Democracy and Growth in the Twenty-first Century

This chapter starts from acknowledging the crisis that has trapped much of the West in a condition of stagnation of ideas about how to govern complexity and slow productivity growth in an era of Internet driven disruptive changes. The focus moves to the two paradoxes which are central to the book. The “innovation paradox” underlines how the Internet revolution has not displayed its impact on growth when its effects are expected to be even larger than those of previous industrial revolutions, while the “democracy paradox” points to many signals of the crisis of legitimacy and effectiveness that liberal democracies have suffered since 1989 when they were declared historically the winners against Communism. The thesis that this book engages with is that this second, the “democracy paradox” is at the very root of the first, the “innovation paradox”. The argument is that the solution to both paradoxes is to be found in radically innovating the mechanisms through which diffused intelligence and individual preferences within civil society are identified, leveraged and processed into collective choices and policies to be formulated and implemented. Such a governance system is referred to as “knowledge democracy” and such innovative mechanisms as “smart participation”. Together, they signal the departure from the traditional implementation of the concept of democracy which appears no longer adequate in this XXI century. China and Italy are empirically investigated in the book as text cases of the current opposite position of the West and the East in growth performance.

The chapter moves from the discussion of the transformation of civil life and democracy in the era of the technological revolution. Rapid and profound contextual changes have affected citizens’ understanding of the values underpinning the concept of democracy and caused behavioural consequences. Citizens as residents of cities, towns and villages have countered change by retiring into their own private space and distancing themselves from their institutions and public affairs, causing a pervasive loss of social capital across territorial communities. The chapter proceeds to analyse how the new technologies can also provide opportunities to reverse the trends of economic dislocation, social anomie and democratic disengagement, by enabling multi-level governance with new modalities of participation by citizens’ in decision-making, thus increasing the community’s stock of social capital. The discussion turns to how territorial communities are transformed when they embrace a socially participated trajectory of sustainable economic and social growth, because of their capacity to adopt and adapt to IT new developments that help to value and employ their specific set of resources. An updated definition of innovation is derived and offered: as technology-enabled social transformation drawing on “societal knowledge”, a process which moves resources towards innovators to produce community-wide benefits. The chapter discusses how the linking of technological innovation, civic engagement and prosperity may occur and it closes with the analysis of the scenario of the “democracy of the future”, expressed through a range of means of participation, IT-supported policy choices and proposals, and in the end better performing institutions.

The chapter explores a case which may induce political scientists, economists and political economists to review the theories on growth, innovation and democracy, around which their disciplines have been organized. Today, China is the most complete representation of the “entrepreneurial state”, the system which may be indispensable to unfold the potential of the industrial revolution which is defining the twenty-first century. The chapter starts from an analysis of the characteristics of the great leap made by the Empire of the Middle in terms of economic growth, reduction in poverty and innovation. It examines the main challenges—from China’s environmental degradation to the high debt, competition from newer economies and the trade war with the USA. It moves to assess how China is addressing them and it underlines that the key of China’s approach is the original use of technologies as a tool to address the problems of its middle-income society. It inquires about the characteristics that make the Chinese central planning apparatus and the Communist Party overcome the obsolescence that killed other communist experiences. A brief comparison between China and Asia is carried out to understand whether China is part of an Asian regional model. The chapter draws conclusions and provides ten recommendations about five assets to preserve and five vulnerabilities to defeat, around which China may design its evolving strategy to become a “moderately prosperous country” in the next few years.

This chapter examines Italy as simultaneously a case of crisis of democracy, innovation and efficiency, to understand how a major Western economy turned into an economic laggard in only three decades and how to reverse the trend. The analysis interrogates Italy also as a laboratory of the decline of the West and of the European Union (EU), with its increasing inequality, decreasing social mobility and lack of innovation. The chapter analyses Italy in the years after World War II, when it emerged from the devastations of two decades of Fascist dictatorship, produced the “Italian economic miracle” of the reconstruction and the “industrial district” model, consolidated its democratic institutions and anchored itself into the Western sphere of international relations. Until the 1990s, with the collapse of Italy’s party system, the accentuated personalization of politics and a growing split within the electorate, shaking Italy’s institutional structure and putting a break on growth that started a trend of loss of human capital fleeing abroad. Multiple top-down attempts at reforms have failed to aggregate and incorporate knowledge holders’ inputs, while currently populist movements even question innovation-driven changes. The chapter empirically shows how a twenty-first-century “renaissance” reversing these trends is likely to be based on innovation-driven change originating from the grass roots, Italy’s networks of model cities, unions of municipalities and town associations. In closing, the chapter argues that to succeed such strategy prospect needs to be framed by national and EU policies.

This chapter brings to bear the research findings of this work onto the thesis that the “democracy paradox” of the missing link between growth and democracy is at the very roots of the “innovation paradox”, whereby the impact of the Internet revolution is still to unfold most of its potential to improve the well-being of citizens. It discusses the lessons learned on the ground about the concepts of knowledge democracy and smart participation as resolutive to reverse the trend of decline in Western democracies. The thesis is largely proven. The chapter underscores the relevance of the empirical cases of China and Italy for the scrutiny of the triangle of performance relationships: technological progress (TP), democratic participation (DP) and socio-economic growth, singling out China as the high scorer. It moves to profiling Australia, Estonia, Canada and Switzerland as laboratories of the democracy of the future because these liberal democracies perform better on the challenge of realizing richer forms of participation and innovation-driven growth. It then confirms from the findings that liberal democracy survives if it proceeds on the path to knowledge democracy, capturing the potential of technologies and reconnecting citizens with representative institutions. The chapter offers ten specific suggestions to contribute to a still too weak debate on the future of democracy and on the development of participatory mechanisms which would make institutions capable to adapt to and govern the mutation that technologies have triggered. Pointing out the limits of this empirical investigation and the need for expanded research, the chapter retraces Marco Polo’s voyage to the East and the reciprocal learning it brought through a silk road that needs to be rediscovered, and in closing it reaffirms the spirit of the West and makes an impassioned call for action to renew democracy in the era of the Internet.