About the author:
Prem Shankar Jha, Journalist, Former editor of the Hindustan Times, Media advisor to Prime Minister V. P. Singh, Visiting Fellow at Harvard University
In 1991, Samuel Huntington’s book, “The Third Wave: Democratization in the Late Twentieth Century,” celebrated the triumph of democracy over authoritarianism across the world. Between 1974 and 1990, more than 60 countries across every continent adopted one or other forms of democratic government. Huntington considered this democracy’s final triumph over authoritarianism. Francis Fukuyama echoed this sentiment a year later in his book “The End of History and the Last Man.”
Barely twenty years later, the euphoria evident in these books had completely vanished. In 2011, Freedom House, which publishes an annual index of democratization across the world, reported that the number of electoral democracies had been declining continuously for the previous five years and had reached its lowest level since 1995. Another democracy watcher, the Bertelsmann Foundation, echoed this conclusion, pointing out that the number of “defective” democracies doubled to 53 out of a total of 128, between 2006 and 2010.
Seven years later, the decline of democracy had reached a critical level. According to the Economist Intelligence Unit, the decline began in 2006. By 2017, 71 countries had seen a regression into authoritarianism against 35 that had moved the other way. The retreat was more marked among developing countries in every region, but right-wing populism had gained ground in the advanced industrialized nations as well, notably in France, the Netherlands, Austria, and Germany, but most markedly in the U.S., as witnessed by the unexpected victory of Donald Trump in 2016.
In the last five years, the retreat from democracy has speeded up. Nowhere is this more apparent than in India, once the cynosure of democracy in developing countries. The two largest developing countries after India, Brazil and Turkey have seen a similar retreat from democracy, and the rise and entrenchment of authoritarian regimes.
What none of the democracy watchers have been able to pin down is “why”? Why simultaneously, and why now? What global changes took place in the mid-2000s that reversed the rise of democratic governments that had taken place in the previous three decades? In what follows I have attempted to give an answer.
I believe that democracy is in retreat because the social and economic conditions that gave birth to it, and in which it thrived, have been all but destroyed in the past two decades. What is more, their erosion is still gaining momentum and is most visible in the low and middle income developing countries that emerged from colonial rule after the Second World War.
For democracy to become the accepted mode of decision-making, there has to be a consensus among all interest groups in a society, that they will not resort to the use of force to change policy. To endure, this consensus has required several pre-conditions to be fulfilled. The most important among them is a softening of the lines of economic and social conflict in society. Throughout human history, these have centered around race (or tribe), religion and economic status. Democracy gives us a way to reconcile conflicts in all three areas. But for the consensus to survive, the intensity of these conflicts have to be reduced and contained.
The building of democracy
Conflicts originating in ethnicity and religion long pre-date the birth of modern democracy. The Industrial Revolution made a new addition to the mix. This was class conflict. In Britain, the birthplace of the Industrial Revolution, the Luddite and Chartist uprisings against industry in the early 19th century gave the ruling class an early warning of the need to find a way to soften the conflict between the gainers and the losers from the rise of industry. Beginning with the Great Reform Act of 1832, the ruling classes responded by progressively widening the franchise to include the working class in parliament and by enacting with their help, the comprehensive social security legislation in 1909 that created the welfare state.
In Germany, Chancellor Bismarck took steps to soften the emerging conflict lines even before Britain. Despite Germany being a relatively late starter in industrialization, he not only extended the voting franchise to all adult males, but introduced old age pensions, accident insurance in industry, and a form of socialized medicine, in the 1870s. His avowed aim was to keep the German economy operating at maximum efficiency, and to stave off calls for more radical socialist alternatives. France and the United States followed Britain, albeit with a substantial time lag, under the spur of the Great Depression, in the 1930s.
To sum up these changes, the Industrial Revolution created nation-states. Within them, the need to minimize class conflict created the welfare state. Both developments were graduated responses to the class conflict that the rise of capitalism was unleashing in industrializing countries. To contain it, nation-states erected progressively higher barriers to imports to reserve their home markets for domestic producers. This allowed the fruits of technological progress to be retained within tariff walls and raised living standards across the board within the country. Between them, therefore, tariff protection and the welfare state created Social Democracy. As Karl Polanyi highlighted in his classic analysis of the rise of Britain, social democracy prevented the creation of the “Stark Utopia” that Polanyi had identified, which could not possibly have endured.
Trade unionism tamed class conflict and channeled it into collective bargaining. Protection of the gains from technology allowed incomes to rise steadily. In Europe, and with a generation’s delay in the U.S., this progressively broadened the middle class, and gave birth to an Haute Bourgeoisie—an “upper-middle” class that lived on the returns from inherited or accumulated wealth and therefore had a strong vested interest in moderating social conflict. The Hundred-Year Peace in Europe that preceded the First World War, gave ample time for this class to develop, take over a leading role in shaping intellectual discourse, and become a powerful moderator of domestic social conflict.
As Nation-State Capitalism matured, the ever-growing scale of production also created an expanding white-collar middle class, consisting of salaried employees in the service industries who were neither bourgeois nor proletariat. The automation of production progressively increased the size of this class in relation to blue-collar workers and turned it into yet another buffer against class conflict.
These were the multiple converging social, political and economic developments that went into the making of the three decades of unsurpassed prosperity and growth – Les Trente Glorieuses – that followed the end of the Second World War and validated democracy in the eyes of the newly de-colonized world. It was also a period of profound social peace caused, as Paul Krugman pointed out in a trail-blazing book, “Peddling Prosperity,” by near-full employment in the industrialized democracies and a uniform rate of real income growth across all five quintiles of the American and Western European populations. It was this extraordinary surge of growth without conflict that discredited socialist and other autarchic models of economic growth, and brought the Soviet empire crashing down in ruins.
