The 2024 Nobel laureate explains why democracy’s survival depends on working-class prosperity—and what happens when institutions fail to deliver

When only 28% of Americans express satisfaction with how their democracy functions—a historic low recorded in January 2024—the warning signals are impossible to ignore. This isn’t merely a statistical artifact of partisan frustration. It represents something more fundamental: a crisis of delivery, where democratic institutions have systematically failed to fulfill their core promises to ordinary citizens.

Daron Acemoglu, the MIT economist who received the 2024 Nobel Prize in Economic Sciences, argues that liberal democracy flourished when it pursued its core promises of shared prosperity, democratic governance at the local and national level, and the free pursuit of knowledge. But those promises now ring hollow for millions who have watched inequality skyrocket while their own economic prospects stagnate. The question facing advanced democracies isn’t whether they’re under threat—the data confirms they are—but whether they possess the institutional capacity to reform themselves before it’s too late.

The Polycrisis: When Multiple Failures Converge

We live in what scholars call a “polycrisis”—a condition where multiple, overlapping emergencies compound one another in ways that transcend their individual impacts. The numbers tell a stark story: between 2016 and 2024, the number of people living with democratic rights fell from 3.9 billion to 2.3 billion. This isn’t gradual erosion; it’s a democratic recession affecting nearly 1.6 billion people in less than a decade.

The Varieties of Democracy (V-Dem) Institute documents this retreat with precision. As of 2024, 42 countries are experiencing ongoing episodes of autocratization, a process where elected leaders systematically dismantle the very institutions that brought them to power. What makes this wave particularly insidious is its legalistic veneer—authoritarianism advancing through the ballot box rather than military coups.

But the democratic crisis doesn’t exist in isolation. It intersects with economic turbulence that has reshaped the social contract across industrialized nations. Consider the wealth concentration dynamics: In the United States, households in the top 10% of the wealth distribution own more than half—specifically 52%—of all total household wealth, with this share reaching as high as 79%. Meanwhile, income inequality measured by the Gini coefficient varies dramatically across OECD countries, ranging from approximately 0.22 in the Slovak Republic to more than double that in Chile, Costa Rica, and the United States.

This economic bifurcation creates what Acemoglu calls the preconditions for democratic decay. When democracy stops delivering shared prosperity, citizens begin questioning whether democratic institutions serve their interests at all.

Acemoglu’s Diagnostic: The Narrow Corridor and Institutional Balance

To understand how democracies survive—or fail—Acemoglu and his longtime collaborator James Robinson developed what they term “the narrow corridor” theory. The concept, detailed in their 2019 book of the same name, rejects the notion that liberty emerges naturally from either strong states or weak ones. Instead, freedom arises from a delicate balance between state power and an empowered society, where institutions provide education, healthcare, infrastructure, and protection from violence while remaining constrained enough that they cannot become predatory.

This framework helps explain puzzling variations in democratic outcomes. Why did some countries successfully democratize while others with similar initial conditions descended into autocracy or chaos? The answer lies in institutional design and the continuous tension between state capacity and societal mobilization.

Acemoglu’s research with Robinson and others has found that democracy directly contributes to economic growth, though it takes time—countries that democratize generally grow faster and invest more in education and health. But this relationship isn’t automatic. It depends on whether democratic institutions remain genuinely inclusive or become captured by narrow elites.

The extractive-versus-inclusive framework provides the analytical foundation. Extractive institutions concentrate power and wealth in the hands of a small elite, extracting resources from the broader population. Inclusive institutions, by contrast, distribute political power widely and create incentives for education, innovation, and broad-based economic participation.

History offers abundant examples. For three decades following World War II, democracy delivered shared prosperity as real (inflation-adjusted) wages increased rapidly for all demographic groups and inequality declined, but this trend ended in the late 1970s and early 1980s. Since then, the compact has broken down. Wages for workers without college degrees have stagnated while inequality has exploded—creating precisely the conditions under which populist demagogues thrive.

Economic Foundations of Democratic Fragility

The connection between economic inequality and democratic backsliding isn’t merely correlational. It operates through specific mechanisms that Acemoglu has spent decades documenting.

Democracy is in crisis throughout the industrialized world because its performance has fallen short of what was promised, with far-right and extremist parties benefiting from the fact that center-left and center-right parties are associated with wage stagnation, rising inequality, and other unfavorable trends. This isn’t hyperbole—it’s observable reality across Europe and North America.

The wealth inequality data reveals the scale of the problem. Brazil, Russia, and South Africa top global rankings for wealth inequality, each posting Gini coefficients around the low 0.8s on a scale where 0 represents perfect equality and 1 represents maximum inequality. But even wealthy democracies show troubling patterns. Among OECD countries in 2021, the ratio of average income between the richest 10% and poorest 10% of the population was 8.4 to 1.

These disparities matter because they shape political behavior. More than 60% of respondents across surveyed countries declared that disparities in income and wealth were too high or far too high in their country. When large swaths of the population feel economically abandoned, they become receptive to politicians promising to overturn the existing system—democratic norms be damned.

Acemoglu’s recent work emphasizes how technological change amplifies these dynamics. Automation and artificial intelligence threaten to further concentrate wealth and eliminate middle-skill jobs, precisely the economic foundation that historically sustained democratic stability. Without deliberate policy interventions to ensure technology creates broadly shared prosperity rather than extracting value for a narrow class of owners and investors, the economic pressure on democracy will only intensify.

The Polarization Multiplier

Economic anxiety doesn’t operate in a vacuum—it interacts with political polarization to create a toxic feedback loop threatening democratic stability.

In spring 2024, only 22% of U.S. adults said they trust the federal government to do the right thing just about always or most of the time, up slightly from the previous year’s historic low of 16%. This institutional mistrust reflects and reinforces partisan divisions. The Centers for Disease Control, for instance, received a 78% favorable rating among Democrats but only 33% approval from Republicans in 2024—a 45-percentage point chasm reflecting not scientific evidence but tribal identity.

The share of Americans who consider themselves on the far left or far right of the political spectrum is particularly high in the United States, with 11% placing themselves on the far left and 19% on the far right. Compare this to Germany, where only 6% identify as far left and 7% as far right, and the distinctive character of American polarization becomes clear.

This affective polarization—the emotional hostility between political tribes—proves more destabilizing than mere policy disagreements. Research shows it enables voters to excuse antidemocratic behavior by their own side while viewing identical actions by opponents as existential threats. Three-quarters of Americans said in 2023 that the future of American democracy was at risk in the 2024 presidential election, with both sides viewing the other as the primary threat.

The international context provides little comfort. Since 2000, 45 countries have experienced significant decline in the free and fair nature of their elections, relating to the spread of misinformation, interference from foreign actors, and erosion of public trust. These trends aren’t unique to any single nation—they represent a global pattern threatening the third wave of democratization.

Institutional Resilience: Pathways Forward

Despite documenting democracy’s current travails, Acemoglu’s analysis isn’t fundamentally pessimistic. The narrow corridor framework suggests that democratic renewal remains possible—but only through specific institutional reforms and renewed social mobilization.

Democracy has long promised four things: shared prosperity, a voice for the citizenry, expertise-driven governance, and effective public services. Rebuilding these pillars requires concrete policy changes, not merely rhetorical commitments.

First, the economic compact must be restored. This means policies explicitly designed to ensure technology creates good jobs rather than merely automating existing ones. Acemoglu and co-author Simon Johnson argue in their recent work that AI deployment should be shaped by tax policy, regulation, and public investment to favor labor-augmenting rather than labor-replacing technologies.

Second, political institutions need structural reforms to rebuild representativeness. This includes addressing gerrymandering, campaign finance distortions, and the ways money translates directly into political power—all of which allow narrow interests to capture democratic processes.

Third, strengthening the civic infrastructure that enables ordinary citizens to organize, deliberate, and hold power accountable. Some countries like Austria, Chile, Nepal, and South Africa faced early warning signs of deterioration but demonstrated onset resilience to autocratization, providing examples of how mobilized societies can push back against democratic backsliding.

The comparative evidence suggests these interventions work. Countries that have successfully reversed democratic decline share common features: active civil society, reformed electoral systems, and economic policies that deliver tangible improvements in living standards for working families.

The Working-Class Imperative

Perhaps Acemoglu’s most urgent recent argument concerns democracy’s relationship with working-class voters—the constituencies that democratic institutions were originally designed to empower.

While Democrats have won recent elections with support from Silicon Valley, minorities, trade unions, and professionals in large cities, this coalition was never sustainable because the party became culturally disconnected from, and disdainful of, precisely the voters it needs to win. This diagnosis applies beyond American politics to center-left parties across the industrialized world.

