25 Dec 2011

Is liberal democracy in the West at risk? This question seems preposterous at a time when people in the Middle East and North Africa are risking their lives to bring down authoritarian governments, in apparent emulation of the West.

Is liberal democracy in the West at risk? This question seems preposterous at a time when people in the Middle East and North Africa are risking their lives to bring down authoritarian governments, in apparent emulation of the West. Yet, the riots that shook London and other major English cities in August are but the latest example of the serious erosion of societal trust in the institutions of government. As Western governments struggle to contain the spreading carnage of the current sovereign debt crisis, the sense of disillusionment is palpable within the poor and the middle classes. In particular, it has become abundantly clear that governments are prepared to push through painful and unpopular spending cuts, which have adverse effects on the economy as a whole and on the poor in particular, in order to maintain their market ‘‘credibility’’.

Sure, some might counter that the crisis of liberal democracy is only a temporary response to a series of shocks, not least the severe economic crisis in parts of Europe and the United States. There is of course some truth in this argument, but like the global financial crisis, the crisis of liberal democracy has been in the making for decades. To understand why, we need to look at liberal democracy not simply as a set of political and legal institutions, but situate its emergence in a particular historical and social context.

Contemporary liberal democracy developed in Western Europe in tandem with industrialisation. Indeed, social democrats and the trade union movement played a crucial role in agitating for universal suffrage, initially only for men, removing the earlier requirement of property ownership.

But beyond the issue of voting, the economic and social transformations of the Industrial Revolution have underpinned the development of the welfare state, which provided social insurance against the vagaries of capitalism and attempted to mitigate the latter’s inequalities.

The welfare state’s emergence was also promoted by the Communist Revolution in Russia and the Great Depression engulfing the world in the 1930s. With millions out of work, leftist ideology gained ground – even in that bastion of individualism: the United States. In most Western states, the way out of the Great Depression involved not only counter-cyclical spending but a political accommodation between labour and capital, manifest in the political arena of the two-party system – one party for labour and another for capital.

Yet a strange thing happened around three decades ago, with serious challenges emerging to the capital and labour accommodation. The arrival of neo-liberalism – the ideology that replaced Keynesianism with the idea that society should be organised along competitive market lines – rose up in the 1970s and early ’80s ostensibly to counter declining rates of profit in key capitalist countries. One of the main targets of new neo-liberal regimes, perhaps most prominently Margaret Thatcher’s in the UK, was organised labour, with unions derided for their inflexibility and, in an increasingly competitive world, ‘‘holding the country to ransom’’.

Attacks on unions (which were promoted as contributing to ‘‘flexibility’’), were accompanied by other measures that would increasingly enmesh populations into the market in the interests of efficiency and growth. Here, privatisation, deregulation and liberalisation were at the heart of a new agenda which signalled the start of the ‘‘there-is-no-alternative’’ market society.

Within market society, the representation of labour and capital was to give way to a technocratic politics in which key economic decisions were to be managed by bureaucrats who were focused on positioning economies and the states that oversaw them in a generically competitive-oriented manner.

Central banks became ‘‘independent’’ (although the captains of industry were never far away from the boards of central banks). Exchange rates were floated. Governments became focused on demonstrating fiscal responsibility to markets by running small surpluses. Public services and redistributive measures were redesigned along competitive market principles that were concerned with making sure citizens ‘‘understood their responsibilities’’ within the market society.

The parties of labour (the social democratic and liberal left) moved to the right – in several cases outdoing the parties of capital in their promotion of market society’s requisite institutions.

In the UK and the US, the new right governments of Tony Blair and Bill Clinton, respectively, normalised workfare and ‘‘lifelong learning’’ programmes as the maximum that populations should expect from government in managing the inequalities of capitalism.

In essence, there was nothing left for politicians to do in representing their constituents other than the roll-out of market society. However, with wages declining in real terms and families offsetting this decline through the easy provision of credit (which often tapped equity in houses), there were political tensions to manage.

manage. In an often complicated juggling act, parties sold themselves on the basis of being able ‘‘to manage the economy’’ and keep interest rates (servicing costs on debt) low. Parties (including those on the left) also focused on another key threat to the ability to service debt – labour competition in the form of migrant labour. However, beginning in the US in 2007, the economic and social frictions inherent in this structure came to the fore. Three decades of poor representation and response has led to the mass marginalisation of populations in many countries. All of this has taken place alongside a serious deterioration in the quality of politics in countries such as the US and Britain. Each was rocked by massive scandals illustrating the links between state and capital are tighter than ever – guaranteeing the representation of the interests of one end of town while the other faces increasing desperation.

Of course, the freedoms and rights associated with liberal democracy have always coexisted with capitalism. Yet, the tensions inherent in the liberal democratic state’s promise of representing all of its citizens with the underlying primacy of ensuring economic growth through capitalism, are becoming impossible to ignore. Without well-organised and popular groups pushing against the interests of the powerful few, the promise of political, let alone economic, equality remains nothing but an empty ideological veneer.

In the 1940s, economic historian Karl Polanyi argued that the dislocations of unrestrained capitalism are often followed by a ‘‘counter movement’’ of social protectionism. Yet, history has shown that this is not an automatic process. It requires coordinated struggle. While social forces in the form of trade unions and social democratic labour parties engaged in struggle during Polanyi’s time, this is not the case today.

Instead, the overarching sentiments to have emerged from the unprecedented events of the past few years are despair, cynicism and even nihilism – as witnessed in the UK riots. None of this bodes well for the future of liberal democracy. The question is: what comes next?

by Shahar Hameiri () is an Australian Research Council Postdoctoral Fellow at the Asia Research Centre, Murdoch University.
Toby Carroll () is Senior Research Fellow at the Centre on Asia and Globalisation at the LKY School.

This is a reprint of an article that first appeared in the Bangkok Post under the title “The Threat to Liberal Democracy”.