Economic Inequality as an Inhibitor to Democratic Change

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High levels of economic inequality have frequently been cited as a reason for why democracy may not be effective in a certain nation, or why democracy cannot prosper for long periods within a country. Democracy in this context is referring to a nation that holds free and fair elections with broad participation, along with a rule of law that contains checks and balances on power (Treisman, Lecture 1). Inequality can be determined using the Gini coefficient, a number between 1 and 100 (from equal to unequal) created by examining various factors of a nation and observing which people have power and wealth. Income inequality inhibiting democracy is far more nuanced than first glance. In fact, this theory needs to be split into two separate elements: does economic inequality prevent the establishment of democracy, and also how is inequality measured in different time periods? The measure of inequality has changed over time, and as wealth has gained mobility, this has affected the way democracy might be implemented in a nation. Scholars from Aristotle to the present day have discussed this very topic, citing various factors or reasons for why inequality cannot foster democracy. It is important to look at the difference and redistribution of the rich and poor in a society, as well as a middle class, and whether that has an impact on democracy. Similarly, capital mobility and the transition from land assets to mobile assets have a significant effect that explains why inequality might impede democracy. High levels of economic inequality impact the establishment of democracy, as factors such as the unequal distribution of power, the lack of the middle-class buffer, and the differentiation of capital prevent democracy from taking hold in certain regions in the world.

The relationship between economic inequality and democracy has been examined via the theory of redistribution explained by Alan Meltzer and Scott Richard. However, this theory does not account for the immense power that the rich have in some societies around the world to suppress protest. The Meltzer-Richard model states that when the gap between the rich and the poor increases, the rich suffer more, since they will be more heavily taxed as a result of amassing a large part of the resources in the economy (Acemoglu & Robinson, 36). Theorists point to this aspect to explain why inequality can lead to democracy; they believe the rich will want to impose a democracy to redistribute the wealth to stop tax increases (Acemoglu & Robinson, 36). This is splendid if the rich, or ‘elites’ as Acemoglu and Robinson call them, gave into democracy so simply, but power is far more valuable than wealth, and the redistribution of power is unlikely to occur with a strict authoritarian regime (15). Nations with extreme inequality and authoritarianism like Saudi Arabia and Venezuela have amassed so much power and wealth that they can easily employ forces to quell pro-democratic sentiment. Their wealth and power are so consolidated at the highest level that citizens are dissuaded from protests in fear. If all else fails, elites in these places have the power to commit electoral fraud and put in a dictator, disenfranchising the poor who were hoping for democratic reforms (Treisman, Lecture 8). Electoral fraud by the elites to put their own in power can prevent democracy from taking hold in a nation, all under the guise of the democratic value of broad elections. Although the redistribution theory provides evidence for how an unequal society can potentially become democratic, it remains impractical when considering the power relations between the elites and the rest of society.

Nations with high inequality might still be democratic. However, these nations suffer from high instability and self-serving policies of the elite, due to the lack of redistributive policies. Acemoglu and Robinson use an ‘inverted U-shape’ to describe the relationship between inequality and democracy. In this case, if inequality is high, the chance for democracy to be implemented is low. However, this does not mean that there are not exceptions to this rule. Even though abuse of power may prevent democracy from flourishing in these nations, there have been many imbalanced nations that have harbored democracy, despite the inequality amongst their citizens. Latin American countries are a good example of this, as countries like Brazil have one of the highest rates of inequality in the world, but maintain a democratic system. The survival of the democratic system in Brazil is likely due to the transitional method it took to achieve democracy (Acemoglu & Robinson, 38). Since Brazil is highly unequal, its democratic transition needed redistributive policies for the poor. However, the nation took a conservative approach, which is why inequality is so high, and why Brazil has become seemingly less democratic over the years, plagued by government scandals that have taken money out of the country. As a result, democratic systems in highly unequal places are mostly unstable and volatile, since the elites are passing policies that give them more power rather than redistribute amongst the population.

