Research from Deutsche Bank has found that the average age of world leaders has jumped markedly in the past decade. The average age of G20 leaders is now 64 – five years higher than it was a decade ago. The leaders of the nine most populous countries in the world are older still, at an average of 76. One reason for this is that leaders are not stepping down.
Elderly leaders who are hanging on to power are contributing to a drift towards autocracy and, with it, an increased potential for political and economic dislocation when change eventually arrives. The bigger a political upheaval, the larger the potential for volatility across financial markets.
Democracies are backsliding
Three separate measures of global democracy have been sliding backwards in recent years. The Economist Intelligence Unit has calculated democracy scores for more than 160 nations since 2006. In 2024, 61% of 137 nations had a deteriorating score versus the previous year, and only 22% had an improving score.
The V-Dem Institute concluded in 2024 that the wave of rising autocracy ‘is not cresting or even slowing down’. It calculated that the world has fewer democracies (88) than autocracies (90) for the first time in more than two decades.
The Bertelsmann Transformation Index tells a similar story. Its measure of democracies versus autocracies has swung almost 10% towards autocracies in only four years, meaning that, by the index’s metrics, autocracies now outnumber democracies.
Part of this trend is due to the Covid-19-related restrictions imposed in 2020. The end of lockdowns has not led to a return to previous scores in many nations at the lower end of the league table of democracy.
This global trend also has an element of contagion built into it: autocratic nations are more likely to interfere in the electoral process of other nations. As Russia’s score has declined, it appears to have embarked upon electoral interference with increased regularity and in a wider range of countries. These actions impact the score of the nation that has been the victim of interference, contributing to the wider global slide in democracy scores.
Is there a connection and what are the implications?Â
There is evidence that some older leaders are taking their nations in the direction of autocracy to preserve their own tenure. China, Russia, Türkiye, India and Iran are all examples of nations where long-term incumbents are presiding over consistently deteriorating democracy scores. The lower the score, the easier it is for the leader to control the levers of power and shore up their incumbency.
In the Financial Times, Gideon Rachman observed that the longer a ‘strongman ruler’ is in power (and they are usually men), the harder it is for the nation to resist the creep towards autocracy. He specifically highlighted that such a ruler uses their extended tenure to attempt to control the media, tame the judiciary and bring the military to heel – in short, to cement their position.
We should ask what will happen when change finally comes. Autocratic leaders may have success in preventing change via the ballot box, but inevitably their reign will at some point end.
What happens then? Â
Succession planning is less likely in an autocratic country than in a democracy. History teaches us that strong leaders prefer an air of uncertainty around succession for fear of undermining their position of dominance. The consequence is that, when change comes, the greater the chance that it is a major rupture.
A change of leadership in nations such as Russia, China, Iran, Türkiye and (perhaps) India could precipitate internal struggles, a period of uncertainty and even involvement by third-party nations.
Should we have similar concerns on succession planning for countries that have worsening scores but currently do not sit in the autocratic category? Perhaps.
Countries that have slipped from democracy to flawed democracy in the EIU scoring system in the past decade include France and the US. Italy has been classified in that category for some time. In all three nations elections have become more fractious.
In France and Italy, new political parties and groupings are an indication of a less predictable electoral outcome, and the possibility of an exit from the euro currency, or even the European Union, are topics for discussion. Moreover, it can be argued that a worsening score in France or Italy may increase the likelihood of future Russian, Chinese or even US electoral interference. A vicious circle.
Declining democracy scores around the world reflect the potential for wrenching regime change when succession eventually occurs. Against this increasingly uncertain backdrop, the chance of future financial market dislocations will be higher.
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Gary Smith is Client Portfolio Manager, Fixed Income at Columbia Threadneedle Investments.
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This article is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal.