I was surprised to learn from my friend Pascale Delpeche, the widow of the outstanding Yugoslav writer Danilo Kiš (rumor has it he was once considered for the Nobel Prize in Literature but passed away just days before the decision was to be made public), that translations of fiction need refreshing every 20 years or so to stay relevant. Could this also be true for book reviews? I return to this review of Iversen and Soskice’s Democracy and Prosperity three years later, now within the context of a new project on public administration in Serbia, and a few dozen more books’ worth of perspective. Back in 2021, I felt disappointment with the book at three levels, and the passing years have only deepened this dissatisfaction.
The scope of exclusion: A narrow view of democracy and prosperity
Originally, the Great Disappointment refers to the false prophecy of William Miller about Christ’s Second Coming in 1844. This, as we know, didn’t happen, leaving his followers bewildered and disillusioned.
One cannot help similar feelings after reading the recent book by two respected academics, Torben Iversen and David Soskice, entitled Democracy and Prosperity (Princeton University Press, 2019). The disappointment is at two levels, and this disappointment is even more disappointing, so to say, in light of the ongoing COVID-19 pandemic.
The first one concerns the scope of the study. Despite the grand title that promises a universal answer to the relationship between democracy and prosperity, the reader quickly realizes that the democracy the authors analyze is limited to what they call ACD – Advanced Capitalist Democracies. They limit their study to OECD countries; in practice, the analysis focuses on the 6-7 most advanced economies in the world, such as the US, UK, Germany, France, and some Scandinavian countries. Hence, you’ll be looking in vain for the general answer that would clarify the relationship which the title boldly promises to explain. The book entirely leaves out three-quarters of the world’s population who live under various regimes (democratic and not so) and experience varying prosperity levels. This narrow scope calls to mind Josep Borrell’s stark metaphor, where Europe is a “garden” and the rest of the world is a “jungle.” Much like Borrell’s framing, Iversen and Soskice’s analysis fences in the world they deem fit to study while neglecting the majority.
The rapid growth of prosperity in China and Southeast Asia (as well as in some African countries) is completely ignored, along with the opportunity to explore any link between prosperity and non-democratic regimes. It takes a stretch of imagination to accept the authors’ argument (advanced from the first pages) that democracy and prosperity are Siamese twins when relatively prosperous societies exist under different types of democracy—or no democracy at all, at least as the authors understand it.
This is a vivid demonstration of “cupola thinking” in academia. German philosopher Peter Sloterdijk observed this phenomenon in The World Interior of Capital, noting that “globalism” doesn’t mean one big global society; it can also mean a globe in the sense of a cupola, grouping the privileged elite under a protective shell and isolating them from the rest, deemed undeserving of consideration. This form of intellectual arrogance and insularity is counterproductive, as it restricts the concept of democracy to a handful of countries (and only two types of Western democratic regimes), excluding most of the world in the process.
Curiously, the book also neglects closer cases within the ACD periphery, such as Serbia, where democracy and economic growth present a striking paradox. In Serbia, democracy—no matter the aspect measured—trends in the opposite direction of economic growth, highlighting questions that Iversen and Soskice’s framework simply fails to explain. For example, Serbia’s GDP increased 4.5 times over the past 20 years, rising from around $39 billion in 2015 to $82 billion recently in a span of just 8 years, with a continued trajectory toward further growth in the coming years. Meanwhile, Serbia’s Electoral Democracy Index, which tracks democratic standards, has seen a significant decline, falling by approximately 20 percentage points over the same period (the left chart in Figure 1).
But let us forget for a moment about Serbia, which some researchers classify as “the periphery of the periphery.” Let us move closer to the ADC center. Here again, the data do not always corroborate the author’s thesis about the positive relationship between capitalism and democracy. Take the case of Hungary. This country backslid in its electoral democracy score by a swopping 40 percentage points between 2010 and 2023 (leaving Serbia far behind in this respect). However, its economic growth continued unabated, demonstrating the lack of a symbiotic relationship between capitalism and democracy, which the authors claim (the right chart in Figure 1).
Figure 1: Serbia’s Electoral Democracy Index and GDP, 2001–2023. Source: Author, based on V-Dem, National Bank of Serbia data, and WDI database.
