Is there a viable future for Democracy?

Introduction

By democracy we mean a system of governance where power is vested in the common people directly or through representation in elections. There are various forms arising from past associations such as a constitutional monarchy or a republic or other types or combinations but the overarching thematic is one where privileges or hereditary benefits don't generally apply.  Some systems of elections involve a first past the post methodology in voting whilst others such as Australia are representative so that preferences determine outcomes where there is no clear majority. In the US for instance there is a mixture of both.

There is also an assumed freedom that arises from the laws of a nation predicated on democratic principles or can be defined by a Bill of Rights. Conservative forces will easily recall times we can relish, when life was simpler and people looked out for one another, but outside of this veneer there also existed a subculture obscured from public view. For instance First Nations peoples and others were subject to institutional abuse which is now more widely acknowledged. Whilst some tentative steps have been taken to move forward in the healing process there emerges other pressing challenges in the current age that pose a threat to democracy.

Mass media and the rise in misinformation and conspiracies. 

What is evident is the mass misinformation from social media and the growth in popularised movements. One could equally point to past domination in the news such as the right wing Murdock Press. But the difference now is there is no longer any clear identity related to opinionated columns by an editor and staff beholden to a particular ideology.  

Rather, a social media bias can be the product of contrived popularity with Bots and the like that involve fictitious people to give credence to what otherwise would be rejected as erroneous minority views.         

For instance it is estimated that between 40- 50% of the population in the western world principally rely for their news and information based purely on social media platforms such as Facebook.  

The latter has demonstrated no desire to police their content or warn about rather obvious false information or to take any responsibility for conspiratorial and harmful posts that influence their followers. Only recently did they finally ban false claims by Trump. Trump himself had 40 million followers on Twitter and he was prone to issue up to 20 tweets on any given day. Even Right wing outlets such as Fox News towards the end of his presidency were at pains to disassociate themselves from his outlandish claims on Twitter.

The original ideals of such a platform to provide a social interaction has been superseded by such exponential growth that it has overshadowed a nation’s ability to ensure it operated in a democratic and fair minded manner.

A Facebook has allowed multi postings of conspiracy theories such as campaigns hell bent on attacking any institutions committed to reducing the tragedy of preventable infectious diseases.

Many readers don’t realize or are uninterested in the rather obvious example of rigid stands that go against just about every scientist in the world and lack a healthy degree of scepticism that ensures critical thinking.

Many young people have in excess of 1000 friends and of course the anti-vaccine readers are only too keen to recirculate such postings on Facebook.   

Freedom

A democracy assumes a citizen’s freedom of expression within certain rules and their voice can be represented in a collective manner to raise issues in relation to private and public institutions. To reiterate this involves the extent to which citizens have or feel they have a say in the decision making process through their elected representatives.   

There also exists confusion between liberty and the extent to which the so-called common good takes precedence. Democracies by their nature assume they represent the aspirations, rights and majority rule of its citizens, but this inevitably boils down to a subjective moral question of what is fair and reasonable.

Recent concerns.

Daniel Blatt who is Eaton Professor of the Science of Government at Harvard University writing in Democracy Now explains the threats to democracy in the world today. He cites growing authoritarianism in China, Russia, central Asia, and much of the Middle East. He also talks about democratic breakdown in Thailand, Venezuela plus backsliding in countries such as Ecuador, Hungary, Nicaragua, the Philippines, Poland, and Turkey which has triggered debates over whether we have entered a period of global democratic recession.

But even previous stalwarts such as the US have fallen prey to the likes of Donald Trump, just as growing anti -immigrant forces have swelled in Europe.

This raises the question as to whether or not liberal democracy around the world can survive.

It is hard to pinpoint the reasons but I believe fractured communication and lack of debate have become a product of the digital age. To reiterate, given the rise in social media platforms we have seen massive increases in conspiracy theories emerging from the period post the Coved pandemic. To further exasperate inequality the pandemic has shielded the better off sections of the community able to function effectively at home and on line.  The front line workers have mostly borne the brunt of reduced income and employment reductions. This trend was already evident as technological developments increasingly call for a better qualified workforce when there will always be large sectors not quite up to the intellectual challenges such a continued course inevitably requires. Disadvantaged and estranged sections of a nation will gravitate to a so called strong leader offering simplistic flawed slogans via Twitter that inevitably plead for additional power that overrides democratic principles.  Unless governments recognise this problem in the technological world we inhabit the threat to democracy can only gather pace.

