Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
A growing chorus of political scientists and business leaders are expressing alarm over what they perceive as an undermining of American democratic institutions and norms under President Donald Trump’s administration, warning of significant economic consequences. They point to a series of actions, including alleged interference with independent economic bodies, increased government intervention in private enterprises, and threats to free expression, as evidence of democratic erosion.
Mounting Concerns Over Democratic Erosion
Experts in governance and economics are voicing profound apprehension regarding the current state of democracy in the United States. Vanessa Williamson, a senior fellow of governance studies at the nonpartisan Brookings Institution, stated she has “never been this concerned about democracy in the United States.” Jeffrey Sonnenfeld, a Yale professor renowned for his connections within the business community, echoed these sentiments, noting a “serious erosion of the foundations of democracy.”
These experts highlight a pattern of events they believe suggests American democracy is being undermined in real time. The stakes, they argue, are massive for both the U.S. economy and the broader business world.
Economic Impact of Democratic Health
Research indicates a strong correlation between democratic governance and economic prosperity. A 2019 study titled “Democracy does cause growth,” published in the Journal of Political Economy, found that democratizations increase GDP per capita by approximately 20% in the long run, primarily driven by greater investment in capital, schooling, and health.
Conversely, scholars have observed negative economic outcomes in countries led by populists. A 2023 study in the American Economic Review concluded that populist leaders leave a “long-lasting negative imprint,” with GDP per capita 10% lower after 15 years compared to non-populist counterparts. Williamson emphasized that “Democracy is just good for the economy. And autocracy is bad for the economy,” attributing erratic policymaking to the decline of democratic institutions.
Allegations of Institutional Undermining
Critics point to several specific actions under President Trump’s administration as evidence of democratic erosion. One instance cited is the firing of Erika McEntarfer, the commissioner of the Bureau of Labor Statistics, by Trump after a jobs report. McEntarfer described the firing as an attack on the independence of a crucial economic institution, stating it “made no sense” and had “serious economic consequences.”
The independence of the Federal Reserve has also reportedly been challenged. Trump fired Fed Governor Lisa Cook, who has since challenged the decision in court. These actions are viewed by some as attempts to exert political control over institutions designed to operate without political interference.
Government Intervention in Private Sector
Another area of concern is the Trump administration’s increased involvement in private businesses. Examples include Trump’s demand for the resignation of Intel CEO Lip-Bu Tan, followed by a controversial taxpayer investment in the chipmaker. Douglas Holtz-Eakin, a former economic adviser to President George W. Bush, criticized this, stating the government is “overstepping boundaries” and making Intel a “state-owned enterprise.”
Further instances include the approval of Nippon Steel’s takeover of US Steel, which granted the federal government a “golden share” in the private enterprise. The Department of Defense also became the largest shareholder in MP Materials, the nation’s largest rare earths miner. Former Vice President Mike Pence noted that “state ownership of business is very common in China and Russia,” countries far from democracies, and that such moves “taken our country to a very perilous place.”
Sonnenfeld went further, describing the federal government’s “intrusion” into the private sector as if “MAGA has gone Maoist, if not Marxist.”
Threats to Free Expression and Media
Concerns also extend to the realm of media freedom. Brendan Carr, a Trump-nominated chairman of the Federal Communications Commission (FCC), reportedly suggested regulatory action against Disney and ABC over remarks made by comedian Jimmy Kimmel. Kimmel’s show was later suspended indefinitely by ABC, a move hailed by Trump.
Williamson described such actions as “straight from the autocratic playbook,” while Sonnenfeld called Trump’s threats to pull broadcast licenses over critical coverage “horrifying.” He added that “the erosion of free expression in the media is really alarming.”
Business Community’s Private Alarm
Despite these public concerns, many business leaders have remained publicly quiet, reportedly to avoid drawing the White House’s disapproval. Trump previously threatened a 100% tariff on Mattel’s imports after its CEO mentioned potential price hikes due to existing tariffs.
However, Sonnenfeld states that privately, CEOs are “quite alarmed” about the state of democracy in the United States. He noted a “splintering” within the business community, with leaders meeting with the president sector by sector rather than presenting a unified voice, though he believes “they need to” come together.
Administration’s Stance
The White House did not respond to a request for comment on these specific concerns. However, Trump has previously highlighted a promised influx of investment and rising tariff revenue as indicators of economic success during his term, asserting in July, “We’re the hottest country anywhere in the world.”
Outlook
The confluence of these actions and expert warnings paints a picture of growing apprehension regarding the stability of democratic institutions and their long-term economic implications for the United States. As political scientists and economists continue to monitor these developments, the debate over the health of American democracy and its economic future remains at the forefront of national discourse.
