Economic Actors and the Problem of Externalities: Could Financial Markets Play a Role in Democratic Backsliding?

Izabela Jedrzejowska-Schiffauer, Peter Schiffauer, Gratiela Georgiana Noja
European Research Studies Journal, Volume XXIII, Issue 1, 215-238, 2020
DOI: 10.35808/ersj/1546


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.

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