Over the past decade, there has been a growing consensus that democracies around the world are facing a crisis from within. According to a 2025 Pew survey, nearly 60 percent of respondents in 23 countries agreed that they are “dissatisfied with democracy.” Polarization, disinformation, and disillusionment with leaders willing to break established norms for personal advantage are certainly to blame for this growing sense of dysfunction, but there is a deeper flaw in today’s democratic governments: state agencies and institutions are increasingly unable to perform the basic tasks they were designed to carry out.

When the COVID-19 pandemic reached the United States, in early 2020, the U.S. government was spending roughly $600 million a year to detect infectious diseases. Yet the virus spread undetected for a month because researchers were unable to get permission from a rigid bureaucracy to test the swabs that would have helped identify it. In the United Kingdom, despite the billions of dollars the government has spent on youth employment services following the pandemic, the number of young people aged 16 to 24 who are not employed, in school, or in training programs has surpassed one million—a precipitous increase of more than 300,000 in less than five years. Germany, a country once known for its efficiency, now has a rail network so unreliable that it has become a national embarrassment; around 40 percent of long-distance trains arrive late. Across large swaths of the United States and Europe, people compare what they hear from politicians of all parties with what they see with their own eyes, and the rhetoric does not match the reality. The result is dismay and distrust.

“State capacity” used to be a term that experts in advanced countries used when speaking of the developing world. If this country receives foreign aid, does it have the capacity to turn it into public good? Now the citizens of those donor countries are asking that question at home. If we pay taxes, will our government provide more of the things we need? If we engage in the political process, will we get the outcomes we seek? Increasingly, the apparent answer to these questions is no. As Brian Shearer, a regulatory expert at the Vanderbilt Policy Accelerator, has laid out, implementing a significant new federal rule in the United States usually takes at least five years from start to finish, making it impossible for a president to deliver on a promised reform before the next election. As a result, the basic feedback loop of democracy—candidates say what they’ll do, voters choose, results arrive, voters judge—is breaking down. Nearly all rich democracies face some version of this crisis.

At a fundamental level, these failures not only erode confidence in democracy; they also undercut sovereignty. When Ukraine needed to restore its communications network after Russia’s invasion, in February 2022, it turned to Starlink’s satellite Internet service, a private enterprise. That meant that although the Pentagon eventually paid to keep the Starlink network running in Ukraine, the decision about whether Ukrainian forces would have the satellite network they needed to strike the Russian fleet at Sevastopol rested not with the Pentagon or with the National Security Council but with Starlink’s founder, the tech billionaire Elon Musk. Since then, frontier AI models have only accelerated the shift of power from public institutions to private companies.

Democracies have not given up on institutional reform. There are glimmers of success in almost every advanced country, including the United States, at agencies such as the Internal Revenue Service, which has finally begun to modernize its woefully out-of-date technology. Following the onset of the pandemic, the massive stimulus that Congress passed in March 2020 showed what governments could deliver when the global economy was on the line. But overall, efforts to make government agencies fit for purpose in today’s world have not been going well. Even Musk, despite his vow to take a chainsaw to the bureaucracy, seemed exhausted by the vastness of what his Department of Government Efficiency had taken on, and abandoned DOGE over a year earlier than planned.

To truly reverse the dramatic decline in state capacity, governments need to take radical approaches that can win public trust. In his classic 1967 book, Inside Bureaucracy, the economist Anthony Downs described how institutions that lose their ability to adapt eventually embark on a slow death, becoming hollow shells of rules and procedures. Once they reach this point, he argued, they must be either reborn or destroyed. Today, advanced democracies around the world need to give serious attention to institutional rebirth—rebuilding state agencies into departments of now, unencumbered by people, precepts, and processes of past eras. But they also need to consider which legacy agencies are beyond reinvention and should be shut down altogether.

Not every broken institution has to be rebuilt from scratch. Governments do not have the time, resources, or political bandwidth to turn over the tables in every part of the state at once, nor would doing so be wise. Relentless, incremental improvement of existing agencies remains an important part of statecraft. But if they are going to solve the current crisis, democracies will have to get comfortable with creating new institutions. Curing what ails democracy today will require many things, but no other remedies will stick if governments can’t deliver what they promise.

There is no single correct formula for institutional rebirth. An institution might be considered reborn when it has installed a new operating model that allows it to achieve its stated mission. Some legacy institutions hold valuable assets—authorities, data, know-how—that are not easy to move to a new home, so governments need to figure out how much of the existing system is irretrievably broken and what if anything needs to be preserved. It is critical to get the degree of newness right.

In North America and Western Europe, state institutions have inherited an operating model that was built in the era leading up to and immediately following World War II. This meant that they were designed to administer large, complicated, stable programs through careful planning and centralized control and that the problems they were supposed to address were assumed to be known in advance. During the postwar decades, that model was generally workable, but when the Internet began to rewire the economy in the late 1990s, it introduced a very different set of practices. Solving problems now depended on a system of testing and learning in which solutions were continually tried out in the real world and adapted accordingly. Today, with the advent of AI, the pace of scientific and technological change has only increased.

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