Democracy in Europe is threatened by multiple forces that cannot be reduced to ‘populism’ alone. Structural economic change, inequality and the rise of technocratic policymaking are all part of the picture.
During the last decade, there has been much discussion of a ‘crisis of liberal democracy’. Initially triggered by the rise of anti-establishment politics throughout Europe, this narrative has intensified since 2016 following the decision by the British people to leave the EU and the election of Donald Trump as US president.
Commentators often point to the role of economic factors – in particular, the distributional consequences of globalization and trade liberalization and their impact on former industrial regions – in creating the conditions for these two politically seismic events. However, there is less consensus on the extent to which economic upheavals have contributed to a possible fundamental crisis of democracy, or on the channels through which this might have occurred.
This research paper seeks to go beyond the existing discussion in two ways. First, much of the debate has focused on ‘populism’, often seen as the main or even the only threat to democracy in Europe. By contrast, this paper argues that there exist a multiplicity of threats to democracy in Europe, that these may include – but are not limited to – populism, and that economic policymaking has a role in each of them. Second, the debate has tended to reduce economic factors, in so far as these are problematic for democracy, to wage or income inequality. It has frequently ignored other forms of inequality, including wealth inequality and the concentrated ownership of assets. This paper examines a wider range of economic factors that may affect the functioning of democracy in Europe.
While populism is hardly a new concept and there remain issues around its definition, it has become central to the debate about the crisis of liberal democracy – particularly in Europe and the US. Certainly, much has been made of the relative importance of cultural and economic factors in causing what is often misleadingly seen as a populist ‘wave’. Yet as well as tending to ignore other potential threats to democracy, this characterization has tended to simplify populism’s own complicated relationship with democracy. Indeed, in some ways populism may actually be considered a symptom, rather than the cause, of any crisis of liberal democracy. It can also be seen as a corrective as well as a threat.
This complex relationship becomes clearer when other threats to democracy are considered seriously. One such threat, as mentioned, is the dramatic rise in income and wealth inequality over the past four decades. While the level of economic inequality in a polity is itself a democratic choice, and can be calibrated through redistributive policies, it can become a threat to democracy if disparities in economic power translate into disparities in political power – as seems to have happened in recent decades in both Europe and the US. It is also important not to focus on income inequality alone as a driver of populism. This paper therefore seeks to broaden the analysis to other forms of inequality and their impact on democracy.
Another threat to democracy in Europe comes from what can be described as the ‘depoliticization’ of policy – in which technocratically driven economic decision-making becomes detached from the mechanics of popular representation and accountability to voters. Populism can in part be understood as a reaction to this trend. This is particularly the case within the EU. Although the various politicians, movements and parties in Europe that can be described as ‘populist’ differ in many ways, a common feature is their Euroscepticism: almost all are critical of, or opposed to, the EU, which is widely seen as embodying a particularly technocratic and essentially depoliticized form of (economic) governance.
Understanding the relationship between economics and democracy in Europe is important not just for describing contemporary trends and tensions accurately, but also for anticipating future challenges. How to shape the transition to a greener economy, for example, is quickly becoming a defining question for economic policymaking in the EU. More broadly, the role of the state itself – and particularly public investment – in the economy is being rethought. This is partly a continuation of the introspection prompted by the euro crisis of the early 2010s, and partly a reflection of the economic dislocations associated with the COVID-19 pandemic. Among other things, the pandemic has intensified discussion about reform of the EU’s fiscal rules and, by extension, its economic governance framework.
As with all economic transformations, Europe’s response to such challenges is likely to have distributional consequences: that is, it will create economic ‘winners’ and ‘losers’. The depoliticization of policy that has occurred as control and oversight have shifted over time to Brussels and Frankfurt is to a large extent the very aim of European integration. But such an approach risks undermining the democratic legitimacy both of transitional economic policies and of the EU more broadly. How decisions are made is as important as what the resultant policies are. Thus, questions around the relationship between economic policymaking and democracy are crucial for understanding not only where Europe stands now, but how to implement reform projects in a way that strengthens democracy instead of undermining it further.
This research paper explores these questions by examining in turn the main economy-related threats to democracy mentioned above. Chapter 2 discusses the relationship between economic policy and populism in more depth. Chapter 3 discusses the role of inequality in liberal democracy. Chapter 4 examines technocracy and depoliticization, and how it relates to democratic economic policymaking. Finally, Chapter 5 discusses some options for why and how economic policymaking in Europe could be ‘repoliticized’ beneficially, in the sense of reconnecting the system to the electoral constituencies which policymaking ultimately serves – or at least ought to in well-functioning democracies.
