this problem for more than a decade when I wrote a book called “The Last Vote” and these worries were the basis for my piece in the Financial Times on December 28. As that column was market-related, this column contains some of the broader political analysis.
The argument is that the lack of economic growth undermines democracy since it makes it more difficult to keep voters happy. Policy measures become a zero sum game where gains for one group must mean losses for another. Growth meant that, in theory at least, all could gain. But in the zero sum game, the losers are always more angry than the winners are happy.
This anger has shown up in Europe by the decline in the share of the vote earned by the centre-right and centre-left parties (for example, the French Gaullists and socialists). In the US, the anger has resulted in the complete takeover of the Republican party by the Trumpist faction.
The result is that democracies seem to be heading for one of two dead-ends: gridlock and plutocracy. In Europe, gridlock results from the splintering of the vote which makes it hard to create a sustainable government. The French parliament is split into three groups and President Macron is struggling to find a viable prime minister; the German coalition has collapsed and elections are due in February.
The US, where wealthy donors have always been politically important, is in the plutocratic camp. Elon Musk, the world’s richest man, helped finance the Trump campaign and has been given a role in cutting government spending. The main legislative achievement of Trump’s first term was a tax cut for corporations and the wealthy. But somehow he convinced many of the poorest US voters that he was on their side.
Plutocracy sustains itself in two ways. First, because it can be self-reinforcing; a plutocratic government sends money to the wealthy which helps finance the politicians who cut their taxes. But that is not the only factor, since the Democrats also raised a lot of money in 2024. The second factor is plutocracy’s control of traditional and social media. Public anger is turned away from the corporations and the finance sector and towards other social groups; immigrants, ethnic minorities and so on. Populism is the art of misdirection; persuading the public to listen to the loud banks and look at the bright lights and not at the men behind the curtain.
Of course, populists are also prospering in Europe. Here again, the anger is turned against immigrants. The plutocrats are less obvious although Musk has already declared his support for Britain’s Reform party and Germany’s AFD. One of the greatest tricks of the populists is their attempt to undermine the three institutions that underpin liberal democracy; an independent judiciary, a free press and a politically neutral civil service. These bodies have served as a defence against overmighty government. And the defence is needed because there are no other checks against an administration with a parliamentary majority.
Liberal democracies are not just about the majority getting its way. In any case, that “majority” usually does not consist of a majority of those who voted, let alone a majority of the overall electorate. Those who voted for the governing party will not have read all its manifesto and may well approve of only parts of it. Or they may simply have voted on the basis of their dislike of the opposing party. This does not really mean governments have a “mandate” for every single policy proposal.
Furthermore, there has to be protection for the rights of minorities against the tyranny of the majority. The majority could vote to severely restrict the liberty of minority groups (and of course this did happen in the southern US states before the civil rights acts). A free press can uncover such injustices and an independent judiciary can correct them. But the judiciary and the civil service have been recast by the right from being useful checks on an overmighty government into being the “deep state”. George Orwell would tip his hat to such sophistry.
By undermining these institutions, as has happened in Hungary, populists can sustain their rule. Democracy becomes a sham since the opposition finds it impossible to get a fair hearing or, as in Russia, the elections are rigged and opponents are imprisoned.
Perhaps this shouldn’t be too surprising. For much of human history, societies have been ruled by elites. Democracy was briefly practiced in Athens but the idea disappeared again until the 17th century. Idealistic groups like the levellers emerged during the English Civil War, and that war was part of a long process that saw the English monarch’s power constrained by Parliament. But full democracy required the Industrial Revolution. That upended the rule of the agricultural elite and also created both a thriving middle class and a factory-based working class that could organise in its own interest. These two groups demanded recognition; the mass armies demanded by 20th century warfare also meant that rulers had to listen to the people they needed to recruit.
But 21st century society is much more atomised. Service sector employees are harder to organise and technological warfare means there is less need for mass armies (with some exceptions, such as Ukraine). The economic changes launched by Thatcher and Reagan have resulted in much higher concentrations of power in industry and much greater concentration of wealth. In short, the only class that seems capable of organising in its own interests is the plutocrats.
How does the UK fit into the plutocracy/gridlock dichotomy? Its first-past-the-post system makes it easier for parties to win a majority, as was demonstrated by Labour’s crushing victory in 2024 with just 34% of the vote. But we only have to go back to the 2017-2019 Parliament to see gridlock in action. That gridlock was the consequence of the 2016 Brexit referendum, which the Leave side won without having any idea how to implement its plans.
The era of British gridlock was very worrying for the long term. First, there were attacks on the independence of the judiciary as “enemies of the people” for decreeing that Parliament must agree to the exit terms. Later on, Boris Johnson tried to prorogue Parliament for several weeks to limit MPs ability to stop the UK leaving without a deal (a decision that was defeated 11-0 in the Supreme Court). All this was justified by the belief that MPs were thwarting “the will of the people”.
But this was nonsense. Theresa May had called an election in 2017 to give her a mandate to push through a deal and “crush the Brexit saboteurs” as the Daily Mail put it. The result was that the Conservatives lost their majority and Labour, which was equivocal in its attitude, increased their seats substantially. Of course, the public had many reasons for its voting decisions (it always does) but if a hard Brexit was its priority, it could have given the Tories a huge majority. It didn’t. The 2017-19 Parliament reflected the public’s indecision.
In any case, the 2017-19 period showed what could happen in Britain and may well happen again in 2029, when this Parliament is likely to end. Labour is already unpopular as it struggles to balance its spending plans with the desire to avoid a Truss-style meltdown in the markets; that means tax rises. Farage’s Reform party is in the wings and is already attracting the support of Musk and a wealthy British property developer, Nick Candy. So Britain could go down either the plutocracy or populist path; neither would be good.
Sorry for a bleak Christmas message but I really think democracy is in trouble. We are actually going backwards. Or as Fitzgerald put it more elegantly in The Great Gatsby “So we beat on, boats against the current, borne back ceaselessly into the past”.