By Graham Vanbergen: Right now, democracy is in crisis throughout the industrialised world. That much is obvious. Less evident to politicians is the reality of why that is. And yet, the evidence stares at us all in the face and has done for years. The promises of neoliberal capitalism, promoted by Thatcher, Raegan, and those economists who supported the idea that all boats will rise, were wrong. While it is true that wealth was created and that we are better off, the reality is that its performance as an ideology has fallen short of what was promised to a significant percentage of people – the working class in particular.
The result is a repetition of history. Far-right and extremist parties see political failure as a divisive opportunity to get a foothold and are capitalising on it. Many philosophers and economists will tell you that the centre-left and centre-right are really associated with wage stagnation, rising inequality, and other unfavourable trends. Maybe that is true to some extent – but that failure can be pinpointed.
Leaving aside the last four decades, corporate profits drove 53% of inflation during just the second and third quarters of last year and more than one-third since the start of the pandemic. As wealth is extracted from the working and lower middle classes, the political mood changes. Corporate profits have risen decade-on-decade whilst wage stagnation has become the norm across the Western world.
Evidence of that mood change came when the UK wrenched itself from its largest trading partner based chiefly on a political portrayal of a lack of ‘sovereignty’ and immigration. It had its roots in consistently falling living standards.
The Conservative Party, riven by more extreme elements from within, highjacked the political narrative and blamed ‘others’ but had no answers. Britain’s Conservative Party, the oldest political party in the United Kingdom and second in the world, now sits on the precipice of an existential implosion.
This same theme is being played out in Europe. The far-right has performed well in their blame-game narrative. France is now in the same democratic danger zone that Italy, Austria and Germany find themselves in, along with Sweden, the Netherlands and Hungary. The result is that the European Parliament stands in the headlights of an oncoming juggernaut. President Macron was persuaded enough to roll the dice and challenge the French electorate and the hard-right. The Western world holds its breath for the outcome.
It is not as if we were not expecting this. Democracy itself is under severe strain. The rise of authoritarianism is intensifying and does so with electoral acceptance to change the status quo.
An in-depth report by the Centre for Economic Policy Research (CEPR) spells this out: “Democracies breed their own support – but only when they can successfully deliver on promises of economic growth, peace, political stability, and the provision of essential public goods.” Few countries can say they delivered it all. None of these promises have been made better in Britain by 14 years of the Conservative Party. The CEPR report shows a significant and growing share of the electorate is losing its faith and belief in democracy and the institutions that support it.
The financial crisis, the pandemic, and the cost of living have particularly affected the young. The far-right has made a lot of ground with this demographic. And as the Reuters article published last month points out – “From Germany and France to Poland and Spain, the far-right made inroads into the youth vote in key states in this EU election – as a generation that has grown up amid constant crises seeks new answers and follows politicians fluent in TikTok and YouTube.”
The fact remains that mainstream political parties continue to ignore the root causes of the cancer that is consuming democracy from within. With eyes looking away, rising extremism means that institutional disintegration is all but assured. The signs are evident: money buys political influence, the tenures of political leaders decrease, trust in political structures falls, illiberalism rises, and political freedom is eroded – to name just a few.
For all of the blame-gaming by the political right – usually immigrants, the crisis of democracy lies in a system that financially engorged itself at the expense of others. As Daron Acemoglu, Institute Professor of Economics at MIT says – “The simple explanation for the crisis of democracy across the industrialized world is that the system’s performance has fallen short of what it promised. In the United States, real (inflation-adjusted) incomes at the bottom and the middle of the distribution have hardly increased since 1980, and elected politicians have done little about it. Similarly, in much of Europe, economic growth has been lackluster, especially since 2008. Even if youth unemployment has declined recently, it has long been a major economic issue in France and several other European countries.”
The purpose of liberal democracy (from WW2) and Neo-liberal capitalism (From 1980) was a system of distribution that was working in the first half of its emergence but the second half has been a demonstration of abject economic failure on a grand scale. It has not delivered on its promises – quality jobs with incomes that could afford a bit more than the basics, of high quality public service offerings and political stability.
