Democracy is inherently fraught. At its core lies the difficulty of translating individual preferences into a coherent social choice, a problem famously captured by Nobel laureate economist Kenneth Arrow’s impossibility theorem and later developed by another Nobel laureate, Amartya Sen, in his 1970 book Collective Choice and Social Welfare. Just as Euclid did for geometry long before them, Arrow and Sen gave political economy a rigorous axiomatic framework, in the process revealing the limits of collective decision-making. Yet, even as the theoretical understanding of democracy has advanced, empirical analysis has lagged behind. In the absence of consistent data, our views on why certain democracies thrive or falter are often driven by prejudice rather than by evidence. To address this gap, the V-Dem Institute publishes its annual Democracy Reports, among the first systematic efforts to measure and compare democratic health across countries and over time.
The Institute’s latest report offers a stark assessment of the United States’ current trajectory. The “speed with which American democracy is currently dismantled,” it warns, “is unprecedented in modern history.” Given America’s position as the world’s leading democracy, such rapid deterioration has implications far beyond its borders. While countries like Turkey and India have experienced democratic erosion in recent years, the report points to sharper declines across Western Europe, where populist leaders are increasingly taking cues from US President Donald Trump.
Of course, any effort to measure democracy is open to criticism, not least because democracy has no single, universally accepted definition. Still, the V-Dem report represents one of the most rigorous efforts possible under the circumstances, developing and refining a set of indicators that track the resilience of democratic institutions and limit the scope for personal bias in evaluating countries with very different political cultures. Unsurprisingly, V-Dem’s 2026 index places Denmark, Sweden, and Norway at the top, and Eritrea, North Korea, and Myanmar at the bottom.
The report paints a bleak picture, noting that the gains of the late-20th-century democratization wave have been “almost eradicated.” But it also highlights some encouraging developments. Sri Lanka, for example, has experienced a remarkable democratic turnaround under President Anura Kumara Dissanayake. And Brazil, following President Luiz Inácio Lula da Silva’s 2022 election victory, has shown that democratic backsliding can be reversed.
Even so, the broader trend is unmistakable. Following Portugal’s Carnation Revolution in 1974, identified by political scientist Samuel Huntington as the start of the “third wave” of democratisation, democracy spread to dozens of countries. As that wave recedes, democratic progress is being set back by nearly five decades.
Can the trend be reversed? As CNN journalist Brian Stelter has observed, the two institutional avenues that offer the greatest hope are elections, which enable citizens to force a change in course, and independent judiciaries that act as a check on executive overreach. But the answer also depends on how we define and measure democratic backsliding. While V-Dem’s methodology offers valuable insights, it has an important limitation. To construct its rankings, V-Dem assigns each country a democracy score based on multiple sub-indices and then aggregates these into a global measure. If the goal is to reflect the experience of individuals rather than countries, a population-weighted average would seem more appropriate. That is, after all, how institutions like the World Bank aggregate GDP. Democratic health, however, cannot be aggregated in the same way as GDP.
To understand why, imagine a world in which every country is democratic. Now, suppose that a major power goes rogue and begins to undermine the rights of individuals in other countries while maintaining its own domestic democratic institutions. In such a scenario, even though each country’s own score remains unchanged, global democracy would clearly decline.
As I argued in my 2016 book Beyond the Invisible Hand, in an interconnected global economy shaped by geopolitical asymmetries, the leaders of major powers can matter as much to ordinary people as—if not more than—their own governments. This is especially true for smaller countries that are economically or strategically dependent on larger ones. The problem would be less acute if all governments adhered to international norms. In reality, powerful countries have numerous ways to bully the weak.
For this reason, measuring the health of global democratic governance cannot rely solely on aggregating national scores. It must also account for how major powers influence, constrain, and violate rights beyond their own borders.
To be sure, designing such a measure would be a complex task. But without it, our understanding of democracy’s current decline—and how to reverse it—will remain incomplete.
The writer, a former chief economist of the World Bank and chief economic adviser to the Government of India, is Professor of Economics at Cornell University.