Globalisation 

A feature of globalisation is that some large multinationals are prone to make false claims in relation to their businesses and the public acquiesce based on flawed analysis. A good example was the threat and subsequent actions by Amazon to boycott the Australian market if the GST rules were revised to impose the tax on it’s on line purchases by consumers. Prior to the recent amendments to the law, purchases of online products were not subject to the tax which was unfair in relation to the Australian suppliers who were required to pass on the tax to customers.

Large sectors of the Australian public also opposed the moves and spread misinformation principally on Facebook, to shore up their obvious reluctance to pay the GST. Particular individuals were targeted unfairly and characterised as greedy Capitalists when all they were proposing was to point out unfairness in the law as it applied to local firms.  

Eventually as the dust settled Amazon quietly re-entered the market and today we have additional tax flowing into government revenues. Similarly any corporation in Australia has a social obligation to operate in accordance with the laws governing its operations, particularly in relation to the spirit of that law. It is only of more recent times the taxation department has been successful in recovering large amounts of tax from contrived artificial arrangements designed to divert income from Australia to tax havens or low taxing regimes that foolishly operated in countries such as Ireland. 

The antidote to combat such measures involves cooperative agreements between countries in measures to uphold fairness and transparency. The action by a select few multinationals engaged in such obvious manipulations in contrivance of accounting standards undermines a lack of trust by its citizens in democratic governance. 

Social media and the digital age   

To reiterate we have seen exponential growth in on-line platforms such as Google, Facebook and Twitter plus their derivatives where Governments have been slow to provide a regulatory response. I have talked about their influence and the risks inherent in the spread of false information. Such platforms are only just starting to recognise the need for formal governance provisions.  

The risk extends to knowledge itself where algorithms are designed to give the same consistent answers which further risks undermining comprehensive analysis. Furthermore the massive information load and the use of bait to attract attention are leading to limited attention spans by this generation brought up on a Digital diet on instant information, which can be dominated by conspiracy theories. The more recent spat between Facebook and the Australian government over payment by Facebook for news content may become a catalyst for a long overdue review of regulation as to reasonable responsibility under the laws of a country. These companies have operated with power tightly held by their founders in ways that undermine democratic principles. 

A key factor then for capital markets in any democracy is to ensure its citizens enjoy enhanced outcomes based on ethical principles that ensure adequate disclosure. The question arises as to whether capitalism itself can achieve this outcome and the extent or otherwise it is subject to government control. A more fundamental question is to ask about its future.

What then is the Future of Capitalism which is currently inextricably tied to democracy?   

I more or less agree with the views of eminent economist and author Paul Collier, who proposes an ethical capitalism supported by values defined by practical logical reasoning. The situational facts and meanings surrounding his ideas provide a good starting point.   

However, his conclusion is hardly a new idea, but follows on from the ancient Greek philosophers who proposed that by leading a virtuous life (the good life) that in turn, ensured one lived an ethical purposeful life. They saw no end in sight, just a continual improvement throughout one’s life, which gave meaning to their existence. You might recall I talked about the golden mean arising from different discourses to end as a resolution to embody in their laws and system of governance. Humanity was seen by them as a political animal, so that issues had to be debated then resolved.       

What Collier is suggesting, in a nutshell, is an ethnically based system flexible enough to embrace the ever changing nature of existence and one which will avoid ceding control to vested or corrupting interests.

One might argue, to some extent, the framework to support such a system already exists in the United Nations charter to facilitate measurable sustainable development goals. In practice, accepting there are notable exceptions, capitalism is largely represented by a piecemeal approach, made up of weak values constrained by vested interests. The prevalence of greed and corruption is always a factor, but equally there are those willing to rally around a more just outcome to weed out corruption or greed in excessive price gouging. I don't accept the premise corruption is endemic to certain cultures, but rather it can be linked to forms of exploitation than can be eliminated more effectively in the dealings between enterprises and governments sharing an ongoing dialogue on ethical standards. Poorer countries may be constrained by a shortage of human capital to be more vulnerable to exploitation than more affluent countries.    

Consequently, the lack of a clear cultural vision for capitalism, continues to underwrite its malaise, notwithstanding some notable exceptions. This state of affairs contributes to the current unrest and the accompanying surge in popularization of simplistic solutions attempting to fill in the void.