The unshackling of the banks ultimately created the financial crisis that demonstrated the lie. National debts escalated, public service budgets were slashed, and average pay increases ground to a halt. The electorate saw that governments had excused the bankers and waived through $trillions worldwide at taxpayers’ expense. It was clear who the paymasters were when politicians did nothing to capture criminals in suits. Not one person of significance went to prison. In Britain, austerity, ushered in by the Conservative Party in 2010, led to the deaths of 300,000 people (as confirmed by the House of Lords report published January 2023).
Electorates all over the Western world came to one basic conclusion – politicians were more worried about donors and their own seats of power than they were about workers and their own citizens or, indeed, the principles of democracy.
While Europe is increasingly threatened by a rising wave of right-wing extremism, Britain may well have learned a lesson from its dalliance with populism and its promises of sunny uplands. Brexit has been a disaster on all fronts – economically, politically, diplomatically, and internationally. Boris Johnson was not just frivolous to the core or a self-absorbed narcissist but has since been classed as the worst Prime Minister in British history (HERE) (HERE) (HERE) (HERE) – and that is saying something when competing with Liz Truss who succeeded him, for the same accolade.
The housing crisis has been in the news for 30 years in England. Yet just 8.7 per cent of England’s land is built-up. A further 37 per cent of the area of England is protected against development by one or more natural designation, leaving entire swathes of land. As I’ve said on countless occasions, Milton Keynes is a shining model of the way forward. This is now a designated area of 22,000 acres, a city of over 250,000 people. Today, Milton Keynes is the nation’s most competitive city (in a new study from academics at the University of Cardiff and Nottingham Business School). We need ten more of them in addition to the current lacklustre new build performance of the last few decades.
The election in Britain shows that politicians know what the problem is now. It’s not blaming immigrants or the EU – low productivity leads to poor public services and a living standards crisis.
If Keir Starmer’s Labour Party does as badly over the next ten years as the Conservative Party has over the last 14 years, public faith in democracy will vaporise. The likes of Nigel Farage want this as their opportunity for power. Farage can smell victory in some form; otherwise, he would be lining his pockets with his friend, the convicted criminal – Donald Trump.
The road ahead is very uncertain in an age of social media, artificial intelligence, automation, and an inability to restrain the organisations that manage them. But make no mistake – democracy and the institutions that support it is the best way of dealing with these big policy issues.
Cultural distress indeed emanates from the large-scale relocation of the global displaced. Each country must decide the best course of action because democracy depends on it. Mass immigration and the globally displaced will be an even bigger story in the decades ahead. As the global population rises and climate change reduces the world’s resources to feed them the basics, the greater the problem becomes. Just as oil was the world’s battleground and growth generator of the last century, food, water and precious metals will eventually become the same in this century.
A new model of organising ourselves is required. Neo-liberal capitalism, the parent of individualism, has not worked. We should be working with each other, not against each other. A greater goal than winner-takes-all is out there. The priorities of citizens should come before that of bankers, multinationals, hedge-fund managers and the so-called titans of technology.
Centrism in Britain has one last shot just as European countries look like they could be engulfed in a wave of right-wing extremism. Our economy needs to be nudging on with good technology, not contractors such as Fujitsu, who have enriched themselves through one of the biggest scandals in British history, as politicians looked the other way. It needs infrastructure investment in public health and education to drive productivity; it needs a building programme to house its people, not bankers making fortunes from what is essentially a permanently rigged housing market through state interventions (such as rent to buy, save to buy, constant changes to property tax regimes, etc).
There is so much to do to rebuild Britain. Starting with the strengthening of democracy, restraining corporate power (such as political donations and lobbying) and laying out a plan in the national interest (such as nationalising failed public services, energy security, etc.) would be a massive start over what has been achieved in the last 14 years. A meaningful and deliverable policy for lowering inequality and agreeing on a strategy for energy resources are just as important as defining and managing acceptable levels of migration.
Democracy and capitalism can work hand in hand and deliver. It just needs the right people to persuade citizens of the right model.