Prefer Westminster or American system

Consensus versus majority - two types of democracy after the 2008 financial crisis

Table of Contents

introduction

1. Arend Lijphart's theory
1.1. The Westminster model
1.2. The consensus model
1.3. Lijphart's results

2. The 2008 Financial Crisis - Attempts at Convergence

3. The two cases of Great Britain versus Germany
3.1. The Federal Republic of Germany
3.2. Great Britain

4. Formation of hypotheses on the basis of Lijphart's theory
4.1. The gross domestic product indicator
4.2. The unemployment indicator
4.3. The Consumer Price Index indicator
4.4. The strike activity indicator

Conclusions

bibliography

introduction

This work takes up a theory by Arend Lijphart, which he presented in "Patterns of Democracy: Government Forms and Performance in Thirty-Six Countries". The work was published in 1999 and goes back to his study “Democracies” from 1984. Based on Lijphart's theory, the question of which form of democracy, that of consensus democracy or that of majority democracy, with the financial crisis and the global one that followed Economic crisis coped better. The almost classic case of the Federal Republic of Germany was chosen as an example of consensus democracies. Great Britain was also chosen in the classic way for majority democracies. Both countries are at a high level of economic development and are in Europe, they are both part of the European Union, which justifies a comparison. It is not necessary to balance data based on different levels of development, as Lijphart does for some developing or emerging countries. The work begins with the presentation of Lijphart's theory. The current financial and economic crisis will then be discussed. The positions of two analysts are shown. The different economic situation of Great Britain and Germany is taken into account by briefly presenting their economic situation. The independent and dependent variables are determined in the chapter on building hypotheses. The two cases of Germany and Great Britain are then examined using the data currently available from the database of the Organization for Economic Cooperation and Development (OECD). The year 2006 is chosen as the comparison period because it precedes the financial crisis of 2008, which was announced in 2007. The final chapter should clarify whether the hypotheses have to be confirmed or rejected.

1. Arend Lijphart's theory

Arend Lijphart distinguishes two basic types of modern democracy. On the one hand the Westminister model, also known as the majority model, on the other hand the consensus model.

1.1. The Westminster model

The Westminister model is also called the majority model. Lijphart sticks to these terms, although he himself suggests speaking of a shared and bound power dimension.[1] The prototype of this model is Great Britain, many former colonies have basically adopted it, sometimes in a modified form. In addition to Great Britain, Lijphart also counts New Zealand and Barbados as belonging to this model type.[2] Lijphart characterizes the model using ten features. First he mentions the concentration of power in one party and mere majority cabinets. So the most powerful player in this model is the cabinet. This cabinet dominance is also his second point. The cabinet is actually dependent on Parliament's confidence, but in reality it only happens when Parliament asks the vote of confidence. It is precisely because of this enormous concentration of power that former minister Lord Hailham speaks of an elected dictatorship.[3] The Westminister model leads in principle to a two-party system, which differs mainly in one dimension, namely the socio-economic.[4] The fourth characteristic, in my opinion, one of the reasons for the presence of only three parties, is the electoral system. It is a majority voting system. The candidate with the best result is elected for his constituency. This means that many votes are lost and can be won even if the election result does not total more than 50% of the votes. The electoral system leads to majorities that are artificially generated by the electoral system, which is why Lijphart suggests speaking of a pluralistic democracy.[5] Another characteristic is the pluralism of interest groups. In general, trade unions and employers, for example, are not integrated into the policymaking process. Therefore, both sides prefer confrontational approaches.[6] Another factor is a unitarian and centralist government. The municipalities and regions have little rights and little room for maneuver. Exceptions to this in the case of Great Britain are the increasing rights of Northern Ireland and now also Scotland and Wales, although this has only been in effect since September 1997.[7] Another factor is the concentration of legislative power in one chamber. The House of Lords can only postpone legislation by one year, but it cannot overturn House of Commons laws.[8] Great Britain does not have any kind of Federal Council. Another point is the lack of a constitution. While there are some basic laws such as the Magna Carta of 1215, the Bill of Rights of 1689 and the Parliament Acts of 1911 and 1949, as well as traditions, principles and conventions, there is ultimately complete flexibility for Parliament in dealing with basic laws.[9] Great Britain does not know a Federal Constitutional Court like Germany's. This also leads to the next point of the absence of judical review. There is no higher law whereas lower ones would be checked for constitutionality. The jurisdictions introduced by the European Union, such as the European Court of Human Rights, are the exception here. The last of the ten typical points of the Westminister model is the control of the central bank by the executive branch. It is only since 1997 that the Bank of England has had the freedom to set the base rate itself.[10] The majority model for the UK case is thus sufficiently outlined and we turn to the consensus model.