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Another aspect that is sometimes forgotten in this discussion of inequality hindering democracy is the establishment of a strong middle class that is instead the reason for democracy in the first place, and its absence in a country makes it difficult for an unequal country to compromise amongst its citizens. Aristotle believed that the middle class was the way to achieve democracy, exclaiming: “great then is the good fortune of the state in which the citizens have a moderate and sufficient property; for where some possess much, and the others nothing, there may arise an extreme democracy, or a pure oligarchy; or a tyranny may grow out of either extreme…” (Aristotle,108). Rather than a highly unequal society being the cause for a lack of democracy, looking at the establishment of a large and mobile middle class can explain why democracy occurs in certain places rather than others. The middle class has access to a sufficient amount of resources as well as being educated, which makes democracy easier to swallow for elites that are concerned about extending democracy to the outer reaches of society (Acemoglu & Robinson, 39). Additionally, the middle class normally pushes for democracy because they have the economic means to participate in a social movement (Acemoglu & Robinson, 39). It is during a period of a large middle class that democracy does well, and societies without an established middle class suffer from this lack of a buffer between the rich and poor (Acemoglu & Robinson, 39). Acemoglu and Robinson reference Costa Rica as being a strong democracy in comparison with its Central American neighbors like Nicaragua and El Salvador, who lacked the middle class Costa Rica had. As a result, it was difficult for democracy to take hold in the region; there was larger inequality between the rich and the poor, with no middle class to bridge the gap. However, there are cases where a middle class is present, and the country is highly unequal, and this inequality prevails over a middle class trying to establish a democracy. China is a prime example of this, as the high level of inequality in the country and the oppressive power of the elites in country prevent the middle class from participating in any democratic movement. Ultimately, the absence of a middle class will usually stop democracy from gaining hold in the region, because the middle class provides resources for the transition to democracy.

One of the most important factors supporting the notion that inequality hinders democracy is the differentiation and disbursement of capital across time. Carles Boix, one of the proponents for inequality hampering democracy, believes there is a downward sloping relationship between the two, and the less likely it is for a democracy to emerge from an extremely unequal society (Tresiman, Lecture 8). One aspect of his graph he is missing is that he does not seem to take into account the change in capital that members of the elite have procured. In the 19th century, capital and property of the rich was based in land ownership. As a result, there seems to be a negative relationship between the land owned by large farms and a democratic system; when the elite owns most of the land, democracy does not flourish (Treisman, Lecture 8). When examining the 20th century, it is important to take into account the change from land being the primary source of capital to relatively mobile assets like human or financial capital (Treisman, Lecture 8). Money, technology, and goods are all easily movable to places like offshore banking centers, something that was impossible to do with land. Since the rich accrue mobile capital, a threat of democracy, and subsequently a redistribution of wealth, can be quickly avoided by transferring capital out of the nation. This tactic of hiding capital provides the elites with more power, as wealth could be held captive, ultimately making the poor citizens refrain from democratic movements. The movement of wealth in the 21st century allows highly unequal states to remain authoritarian, since the elites will simply use their mobility to invest elsewhere, leaving the lower classes in a precarious situation.

Nations with high inequality hinder democracy due to the immense power of the elites, along with a lack of a middle class, and the easy mobility of capital, all of which prevent citizens from fighting for democratic reforms. Other factors of course influence a country’s unique transition to democracy, like race, religion, or class reasons. Future research could potentially reveal other effects that explain a country’s ability to democratize, like the influence of global or ideological factors. The absence of a middle class, combined with the power and mobility of the elites in highly unequal countries create a climate relatively unsuitable for democratic change.

Works Cited

  1. Acemoglu, Daron, and James A. Robinson. Economic Origins of Dictatorship and Democracy. 2006, Chapter 2, pp. 15-47.
  2. Aristotle. “Section 11”. The Politics, Book IV, pp. 106-109.
  3. Treisman, Daniel. Lecture 1: Introduction. Roots of Democracy, University of California Los Angeles, January 8, 2019, Los Angeles.
  4. Treisman, Daniel. Lecture 8: Inequality and democracy. Roots of Democracy, University of California Los Angeles, January 31, 2019, Los Angeles.
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