THE CRISIS OF DEMOCRATIC CAPITALISM IN THE 21st CENTURY

Vienna Federal Court Building, completed in 1839 (architect: Johann Fischer)

Levying hefty taxes on the top one per cent of a society ought to be the most natural thing for politicians seeking to please the masses. Yet most of today’s populist governments are more concerned with immigration and nationalist pride than with the top rate of income tax. This is a sign of the corrupting influence of inequality on democracy. It might be supposed that the more democratic a country’s institutions, the less inequality it should support. Rising inequality means that resources are concentrated in the hands of few and these should be ever more easily outvoted by the majority who are left with a shrinking share of national income. But studies of the relation between democracy and levels of inequality point in conflicting directions. They conclude that democracies raise more taxes than non-democracies, but this does not translate into lower levels of inequality necessarily. One possible reason for this disconnect is that people do not care much about inequality and therefore do not expect their politicians to do something about it. Yet when asked in surveys two thirds of Europeans express concern about current levels of inequality. Nevertheless, it is a fact that political agendas in Europe have become less focused on redistribution even as inequality has risen. Though both inequality and public concern about it are increasing, politicians seem less interested in tackling the problem. On the contrary, instead of increasing pressure on politicians to remedy unfair income distributions, rising inequality boosts the power of the rich, thus enabling them to counter the popular will. Research in political science shows that today’s rich wield outsize influence in Western democracies. The relation between concentrated wealth and political power of the rich is scarcely limited to political campaign spending or to the USA. The rich have many means to shape public opinion: financing nominally apolitical think-tanks or buying media outlets, for example. Although their power may sometimes be used to influence the result of a particular vote, it is often deployed more subtly to shape public narratives about which problems deserve attention. Matters related to “social order”, such as crime and immigration, are found in bills brought before European parliaments and issues such as economic justice are crowded out. This can be attributed to the “negative agenda power” of the rich. As their wealth increases, they have a greater ability to press politicians to emphasise some topics and ignore others. The evidence that concentrated wealth contributes to concentrated power is troubling. It suggests that reducing inequality becomes less likely even as it becomes more urgent. It implies that a vicious cycle of rising inequality is developing together with a loss of democratic accountability. From a historical perspective inequality inevitably rises until checked by disasters like wars or revolutions. Let’s hope that Europe’s one per cent is not all-powerful and uniform in its determination to keep distributional policies off the agenda. In functioning Western democracies political leaders might well find that redistribution can be a winner at the ballot box.

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