To facilitate a new ethical face to capitalism will require a concentrated effort to not only make a more convincing case, but to examine the big ideas of the past to see what aspects might assist us identify current inherent weaknesses. 

The goal might seem an impossible task, given significant cultural differences, but I would regard such an approach as a continual work in progress, to reflect an ever changing world. 

An important dynamic ingredient is the inclusion of cultural differences within the framework of agreed ethical standards. This has the capacity to create a more meaningful existence as we increasingly become part of a global village, necessitating cultural exchanges. This requires an empathetic and imaginative approach which will remain an ongoing work in progress.          

Of course human nature points to the fact that any system will carry with it the seeds of failure, but to the extent to which capitalism is clearly deficient, one can envisage clear cut moves to focus on maintaining an egalitarian society, without having to dismantle the whole system.  

Collier asserts the moral basis for a utilitarian focus to posit a fairer system of governance pertinent to Keynes and Adam Smith’s ideas (against mercantilism) have lost their way to breed disillusionment to those who feel overlooked in modernity.

Collier wants us to more frequently ask our institutions  what are your values i.e. ‘what are the ethical foundations to this so called ethical state’, ethical firm’, ethical family etc. to represent the functional aspects to ensure fairness and equity for all of the stakeholders. In essence it has a socialist ring to it without inviting a wholesale dismantling of the current system of capitalism.

Hence I don’t want to confine the discussion just to business and institutional representation but rather more broadly to drill down into such aspects as the family and local small community groups.

In order to do justice to the topic, I believe it important to get an understanding of the works of Karl Marx who successfully predicted the inequalities and concentration of wealth that we now see are evident in capitalism. The atrocities associated with socialism and more importantly to Marxism have virtually nothing to do with his philosophy as they involve the inherent vested interest he rallied against in his critique of capitalism plus hideous crimes against humanity.    

Marx was profoundly influenced by the philosophy of Hegel and concluded the opposing forces must eventually erupt if there is a prolonged imbalance, i.e., at a particular level of say a worker strike, this could lead to an untimely revolution once you build sufficient pressure within the capitalist system. The more desirable position then was embodied in his idea of socialism, which he saw as the naturally forming system that ceded authority to all those who worked under it.

In his social construct Marx thought that human liberation could only be achieved once the means of production were communally owned, and material equality for members of society were achieved. 

His ideas represented a fundamental shift in the prevailing worldview that supports our westernized system of capitalism. Personally, I don’t see any pressing need for any radical departure, but rather, to the extent progress can be made, we move towards a more ethnically based capitalist system. Certainly the ethically based funds management industry is taking steps to achieve this, as is a plethora of firms, in what remains a somewhat piecemeal approach. In any large organization today there is what is known as a governance executive, whose task is to ensure the organization conducts itself in a sustainable and ethical manner. The more recent failures in this regard have often exposed the fact that individuals' advice was ignored, in what was a cultural collapse in values. 

Returning to the Marxist philosophy, the idea of dialects also encourages one to recognize that everything is always in a state of flux so that the matter of ethics is dependent on an ongoing dynamic narrative that invites cultural exchanges and imagination.

Hence Marxism tends to invite two principal views; those who seek to demonstrate the triumph of global capitalism versus a growing number of people who are becoming increasingly concerned over inequality and lack of an environmental focus that such a system is prone to deliver. The former group will argue his ideas were false, whilst in the latter, there are those who are interested in his ideas. The reality is, of course, that the system of capitalism that existed in the extreme of Victorian capitalism was far different to that which has emerged in modernity, a construct of differing laws and practices within trading nations. But notwithstanding, his philosophy and economics provides a sharp focus on the alternatives to the present system and to the efficient operation of the invisible hand of the market proposed by Adam Smith in Wealth of Nations.

The weakness in Marxism is that human nature is likely to react in the same way under either a system of capitalism or communism to ensure the accumulation of inequalities. 

However, historically Marx remains a significant philosopher whose ideas remain relevant as a talking point, to initiate philosophical enquiry into failures of the current capitalist system. That is to prompt enquiry on how it might be modified to ensure better outcomes. What we can say, at the outset, that some of his ideas have some rather obvious shortcomings.  However, it could be argued politically and in  economic terms they were never implemented in the manner envisaged by Marx, particularly in relation to Stalin’s purge, Mau and Pol Pot, who all laid claim to Marxism.

