Politicians need new economic narrative to preserve democracy
http://www.vancouversun.com/business/Po ... z1l7BJiqPZToo long to post here. Some excerpts:
Two important contributions to this discussion are found in the current issue of the journal Foreign Affairs. Francis Fukuyama, senior fellow at the Center on Democracy, Development, and the Rule of Law at Stanford University in California, warns in "The Future of History" that our economic system is "eroding the middle-class social base on which liberal democracy rests." Charles Kupchan, professor of international affairs at George-town University in Washington, D.C., in "The Democratic Malaise," argues that the inability of democratic governments to address the broad public's needs is "undermining the legitimacy and efficacy of representative institutions."
What threatens then is far more serious than a market correction, or sluggish GDP growth. What's at stake, if we buy into this thesis, is nothing less than the survival of the free world.
Liberal democracy took hold in countries where a majority of citizens reached a sufficient level of prosperity to consider themselves middle class, which explains the high correlation between developed nations and democracy. But Fukuyama says troubling trends could undermine the middle class, leaving only a minority able to achieve that status. For instance, real median incomes in the United States have been stagnant since the mid-1970s, the impact camouflaged by the emergence of two-income households, subsidized mort-gages and a flood of foreign (mainly Chinese) money, all of which produced the illusion that standards of living were rising. The collapse of the housing market, credit crisis and subsequent recession in 2008 forced Americans to face reality.
Whereas the benefits arising from changes in technology in the early phase of industrialization flowed down to the rest of society, particularly in employment, the benefits of technological innovation today accrue to a minority of well-educated and talented individuals. Kupchan points out that Facebook is valued at around $70 billion and employs 2,000 workers; General Motors is valued at $35 billion and has 77,000 employees in the U.S. and 208,000 worldwide.
Kupchan's remedy will be unpalatable to free marketers. He says the West must engage in economic planning on an unprecedented scale, with state-led investment in jobs, infra-structure, education and research. Furthermore, leaders must adopt policies that benefit the mass public rather than party faithful or special interests and, finally, Western governments must steer their electorates away from isolation and protectionism. "Globalization is here to stay," he says, "and retreat is not an option."
Both scholars end their arguments with warnings: Fukuyama says inequality may continue to worsen because elites in all societies use their access to the political system to protect their interests. Kupchan acknowledges that his proposals will require extraordinary leadership and political courage, adding that until they are realized, "the democratic malaise will persist."
