How Democracies Collapse

Like you, I have been told by the media that "democracy is on the ballot" in America. With such a bold statement, I decided to dig into some history and run some comparative analysis. Below, I dive into the historic accounts of failed democracies, the current economic state of America, and strategies I find interesting and valuable for getting us to a better state.

HISTORY

Throughout history, economic blunders have caused democracies to collapse more often than political overthrows. The average age of democracies before transitioning to non-democratic regimes is approximately 16.5 years, with an average debt-to-GDP ratio of around 50%. Financial crises, often more than political instability, have been the common cause in 70% of these cases.

1. Germany (Weimar Republic, 1919-1933):

- Age: 14 years

- Debt-to-GDP: >100%

- Context: Severe economic hardship due to hyperinflation in the 1920s and the Great Depression in the early 1930s eroded public confidence in democratic institutions, facilitating the rise of Adolf Hitler.

2. Chile (Democratic government post-World War II until 1973):

- Age: 28 years

- Debt-to-GDP: 30-40%

- Context: Economic instability, inflation, and external debt weakened public trust in Salvador Allende's government, paving the way for General Augusto Pinochet's military coup.

3. Italy (Democratic period post-World War I until Mussolini, 1919-1922):

- Age: 3 years

- Debt-to-GDP: >100%

- Context: Post-World War I economic challenges and war debt facilitated Benito Mussolini's rise to power and the establishment of a fascist regime.

4. Spain (Second Spanish Republic, 1931-1939):

- Age: 8 years

- Context: The Spanish Civil War led to severe economic disruption and increased national debt, contributing to the fall of the Second Spanish Republic and Francisco Franco's dictatorship.

5. Thailand (Periods of democracy between frequent military coups, such as 1992-2006):

- Age: Varied, with some democratic periods lasting only a few years

- Debt-to-GDP: 20-40%

- Context: Various coups occurred against a backdrop of economic instability, each period of political unrest marked by significant economic challenges.

6. Argentina (Democratic periods between military coups, such as 1973-1976):

- Age: 3 years

- Debt-to-GDP: 30-40%

- Context: Economic difficulties, including inflation and external debt, led to public dissatisfaction with democratic governance and a military coup.

7. Pakistan (Democratic periods between military coups, such as 1971-1977):

- Age: 6 years

- Debt-to-GDP: 40-70%

- Context: Economic instability and debt crises frequently preceded military coups, each period of democratic collapse marked by significant economic challenges.

8. Venezuela (Fourth Republic, 1958-1999):

- Age: 41 years

- Debt-to-GDP: 40-50%

- Context: Economic mismanagement, declining oil prices, and increasing national debt led to severe crises, weakening democratic institutions and facilitating the rise of authoritarianism. The collapse was marked by significant violence, including widespread protests, government crackdowns, and political unrest.

9. Egypt (Post-2011 Revolution democracy until 2013):

- Age: 2 years

- Debt-to-GDP: 80-90%

- Context: High public debt and economic challenges contributed to public discontent with Mohamed Morsi's government, leading to military intervention.

10. Turkey (Multi-party democracy established in 1950, gradually eroded after 2000):

- Age: Around 50 years of stable democracy before significant erosion

- Debt-to-GDP: 30-40%

- Context: While the coup attempt was primarily political, underlying economic issues such as inflation and public debt contributed to ongoing instability and democratic erosion.

TODAY

Examining the current state of American finance and politics provides insight into how economic conditions influence democratic stability:

Economic Context: As of 2024, the U.S. national debt exceeds 120% of GDP, reflecting significant borrowing and fiscal challenges. Inflation rates have fluctuated, with recent years experiencing higher-than-average inflation due to supply chain disruptions, stimulus spending, and global economic uncertainties. The unemployment rate remains relatively low at 3.7%, but concerns about wage stagnation and job market disparities persist. The labor force participation rate has slightly declined, indicating potential issues with job market engagement.

Political Polarization and Gridlock: The U.S. is experiencing high levels of political polarization, with deep divides between major political parties. This has led to legislative gridlock and challenges in passing significant policy reforms. Trust in democratic institutions, including Congress and the electoral process, has eroded, with growing skepticism about the integrity of elections and the effectiveness of government.

Military Influence and Security: While the military remains under civilian control, concerns about the politicization of military leadership and national security issues influencing domestic politics are increasing.

Weak Democratic Institutions: Despite having strong democratic institutions, there are concerns about their resilience in the face of partisan attacks, judicial politicization, and efforts to undermine electoral processes.

External Influence and Intervention: The U.S. faces challenges from foreign interference in elections and political processes, including disinformation campaigns and cyberattacks from state and non-state actors.

FUTURE

To address the challenges facing our democracy and economy, America must focus on producing materials, energy, and products more efficiently than anyone else in the world. We need to establish clear national goals:

1. Increase Production Efficiency: Achieve world-leading levels of efficiency in manufacturing and production processes to reduce costs and improve competitiveness.

2. Enhance Energy Sustainability: Invest in renewable energy sources and technologies to ensure a sustainable and reliable energy supply.

3. Develop Circular Supply Chains: Create supply chains that minimize waste and maximize the reuse and recycling of materials, reducing dependency on imports.

4. Foster Innovation: Encourage innovation in technology and manufacturing to stay at the forefront of global advancements and maintain a competitive edge.

5. Strengthen Domestic Manufacturing: Reduce reliance on foreign imports by revitalizing local industries and increasing domestic production capacity.

6. Create High-Quality Jobs: Generate employment opportunities in high-tech and sustainable industries, ensuring economic growth and stability.

CONCLUSION

We have fallen too far into a consumer economy that we have forgotten the value of American production. With a major technological revolution propping up the American economy, we must not lose sight of our common people making and moving the goods we all depend on. Regardless of where you land politically, history shows us all that we must improve our P/L as a country. Working together, innovating, and competing against the world are the key to our success and the futures for our children.