Not Just Democracy on the Ballot

by | January 8, 2024

This year nearly half the world’s population will go to the polls. Although issues, candidates, history, and context vary widely from one election to another, one profound challenge is common. It is the erosion of faith in liberalism. 

Liberalism can be defined as the willingness to respect and even accept different points of view, or new ideas. Liberalism in a political sense places primacy in the rights of the individual, in democracy, and in free markets.

Liberalism is the foundation of democracy and capitalism. It provides a framework of rights guiding how individuals should engage in society. 

But like all social constructs, liberalism requires faith in its efficacy if it is to thrive, or even survive. Without faith, liberalism will founder. That is the case today, and the consequence is this foundational pillar of society is rotting from within.

Liberalism has been under attack for at least the three centuries since the Enlightenment and humanism first gave birth to liberal democracy in North America, the UK, and parts of western Europe. Even during intervals when liberalism was most ascendent, for instance in the three decades following World War II, it had its detractors, in- and outside established democracies. 

Nor was liberalism ever achieved. There is no golden era to which any nation or collection of individuals can look back upon and say, without reservation or caveat, that pure liberalism prevailed. When it comes to ensuring the rights of every individual, liberalism has never been a finished work. It has always come up short. 

At the same time, liberalism’s powerful appeal stems from its aspiration. Liberalism, to paraphrase Martin Luther King, is a credo dedicated to bending arcs in the directions of individual rights, individual liberties and toward a more just society. It rests on the principle that laws grounded in ‘inalienable rights’, rather than arbitrary power, govern our lives and sometimes even limit our freedoms.

Paradoxically, while liberalism champions individual freedoms and rights, its greatest advances have occurred when liberalism has been a collective belief. There was a time, and it may yet return, when Adam Smith’s metaphor of an invisible hand was broadly accepted. Self-interest could deliver the common good. Liberalism served the collective interest.

In recent decades liberalism has been confronted by its greatest challenges since those of 20th century fascism or communism, or 19th century US slavery and civil war. Yet unlike those ‘external’ challenges of history, today’s threat to the liberal ideal comes from within. It is the erosion of faith in liberalism’s foundational principles. To us, that threat is more pernicious than the ones posed by all the armies amassed over the past 200 years in opposition to liberal democracy.

Today’s erosion of faith in liberalism has many causes, but four stand out. 

First, interdependence. Our economic lives are more interdependent and interconnected than in Smith’s world of atomistic, self-interested agents. Pollution, climate change and other negative externalities violate the core assumption that one’s self-interest invariably serves the common good.

Second, welfare. Hallmarks of liberal economics are specialization and trade, which unambiguously permit higher production and greater consumption. Yet human welfare is not the same thing as a singular focus on consumption-driven utility maximization. Not everyone, perhaps not even a majority in society, is willing to accept cheaper and more plentiful goods if the consequence is devastated inner cities, barren former communities of commerce or enterprise, diminished labor bargaining power, environmental degradation, or insecure supply chains. Liberal economics offers positive sum appeal, but it must encompass more than just consumer utility maximization. 

Third, human emotion. Humanism and liberalism are grounded in free will and rational decision-making. But real-world outcomes and the findings of behavioral science suggest that our capacity for free will and rationality is, at best, bounded. Exploiting our insecurities, weaknesses, impulsive natures, and needs for confirmation, social media and artificial intelligence weaken our capacity for reasoning by appealing to our raw emotions and base instincts. We become less capable of appreciating difference, nuance, and complexity. We become less receptive to differences of opinion or to new ideas, the essence of the liberal credo. As a result, we lose our capacity to meet the demands of liberal society.

Fourth, unequal playing fields. Excessive concentration of power and wealth in our economy and in our politics diminishes faith in both systems, as well as in their institutions. Over time the economy is seen less as a vehicle for meritocratic success, where ingenuity and hard work are rewarded, and more as a rigged system designed to perpetuate the power of elites. The political system, and increasingly not just our legislative and executive branches, but also our judges, justices, prosecutors, the police, the military, and our civil servants, are perceived to be partisan, offering their powers to the highest bidders.

