Economic actors and the problem of externalities : could financial markets play a role in democratic backsliding?

Abstract

Purpose: Economic actors tend to exert powerful impact on socio-economic and political developments around the globe, including yielding financial and political crises in developed democracies. Approach/Methodology/Design: While a number of studies discuss the impact of finance on political and societal reality, research on the interlink between finance and democratic processes is very limited. Drawing on secondary literature and a case study of two young Central-European democracies, this paper contends a relationship between financial economy and democratic backsliding. Findings: The findings challenge the existing conventional accounts of the reversal to authoritarian politics in Poland and Hungary. Practical Implications: They also identify a mismatch between the constitutional foundations for embedding the market within the society and its institutions on the one hand, and the political-institutional reality in contemporary democracies. Originality/Value: The research provides theoretical assumptions encouraging further study on unwelcome externalities produced by financial markets.