Fading economies herald the demise of liberal democracy

How inevitable is the decline of liberal democracy? For a brief, heady moment after the Cold War, liberal democracy seemed not only in the ascendance but inevitable. History, according to that now infamous prediction of Francis Fukuyama, had ended. With communism defeated and markets and democracies triumphant, humanity – by one reading – had converged on its ultimate political and economic form. Even countries with little democratic tradition were expected to fall into line.

That hubris has aged poorly.

From the developed world to Africa: democracies in decline

The evidence of democratic decline is too numerous, and geographically dispersed, to ignore. In the latest example in America, supposedly the “greatest democracy on Earth”, federal agents last week shot another innocent protester in cold blood. In Europe, the spread of populist extreme-right movements seems unstoppable.

And closer to home the signs are even more alarming. This month, Uganda’s octogenarian president, Yoweri Museveni, was declared the winner of an election the opposition say was rigged from the outset, further extending his four decades in office. Officially, Museveni garnered 72% of the vote, with his main challenger – the musician-turned-politician Bobi Wine – getting only 25%. Yet few impartial observers were convinced. The whole sordid spectacle was depressingly familiar; internet blackouts, constant harassment of opposition candidates and the deliberate repurposing of government institutions into instruments of political survival.

Democracy backslides as coups abound

Across the continent democratic backsliding has been accelerating. Since the Covid pandemic of 2020 – a year that may well go down as a turning point on the continent – there have been 14 coup attempts, many clustered in west Africa’s “coup belt”. Sudan, Niger, Guinea and Mali have all fallen to soldiers brandishing AK-47s, promising order and sowing instability. In many cases these juntas were greeted with cheers, in a measure of widespread popular disgust with supposedly democratic politicians. Where tanks have not rolled into parliament, incumbents have increasingly turned to “lawfare”; bending courts, rewriting constitutions and hollowing out institutions to dig themselves in, such as in Tanzania or Togo. The result is a slow but steady rolling back of the democratic gains of the 1990s.

South Africa, for the moment, remains a notable exception. Under Cyril Ramaphosa’s Government of National Unity the press is still robustly free, and the rough and tumble of coalition politics has made the country’s democracy more competitive and accountable than before. For the first time in its democratic era, power is no longer held by the ANC in a quasi-monopoly, living off its Struggle credentials and the long memories of voters. This year’s local government elections will hopefully be another sign that voters are increasingly willing to punish incumbents at the ballot box.

Why did liberal democracy spread, and why is it being rolled back?

All this raises some critical questions. If liberal democracy is not inevitable, why did it spread so widely in the first place? And why, now, does it apparently appear to be going into reverse?

One answer, recently revived by the US political economist Matthew Burgess, is that democracy’s fortunes have tracked the same lines as economic progress. This is not the older modernisation theory that prosperity automatically results in liberal politics; China and the booming Gulf states are obvious counterexamples. But broad-based growth may be necessary to sustain democratic systems, even if it is not sufficient on its own to create them. Voters are more tolerant, institutions are more stable and politicians more patient and less willing to resort to desperate measures to stay in office when people generally feel that they will be better off tomorrow than today.

Ominously, as John Burn-Murdoch has written in the Financial Times, that relationship has gone into reverse. Democratic backsliding, the advent of populism and the crumbling of the “rules-based” liberal international order have closely followed a prolonged period of economic and demographic slowdown across much of the developed world. Seen this way, the instability experienced since 2016 is not an anomaly caused by a few bad-egg politicians and social media algorithms. It is, unfortunately, the new normal.

This fits with Canadian Prime Minister Mark Carney’s observation last week at Davos that the world has entered a fundamentally different era. In his speech he focused more on geopolitics, but the point applies more broadly.

Read more: Canada’s Davos wake-up call for honesty rather than compliance

The economic and demographic contexts that resulted in the post-Cold War liberal order up to the financial crisis – rapid productivity growth, low inequality, growing workforces and the peace dividend of the demise of the Cold War – no longer apply.

The inflection point, in this reading, is the global financial crisis of 2008. What began with the collapses of Bear Stearns and Lehman Brothers mutated into the Eurozone crisis and a lost decade for much of southern Europe, especially Greece, Italy and Spain. Throw in the migration crisis of 2015 when millions of immigrants arrived in Europe illegally and the spread of populism looks almost inevitable. Ever-higher inequality has been societally poisonous.

Why is this? Prosperity, of course, does more than just raise median incomes. It engenders a sense of trust in humanity and a belief that cooperation is in everyone’s interest. A constant-sum approach means everyone stands to benefit, as opposed to politicians and sectors of society fighting for scraps of an ever-smaller pie. When growth is robust, societies are more willing to tolerate diversity and multiculturalism without feeling threatened. They are more able to invest in the future and accept the slow and imperfect compromises that democracy, by definition, requires.

A low-growth, high-inequality, ageing world is different. Stagnation breeds impatience and frustration. Zero-sum thinking becomes pervasive. Voters become hostile to institutions that promise much but deliver little. As populations age, investment falls and public finances come under relentless pressure. Governments raise taxes and cut investment to cover ever higher pension and healthcare burdens.

This is fertile ground for political entrepreneurs who vow to smash the system rather than mend it, and who openly decry the legal and institutional checks and balances that liberal democracy treated as sacrosanct.

Is liberal democracy doomed then?

Is liberal democracy, in this new lower-growth world, in terminal decline? The backlash against Donald Trump – especially following the recent brutal murders by his ICE goons – offers some grounds for hope. As does the rise of figures like Carney, who’s election itself was a reaction to the rise of Trump. But European and African political trendlines suggest no imminent restoration of the old liberal order.

Perhaps Vladimir Putin was correct when, in 2019, he famously branded liberalism “obsolete”. A revival of liberal democracy would require some kind of reversal of the underlying economic and demographic forces at play, and on this the outlook is bleak.

Immigration remains politically toxic and unpopular even when it is economically essential. Pension reforms are inevitably postponed, at the expense of investment into vital state functions. And the impact of artificial intelligence, perhaps the only plausible source of material growth in the developed world, may well exacerbate inequality and social tensions before there is any positive uptick in growth and productivity.

As Gramsci wrote: “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear.” Trump may yet fade from the stage, but the conditions that produced him will not. The old order worked under a unique set of circumstances during a specific moment. Those circumstances, sadly, have gone. DM