1.2. The consensus model

Lijphart explains the consensus model using the two countries Switzerland and Belgium as well as the European Union. The findings can easily be transferred to the Federal Republic of Germany. He also names ten characteristics for this model. First, the power of the executive is shared in broad multi-party cabinets. In addition, the balance of power between the executive and legislative branches and control by the constitutional court, as well as a multi-party system with e.g. four parties in Switzerland. The representation takes place proportionally. Corporatism is also a characteristic of interest groups. Decentralized, federal structures are also typical. There is a strong two-chamber system. Another characteristic is the constitutional regidity, i.e. a constitution with high hurdles for constitutional changes.[11] The constitutionality of laws can be checked in Belgium and Germany, with the exception of Switzerland, which otherwise represents a typical example of the consensus model. The last point is the independence of the central bank.

1.3. Lijphart's results

Lijphart is now examining 36 democracies, which he assigns to each of the models. His basic question is which model works better, i.e. produces better results. He differentiates between macroeconomic performance and the control of violence in the sense of street fighting or uprisings. He also looks at the quality of democracy; he calls these factors “kinder and gentler democracy”. These include, for example, the representation of women in parliament, the difference between rich and poor, the corruption index, voter turnout and satisfaction with democracy.

Lijphart notes that when looking at the macroeconomic side there are only statistically insignificant differences, with consensus democracies doing slightly better. However, the differences are so small that they do not allow one or the other model to be preferred.[12] There is one major exception to this, however, namely combating inflation. The consensus democracies score significantly better on all indicators (price index, GDP deflator).[13]

When looking at the “soft” indicators, which he also calls the female indicators, that is, satisfaction with democracy, etc., the consensus democracies also come off statistically significantly better than the majority democracies.[14]

2. The 2008 Financial Crisis - Attempts at Convergence

The US-American investor and billionaire Georg Soros confesses in his book "The Analysis of the Financial Crisis ... ... and What It Means - Worldwide" that he too underestimated the crisis and expected timely intervention by the financial authorities. Instead, Lehmann Brothers went bankrupt and within a few days "the entire financial system suffered a cardiac arrest and had to be artificially kept alive"[15] Soros compares the impact on the world economy with the Great Depression of 1929.[16] In another work, Soros writes of two intertwined bubbles, the real estate bubble on the one hand, and what he calls the super bubble on the other.[17]

[...]



[1] Cf. Lijphart, 1999, p. 5. The English original speaks of “joint-power dimension” versus “divided responsiblity or diveded-power dimension”.

[2] See Lijphart, 1999, p. 10.

[3] See Lijphart, 1999, p. 12.

[4] Cf. Lijphart, 1999, p. 14. Lijphart naturally points out that there is a third political force in Great Britain, the liberals.

[5] Cf. Lijphart, 1999, p. 15. The term “pluralitarian democracy” is used in the English original.

[6] See Lijphart, 1999, p. 15f.

[7] See Lijphart, 1999, p. 18.

[8] See Lijphart, 1999, p. 18f.

[9] See Lijphart, 1999, p. 19.

[10] See Lijphart, 1999, p. 21.

[11] See Lijphart, 1999, p. 40.

[12] See Lijphart, 1999, p. 272.

[13] See Lijphart, 1999, p. 273.

[14] See Lijphart, 1999, p. 300.

[15] Soros, 2009, p. 25.

[16] Soros, 2008, p. 93.

[17] Soros, 2008, p. 94.

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