The demise of liberal democracy

GIS Statement* by Prince Michael of Liechtenstein

Big government, high taxes, massive debt, political polarization and social crises have become the norm throughout Western Europe and North America. But it is high time for leaders and citizens to take a look at the lessons history has to offer. Only then could the region avoid going down the same path as Rome and other fallen empires

Western governments appear to have thrown caution to the wind. Higher taxes are financing massive spending campaigns that have no clear implementation strategy (source: GIS)

Both the Biden administration and the European Union have announced unprecedented spending programs, $1.9 trillion and 1.8 trillion euros respectively, to fight Covid-19 and kickstart the green economy. There is no clear concept on how these funds will be spent or financed. But this kind of spending could serve as a pretext for a sharp tax increase in Washington. It appears that on both sides of the Atlantic, governments see the pandemic and the green economy as ideal excuses to keep overspending and increasing the role of the state and the administration.

This is alarming, given what took place in past societies and states that resorted to overspending and degrading the worth of their currency. In ancient Rome, during the late years of the empire, internal turmoil had disturbed trade flows and the government had become bloated and inefficient. Rulers had to find ways to appease rising discontent. So they tried to buy off the population with gifts. To find the necessary funds, they increased taxes, implemented aggressive tax controls and began debasing silver coins by adding copper (a method strikingly reminiscent of today’s quantitative easing).

With these new measures came a tangle of laws that opened the door to corruption. The people of Rome began demanding panem et circenses as their due. The regime had to feed and entertain the population to survive, to the detriment of a sustainable common good. These welfare handouts from the state created rivalry between different social groups who felt they were disadvantaged compared to others, further poisoning the political situation. As a result, the formidable Roman Empire, once an efficient and well-functioning system, decayed and collapsed. Still, the principle of redistribution by taxing the rich to feed the poor remained popular. But this created the wrong incentives, punishing the hardworking on one side and encouraging idleness on the other.

Likewise, Spain was once the dominating power in Europe. In the 16th century, its European territories included not only the Iberian peninsula, but also large parts of Italy and the Netherlands. Its overseas lands stretched from the southern tip of Tierra del Fuego up to modern-day Colorado and California in the Americas, and also included the Philippines in Asia and territories in Africa. But the Spanish state expanded so much that it required higher taxes, which in turn led to inflation. The defeat of the Armada around the British Isles was not the cause of this decline, but a symptom.

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The demise of liberal democracy


*GIS is a global intelligence service providing independent, analytical, fact-based reports from a team of experts around the world. We also provide bespoke geopolitical consultancy services to businesses to support their international investment decisions. Our clients have access to expert insights in the fields of geopolitics, economics, defense, security and energy. Our experts provide scenarios on significant geopolitical events and trends. They use their knowledge to analyze the big picture and provide valuable recommendations of what is likely to happen next, in a way which informs long-term decision-making. Our experts play active roles in top universities, think-tanks, intelligence services, business and as government advisors. They have a unique blend of backgrounds and experience to deliver the narrative and understanding of global developments. They will help you develop a complete understanding of international affairs because they identify the key players, their motivations and what really matters in a changing world. Our experts examine the challenges and opportunities in economies old and new, identify emerging politicians and analyze and appraise new threats in a fast-changing world. They offer new ideas, fresh perspectives and rigorous study.