Only 19 percent of Americans today say they can trust their government to do what is right. Meanwhile, citizens in developing countries see authoritarian leaders as more trustworthy than democratic politicians. Increasingly, it seems that people across the globe are skeptical of the ability of democratic governments to act effectively — including as good custodians of the economy. Indeed, the liberal democratic system is unwittingly undermining the economic growth that is necessary for its continued survival.
At the root of the problem is a predilection for short-termism that has become embedded in the political and business culture of modern democracies. By design, Western politicians have relatively short political horizons; they are often in office for terms of less than five years. So they find their duties regularly interrupted by elections that distract from the job of addressing long-term policy challenges. As a result, politicians are naturally and rationally drawn to focus their efforts on seducing their electorates with short-term sweeteners — including economic policies designed to quickly produce favorable monthly inflation, unemployment, and GDP numbers.
Voters generally favor policies that enhance their own well-being with little consideration for that of future generations or for long-term outcomes. Politicians are rewarded for pandering to voters’ immediate demands and desires, to the detriment of growth over the long term. Because democratic systems encourage such short-termism, it will be difficult to solve many of the seemingly intractable structural problems slowing global growth without an overhaul of democracy.
One of the most fundamental obstacles to effective governance is the short electoral cycle embedded in many democratic systems. Frequent elections taint policymaking, as politicians, driven by the rational desire to win elections, opt for quick fixes that have a tendency to undermine long-term growth. Meanwhile, they neglect to address more entrenched, longer-term economic challenges, such as worsening education standards, the imminent pension crisis, and deteriorating physical infrastructure, that don’t promise immediate political rewards.
