The economic basis of democracy in Europe

Understanding contemporary challenges to democracy in Europe requires looking beyond the rise of ‘populism’. Instead, it requires acknowledging a multiplicity of threats to democracy, in particular those arising from the structure of European economies and economic policymaking.

A sharp increase in economic inequality – ranging from income inequality to discrepancies in wealth and economic security – over the past decades has translated into political inequality. Furthermore, democratic systems have become less responsive to electorates through the ‘depoliticization’ of policymaking, in particular economic policy, as a result of its insulation from national-level democratic scrutiny.

The green economic transition and other policy challenges such as tackling high inflation mean it is critical to understand how economic change can be successfully accomplished without triggering a political backlash. In Europe’s case, the functioning of democracy can only be strengthened through a ‘repoliticization’ of economic policymaking, including both fiscal and monetary policymaking.