When the authors discuss the challenge of a “middle income trap” (why it is difficult to break into the rich ACD club), they put the onus on the aspiring countries criticizing their inability to conduct an economic revolution by making major investments in new technology and the supply of highly skilled workers. They seem to be genuinely oblivious of the fact that access to modern technologies is highly regulated and significantly restricted. As I’m writing this, the European Parliament has just voted down an amendment to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to back India and South Africa’s proposal to temporary lift intellectual property rights for the COVID-19 vaccine.This voting has brought together even those who normally disagree: the centre-right European People’s Party (EPP), the socialists (S&D) and the liberals (Renew Europe) all voted against. So much about democracy for us from under the cupola and democracy for them.
This inverse relationship between economic growth and democratic indicators directly challenges the theory proposed by Iversen and Soskice in Democracy and Prosperity, where democracy and prosperity are seen as mutually reinforcing within Advanced Capitalist Democracies (ACDs). Serbia thus serves as a striking counterexample, highlighting how democratic measures and economic performance do not necessarily advance hand in hand, particularly within the periphery of the ACDs.
Methodological blind spots and circular logic
The second disappointment is linked to the methodology used by the authors, which is essentially reduced to a circular logic. They reject the notion that democratic capitalism involves a clash of interests between labor and capital. Instead, they present democratic capitalism as a conflict-free society (at least from a class perspective), an embodiment of social harmony and cooperation: “Democratic governments construct and reconstruct their economies, conditioned by past choices, in response to voter demands for effective economic management, internationally competitive economies, and a better life for themselves and their children.” Here, democratic governments are portrayed as benevolently attentive to their electorate, who, in turn, vote for governments that promote advanced capitalism. A delicious circular logic emerges: Advanced capitalism (Western-style) is the only way to make voters happy; the democratic process is the surest method to select the party that practices advanced capitalism best; ergo, advanced capitalism and democracy are symbiotically related. QED.
The authors explore several themes to demonstrate how advanced capitalism supposedly aligns with popular interests, the cornerstone of their theoretical construct. First, they argue that advanced capital is weak and cannot decisively influence political decisions (for instance, it is not as footloose in the era of globalization as often portrayed and is thus dependent on national markets and regulations). Second, the median voter (represented by the skilled workforce, on which, according to the authors, advanced capitalism is built) has a vested interest in perpetuating advanced capitalism because “this skilled workforce gains rent from advanced capitalism above the competitive market value of their skills.”
If you thought it was big capitalist monopolies that increased their profits in 2020 (COVID-19 or not) and are now gaining rents from capitalism, you would not be grossly mistaken. Microsoft’s net income increased by 13%, paling next to Amazon’s record 84% increase, which still falls below Goldman Sachs’s fabulous 135% net income growth. Apparently, though, it’s the skilled workers—whose incomes declined in 2020 despite unprecedented support measures—who are exploiting advanced capitalism. Mahler et al (2022) report that the world in 2020 witnessed the largest increase to global inequality and poverty since at least 1990. They estimated that COVID-19 increased the global Gini index by 0.7 point and global extreme poverty (using a poverty line of $2.15 per day) by 90 million people compared to counterfactual without the pandemic.
The U.S. recovery offers more evidence. Despite exhortations for a “better recovery,” we’ve seen the average hours worked per week rise by almost an hour to 34.9 since March 2020, with only a $15 increase in weekly earnings. This 1.6% rise in wages contrasts sharply with the GDP gains of 33.3% in Q3, 4.3% in Q4 of 2020, and 6.4% in Q1 of 2021. Recent data shared by Branko Milanovic shows that any COVID-driven reduction in U.S. inequality has now reverted to pre-pandemic levels. Once again, the power of capital is there to stay, despite all learned deliberations about the supposed harmony of advanced capitalist democracies (Figure 2).
Figure 2. Percentage change in real per capita disposable income between 2018 and 2022 in the United States. Source: Milanovic, B. (2024)
Economic theory suggests that employers should offer better wage terms to balance labor supply and demand, but this simply isn’t happening. Instead, businesses hold out, hoping they won’t have to increase wages. Yet, to Iversen and Soskice, the ACD model is a perfect match between capital and democracy: There’s no clash between the principle of “one person, one vote” and “one dollar, one vote” because both capitalist and worker supposedly want advanced capitalism to succeed.
