5 New Crises of Democratic Capitalism: Ideas on Solutions, Anyone?

06/24/2015 04:29 pm ET | Updated Jun 24, 2016

It's now been almost four years since the Occupy Wall Street movement began. There has been much discussion of the so-called crisis of capitalism. But comparing today's situation with previous tough and volatile times, is there really a crisis?

After all, the 2008 recession has been tough, but nothing like the Great Depression of 1928. Weren't the conditions of workers worse under the robber barons of the early days of industrialization? In the past there have been serious alternatives to capitalism, such as the Russian and Chinese revolutions that gained widespread and global support. Dwarfing today's wars, 70 million people died in World War II as fascism showed what can happen when when a deep crisis develops and powerful forces dispense with democracy in favor of horrific totalitarian rule. Sure, there are protests today, but they don't compare to the May-June 1968 upsurges in Europe and Mexico or the mass demonstrations of millions in the U.S.A. against the Vietnam War. Don't the challenges of today pale in comparison? Aren't things relatively good?

A survey of 2015 shows a new set of very real problems. Different from those of previous times, they are nevertheless profound and chronic and have reached crisis proportions that are in some ways more worrisome than in times before. There are five big ones:

1. Economic Growth Without Job Creation

This is the first time in history where the economy is growing but not generating jobs, at least not in a commensurate manner. Many economists predict decades of unacceptably large structural unemployment. In a recent report, the World Bank's senior director for jobs, Nigel Twose, wrote, "There is little doubt there is a global jobs crisis." This is particularly bad for youth, as their unemployment levels range from almost 20 percent (Canada, U.S.A.) to over 50 percent (Spain, Greece). Emerging technologies will exacerbate this problem as computers learn to perform many activities, from driving taxis to diagnosing patients, ousting human workers. One UK report indicated that one third of all UK jobs will be replaced by robots and computers in the next 20 years.

Unemployment is the fuel for social unrest and even revolution. The Tunisian revolution of 2012 was called "The Unemployment Revolution." Today's so-called "jobless recovery" is not something that GDP growth or further improvements in the business cycle can change. Growing unemployment is not cyclical; it's secular and structural. No one knows how to fix this unprecedented situation.

2. Wealth Creation Combined With Growing Social Inequality

Throughout the last century income for individuals and families at the 51st percentile were on the rise. Despite depressions and upheavals, prosperity for these individuals, and for society at large, increased steadily. This is no longer the case. Capitalism is becoming deeply skewed to benefit those who are most affluent and influential. Many wonder how the richest 80 people can own half the world's wealth. Thomas Piketty's bestselling management book of last year presented convincing evidence that social inequality in capitalist countries will continue to deepen.

This is serious because it means that the American dream is actually not a reality for most. Fifty-nine percent of those polled recently agreed that "the American dream has become impossible for most people to achieve." And it's getting worse. Most people are falling behind financially: Student debt is at an all-time high -- a whopping $1.5 trillion in the U.S.A. alone; the stay-at-home parent is no longer possible, as most families need two breadwinners; and most Americans can no longer look forward to secure retirement.

3. Looming Environmental Catastrophe

Most of the world's population lives in capitalist economies, and the system has been a big improvement over the agrarian economies that preceded it.

But the basic institution of capitalism, the corporation, has passed many costs onto society -- what economists call negative externalities -- and the big one is borne by the environment. According to nearly all scientists, our planet's ecosystem is in deep duress; our air, our water, and, most urgently, our climate are being irrevocably altered. At one annual Davos meeting of the World Economic Forum, Bill Clinton gave evidence that if we reduce carbon emissions by 80 percent by the year 2050, it will still take 1,000 years for the world to cool down. In the meantime, bad things are likely to happen -- like 1.5 billion people losing more than half of their water supply in the next decade. There has arguably never been a bigger impending crisis, not just for capitalism but for humanity.

4. A Crisis of Legitimacy for Democracy

In established democracies, voters haven't been angrier with governors since the dawn of universal suffrage. Nor have so many citizens in so many countries acted on the bumper sticker exhortation "Don't Vote! It Only Encourages Them!"

