Entitlements – the weakening of democracy and capitalism?

When the Soviet Union imploded in 1989, some predicted that western style democracy and market capitalism would reign supreme. Countries without these institutions would move in a westerly direction. It was a nice thought but did not happen and the hubris has since been deflated.

One reason is the epidemic of entitlements granted to and then protected by special interests. Everyone from corporations to poverty groups seek benefits from governments which once granted are difficult to roll back. While the interested parties may benefit the system as a whole becomes infected and debilitating illnesses ensue.

Twenty-five years after writing The End of History in 1989, Francis Fukuyama has revised his previous view and examined the weaknesses of market capitalism and the democratic process as practiced in the North America, Western Europe and various other countries.

A question now is whether these institutional arrangements are in decline and what will replace them? Alternatives include, amongst others, some degree of anarchy, a repressive political regime, a more centrally controlled economy, or some combination of the foregoing.

Not being a student of these issues, my views are based on the limited history I have read and experiences I have lived through.

Measures which may weaken the democratic process.

1. First past the post electoral systems result in winners often being elected with well less than 50 percent of the vote. Proportional representation lessens this problem but creates others, the existence of many parties, each with a narrow interest creating difficulties in getting majority votes for the passage of legislation. One alternative is a preferential voting system whereby an elected representative must get 50 percent of the votes cast.

2. The electoral process encourages candidates to propose policies which attract particular groups of voters. These almost always cost money and over time become considered as entitlements. They are difficult to remove and tend often to increase in terms of cost. Sunset clauses supposedly limit these effects but don’t seem to work well once a constituency is created.

3. Electoral boundaries may be drawn so as to favour a certain party. U.S. Congressional districts are rife with this process of gerrymandering but it occurs elsewhere. Limiting the number of voters is another way to rig electoral systems as is specifying the qualifications which candidates for election must have.

4. Unelected (appointed) bodies such as Canada’s Senate may be given legislative powers, while in other jurisdictions the powers of an elected upper chamber may influence appointments or legislation.

5. Judicial positions may be held as a result of appointment or election with or without specified terms. There are downsides to both processes. Appointees may be given short terms. In the case of election, the person may be influenced in decision making by the likelihood of reelection.

These are some of the shortcomings I see of the democratic process. The term democracy is much abused. It is used in cases which result in one party rule. Many authoritarian systems describe themselves as democratic, while so-called democratic regimes have elements which are often undemocratic. In the long term, I think that the growth of entitlements, which are difficult to roll back, is the main Achilles heel of functioning democracies. This is one reason for the growth of right wing groups. If the elixir of democracy is to give people more and remove nothing, then the system may grind to a halt or at least malfunction so badly that people are encouraged to resort to extreme measures.

There is now a website which ranks countries by their degree of democracy. More countries are now considered democratic than in the past, but the criteria used do not include measures like the extent, growth and permanency of entitlements.

The future for market capitalism

1. Capitalism was always a mixed system with governments involved both to produce certain goods and services, and to provide a legislative framework for private actors to produce and distribute them. The issue is the extent and nature of this government activity. Even most libertarians expect that their property rights will be protected by a judicial system, their borders defended from attack and certain public goods like highways provided by the state. Socialists advocate much more government involvement in areas affecting the distribution of income as well as the production of goods and services.

2. Issues include the effectiveness and cost with which governments provide for the publicly supplied goods and services, as well as the extent to which things like education and healthcare are publicly supplied and regulated. Some lobby for more government involvement, some for less.

3. Private and public interests are now more intertwined. Financial institutions which are free market advocates also lobby intensively for a legislative framework which promotes their activities and protects them from loss in the case of defaults. After the latest global financial meltdown, the financial sector, with assistance from governments, has seen measures introduced which protect their interests. This is a form of corporate entitlement which becomes entrenched in the economy.

4. In the past the framework for market activity included laws and policies dealing with incorporation, taxation, competition, bankruptcy and contracts. These are now extended to include special measures for particular industry or market segments. They become a form of entitlement for the private sector similar to entitlements for individuals. Removal or amendment is difficult unless they are to be increased.

5. All may not be lost. One set of forces working against the debilitating effects of entitlements is the competition generated by information technology. The list of sectors shaken up by IT include all forms of communication, broadcasting, newspapers, magazines, films, television, publishing, education, transportation, healthcare and many other industrial and especially service activities. New technologies serve to undermine established entitlements in markets and may do the same in the political sphere as well with the growth of social media.

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