Neoliberal ideological capture and the “Median Voter” illusion
The authors remain unfazed by the rising inequality in ACDs. For them, inequality is merely the result of technological change and political choices catering to middle- and upper-middle-class constituencies, who, they say, are unwilling to redistribute to the poor. This explanation conveniently overlooks research showing a hollowing out of the middle (Case and Deaton, Stiglitz, among others) and suggests that the so-called median voter may now be shifting rightward, as the middle class increasingly aligns closer to the upper-income brackets. As Joseph Stiglitz remarked, “Those on top have won and those at the bottom have lost, and lost a great deal.” So, who exactly is the “median voter” today, if not an echo of elite priorities?
This erosion of the middle class is both a product of economic shifts and a cause of its growing radicalization, as segments of the middle class adopt more extreme political views aligned with elite, market-driven priorities. This drift has contributed to the rise of right-leaning populist parties, as seen in recent elections in France (Rassemblement Nationale) and Germany (AfD), which capitalize on this sense of disillusionment. As Boris Kagarlitsky observes, the preservation of liberal democracy’s institutions doesn’t ensure their functionality, and by the late 2010s, the chasm between the populace and elites led to mass revolts. As democracy becomes increasingly hollowed out, as Kagarlitsky notes, even public debate becomes unwelcome, intruding upon a system now driven by principles of commercial gain and risk minimization. While the French left may claim victory in this year’s election for whatever they want (and as much as they want), Prime Minister Michel Barnier and his cabinet, representing minority right-wing parties, bear little resemblance to the results of July’s parliamentary election.
The United States ranks 26th out of the 32 countries that constitute the Organization for Economic Cooperation and Development (OECD) in voter turnout. Roughly about 60 percent of eligible people voted in the United States during recent presidential elections. But it is a well-known fact that wealthier people tend to vote at higher rates (Figure 3). Of course, wealthier people believe that they have more at stake if they don’t vote than those with less resources or income.
The two trends (the decreasing trend in voter turnout, which holds not only for the US but other OECD countries as well) and the raising share of wealthier people among the voters, which is anywhere between 10 and 20% (see Piketty’s Capital and Ideology) results in a shift of the median voter towards the richer end of the national income distribution. The so-called median voter is no longer in the middle of the distribution but closer to its right-side tail, effectively becoming a median for 50% of the top earners.
Figure 4. Voter turnout and social cleavages 1945-2020. Source: Piketty, T. (2019).
This, in turn, raises the question of which democracy is in question. For the authors, it is a classless advanced capitalist democracy based on social cooperation and harmony. But Marx argued that as long as capitalism and private property existed there could be no genuine democracy, that democracy under capitalism was bourgeois democracy, which is to say not democracy at all. While it would be in the interest of the working classes to enter a coalition with the bourgeoisie in supporting this form of democracy in order to eliminate feudalism this would be a tactical maneuver. Capitalist democracy could only result in the increase in exploitation of the working classes. Only the elimination of capitalism and private property could result in the emancipation of the working classes and the attainment of true democracy, as Marx stressed.
Authors as different as Branko Milanovic, Yascha Mounk, Paul Collier and Joseph Stiglitz point to the increasing power of capital in shaping politics and ultimately influencing the election outcomes. Stiglitz highlights money’s dominance in politics, from lobbying to media controlled by elites. In his words, the wages adjusted for inflation at the bottom of the income distribution in the US are at the same level as they were 65 years ago. The “symbiotic” link between capitalism and democracy seems less about equality than about a subtle capture, as even the Economic Origins of Dictatorship and Democracy by Acemoglu and Robinson acknowledges. They concede that one person’s vote may be worth more than others and, in particular, the elites may be able to exercise more or less influence over what happens in a democracy.
For Iversen and Soskice, however, this hollowing out of the middle goes unnoticed. The Median Voter Theorem (MTV), which Iversen and Soskice use as their workhorse model, is the simplest and perhaps the most naïve setup in which each person has one vote. In reality, however, is as well-known that political parties have objectives that are to some extent autonomous from those of citizens, and the policies they offer reflect them, not simply the wishes of the median voter (see Acemoglu and Robinson). This is particularly true when there is uncertainty in the outcome of elections or parties cannot commit to arbitrary policy platforms. When either of these is true, political parties’ objectives, not simply the preferences of the voters, are important in influencing political outcomes. In this case, groups that can capture the agendas of political parties can influence democratic policy to a greater extent than their numbers would indicate.
