Debt and democracy of creditors
https://doi.org/10.21202/2782-2923.2025.4.701-722
Abstract
Objective: to empirically test Wolfgang Streeck’s hypothesis on the transformation of a “tax state” into a “debt state” and to assess its impact on political stability using the example of the European Union’s six developed democracies.
Methods: the study uses a comparative case study and political and economic analysis. The empirical base comprises data from the International Monetary Fund, the World Bank, and the OECD (1990–2023) on the dynamics of gross government debt, tax revenues, interest expenses, and rates for the United Kingdom, Germany, Greece, Spain, Italy, and France. For analysis, the countries were divided into two groups: those that suffered from the debt crisis (Greece, Spain, Italy) and those that remained stable (Great Britain, France, Germany).
Results: Streeck’s hypothesis was partially confirmed. The author found that the relationship between high government debt and political instability is most pronounced in Greece, Spain and the United Kingdom. The key factor, however, is not the absolute amount of debt, but the cost of servicing it: despite its growth, low interest rates over the past decade have significantly reduced the fiscal burden. No direct relation was found for Italy and France, while for Germany the hypothesis turned out to be incorrect. Additionally, it was shown that the regime of “creditor democracy” in its purest form is typical for the countries with “negative sovereignty” (poor and some middle-income countries).
Scientific novelty: it is one of the first attempts to verify Streeck’s concept using specific macroeconomic and political data for developed countries. The author introduced the relation between the “debt state” theory and the dynamics of political stability and proposed its broad interpretation through the prism of the “negative sovereignty” theory.
Practical significance: the results obtained can be used to justify and implement a rational government debt policy, taking into account the high probability of new exogenous shocks and rising interest rates.
About the Authors
I. S. Bukina
Institute of Economics of the Russian Academy of Sciences;
Russian State University for the Humanities
Россия
Россия
Irina S. Bukina, Cand. Sci. (Economics), Head of the Center for macroeconomic analysis and forecast, Leading Researcher
Moscow
P. A. Orekhovskiy
Institute of Economics of the Russian Academy of Sciences;
Russian State University for the Humanities
Россия
Россия
Pyotr A. Orekhovskiy, Dr. Sci. (Economics), Professor, Chief Researcher
Moscow
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Review
For citations:
Bukina I.S., Orekhovskiy P.A. Debt and democracy of creditors. Russian Journal of Economics and Law. 2025;19(4):701-722. (In Russ.) https://doi.org/10.21202/2782-2923.2025.4.701-722
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