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Democracy failure

By John Keane - posted Monday, 20 April 2009

Eighteen months into the deepest economic slump since the Great Depression of the 1930s, one thing is abundantly clear: the world economy is once more suffering the incalculable shock effects of a massive market failure.

The bursting of the global credit bubble, predictably, is paralysing virtually all market sectors in most countries, even those (like Japan) that took earlier measures to fit “bank proof” shock absorbers to their economies. Governments have been dazed by the scale of corporate debt issuance and “securitisation” - the risky bundling of debts on such things as mortgages and credit cards.

Panicked reactions and contradictory stopgap measures are multiplying. Trying to calm jitters, the International Monetary Fund’s Dominique Strauss-Kahn has recently pronounced that the world faces a “great recession”. Suddenly, as if through overnight conversion, politicians rail against “greedy” bankers and corporate fat cats. Moralists are out in force and talk of victories against banks by “people power” (John Prescott, former Deputy Prime Minister of the United Kingdom) is having a field day.


Scapegoats - Bernard Madoff, Sir Allen Stanford, John Thain - have become household names. So have words like “bail out”, “toxic debt” and “rescue packages”.

Of significance - Obama’s 2009 budget points in this direction - is the appearance of first-stab efforts to formulate redistributive policies that protect citizens against unemployment, loss of savings, deteriorating public infrastructure and other effects of the bursting bubble.

Such moves against the old free market consensus resemble slamming shut the gates after the horse called Equality has bolted. Among the documented effects of the credit bubble is that most democracies experienced a 30-year widening of income and wealth inequality.

The whole trend - towards hourglass-shaped societies - has been bad for democracy. It has spawned an underclass. Middle-class people were deluded into thinking they were growing richer by the day. The spirit of solidarity so necessary for citizenship was corroded by market selfishness. The present bursting bubble is deepening these undemocratic trends.

In poor countries, according to the World Bank, only a quarter of governments have the resources to cushion their citizens against the great recession; net capital flows in their direction have fallen to less than a fifth of the level two years ago. In richer countries, where “de-leveraging” is rife, mortgage defaults among the poor are rising. Private wealth levels are plummeting (the Asian Development Bank has estimated that the equivalent of a year’s global economic output has so far been lost in financial assets alone). Pension funds are threatened: in Britain alone an estimated 90 per cent of final-salary schemes are technically now under-funded.

As companies slash dividends, preserve cash and reduce employment, trade unions find themselves challenged. Bank bailouts and other mega-forms of government intervention are sharpening the sense of many citizens that while the rich get billions the people get pennies.


Then there is the most worrying threat to equality posed by the bust: that when the huge rescue package bills are finally presented, governments will try to rebalance public finances through spending cuts and increased taxes that have further socially regressive effects. Hence the searching question posed recently by Richard Bruton, the Finance spokesperson for Ireland’s opposition Fine Gael party: “The banks bailed out the developers, the government then bailed out the banks, today the taxpayer is being asked to bail out the government once again. The question I ask is: who is going to bail out the taxpayer?”

To the extent that democratic institutions have failed to live up to their own standards of citizen equity we can speak of democracy failure. But there is a more troubling sense in which countries such as Britain and the United States have suffered democracy failure. After 1945, when there were only a dozen democracies left on earth, a major sea change took place in the real world of democracy. Monitory democracy was born. A clue to its novelty is the invention of scores of power-scrutinising mechanisms - human rights organisations, summits, forums, integrity commissions, participatory budgeting and citizens’ assemblies - whose combined effect has been gradually to alter the political geography and everyday dynamics of democracy as we know it.

Democracy is coming to mean much more than periodic elections - though nothing less. It means the permanent public scrutiny and restraint of power, wherever it is exercised in the domestic and cross-border fields of government and civil society. The historic struggle for one person, one vote is over. In the new age of monitory democracy, elections still count, but parties and parliaments now have to compete with thousands of monitory organisations and networks that try to keep power on its toes. The old meaning of democracy as the periodic election of representatives based on the rule of one person, one vote, is being replaced by democracy guided by a different and more complex rule: one person, many interests, many votes, many representatives, both at home and abroad.

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About the Author

John Keane is Professor of Politics at the University of Westminster and WZB and a Fellow of the Royal Society of Arts. Founder of the Centre for the Study of Democracy, a consultant to the United Nations and a recent member of the Amercan Institutions of Democracy Commission, his books include Global Civil Society?, Václav Havel: A Political Tragedy in Six Acts and the prize-winning biography Tom Paine: A Political Life. His full-scale history of democracy, The Life and Death of Democracy, is to be published in June 2009.

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