The existence of a symbiotic connection between capitalism and democracy has been questioned by many authors. David Harvey in Seventeen Contradictions and the End of Capitalism says: ”Bourgeois democracy has not necessarily being a consequence of capital’s rise to dominance as the economic engine of a social formation: its owes its dynamic to broader political forces and to long-standing attempts to find collective forms of governance that effectively bridge the tension between the potential arbitrariness of state autocratic power and the popular desire for individual liberty and freedom.”
Peter Burger in his book The Capitalist Revolution (1986) claims that capitalism is a necessary but not sufficient conditions of democracy and that democratic governance may become impossible if a capitalist economy is subjected to increasing degrees of state control while opening socialist economies up to increasing degrees of market forces can make democratic governance a possibility under socialism. One big assertion in Democracy and Prosperity is a strong state that works in the interest of the majority. This is a premise that needs proof and there are too many proofs to the contrary, as the latest developments show. After all, in the words of Marx, a modern bourgeois democracy is just a system where the oppressed have an opportunity once in a while to choose who will oppress them during the next electoral cycle.
The increasing power of money shapes the dominant ideology influencing not only who votes but also how they vote. The ideological capture of the big capital (of which, for example, Fred Block writes in Capitalism: The Future of an Illusion) is a reality. In the not-so-distant past, we observed for steady approval rates of Donald Trump among Republican voters, no matter how much his policies benefitted ordinary Americans. To achieve this, the big capital deploys via the state what Louis Althusser calls “ideological state apparatuses”. As a class seizes state power and becomes dominant, it has to have the use of not just the repressive state apparatuses (the army, the police, the courts), which function above all on physical violence, but also of another type of apparatus, which functions above all on ideology in other words, on persuasion or inculcation of the dominant class’s ideas on “consensus”. ADCs are obviously very successful in creating such apparatuses. The argument used by Iversen and Soskice that the capital in advanced economies cannot produce much political influence because is too weak, driven by diverse interests and cannot overcome the collective action challenge does not stand. The capital does not need to solve the challenge of collective action when it has a state acting on its behalf.
The assumed symbiosis between capital and democracy, it seems, serves mainly capital—it is a parasitic, not a mutually beneficial relationship from the perspective of the working class.
Protect the status quo in the garden!
The last disappointment is how comfortable the authors are with modern capitalism and the lack of the slightest effort to discuss if not alternatives (that would be too much considering their ideological stance) but at least some improvements to the obvious failures of capitalist democracies. Even those who are absolutely convinced about the advantage of modern liberal democracy (i.e. capitalism) over any other regime (such as Yascha Mounk and Paul Collier) do recognize some negative trends and suggest how capitalism functioning can be improved, not to mention the authors on the left of the political spectrum, such as Piketty and Varoufakis, who argue for “participatory socialism” with a broad-based ownership base, stronger redistribution mechanisms, greater role for social property, etc.
Not the authors of Democracy and Prosperity, though. For them, to borrow from Moliere, ”Les malheurs particuliers font le bien général; de sorte que plus il y a de malheurs particuliers et plus tout est bien”. In this regard, Democracy and Prosperity exemplifies what Raju Das describes as the marginalization of Marxism in academia, where critical perspectives on capitalism and class conflict are increasingly sidelined. Instead, elite priorities are dressed up as objective scholarship, reinforcing the ideological capture that favors neoliberalism over a meaningful critique of capitalism’s inherent inequalities. This book epitomizes academia’s neoliberal capture, where elite ideology masquerades as impartiality, cloaking a system that fails most of humanity.
In the end, Democracy and Prosperity resembles the “garden” described by Josep Borrell—an enclosed, idealized world that isolates itself from the vast, complex “jungle” beyond. By focusing exclusively on privileged democracies and excluding the rest, the book fences in its worldview, offering little insight into the global realities that shape and challenge democracy today.