The onset of Globalization
And then, in the 1980s, even as the democracy wave was gathering strength across Eastern Europe and the developing world, all this went into reverse gear. The reason was the onset of economic globalization. Beginning in a small way in the 1960s, enterprises located in the industrialized nations found that revolutions in transport and communications had made it possible for them to make more money by manufacturing their products in Asia and Latin America and shipping them back to the markets in Europe and America, than by continuing to manufacture them at home. That was the beginning of de-industrialization in the industrialized economies. This brought on a phenomenon that the Industrialized countries of the West had not experienced before – chronic as distinct from trade – cyclical unemployment.
This had never happened before because while mass production and automation had been reducing the quantity of labor needed in production since the early days of capitalism, it had been increasing the number required to distribute the product because of the much slower growth of productivity in the distribution industries. So the decline of demand for labor in manufacturing was more than made up by the increase of demand for labor in the distribution of its products. But when there was only a shift of existing manufacturing out of the country, the demand for labor in the service industries did not rise. That was when unemployment, which used previously to rear its head only during the downward phase of a trade cycle, became chronic.
Chronic unemployment has destroyed the bargaining power of trade unions. As their capacity to check the rapacity of employers has dwindled, all the humanizing safeguards created during a century of social democracy – union-negotiated wages, collective bargaining, job security, fixed working hours, the 40-hour week, the mid-week half day, guaranteed pensions, designated annual vacation periods and the like, have evaporated. Even unemployment benefits have now been limited to two years in the U.S. and somewhat less in Western Europe.
Companies now hire and fire workers with no notice and without attracting any penalty. Except in high-tech fields, LIFO (last in, first out) has become the new norm. This is inhumanly cruel to young job seekers. With no job security, they are unable to plan a future, unable to marry, unable to invest in a home or even a car, and most tragically, unable to plan on having children. As Eric Hobsbawm wrote in his penultimate book, “The Age of Extremes,” today’s youth are being forced to live in a constant present, because they no longer have a future they can look forward to.
Nor are we even close to the end of this road. While automation and robotization of manufacture continue to attenuate the blue-collar working class, the computerization of administrative and financial transactions is driving the white-collar working class out of work as well. The resulting “race to the bottom” has been hugely accelerated by economic and financial deregulation. Both have been demanded by the principal beneficiaries of globalization – transnational enterprises, and international banks and financial institutions.
The naked rapacity that financial deregulation, and the merger of commercial with investment banking unleashed, led to the foreclosure crisis in the U.S. that destroyed an entire generation of new entrants into the middle class, and the near-destruction of the Greek economy so vividly described by Yanis Varoufakis in his book “Adults in the Room.” In both Europe and America, not only did the banks get away scot-free but they forced governments to bail them out in order to prevent the total ruin of the depositors with whose money they had been playing.
Then they administered the coup de grace: not only did they force governments to bail them out, arguing that if they became bankrupt, millions of small depositors would lose their savings, but they argued that economic revival required a lowering of interest rates. They brought down their deposit rates to as low as half a percent, and in a few extreme cases to a negative rate of interest. Depositors then had to pay for the privilege of keeping their savings in a bank.
Since the financial crisis, therefore, the haute bourgeoisie has been forced to live on its capital instead of its earnings therefrom. With every passing year during the past 15 years, therefore, this last, most influential buffer against social conflict – the class that had the greatest stake in peace – has been wearing thinner and thinner. With this, the stark lines of conflict that Capitalism has produced in the early phase of every cycle of its rebirth since the rise of city-state capitalism in Italy in the 15th century, have reappeared.
These four developments – the end of job security, the death of the blue-collar working class, the end of work for the white-collar and lower middle classes, and the melting away of the haute bourgeoisie – have created the Stark Utopia in global capitalism that Britain, thanks to the Elizabethan Poor Laws and the Church, had so narrowly avoided during the birth of nation-state capitalism. In 1965, the income differential between the lowest-paid worker in an average American enterprise and its CEO was about 20 times. In 2018 it was 278 times!1 In that year, 10 percent of Americans owned 70 percent of the wealth of the country, while 50 percent, at the other end, owned 2.5 percent! In just 30 years, globalization had converted Krugman’s “picket fence” pattern of real income growth in American society into an unclimbable stepladder.
This is a global phenomenon. There are more than 700 billionaires in the U.S. But at the last count a year ago, there were also 144 in China and 141 in India. Mukesh Ambani, one of the Indian billionaires, owns or controls $748 billion worth of assets.2 This is 26 percent of the GDP of India which contains a fifth of the world’s population.
The industrial world is divided now between the very, very rich, for whom a $644 million hydrogen-powered yacht (unveiled at the 2019 Monaco Yacht Show) is a plaything, and the unemployed poor, more and more of whom beg on the pavements of our megacities and sleep inside cardboard cartons at night. Is it surprising then that more and more people of the world feel betrayed by democracy, and are turning to strong men in search of shelter, in search of hope? Today these are creations of the Right. But how long will it be before they become the Messiahs of the dispossessed and turn on their makers?
1. Council on Foreign Relations: The US Inequality Debate. https://www.cfr.org/backgrounder/us-inequality-debate#:~:text=Income%20and%20wealth%20inequality%20is,slavery%20and%20racist%20economic%20policies.
2. Mukesh Ambani, the head of Reliance.
This article is from the November issue of TI Observer (TIO), which is a monthly publication devoted to bringing China and the rest of the world closer together by facilitating mutual understanding and promoting exchanges of views. If you are interested in knowing more about the September issue, please click here:
http://www.taiheinstitute.org/Content/2022/11-30/1912145654.html
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