WEBINAR 2: GLOBAL CHALLENGES - Illiberal Democracy and Undemocratic Liberalism: Two Symmetrical Opposites
George KATROUGALOS
11 November 2020
Democratic regimes historically synthesize two components: a democratic one, comprising rule of majority and popular sovereignty; and a liberal one, entailing respect for human rights. Liberal democracies need both elements to function properly and not to degenerate. However, the usual criticism is limited to the emergence of “illiberal democracies”; in other words the rise of autocrats in states where elections are held, but rule of law is weakened. This phenomenon is usually associated with populism, a vague term with disputable heuristic value.
Actually, weakening of our democracies can clearly be associated also with the dominance of policies which undermine the democratic element, by trends such as the breach of the social contract associated with the welfare state and the delegation of important political decisions to unaccountable public decision makers. By the confluence of these two trends emerges a regime where human rights, especially economic and property rights, are fully protected but the will of the majority has little, if any, influence on substantive decisions related to the overall direction of economic policies and the relations of state and the market. The archetype of this type of polity is Enlightened despotism – the Prussia of Frederick the Great. There may be judges in Berlin, but the miller of Sans Souci is politically unrepresented and powerless.
I consider this “undemocratic liberalism” as a catalyst for the generation of its inversed idol, “illiberal democracy”, and I will try to show the interaction between these two, as functionally symmetrical opposites, arguing that they should be addressed not distinctly and separately but as a common threat for our democratic regimes.
It is true that under a Schumpeterian concept of democracy, undemocratic liberalism is impossible, at least after the historic moment when the electoral right is generalized to the whole population. Contrary to the republican ideal of civic participation, Arendt’s “Vita Activa”, as the only way for a meaningful democracy, in the elitist theories citizens’ involvement occurs exclusively via their elected representatives. Electors are not supposed to control the latter in any way except by refusing to reelect them. This is by definition guaranteed in countries having periodical elections. And actually, in periods of relative prosperity, the normal pattern of behavior is that electorates do not consider they should back-seat drive their representatives. The formal legitimacy of the electoral procedure is producing also substantive legitimacy.
A crisis of political trust
However, this is true only when there is undisputed trust to the institutions, in the sense of a widespread and not contested confidence to the fairness of the political process as a whole and, more specifically, to the institutions of political representation. This is not any more the case neither in Europe (graph 1) nor in the majority of western democracies (graph 2). Interestingly, despite the common wisdom that EU institutions are facing an existential crisis, actually distrust towards national governments and parliaments is more acute (graph 1).
The more interesting finding in graph 2, besides the obvious dissatisfaction of the majority of population in almost all mature Western democracies, is that the biggest concern of the citizens is about social problems related to poverty and inequality, as well as to the decline of welfare state in healthcare or unemployment. (Corruption, crime and violence dominate the answers of the rest of the countries).
The slow process of erosion of the welfare state of the last decades, precipitated by the recent economic crisis, has dramatically uprooted confidence and produced a huge gap in trust towards the political institutions, both national and transnational. In Europe it has been the result of the confluence of two parallel trends: the general deregulating impact of globalization and the gradual erosion of the European social model by the dominant EU neoliberal policies of the last decades.
Globalization and Inequalities
The limits on the state’s regulatory capacity and the removal of barriers to market access are part of the broader process of globalization, as a driving force of both denationalization and extraterritoriality. There is an evolving “disaggregation” of the state through the transfer of public functions both “upwards” to international or transnational entities (EU, WTO) and “downwards,” through the de-centering of decision-making either to lower state levels (devolution) or by new blends of public and private power at all levels of government.
In this framework, overlapping economic and societal crises have morphed into a democracy crisis. Rising economic inequality, accentuated by the financial crisis, has been the major catalyst to political destabilization. At the center of this evolution is not, as often posited, just the cleavage between winners and losers of globalization, “somewheres” and “anywheres”.[1] It is neither a cultural problem, related to the emergence of rigid cultural identities, between cosmopolitan citizens and backwaters. The widespread social malaise is caused by more tangible causes: the fall of living standards and the rise of inequalities.
It is true that regional inequality within rich countries has increased, reflecting trends of globalization favoring the open, “global” cities. According to the Organisation for Economic Co-operation and Development (OECD), the average productivity gap between the most productive 10% of regions and the bottom 75% widened by nearly 60% over the past 20 years. But this is a secondary aspect of the much wider upsurge of inequalities. At the global level, estimates suggest that almost half of the world’s wealth is now owned by just 1% of the population, amounting to $110 trillion—65 times the total wealth of the bottom half of the world’s population. Strikingly, the bottom 70% accounts for just 2.7 percent of global wealth.[2]
Even in the more affluent OECD countries, as seen in graph 3, 60% of the population has considerably less wealth than the richer 10%. In addition, the top 10% now has an income close to nine times that of the bottom 10%. Even more spectacular is the widening gap between the super rich and the rest of the society: Between 1980 and 2015 the average real income of 0.01% of the population has grown by 322%, whereas the income of the lowest 90% has stagnated, rising only by 0.003%.[3] This results in a general pauperization of the whole society but also in the squeezing of the middle class, through the shrinkage of the income share accruing to the middle 20%. In the European South the situation is even worse: 97% of the households in Greece and Italy had stable or falling income between 2005 and 2014, compared with just 20% in Sweden,[4] where the welfare state has not been so gravely degraded.
