Inequality is not good for democracy and it is, as is widely known, on the rise everywhere. While wealth has always been instrumental in shaping political outcomes in electoral democracies, the concentrated wealth that has arisen with economic globalization has produced ever-more brazen forms of authoritarian behaviours on the part of political elites as they respond to the interests of their powerful economic allies. While details differ from country to country, there is an important common denominator: the role of economic power in giving greater leverage to political claims. In the worst cases, the economically powerful buy politicians, the media, and troublesome individuals. In all cases, the alliance between political leaders and economic elites has coincided with a notable distancing between political leaders and their publics.
Latin America: Concentrated Wealth and Electoral Authoritarianism
In an earlier post, I discussed the relationship between globalization, electoral democracy, and corruption in the Brazilian case. Economic globalization and the election of a left centre government under Luiz Inácio Lula da Silva in 2003 ushered in a concerted effort to reduce poverty. The new regime, remaining true to the main principles of neoliberalism, also sought the expansion of trade and investment, seen as necessary to secure tax revenue for social programs and as the best way to ensure the political acquiescence of the country’s powerful private sector.
Corrupt business practices were a central mechanism in keeping powerful business interests, which had serious reservations about this left/centre government, at bay. Although corruption has involved most politicians of all political stripes—the charges against Dilma Rousseff (President from 2011 to 2016) were not serious ones. Impeachment on corruption was the means by which the political right, closely allied with the country’s most powerful business interests, who were fearful of the growing scope of corruption investigations under Rousseff, removed her from power. Declining commodity prices created an irresistible opportunity to rally the economically insecure against the regime. The media, concentrated in the hands of the economically powerful and a strong advocate of Rousseff’s removal from power, was instrumental in rallying the public to the cause. Many observers have described Rousseff’s removal from power as “a congressional coup.” The new government of Michel Temer has responded with repression as mobilization in support of Lula gained momentum. Poverty and unemployment have shot up as the economic crisis deepened and spending on social programs declined. Latin America’s neoliberal authoritarianism, unlike its authoritarianism of the past, does not entail military intervention to protect the interests of the economically powerful. Today, this goal is achieved through the manipulation of the institutions of electoral democracy.
The United States: Oligarchical Rule
It is hard to avoid agreeing with the often-repeated observation that U.S. politicians represent the top 1 percent. Arguably, the country’s rich oligarchy is above the law and has the capacity to shape public policy to the detriment of the majority. The financial sector, for example, invested billions of dollars in lobbying and campaign funding to obtain the dismantling of the country’s financial regulatory framework, a development that was instrumental in the 2008 financial crisis. While the big financial houses remained largely protected, the largest proportionate losses were suffered by young and middle aged, less wealthy African Americans and Hispanics families.
Donald Trump has allied himself closely with the country’s rich and powerful, reducing corporate taxes and appointing business people to key government positions. Like its Latin American counter-parts, American big business avoids paying taxes by the use of offshore tax havens. The ultra-rich control the unabashedly pro-business news media. A recent article published by Open Democracy documents the increasing use of intimidation by the politically and economically powerful against the economically weak. Methods include bribery, non-disclosure agreements, lawsuits (threatened and real), employee contracts that allow firing for any reason, physical intimidation, along with the use of an army of lawyers and private security firms that operate to protect the super-rich from the consequences of their actions. As in Brazil, wealth drives politics and political outcomes.
Canada is not Immune: The Alliance between Liberal Elites and the Rich
Inequality in Canada has been increasing. Between 1982 and 2010 the incomes of the top 10 percent of Canadians increased by 75 percent; the incomes of everyone else increased by only 2 percent. According to the 2017 ranking provided by the London-based Economic Intelligence Unit Canada is a “full” democracy, while the United States is a “flawed” one. Even though Canadian politics has avoided the marked authoritarian hue of the previous two examples, the close alliance between the country’s political elite and Canadian business and the distancing of the former from ordinary members of the public is becoming increasing apparent. As noted in an earlier post, a 2009 Canadian bill, which had widespread public support, sought to establish standards for Canadian oil and mining companies abroad. It failed to pass due to heavy lobbying by the oil and mining companies.
While the Trudeau government has made much of its efforts to make sure the rich pay their taxes, the Canadian super rich get away with a great deal. The Paradise Papers identified wealthy Canadian individuals who are key fund-raisers for the Liberal Party, as among those who use tax shelters to avoid paying taxes. The Trudeau tax reform, orchestrated by his millionaire finance minister, Bill Morneau, sought to end tax advantages for small business while leaving trusts for the super-wealthy, designed to reduce taxes paid substantially, entirely intact. Then, there is Justin’s Trudeau all-expense paid family vacation on the island of billionaire philanthropist Aga Khan with travel and security paid for by the Canadian taxpayer. The optics were especially problematic given the nearly 50 million dollars handed over to the Foundation by the Canadian government in 2016 alone. At the provincial (Ontario) level, the constantly rising price of electricity (with a particularly harmful impacts on low-income families) has occurred alongside the privatization of Ontario Hydro and a scandal entailing the government’s destruction of information related to the bad policy choices that contributed to high energy costs. The revelation that the CEO of the province’s main electricity company, Hydro-One, makes an outrageous 6.2 million in salary benefits has understandably further fed a rising populist angst against the ruling party. Canada’s political elites appear immune to the sensibilities of the wider public.
Formal Democratic Institutions are not enough
The cases discussed above suggest that the operation of formal democratic institutions will only be as fair, effective, and legitimate as the underlying power relationships and societal consensus that supports them. If those with inordinate economic power can permeate political and bureaucratic institutions and shape the behaviour of policymakers, the legitimacy of political leaderships is quickly undermined. Overtime, the legitimacy of formal democratic institutions is likely to fall prey to the public perception that these institutions do not operate in their interests, but instead support the interests of the already rich and powerful. Rising levels of socio-economic inequality feeds such perceptions, as the wealthy appear able to accumulate ever-larger shares of national wealth. A cross-national political elite consensus that agrees to resist business pressure and pursue policies that ensure fair distributive outcomes is essential to both the legitimacy of liberal democratic institutions and the avoidance of populist instability. In some cases, such a scenario is highly unlikely given current the unequal configuration of political power. In others, like the Canadian case, political elites cannot act soon enough.