President Biden is fond of saying that ‘democracy is on the ballot’ in 2024. That may be narrowly correct. There is every reason to believe that Donald Trump would even further degrade democracy in America if he again became president in 2025. He might even seek to end it.

But in portraying the 2024 election as a battle for democracy, President Biden is simultaneously understating the threat and diminishing his chances for victory. ‘Vote for me because the other guy is horrible, dangerous, or worse’ is not a rallying call. The other guy may be preying on the fears and frustrations of his followers, but at least he offers them hope for change, however distasteful it may sound, seem, or become.

When voters everywhere, but particularly in the US, enter the polls in 2024 they, like hundreds of millions of their brethren before them in history, want to vote for—not against—something.

Polls suggest that Americans, and in particular younger Americans, abhor the idea of two geriatric white men contesting the outcome. But we humbly submit that neither ageism nor racism are the root cause of their dismay. After all, America’s ruling political elite—its governors, representatives, and senators—have been dominated by ageing white men for as long as America has been a democracy. The present 118th Congress has the oldest average age of a senator (64.4 years) in the nation’s history and nearly the oldest average age of a representative (57.8 years). The average age of a sitting state governor (62.6 years) has never been older than today.

What bothers voters today is not the birth age of the candidates but their inability to address the needs of our age. To quote from our own Jackson Hole Economics mission statement, today’s voters recognize what the intellectual founders of the Enlightenment knew: 

“Free societies can only survive if outcomes are sustainable. Locke, Hume, Smith, Riccardo, and others elucidated the dangers of unequal opportunity, plutocratic tendencies, excessive concentration of wealth and power, and the need to recognize the inter-connected nature of economic and political systems.”

Those philosophers, were they alive today, would recognize what is on the ballot in 2024—the need to rejuvenate liberalism. To do so requires more than correctly abhorring the alternative. It requires re-affirming our faith in the liberal ideal.

A resounding 2024 message, instead, ought to encompass these ideas:

  • The role of a liberal democracy is to promote and defend individual rights without favor for, or disregard of, anyone. Human liberty must be universally and equally enjoyed by all. The concrete first step is to pass voting rights legislation that ends voter discrimination.
  • Markets are only free, and the invisible hand can only promote the common good, if competition prevails. The concrete step is to pursue anti-trust and anti-competitive cases more vigorously using existing and, if necessary, new laws.
  • Specialization, international trade, and technological progress raise output, but that alone cannot determine whether they are socially desirable. When ‘progress’ entails disruption, as it almost always does, public investment is required to promote opportunity among those disadvantaged by trade and innovation. The concrete step is that public policy must aim to boost broad-based gains in employment and living standards via investment in infrastructure, education, and training.
  • Free markets fail when externalities such as pollution or climate change are by-products of individual self-interest. The concrete step is to identify adverse spillovers and to remedy them, wherever possible with market instruments (e.g., subsidies, taxation) rather than blanket prohibitions (reserved only for the most hazardous externalities). 

Liberal democracy is humankind’s most precious innovation. But faith in its tenets is being tested in an era of economic, financial, social, and technological upheaval. The threats today to liberalism are greater, in our view, than those posed by history’s despots and tyrants, no matter how powerful their military might may have been. 

As the American historian and philosopher Will Durant put it: “A great civilization is not conquered from without, until it has destroyed itself from within.”

Restoring faith in liberalism must go beyond calling out its enemies. Liberalism can become the effective rallying cry to strengthen and reinvigorate democracy and capitalism, but only if its 21st century reincarnation appeals to its roots in individual liberty, openness, and an appreciation for the common welfare.

The challenge for 2024, for all of us, is to reverse the rot from within. Liberalism can be defended. It must be defended. 

