Has Democracy Become an Obstacle to Economic Prosperity in the Developed World?

Democratic governments by definition must have the support of the majority of voters in to remain in power. One potentially fatal flaw in this system is that whilst the majority wield the power to hire and fire politicians, this same majority consists of voters who are often ignorant of how the economy works and are either resistant or downright hostile to any changes that threaten their own short term self-interest. Appealing to popular misconceptions and fear mongering have become commonplace tools of attracting voter support even if the long term economic prospects of the country are diminished as a result.

Greece is a poignant example. Years of overgenerous welfare and pensions schemes, together with job security verging on invincibility, having made a considerable contribution to their enormous debt burden. Now that the party is over, the need to restructure the entire economy in the midst of deep recession is devastating. Even the US came close to defaulting on its debt, with the Democratic and Republican parties vying for political advantage in a game of political brinksmanship, culminating in the loss of its S&P AAA rating – almost making a mockery of the once ironclad concept of ‘risk-free’ debt.

Australia is also showing signs of becoming increasingly unstable due to the democratic system (though universes away from the ‘Greek tragedy’). The government bows to populist pressure by protecting industries instead of explaining to voters that an ‘economy in transition’, as they so often refer to it, means jobs will be lost and inefficient sectors will perish in favour of new and more efficient industries. The government should be seeking to ease this transition by retraining workers, not by paying huge subsidies to industries that otherwise cannot compete.  Meanwhile the Liberal/National Party opposition is promising to rescind almost every Rudd/Gillard government initiative, leaving businesses with very little certainty and thus hesitant to invest. Public opinion is so malleable that not only the opposition but also various lobby groups have been able to whip up such a frenzy of fear of imminent economic doom resulting from the carbon and mining taxes (amongst other policies), that the head of the federal Treasury, Martin Parkinson, has had to remind Australians that they do not live in Greece!

Perhaps Plato was right (the irony that he was Greek notwithstanding) when he argued in ‘The Republic’ for an ideal state to be run by wise Philosopher Kings or ‘Guardians’. Translated for our era this would be a society led by technocrats with each government department run by the best and brightest minds from their respective fields. Unfortunately without elections there would be little safeguard against tyrannical or corrupt behaviour, and therefore for now I will have to agree with Winston Churchill’s remark that “Democracy is the worst form of government, except for all those other forms that have been tried from time to time.”