Furthermore many of his criticisms of Victorian capitalism have disappeared in a strict legal sense, whilst continuing to flourish outside of the law and in some countries.

In summary then we might ask the question: are we not seeing the end result today of what Marx prophesied?

Economics 

The problem with modern day economics is it has become beholden to more and more complicated elegant theories that in practice don’t allow for human nature that does not necessarily equate to rational outcomes, so that forecasts prove to be erroneous conclusions. There is also the abrogation of the responsibility to govern under the guise of libertarian ideals that attempt to assign responsibility to markets without safeguards to ensure regulations reflect community standards for fair and reasonable outcomes. In this respect economic policies to be effective need to be based upon objectives that entail measures aimed at maintaining full employment and ensuring a more egalitarian society in the most efficient allocation of resources. The world is increasingly becoming more and more of a global village and the extent to which ethical standards need to reflect a cooperative dialogue between nations has never been more important. In its most basic form economics aims at end the most efficient allocation of resources amongst competing wants determined on the basis of moral outcomes. This is how it originated and more than ever needs to maintain that human face so that its governance objectives are readily digestible to the broad population. The answer might be found in corporate social responsibility.

What is corporate social responsibility?

Corporate Social responsibility is an expectation that business is to be conducted in an ethical and sustainable manner on behalf of its stakeholders and the wider community. Ethics and sustainability are linked since sustainability in the environment and its preservation is a moral responsibility for this generation to pass on to future generations. It depends of course on a system of democratic governance that is included in legislative requirements.  

How could this be enacted in legislative provisions of the Companies Act and in regulatory regimes?

The most appropriate approach to responsible corporate behavior is to determine guiding descriptive principles, rather than to try and prescribe in detail a list of detailed obligations.

Prescriptive obligations create a compliance approach restricted to those obligations documented. Descriptive type principles on the other hand require imagination and are likely to lead to a more comprehensive review within the “Spirit of the Law”.

Corporate Social Responsibility – A suggested example of a guiding principle:

It is the responsibility of the Corporation, through its Directors and officers to ensure at all times it conducts its business in an ethical and sustainable manner. The Corporation shall include in its Corporate Governance provisions those core values considered necessary to uphold this principle in the conduct of its business. The Annual Report is to include a narrative with key indicators demonstrating its adherence to this principle.

What are the incentives or disincentives for a company to conduct its business in a socially responsible manner?

The incentives for a company to conduct its business in a socially responsible manner are evidenced in enhanced brand recognition and improved shareholder returns. This is achieved as the stakeholders and customers recognize a company’s values. Its reputation is thereby enhanced and ultimately the returns to shareholders. The disincentives arise from competitors who obtain short term advantage by unethical work practices. The latter type of activity is evidenced in secretive conduct where communication is restricted to its direct shareholders.

There is ample opportunity to improve communication with stakeholders by the Directors at Annual general Meetings where they report on the broader issues of their responsibilities under CSR.
At present reporting in Annual reports is characterized by a hap-hazard approach to Ethical business practice and sustainability. The two are seen as different. I would contend they are one in the same. The question of ethics is generally covered by comment on corporate governance which defines the rules for the Board, its composition and responsibilities.

Directors currently have sufficient power to make decisions in the best long term interests of the company, but it’s advisable that a general provision be included in the corporation law outlining their responsibility to maintain CSR aspects. Such a broad provision should be descriptive and not prescriptive to specify responses to different classes of stakeholders.

Conclusion

But as always, there are signs that nations manage to eventually heal themselves as the spirit of a particular age comes to grips with the threats to democracy. A rational way out is found by means of argument or by force, as tragic as that can be. There will be new initiatives and solutions. 

This is true in the fields of new communication channels, technology and artificial intelligence which can be a positive tool if adequate safeguards for human intervention and ethical outcomes are built into those systems. 

Currently I believe we are in a slave relationship in relation to technology but over time the human spirit I believe will gain ascendancy. 

This has always been true for civilisations with new discoveries and periods of confusion and strife intermingled with enlightenment.

As a half glass full optimist I remain convinced democracies will continue to evolve in a more positive manner in the future. But for the time being we are in the midst of a democratic recession.