Filed Under: Featured . Politics

About the Author

Larry Hatheway

Larry Hatheway has over 25 years experience as an economist and multi-asset investment professional. He is co-founder, with Alexander Friedman, of Jackson Hole Economics, LLC, which offers commentary and analysis on the global economy, policy & politics, and their broad implications for capital markets. Prior to co-founding Jackson Hole Economics, LLC Larry worked at GAM Investments from 2015-2019 as Group Chief Economist and Global Head of Investment Solutions, where he was responsible for a team of 50 investment professionals managing over $10bn in assets. While at GAM, Larry authored numerous articles on the world economy, policy-making and multi-asset investment strategy. Larry was also the lead investment manager for various mandates, funds and an actively managed multi-asset index. Larry also served on the GAM Group Management Board, was Chairman of the GAM London Limited Board and served as member of the GAM Investment Management Limited Board. Larry was also Chairman of the GAM Diversity & Inclusion Committee. During his tenure at GAM, Larry was based in London, UK and Zurich, Switzerland. From 1992 until 2015 Larry worked at UBS Investment Bank as UBS Chief Economist (2005-2015), Head of Global Asset Allocation (2001-2012), Global Head of Fixed Income and Currency Strategy (1998-2001), Chief Economist, Asia (1995-1998) and Senior International Economist (1992-1995). During his tenure at UBS, Larry was also a standing member of the UBS Wealth Management Investment Committee. While at UBS, Larry worked in Zurich, Switzerland, London, UK (various occasions), Singapore and Stamford, CT. At both GAM Investments and UBS Investment Bank Larry was widely recognized for his appearances on Bloomberg TV, CNBC, the BBC, CNN and other media outlets. He frequently published articles and opinion pieces for Bloomberg, CNBC, Project Syndicate, and The Financial Times, among others. Before joining UBS in 1992, Larry held roles at the Federal Reserve (Board of Governors), Citibank and Manufacturers Hanover Trust. Larry Hatheway holds a PhD in Economics from the University of Texas, an MA in International Studies from the Johns Hopkins University, and a BA in History and German from Whitman College. Larry is married with four grown children and a loving Cairn Terrier, and resides in Wilson, WY.

Alex Friedman

Alex Friedman is the co-founder of Jackson Hole Economics, LLC, a private research organization which provides analysis on economics, politics, the environment and finance, and develops actionable ideas for how sustainable growth can be achieved. Friedman is a senior leader with two decades of experience growing and transforming organizations in the financial and non-profit industry. He was the CEO of GAM Investments in London and chairman of the firm’s executive board. Previously, he was the Global Chief Investment Officer of UBS Wealth Management in Zurich, chairman of the UBS global investment committee, and a member of the executive board of the private bank. Before moving to UBS, Alex Friedman served as the Chief Financial Officer of the Bill & Melinda Gates Foundation. He was a member of the foundation’s management committee, oversaw strategic planning, and managed a range of the day-to-day operating functions of the world’s largest philanthropic organization. Friedman also created the foundation’s program-related investments group, the largest impact investing philanthropic fund in the world. He started his career in corporate finance at Lazard. Friedman served as a White House Fellow in the Clinton administration and as an assistant to the U.S. Secretary of Defense. He is a member of the board of directors of Franklin Resources, Inc. (Franklin Templeton), a member of the Council on Foreign Relations, Chairman of the Advisory Board of Project Syndicate and a board member of the American Alpine Club. Friedman is a regular contributor to a range of newspapers and thought leadership groups and is also the author of Babu’s Bindi, and The Big Thing, both children’s books. He is an avid mountaineer and rock climber and led the first major climb to raise money for charity through an ascent of Mt. McKinley. Friedman holds a JD from Columbia Law School, where he was a Harlan Fiske Stone Scholar, an MBA from Columbia Business School, and a BA from Princeton University.

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