Apr 15, 2025

Prosperity Does Not Equal Democracy: Economic Inequality and Democratic Erosion

By: Kasey Olympiev

The United States is rich.  In fact, almost ridiculously so; to illustrate, according to the IMF’s World Economic Outlook for 2025, the U.S. sits proudly at the apex of worldwide rankings, with an estimate of $30.34 trillion in GDP.  In second place?  China—with $19.53 trillion, or a whopping 36% plunge down the graph.

Wealth is often closely associated with, or even assumed equivalent to, the concept of “prosperity”—for good reason.  Comparatively speaking, the United States is generally seen as a prosperous, developed place to live, especially by those struggling under suffering economies and thick political tensions elsewhere on the globe.  The American Dream—the notion that with perseverance and some good old-fashioned hard work, anyone can get rich and live well—is highly attractive, and also, as it seems, dead.

While such a severe, simple, perhaps even brash claim cannot adequately capture the economic outlook for every low- and middle-class American—because outliers in any data set exist, and success can, has, and does happen, for a lucky few—income mobility for the vast majority of citizens is declining in the U.S.  Or: It’s way harder to earn more than your parents today than it was a handful of decades ago.

This might be a little less worrying of a trend, if we weren’t, as mentioned, pretty rich.  But where does all of it go, if not in the hands of working Americans?  The answer is in the hands of the top 10%, who have enjoyed 4,157 times more wealth per household as compared to the remaining 90%.  It doesn’t stop there; growth for high-class families has been steadily rising, while low- and middle-class incomes have remained stagnant since two decades ago.

To sum up: America is rich, but the majority of Americans are not.  Why speak of income inequality, though?  Because, as it happens, it has some worryingly strong ties to the steady erosion of our democracy.

The information can appear conflicting, however.  Numerous studies have contributed to the idea that development equals democracy, such as Przeworski’s, which states plainly that though democracies do not emerge from prosperous economies, they are much more likely to survive under them; or Boix and Stokes’s rebuttal, which even reinforces the initial hypothesis in proposing that yes, actually, wealth does indeed also lend to the establishment of stable democracies.

The evidence appears robustly in favor of prosperity spelling democracy—so why is the United States still slipping further into autocracy, when we appear to have some of the all-around highest levels of wealth and development in the world?  The pivotal factor, as mentioned, is the distribution of that prosperity.

In Lust and Waldner’s extensive summary of the hypotheses attempting to explain democratic backsliding, the economic inequality theory stands out particularly stark.  The idea is that in highly unequal societies, the wealthy have very little incentive to root for democracy, seeing as in an autocracy, it becomes far more difficult for the majority to vote for policies which would impose taxation on the rich.  And this matters, because as we know, said wealthy have tremendous sway in our elections and policy outcomes; in the U.S., it is firmly not one person one vote as it is so advertised to be.

The remedy to this vicious cycle is, in fact, more equality; Boix explains, as equality increases (whether the wealthy like it or not), the taxes paid become less than “the costs of repression that [the rich] would have to bear to exclude the majority,” or rather, anything other than democracy starts to be more trouble than it’s worth.

To relate the abstract and the theoretical to the harsh reality: America is rich.  It is also rapidly becoming less democratic.  Though insinuating the factors contributing to that backslide are economic alone would be not only naive but false, it stands to reason that closing the gaping wealth gap could, ostensibly, do a lot for our resilience against autocracy—and the revival of that American Dream.

This seismic shift would have to come in a slew of forms.  Reducing inequality isn’t just taxes (although a graduated income tax is certainly what may fund these changes); it’s reinforcing worker’s rights, reforming antitrust policy, investing in small businesses over billion-dollar corporations, establishing paid leave—all those things which the wealthy crow will be to the detriment of our economy, because, of course, they will be to the detriment of the wealthy.

But democracy is all of us—not just the top 10% of us.  And unless we start acting like it is, with sweeping reform and some major mindset modification, just how rich the United States is may be the least of its concerns.

Sign Up For Updates

Get the latest updates, research, teaching opportunities, and event information from the Democratic Erosion Consortium by signing up for our listserv.

Popular Tags

1 Comment

  1. Anusha Anand

    This post highlights how economic factors can contribute to democratic backsliding, even when a state is extremely rich. Wealthy elites who have significant influence over politics in the US have little incentive to uphold democratic norms. Building off of your argument, the fact that many Americans still live in poverty or struggle to afford basic goods has contributed to polarization and animosity between political parties. People disagree on what has caused the rise in prices, with some blaming factors like immigration and others pointing to corporate greed. During this period of democratic erosion in the US, one form of resilience may be uniting the middle and lower classes around economic interests rather than identity-based politics.

Submit a Comment