Mark Blyth is Eastman professor of political economy at Brown University.
To get what you vote for, you must at least have the right to vote. Even in the wealthiest countries, democracy is of recent vintage — something that we tend to forget. The U.S. was founded as a republic, not a democracy: All of its adult citizens were not fully enfranchised until 1965.
Democracy as we now know it came to Europe at the end of World War II, as the antidote to fascism and then to communism. It worked so long as two policies were pursued: First, that the investor class of a given society could not move its wealth abroad and had to invest at home to make profits, increasing the well-being of its countrymen.
The second was that governments prioritized full employment and wage growth. The restrictions placed on global finance after the war made the first condition hold, and governments produced policies that made everyone richer — primarily because capital was invested at home and workers paid taxes that gave them social insurance. In short, the people got what they voted for — the promise of growth that would benefit everyone.
U.S. incomes doubled from 1930 to 1960 and then doubled again from 1960 to 1980. Europe had “Les Trentes Glorieuses,” and the Italians spoke of “Il Boom.” But this changed in the 1980s. The side effect of policies pushing up employment and wages was inflation, which acted as a class-specific tax on investment and profits. (If I invest today for a 5 percent return and inflation rises to 6 percent, I’ve lost cash.)
In response, the investor classes of the developed world launched a market-friendly revolution — think Reagan, Thatcher and the European central bank — that switched policy targets from employment and wage growth to lowering inflation and stabilizing prices. They also freed finance from its “repressed” condition, globalized production and privatized the state. They promised citizens more prosperity by different but purportedly more efficient ‘market friendly’ means.
But since 1980, outcomes for society overall have not been positive — only for the investor class. Growth in the period 1980 to 2008 was half of what it was in 1950 to 1980. And while productivity has risen and profits have soared, wages for almost everyone outside of the top 10 percent have stagnated. (After all, why should you get a pay raise if prices are stable? And be careful about asking for one: Your job might get moved abroad.)
To keep the illusion of prosperity going, the financial sector has filled the wage gap with credit. Citibank was hardly alone in offering people the chance to “Live Richly” and “open a cravings account” in the mid-2000s, and the 90 percent has leveraged up. Meanwhile, we got so good at controlling inflation that central banks today cannot generate any of it at all no matter how hard they try, which makes it difficult to pay back debts, especially when wages are not growing.
Unsurprisingly, people are beginning to realize that they are no longer getting what they vote for. Instead, they are being asked to pay more and more for what they already receive through taxes, taken from stagnant or declining incomes, which also must service their debts. In such a world it’s great to be a creditor and lousy to be a debtor. The problem for democracy is that most people are debtors.
In such a creditor-friendly world, however, democracy is reduced knowing that the menu of policy will never vary. Trump’s win in the Midwest, British voters deciding to leave the European Union, Italy’s referendum and Greece’s revolt against its creditors are all connected in this way.
Looking forward, similar trends are playing out in France, which will hold elections next year. At the moment, the only party that wants to fundamentally break with the policies of the past 30 years is the National Front. Given the pathetic state of the French left parties, leftist voters in France are being asked to turn out to elect a right-wing candidate who wants France to embrace more of the same liberalizing and income-skewing policies that have failed everywhere. But why would they do this? Just to stop the Front, whose economic policies are far closer to what they want? This has Brexit and Trump written all over it.
At the end of the day, when you no longer get what you vote for and when the role of voting is reduced to affirming the status quo, voters will vote for the most undemocratic of options if that is all that is “off the menu.” That’s democracy in action in a world devoid of choice. When you can’t get what you want and most people do not benefit from the economic outcomes of government, it’s also what makes democracy unstable.