Inequality, Democracy, and Liberalism

• In Event: Inequality and Democracy

Abstract

Does economic inequality pose a threat to democracy? The potential damaging impact of inequality on democratic stability has drawn increasing attention in recent years. Especially, a growing volume of literature addressed widening income disparity as a major force that drove the unprecedented rise of authoritarian populism and the erosion of democratic institutions simultaneously witnessed across the world over the last few decades.

The established literature on democratic governance generally points to the destabilizing effect of inequality. Studies of democratic support provide cumulative evidence that worsening inequality may dampen public support for democracy, which would in turn pave the way for the legitimacy crisis of democratic governments. Specifically, some devote attention to the authoritarian turn within democratic regimes that might occur once the public becomes less content with performances of democratic governments and more sympathetic with leaders being willing to transgress democratic norms and rules when necessary to better serve the interests of their constituents. Relatedly, studies of democratic breakdown stress that ever-increasing wealth disparity would raise the likelihood of transition from democracy to autocracy by dramatically increasing the political costs of redistribution, often considered central to democratic governance, among the elites.

And yet, although the destabilizing effect of economic inequality seems to be broadly accepted, evidence remains inconclusive. The literature on democratic support relies heavily on cross-sectional analysis. This is problematic, because studying the stability of democracy is aimed at investigating the extent to which democracy persists over time. Cross-sectional analysis is also prone to potential bias from unobserved country-level confounders, which is often a serious concern among students of comparative political economy. The literature on democratic breakdown tends to fare better with longitudinal evidence. Previous studies, however, do not take account of heterogeneous qualities of democracy: if inequality destabilizes democracy, it seems unrealistic to assume that it does so uniformly across all democracies. One may instead question if the destabilizing effect of inequality would differ across democracies, as the citizen’s political attitudes are likely to be structured by the varied qualities of democratic governance.
In this paper, we investigate whether inequality destabilizes democracy, drawing on a compiled dataset of 92 democracies that covers a span of 30 years (1990-2020). Our analysis proceeds in two parts. First, we test the longitudinal effect of inequality, examining how increasing inequality within each country affects the stability of democratic governance. Next, we explore whether this effect varies by the quality of democracy. To capture the differential qualities of democratic governance, we leverage on a well-established typology: electoral democracy (the fundamental type of democratic regime where free and fair elections are held regularly) and liberal democracy (an advanced type of regime where, in addition to elections, the conventional set of counter-majoritarian measures are institutionalized to strengthen pluralism and equal representation). To complement this analysis, we also conduct a set of micro-level cross-sectional analyses of income disparity and its effect on undemocratic attitudes in the two different types of democratic regime.

Our study advances the existing literature in several important ways. First, our analysis provides the first longitudinal evidence on the differential effects of economic inequality on democratic stability across the democratic regimes. Our analysis lends strong support for the destabilizing effect of inequality within electoral democracies, whereas yielding weak evidence for it within liberal democracies. Second, our micro-level cross-sectional analysis complements our main finding by drawing on a demand-side dynamic of income disparity and undemocratic inclination. Consistent with some recent studies, income disparity turns out to fuel undemocratic inclination among citizens in liberal democracies to a greater degree than in electoral democracies. We find, however, that the effect of regime, i.e., living in a liberal democracy instead of an electoral democracy, dramatically outweighs the effect of individual-level income disparity. Finally, our study sheds new light on the role of democratic quality in protecting democratic governments when threatened by distributive failure. Despite long-standing controversies about its troubled marriage with democracy, liberalism in the end turns out to be a guardrail of democracy in hard times.

Author

• Sang Kyung Lee, Sogang University