Rowman and Littlefield International

The Crisis of Liberal Democracy

Published on Friday 19 May 2017 by Bernd Reiter

In his latest book, author Bernd Reiter examines case studies of laws and institutions which have been enacted in order to block economic elitism and protect democratic self-rule. Elitism undermines both democracy and markets, and ways are need to limit the power of professional politicians, as well as the asset holdings of the rich, so that the goods they hold can re-enter general markets. Reiter’s work explores the notion that alternatives to representative, capitalist democracy are possible, and can be put into practice. Here, we are given a preview of the findings of his work:

  • Given the fragility of our ecosystem and the dynamics of relational markets, we have to think beyond growth as a strategy to achieve welfare for all. We cannot afford to count on the repeated crises caused by unregulated capitalism for average people to have a fair chance on competitive markets. Our next severe crisis might be our last.

  • Instead of debating minimum wages, we need to start debating maximum earnings and institutions able to avoid the formation of intergenerational dynasties. The proper place to have these debates is the community or municipality, as it is only here that a discussion about “how much should any single member of our community be allowed to accumulate” makes sense and can be legitimate. Active community membership and an active exercise of citizenship at the local level promise to provide the canvas upon which political decisions can and must be made. Finding ways to avoid that one member of the community occupies half of the land, owns most of the houses, and controls most of the assets of a community is a political decision par excellence. Thus the key to rein in economic excesses and inequalities consists of invigorating local communities and shifting more political decision-making power to local communities, particularly legislative power. At times, it seems necessary to exercise a break with the past and start anew if social, political, and economic hierarchies have become too entrenched. However, even such a new start is prone to lead to the formation of new hierarchies that again tend to threaten democracy, equal opportunity, and fairness. Democrats thus have to be constantly in “reform mode” and willing to devise new ways to protect what is the core of democracy rule: self-rule, fairness, and equal opportunity. These are some of the main findings of this book.

  • Democracy cannot survive without shared interest and physical proximity. Face-to-face interaction is not only essential for real democracy, it is also necessary. A shared culture can achieve such shared interest, but it is not necessary for achieving it. There are cases, such as Vermont, in which shared interest has been achieved despite cultural and population heterogeneity. After all, a shared interest can be constructed across cultural and ethnic cleavages.

  • Lawmaking cannot be delegated. This is what the theory indicates and what the data also support. This finding also strengthens my assessment that the central problem of our current democracies is the excessive focus on representation and on voting. Voting is not related to democracy. The data thus support my locating of the problem of contemporary democracies with elected representatives. Elected lawmakers stand in the way of true democracy.

  • For markets to work properly and provide opportunities and fairness to new generations, redistribution is not enough. The data indicates this clearly. Fairness and equal opportunity over generations can only be achieved through either communal asset holding or the establishment of upper limits to income and wealth. The institutions we would need to put in place to achieve this goal would come very close to what has been labeled by such authors as Jacob Hacker, John Rawls, James Meade, and Anthony Atkinson as “pre-distribution” or “property-owning democracy.” In theory, these are systems in which all members of a community are given the same tools to succeed on competitive markets before they compete. There will still be winners and losers in such a system and incentives to strive and succeed, thus avoiding the known disincentives and moral hazards created by state-dominated markets.

  • Interestingly, the market distortions resulting from asset concentration and inequality demand similar remedies as those real democracies demand. To be sure, for democracy to work, a community must be constructed is such a way as to avoid the consolidation of political power and assets in a few individuals and families. It must also be guarded against the handing down of political power and wealth, as the formation of elitism in the form of an aristocracy will result. Those wielding power and controlling wealth will seek ways to hold on to it and pass it on to their children and family members. The people must find ways to avoid this tendency and they must erect institutional barriers against it if they want their democracies to remain real, deep, and lasting. My analysis shows that very similar measures must be taken for the sake of keeping markets open and fair to all. While my empirical analysis examined real direct democracy and fair markets separately, it becomes clear that they are indeed related. Just as the theory indicates, it is through fixing our democracies that we can and must fix our economies. This relationship is not symmetrical, however, as we cannot hope to fix our markets and through it also fix our democracies. Politics trumps economics in that it is through politics and by devising political institutions and regulations that we can reign in our different markets and ensure fairness and equal opportunity on them. My findings about the centrality of shared interest, physical proximity, and face-to-face interaction thus also apply to markets. Markets work best if they are embedded in local communities and constituted through trust-building, repeated, face-to-face interactions.


View Bernd Reiter's TEDx talk here:

If you would like to pre-order a copy of the book, please click here