The Collaborative International Dictionary of English v.0.48:

Demoralization \De*mor`al*i*za"tion\, n. [Cf. F.
   d['e]moralisation.]
   The act of corrupting or subverting morals. Especially: The
   act of corrupting or subverting discipline, courage, hope,
   etc., or the state of being corrupted or subverted in
   discipline, courage, etc.; as, the demoralization of an army
   or navy.
   [1913 Webster]

WordNet (r) 3.0 (2006):

demoralization
    n 1: destroying the moral basis for a doctrine or policy [syn:
         demoralization, demoralisation]
    2: a state of disorder and confusion; "his inconsistency
       resulted in the demoralization of his staff" [syn:
       demoralization, demoralisation]
    3: depression resulting from an undermining of your morale [syn:
       demoralization, demoralisation]