LONDON – The year 2016 showed that the durability of liberal democracy can no longer be taken for granted, even in the West. In fact, Harvard University political scientist Yascha Mounk’s analysis of World Values Survey data shows that, in many Western countries, public confidence in democracy has been declining for quite some time.
What explains this trend? The political upheavals of 2016 suggest that many people are frustrated with democratic inaction. Slow income growth, unemployment, inequality, immigration, and terrorism are supposedly not being tackled decisively enough. Democratic countries’ political establishments seem to be in a permanent state of torpor, fueling voter demand for strong leaders who promise to smash through political gridlock and sweep away bureaucratic resistance to bold new policies.
These leaders – who assert that they alone can fix their countries’ problems – are often sought, and found, in the corporate world. Many people regard a successful CEO as someone who can deliver on well-defined objectives, so they conclude that a businessman can solve social problems that a politician cannot.
But this view is misleading, because political leadership is fundamentally different from corporate leadership. In economists’ parlance, it is the difference between general-equilibrium and partial-equilibrium analysis. Corporate leaders must deliver for their shareholders, and shouldn’t bother themselves too much with what happens to the rest of society. If profit maximization requires cutting costs and downsizing, the corporate leader can eliminate jobs and issue severance payments to redundant workers. What happens to these workers next is a concern for somebody else – namely, the state – to address.