[1]In D. Goodeheart’s bestseller, The Road to Somewhere: The Populist Revolt and the Future of Politics, (London: Oxford University Press 2017) “anywheres” are the winners of globalizations, educated, middle class professionals who feel at ease everywhere, whereas “somewheres” are those attached to their communities, basically because of lack of skills, ambition or professional abilities.
[2] F. Nieva, R. and N. Galasso, ‘Working for the Few - Political Capture and Economic
Inequality’ (2014), 178 Oxfam Briefing Paper.
[3] Household income/income share: Congressional Budget Office as appears in <https://www.motherjones.com/politics/2015/02/income-inequality-in-america-chart-graph/>
[4] R. Dobbs et al, ‘Poorer than their Parents?, Flat or falling economies in advanced economies’, McKinsey Global Institute (July 2016) <http://www.mckinsey.com/global-themes/employment-and-growth/poorer-than-their-parents-a-new-perspective-on-income-inequality> accessed 26 september 2018.
The continuous lowering of living standards and the explosion of inequalities should not be attributed abstractly to globalization. The latter is not a natural phenomenon. It can be steered and reined by national policies towards either pro-social or pro-market objectives. What has been described in the previous paragraphs is the outcome of deliberate political options, which have degraded labour relations and dismantled the redistributive mechanisms of the welfare state. More specifically:
Labour market deregulation and accentuated flexibility, in tandem with a decline in trade union rate and worsening of prevalent collective bargaining legislation has reduced the bargaining power of middle and lower-income workers, leading to lower minimum wages relative to the median wage. According to a recent IMF work report, a decline in trade union membership (union rate) and the resulting easing of labour markets measured by an increase in labour market flexibilities index by 81⁄2 %—from the median to 60th percentile—is associated with rising market inequality by 1.1%.[1] Moreover, the rapidly increasing gap between rise of productivity and wages,[2] has a cumulative effect on workers’ share of national income, which has fallen dramatically after 2000.[3
A huge decline in the progressivity of taxation has undermined the funding of the welfare state and widened the inequalities, through cuts of social transfers such as welfare assistance or public retirement benefits. According to the OECD, top marginal tax rates, which have been above 80% in 1960, have fallen from 59% in 1980 to 30% in 2009. The average rate of Corporation Tax has been cut from a nominal 34% in 1995 to 22% in 2017.[4] The deterioration of provision of public goods that boosted productivity and growth in the past is also associated with the massive privatization of important social services.
Inequalities and crisis of democratic legitimacy
Societal inequalities can be tolerated in a capitalist system, even considered as the “natural” outcome of the invisible hand of the market. It is quite different if people believe that they are unfair, as a direct product of a political decision, such as the cancellation of the social contract inherent to the welfare state. It is highly indicative that the declaration that the “economy is rigged” does not come only by outspoken critics of neoliberalism like Jeremy Corbyn, but also by prominent Tory ministers, such as Michael Gove[5] and a vast majority of the electorates (see Graph 4).
[1] E.Dabla-Norris, K.Kochhar, F.Ricka, N.Suphaphiphat and E.Tsounta (with contributions from P. Sharma and V. Salins) ‘I M F, Causes and Consequences of Income Inequality: A Global Perspective’ 1 Authorized for distribution by Siddharh Tiwari (June 2015) <https://www.imf.org/external/pubs/ft/sdn/2015/sdn1513.pdf> accessed 10 October 2018.
[2] ILO, Global Wage Report 2016-1017, ‘Wage inequality in the workplace’, ILO, Geneva (2016) <http://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/@publ/documents/publication/wcms_537846.pdf>accessed 30 September 2017
[3] ILO-OECD, ‘The Labour Share in G20 Economies’ (February 2015) <https://www.oecd.org/g20/topics/employment-and-social-policy/The-Labour-Share-in-G20-Economies.pdf>accessed 10 October 2018
[4] IMF, ‘Causes and Consequences of Income Inequality’
[5] Editorial, ‘More Money, more problems’, Economist, (July 28th-Augutst 3d 2018) vol. 438, n. 9102, 23
As it was to be expected, democracy per se is affected by the rampant crisis of confidence. As shown in Graph 5, for the majority of the Americans born after the 1960s and the Europeans born after the 1970s, it is not deemed anymore “essential” to live in a democracy.
Even moderate politicians, like the former Prime Minister of Australia Kevin Rudd are characterising this situation as an existential threat for the future of democratic regimes: “Citizens will continue to support their democratic capitalist systems so long as there is reasonable equality of opportunity and a humane social safety net. Take these away and the citizenry no longer has a material stake in mainstream democratic politics”.[1]
[1] K. Rudd, ‘The rise of authoritarian capitalism’, New York Times, (17 September 2018).
George Katrougalos is Professor of Public Law at Democritus University of Thrace. He has published extensively on comparative constitutional law, law and globalization and social rights. Among his monographs are: ‘Crisis and Way Out’, Athens, 2012, ‘Social Policy and Social Rights at national and international levels’, Athens, 2009 “Southern European Welfare States”, Palgrave Macmillan, London/N.York, 2003, “The Social state in the post-industrial era”, Athens, 1998. He has lectured as visiting professor or invited speaker at the Universities of Oxford, Columbia, Humboldt, London School of Economics, Dublin College University, Tilburg, UNAM, New Delhi Law School and others.
He is a member of the Greek Parliament, former member of the European Parliament. He has served as Minister of Foreign Affairs, European Affairs, Labor and Social Security and Administrative Reforms of Greece.