Welcome to the post-democratic dystopia

1
Ben D. Kritz

Ben D. Kritz

THERE is a concept, which was originally described by political science professor Colin Crouch about a dozen years ago, that the combination of capitalism and democracy is causing the latter to evolve into an aristocratic or oligarchic form.

That shouldn’t come as much of a surprise to anyone, especially in this country, which has a long experience in being controlled by a narrow, hereditary political elite. What is surprising, however, is how quickly the new, post-democratic system is self-destructing; we see evidence of it in the world’s current economic issues – money ‘trapped at the top’ of the financial system in the markets, flagging demand and detrimentally low prices of basic commodities like oil and coal.

This wasn’t supposed to happen, of course. The shift in economic policy toward privatization and globalization was supposed to lead to better, more competitive services, and spread economic benefits by opening up access to more national economies, thus providing economic opportunities and eliminating poverty on a large scale. It hasn’t been a complete flop; over the past decade the number of people worldwide living below the lowest poverty line (the equivalent of $1.25 per day) has been impressively reduced. In many places, including the Philippines, a middle class of sorts has developed.

But when one takes a closer look, the gap between the income of the middle class and the income of the highest economic segment of the population is growing rapidly. The more money flows to the top segment – the people behind the biggest conglomerates and holding companies – the less is available for entrepreneurial development and job creation within the growing middle class.


So here’s the problem: The middle class has grown as a result of business development and job creation from the leading economic class, but is losing strength. Middle class families grow, so unless wage increases (through direct increases for existing jobs and the addition of new jobs) match that growth, middle class resources are gradually depleted. Which means the middle class spends less and less on consumption, and invests less and less in small business – which in turn further handicaps wage growth, because small and medium enterprises have an outsized positive impact on job creation.

The top of the economic heap – the class that includes national conglomerates, large financial institutions, and multinational corporations – is not, as I pointed out last week, investing earnings into business expansion, certainly not at the rate needed to match an ideal rate of wage growth, and so the standard of living for the vast middle class is slowly degrading. In the UK, for example, the population has now fallen back into being net borrowers (households are spending more than they earn on an annual basis).

In places where the economy is falling apart more quickly (Brazil and Venezuela, for instance), some people are even slipping back into poverty after having climbed into the middle class in better times.

What seems to be happening now is that the capitalist aristocracy is approaching its own limit. All the vast amount of capital circulating in the financial markets is there to earn returns, but as vast as the amount of money is, it still needs at least some input from tangible business-expanding investment; the ridiculously high valuations of companies cannot be sustained through market activity alone. A certain level of expansion is required, but it, in turn, requires a certain level of consumer demand, which is a function of the capital available to the middle and lower economic segments. The appetite for ROI, more specifically ROI growth, seems to have exceeded or is perilously close to exceeding, the global economy’s capacity to maintain it.

There may not be a solution to the gradual decay. The obvious cause is an unproductive distribution of wealth, but the tools available to conventional economic knowledge that are used to redistribute capital – manipulating key interest rates to spur lending, or putting cash directly into financial markets through currency or securities trading – have not had enough of an impact, and will have even less as the world economy grows over time. The long-term solution, such as increasing the rate of wage growth, and then maintaining the rate at an efficient level, is largely driven by job creation, and probably cannot be accomplished fast enough at this point to make a noticeable difference over a short term.

What the future will bring is anyone’s guess, but if you believe that history at least rhymes, even if it doesn’t exactly repeat itself, our prospects could look a bit grim. The last time the world encountered the sort of economic circumstances we are experiencing now was in the years before the Great Depression.

ben.kritz@manilatimes.net

Share.
.
Loading...

Please follow our commenting guidelines.

1 Comment

  1. First, the globalists must be overthrown. As long as its the globalists who are calling the shots, there is no hope.