Economic Inequality and Democratic Instability

Had he lived today, Alexis de Tocqueville would probably not have been a neoliberal. Not only would he have rejected neoliberalism’s “one model fits all” approach to development, he could hardly have embraced an approach that privileges efficiency and the creation of wealth over its distribution; he was far too concerned with the “providential fact” of social equality and its implications for democracy. For Tocqueville, the “general equality of condition” that so struck him during his stay in the United States (I, 3) was the basic building block for political democracy; any change toward overly skewed social and economic inequalities would, in his view, inevitably endanger democratic politics. In contrast with many contemporary institutions and scholars, he would not have failed to take account of how economic policy prescriptions affect equality or to recognize their impact on the sustainability and quality of new democracies.

Yet Tocqueville’s writings are no simple paean to egalitarianism or majority rule. An aristocrat himself, he was nonetheless critical of the old order, yet he was no blind fan of the new. Profoundly ambivalent about a relationship between democracy and equality that threatened to produce a “tyranny of the majority,” he also warned that democratic rule might be insufficient to overcome very powerful inegalitarian tendencies inherent in the development of capitalism. Industrialization and urbanization could breed a “new aristocracy” of manufacturers, much less virtuous than the old landed aristocracy. “One of the harshest that ever existed in the world,” this new aristocracy would not hesitate to use its expanding ownership of material resources to ensure its control over the citizenry. “If ever a permanent inequality of conditions and aristocracy again penetrates into the world,” he warned, “this is the gate by which they will enter” (II, 161).

What is so striking about these observations is their relevance for understanding the Americas today. Differences in patterns of income distribution between the United States and Latin America are central to any explanation of their divergent development trajectories. Latin America today is the most unequal region in the world: A quarter of all national income is received by a mere 5 percent of the population, and the top 10 percent own 40 percent of the wealth—a level of inequality that can be found only in a few African countries whose per capita income levels are half that of Latin America! To underline the magnitude of these inequalities and the concentration of wealth and power they represent, suffice it to note that in the developed countries (no bastions of equality themselves) the wealthiest 5 percent receive on average only 13 percent of all national income—about half the Latin American norm.

Moreover, the most recent wave of democracy in the Americas has coincided with a sharp deterioration in equality. Income distribution, which had become more equal during the 1970s, worsened considerably in the 1980s and has remained stagnant in the 1990s, despite positive growth rates throughout the decade. Poverty statistics reveal the same trend: sharp increases during the 1980s (Latin America is the only region in the world with this pattern!) and a lack of progress in reducing poverty during the 1990s. As Latin America enters the twenty-first century, inequality levels have grown so high that poverty does not (and will not) decline substantially as a “trickle-down” effect of growth, even in periods of economic recovery.

The very heart of Tocqueville’s genius lies in how he related the advantages (and problems of) social equality to the practice of political democracy. Today, perhaps more than ever before, contemporary observers should learn from his example. Gross economic disparities greatly contributed to Latin America’s past democratic failures and, despite the current complacency regarding democracy’s third wave, they are likely to do so again. But this time, just as Tocqueville warned so long ago, the primary danger to democracy may have changed from the “sudden death by coup d’état” that policy makers are so intent upon preventing to the “slow strangulation by insidious oligarchy” that is happening before their very eyes. ¹

The Structure of Property

The United States that Tocqueville observed had...