Introduction
Civil liberties and political rights in countries across the world are at their lowest point in a decade in 2017 with over seventy one countries experiencing a net decline in individual freedoms and democratic rights according to a FreedomHouse report (1). In fact, 2017 marked the 12th consecutive year of decline in global freedom according to the same report. Countries which made their transition into democracy with the “Third Wave of Democratization” (A) (2) are particularly prone to strongman politics and illiberal governments – the hallmarks of an authoritarian regime. Turkey, South Korea, and Thailand are just a few examples of newly formed democracies experiencing attacks on established democratic norms. In this paper I will argue that this phenomenon of withdrawal from democracy is largely due to the increase in income inequality that has accompanied the robust economic growth many of these relatively recently established democracies have experienced. This rise in income inequality has resulted in a huge economic gap between the societal elites and the middle class resulting in increasing polarization and populist anger. The fact that democracy has not yet deeply taken root in these countries further exacerbates the problem. I will examine the impact of the 2008 financial crisis on the middle class population in these countries and how it has led to – in many cases – a widespread disenchantment with the regime. I will also critically analyze the established theories of comparative politics (including the modernization theory, S.M. Lipset’s theory, and Robert A. Dahl’s hypothesis) and how many of them fail to explain the political scenario rocking the world today.
The Uptick of Economic Growth in the 1990s and the 2000s and the accompanying rise in Income Inequality
The last decade of the twentieth century and the first decade of the the twenty-first century was characterized by increasing economic growth in most of the developing world, including the newly democratized nations of the third wave. These countries adopted the principles of free market economics to varying extents, opened up domestic markets to foreign investment and international competition, and increasingly integrated themselves with the global economy . The result of this economic liberalization was clear: the world economy grew by an outstanding rate of around 4% from 2000-2007 which benefited countries like Turkey (which grew at an average rate of 6%), India (which grew in excess of 9% from 2005-2008), and South Korea (where the growth rate touched 8.9% in 2000). This brisk growth resulted in an enlarged economic pie and an unprecedented increase in the economic clout of these developing countries. However, this amazing economic growth had an unintended side-effect: economic inequality. Studies have proved that the ordinary people missed out on much of the wealth their nation was theoretically creating (3). For example, India (which liberalized in the 1990s) grew by more than 6.6% annually between 1990 and 2012, but its GINI coefficient (a measure of income equality with 0 being perfectly equal and 100 being perfectly unequal) rose from 33.5 in 1993 to 37 in 2010 (4). Same is the case with China – its blazing fast 10.2% GDP growth rate was accompanied by a 1.6% rise in its GINI index annually (5). Turkey and Thailand had a GINI coefficient of 67 in 2016. In fact, Turkey has the worst income distribution among all the countries in Europe (6), and Thailand was the third most unequal country in the world in 2016 (7). South Korea is struggling with the same problem and was announced as the most unequal country in the Asia-Pacific region in 2016 by the International Monetary Fund (8). And even though Hungary is high up on the list of countries having income equality, its GINI coefficient has decreased over the years (9). I have used these examples to demonstrate the fact that most of the democracies we are discussing here either have high inequality or have increasing inequality. In the next section of this paper I will focus on the connecting this endemic income inequality with the threat to democratic institutions in these countries.
Connecting the dots: the correlation between Economic Inequality and threats to democracy
Taking a look at the list of countries having the worst income inequality brings us to a startling conclusion. In 2016, all the countries with the highest income equality (Russia, India, Thailand, Indonesia, Brazil, China, the United States, and South Africa) were experiencing threats to democracy (or were already authoritarian like Russia and China). India has voted into power a Hindu nationalist party which is increasingly at ease with voicing anti-minority opinions, the United States is suffering from an increased tolerance for right-wing fringe organizations, the Philippines has an illiberal demagogue as its President, and the South Korean leadership is is growing increasingly intolerant to dissent and opposition (10).
Consequently, it can reasonably be inferred that there is some co-relation between democracy and economic inequality in general. Today, half of the world’s wealth is owned by the super-rich one percent (11). With so much of the wealth and power concentrated in the hands of the elites, the society is bound to be extremely polarized. The effects of this inequality are brought to the forefront when an economic crisis hits the society that disproportionately affects the poor and the middle class (in this case the 2008 Financial Crisis). Historically in such scenarios, the increasingly disenfranchised middle class and lower class becomes more strident in its demand for a greater share of the economic pie. As expected, the citizens constituting the elite class of the society have no plans of giving away their immense prosperity and distributing it across the population. This polarization unsurprisingly results in a direct clash between the establishment and the increasingly agitated ordinary population. According to political scientist Robert A. Dahl, in such a scenario, the elites’ cost of tolerating opposition to their lifestyle and power increases until it reaches the tipping point – where it crosses the cost of repression (subduing popular dissent) (D). What happens next is often predictable – a widespread clampdown on freedoms and civil rights and a decrease in tolerance for opposition. This theory has been proven to be accurate by a recent study which warns us that increasing economic inequality may lead to societal collapse in the future (12).
What brought the issue of income inequality to the limelight was the 2008 Financial Crisis. The crisis originated in the United States but impacted economies all across the globe and particularly dealt a deathblow to the economically disenfranchised sections of the society, resulting in a significant increase in unemployment (13). The gravity of this situation was fully recognized by U.S. President Barack Obama when he declared income inequality to be “the defining challenge of our time” (14).
In order to strengthen my argument that rising income inequality is largely responsible for the democratic regression in third wave democracies, I will look at examples of countries with low income inequality and see if they are more democratic than the countries we are discussing. According to the GINI index, Sweden, Norway, and, Finland are some of the most equal countries of the world. All three of these countries also score a 100/100 on the FreedomHouse Democratic Freedom index (1).
A critique of the established theories of comparative politics
This brings me to my critique of the Modernization Theory and S.M. Lipset’s views on economic growth and democratization. The fundamental principle on which the Modernization theory rests is that most nations across the planet are on the same path of economic and political development – an authoritarian, agrarian society progresses into a democratic, industrial society over a definite period of time (B). Lipset further bolsters this theory by correlating economic development with the establishment of democratic institutions – the more economically developed a country, the better the chances of it supporting democracy (C). However, these theories fail to incorporate the fact that all economic development is not the same. Broad-based economic development which uplifts all sections of the society is very different from economic development enriching only the top echelons of the society, leaving peanuts for the poor. To critically examine the status of democracy in a nation, it is very important to take into account the equality of distribution of economic resources as well as the GDP and GDP per capita.
Conclusion
In this paper I took an economic approach to explain the recent spate in attacks on democratic institutions in Third Wave democracies. I explained how increasing economic growth has bought about increasing income inequality which has polarized the society. This polarization in society has increased the cost of tolerance for the elites who today control vast amounts of power and wealth. This rise in the cost of tolerance has made these societies more susceptible to illiberalism and authoritarianism. I examined the role of the 2008 financial crisis in exacerbating the difficulties of the lower and middle class and critiqued some of the prevalent theories in political science. I talked about democratic backsliding in the United States and India to demonstrate that no nation, no matter how historically democratic, is immune to the menace of economic inequality. It is thus the need of the hour for our democratically elected leaders to realize that high GDP growth rates will not solve the problems of intolerance and polarization our society is facing today; sustainable, inclusive growth will.