Exhibit A is the U.S. Congress. Most Americans think the U.S. Congress is dysfunctional and deeply corrupt. And for good reason. As in many countries, U.S. politicians are beholden to wealthy contributors and interest groups, and many members of Congress go on to become lobbyists. The insurance industry prevented the country from joining the rest of the developed world and transitioning to a single-payer healthcare system. Fully 92 percent of Americans want background checks on people buying guns, but the rich and powerful NRA thwarts any legislation introduced to implement this measure. The notion that Congress is "government of the people, by the people, for the people" is, in this light, risible.

The problem exists elsewhere.

The American political sociologist Seymour Martin Lipset wrote that legitimacy is "the capacity of a political system to engender and maintain the belief that existing political institutions are the most appropriate and proper ones for the society." The ongoing abuse of trust by elected and appointed office holders in modern-day democracies is not simply a series of isolated incidents but a manifestation of a deep and widespread rot. The result is a full-blown crisis of legitimacy.

The same problems loom everywhere from the UK expense-claims scandal to the immoral and illegal actions of former Italian Prime Minister Silvio Berlusconi or Toronto Mayor Rob Ford. There is now open discussion among leading thinkers that global institutions like the UN or the World Bank are no longer "fit for function."

The danger is that large numbers of people may seek alternatives to democratic capitalism, ranging from anarchism and radical libertarianism to authoritarian communism and even theocracies like fundamentalist Muslims propose. There is even a growing danger of fascism with the rise of the far-right and even expressly fascist movements in the Europe and other places.

5. Global Social Unrest, Upheaval and Conflict

Confidence in many of the critical institutions of democratic capitalism, ranging from big business and banks to schools, newspapers and the Supreme Court, is pretty much at an all-time low. This situation is not sustainable.

Radicalization occurs when there is a disparity between expectations and reality. That disparity is growing throughout the democratic capitalist countries. It may appear that previous times of protest were more tumultuous than today. And to be sure, there have been periods of upsurge when the actions of capitalist governments were challenged by labor unions, civil-rights activists, anti-war crusaders, women's groups and working people fighting against austerity measures. However, in terms of raw numbers, protests around the world have been growing steadily for many years, reaching an all-time high today. This is illustrated by the GDELT Project, an extraordinary database of world news that has mapped every world protest since 1979. Take a look for yourself; the numbers today are staggering.

North of the border, Canada, which might appear to be a bastion of calmness, is a case in point of deceptive tranquility. The largest demonstration in Canadian history, against the war in Vietnam in the early 1970s, took 12 months to organize and engaged 25,000 people. In 2012 a student demonstration in Quebec brought out 250,000 people with 24 hours' notice and led to the defeat of the provincial government in the next election.

We've witnessed the mass upsurge of the Indignados in Spain, leading to the Podemos electoral alliance, the rise of Syriza in Greece, the powerful independence movement in Scotland and Catalonia, and the coming to power of radical governments in Latin America through the so-called Pink Tide process.

During the Arab Spring the world watched as repressive governments, many of which had enjoyed considerable support, or at least tolerance, from the West (ostensibly in pursuit of "stability" in the region), were overthrown by powerful movements led by students fed up with the status quo. The failure of most of these movements to lead to the consolidation of a democratic, secular government is further evidence of growing volatility.

We've not seen the massive deaths of World War II, but last week the UN stated that a record 60 million people have been displaced in the last year due to war and conflict where democratic institutions have failed. Last week the even Pope Francis got involved, saying in his encyclical letter that the world now lives in a state of permanent war. Arguably, as democratic societies fail, the world today is more unstable and crisis-ridden than at any previous time in history.

The bottom line? Democratic capitalism arose hand-in-hand with the industrial age. If it's to survive the transition to a knowledge age and the digital economy, it will have to change -- profoundly.

UPDATE: Later this year I'll be publishing a significant paper on what is to be done to rebuild democratic capitalism for success, stability and sustainability in the future. This blog post is to respectfully ask for any ideas or thoughts on what is to be done.

Don Tapscott is a fellow at the Martin Prosperity Institute, which is working to rethink democratic capitalism. He is also the chancellor of Trent University and the author of 15 books, most recently The Digital Economy.