The policy implications are clear: More good jobs—finding ways to create good jobs in communities and spreading prosperity that way—must become the organizing principle of democratic governance. This isn’t about nostalgia for manufacturing employment but about ensuring that economic growth translates into broadly shared gains rather than concentrated windfalls for asset owners.

Historical precedent supports this emphasis. The golden age of democratic stability in advanced economies—roughly 1945 to 1980—corresponded precisely to the period when working-class incomes grew fastest. Democracy thrived when it delivered economic security. It now struggles because that delivery system has broken down.

Technology, AI, and Democratic Futures

The technological landscape adds new complexity to democracy’s challenges. Artificial intelligence, in particular, presents both opportunities and acute risks for democratic governance.

On one hand, AI could enhance state capacity, improve public service delivery, and accelerate scientific progress in ways that benefit everyone. On the other, it threatens to concentrate economic power even further, eliminate millions of middle-skill jobs, enable unprecedented surveillance, and flood information ecosystems with AI-generated propaganda.

Acemoglu has testified before the U.S. Senate warning that AI deployment, if left to pure market forces, will likely accelerate inequality and undermine social cohesion. The technology itself is neutral, but its institutional context determines whether it strengthens or erodes democracy. Companies designing AI systems for automation rather than augmentation—replacing human judgment rather than enhancing it—make choices that ripple through the entire political economy.

The policy challenge involves steering technology toward inclusive outcomes without stifling innovation. This requires active industrial policy, thoughtful regulation, and potentially significant changes to how we tax capital versus labor. None of this is simple, but the alternative—allowing technological change to further hollow out the economic middle class—represents a clear pathway to democratic collapse.

Can Democracy Deliver Again?

The central question isn’t whether democracy faces a crisis—democracy is going through a very, very tough stretch, in part because it has not realized its promise for all people, particularly those at the lower end of the labor market. The question is whether democratic systems retain sufficient institutional capacity to reform themselves.

Acemoglu’s framework suggests cautious optimism grounded in historical realism. Democracies have weathered serious challenges before—the Great Depression, World War II, the civil rights struggles. Each time, reform came not from benevolent elites but from mobilized citizens demanding that institutions live up to their stated values.

The narrow corridor theory reminds us that democratic liberty has never been the default state. It emerges only from continuous struggle—the Red Queen effect, where state and society must keep running just to stay in place. Complacency leads to drift toward either despotism or anarchy.

Current global trends provide both warning and possibility. In Thailand, Zambia, and other nations, democracy eroded but people resisted growing authoritarianism, allowing these countries to partially or fully restore previous levels of liberal democracy. These reversals demonstrate that when democracy deteriorates, its fate isn’t sealed—institutions can be reclaimed through organized citizen action.

The Stakes: Liberty and Prosperity

The conversation with Acemoglu ultimately centers on what we risk losing. Democracy isn’t merely a set of procedures for selecting leaders—it’s the institutional foundation for both human liberty and shared prosperity.

It’s very difficult to maintain economic inclusion when ruled by the iron fist of an autocrat, Acemoglu notes. The extractive institutions that characterize autocracies systematically prevent the broad-based innovation, education, and entrepreneurship that drive sustained economic growth.

The stakes extend beyond economics to human dignity and freedom. Autocratic alternatives promise efficiency and decisive action, but they deliver neither. Instead, they concentrate power in ways that ultimately serve narrow interests while suppressing the very social dynamism that makes societies vibrant and productive.

For liberal democracy to survive this age of spiraling crises, it must rediscover its core promise: building inclusive institutions that genuinely serve the broad public rather than narrow elites. This requires confronting economic inequality, repairing social trust, reforming broken political systems, and ensuring that technological change serves human flourishing rather than extractive concentration.

The narrow corridor ahead is treacherous. But it remains navigable—if we choose to walk it with clear eyes and determined purpose.

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About the Research

This analysis draws on Daron Acemoglu’s extensive body of work, including “Why Nations Fail” (2012) with James Robinson, “The Narrow Corridor” (2019), and his recent Project Syndicate commentaries on democratic crisis and working-class politics. Data sources include the Varieties of Democracy (V-Dem) Institute, OECD inequality statistics, Pew Research Center political surveys, and World Bank inequality metrics.