I think that there is little doubt that Western democracy has 'lost it's way' a little bit, or is a state of increasing crisis. The roots of this crisis are, ironically, not in the politics of democracy per se, but in the economic path of Western Capitalism over the past few decades. The rise of globalization and Neo-Liberal economics led inevitably toward a problematical and predictable result - dramatic and ever increasing inequality of money and power in society. This state of inequality leads to a society of crisis. This crisis appears in the form of an ever shrinking economic security for the majority of people in society. The so-called shrinking of the 'middle-class' is really just the label we put on a society in which people's economic power and longterm security becomes ever less tenable. Millions of people are without a pension for their old age, with precarious jobs that will never afford them an opportunity to provide for their future economic security. Meanwhile, huge student debt is being amassed by a generation who have little hope of stable, secure, and prosperous employment. Decades of wage stagnation led to something much worse, a precarious economy in which people are becoming little more than wage-slaves to big corporations.
All of this regressive economic movement, leads to a kind of illusion of democracy. Neo-Liberals hijacked the political discourse and political institutions, orchestrated the death of a more equal and humane form of capitalism, and then they whip up populist fervor telling people that our political institutions are broken and can't deliver renewed prosperity BECAUSE OF THE VERY SITUATION THAT THEY PROMOTED IN THE FIRST PLACE.
Thus the great irony of our generation is found in the fact that the very people who have promoted this inequality (people like Donald Trump, Ted Cruz, and our own Harper and his minions) are the people who now use populist language to try to convince people that they are the solution to their own bad policies. Neo-Liberal politicians are, of course, in no sense interested in reversing what they have wrought. They want a precarious work-force, they want a weak and desperate working-class, they want a very small middle-class for the very simple reason that poverty for the many de facto means more wealth and power for the few.
But the saddest part of this is that or democratic institutions, the institutions that brought you government pensions, universal education, the right to a safe workplace, minimum wages (albeit too small), etc., are the victims of this economic bait and switch. The Neo-Liberal strategy has been fairly simple: create a very unequal society by taking hold of the political institutions and legislating radically in favour of the rich and corporations, stand in the way of any positive reforms that will help people be more financially and socially secure, and then blame those very institutions for what the Neo-Liberals were pursuing with such fervor in the first place. To keep this agenda on track they not only demonize the various parts of government that they have intentionally used to pursue their ends, but they divert people's attention with fear-mongering, hate speech, scapegoating of minorities, and a general championing of know-nothingism.
There is no question that our political institutions can always benefit from improvements. But it is not really the political institutions, per se, that are the problem here. The problem is that the Neo-Liberals have created a society that is dangerously imbalanced and then convinced people that this imbalance is somehow the result of legislative recalcitrance and/or leftist pipe-dreams. And the Corporate media has so twisted people's perception of the situation that many average people in the US, for example, can listen to Donald Trump, a guy who has spent his life pursuing a society of inequality, and believe that he wants to bring about a restoration of the middle-class. For a decade, here in Canada, Stephen Harper ruthlessly pursued an agenda, the primary goal of which was to create greater economic inequality, and he continually ignored or blamed others for that growing problem. Meanwhile, he failed to diversify the economy (a Economics 101 lesson) and the inevitable decline in oil prices has been like a double whammy for average people. And the real wealthy people go merrily on with ever increasing economic leverage over the rest of the precarious population.
Western democracy has, indeed, lost its way. But the reason is because we bought an agenda that seeks to destroy it and any economic equality that it brought with it. The crisis in democracy is not really an institutional crisis, it is a crisis of inequality and Neo-Liberalism that turns people into slaves of a corporate hegemony. And the people are so busy just trying to survive and lead a decent life that they have no idea what is going on around them, and the weakest ones are willing to blame minorities and the most vulnerable for a problem that was actually intentionally created by rich white men.