We believe that the populist trend is on the rise both in the European Union and globally, and we are positioning our thinking on financial markets accordingly.
We anticipate what kind of shift populism can have on the global order, what it can mean for certain countries or regions specifically, and what it might mean for their currencies and capital markets.
In particular, we’re investing with an eye toward the increased populist and nationalist elements taking root in many developed markets globally.
Populism is playing an increased role in influencing economic policies. Moreover, it can have a greater effect in defining economic policies than what’s traditionally been leveraged through the standard channels of fiscal and monetary policy.
Fiscal policy is where populism will be most direct. But it inevitably spills over into monetary operations as such policies influence employment, output, and inflation outcomes. Populism will also have an outsized role in shaping international relations, political cooperation within and amongst nations, and, in some cases, migratory flows as populists revolt against immigration policies that may lead to adverse economic and/or sociocultural effects.
What Populism Is Populist Trend
Populism is a phenomenon that is largely not understood very well largely because it happens infrequently, only at about the rate of major wars or economic depressions. It is seen on occasion in emerging/frontier countries – for example in Peron’s Argentina and Chavez’s Venezuela. However, in developed markets it occurs rarely and generally only when economic or social conditions deteriorate – or the wealth or opportunity gap between different economic and/or social factions increases. Populist Trend
The 1930’s represent the last time a major populist wave swept global politics, which saw the rise of Roosevelt in the US, Mussolini in Italy, Franco in Spain, and Hitler in Germany. This largely came as a consequence of the Great Depression and its mismanagement.
In similar economic circumstances in 2008, the US responded by voting in a leftist government, though populism didn’t manifest until nearly a decade later when the economic recovery was slow and disproportionally to the benefit of few. Even nearly a decade after the end of the financial crisis, 80% of Americans have a lower net worth in inflation-adjusted terms than they had in 2007. Populist Trend
In short, populism is the following: Populist Trend
- A platform that emphasizes “the people”
- Attacks the “elites” (e.g., banks, corporations) and the political “establishment”, or those in positions of power who are perceived to be ineffective
- Typically characterized by:
- a burgeoning gap (or a perceived gap) in economic opportunity and income inequality
- a broadly weak or languishing economy
- social frictions
- an ineffective government or a sclerotic political situation
- a pushback against cultural threats from those who may have different values from those who typically populate, or have historically populated, the country Populist Trend
The movement is generally led by the rise of a charismatic and often confrontational figure who generally, but not always, runs on the following policies or actions:
– Nationalism/a pushback against globalisation Populist Trend
– Trade protectionism
– Tighter immigration policies Populist Trend
– Vouches for stronger centralised power/less democracy
– Often criticizes the media for the undue influence they wield Populist Trend
Because of this blend, conflicts generally appear between opposing political groups and those who identify with distinct political brands – namely, the left and the right, with respect to both economic and social issues. And there is generally both intra-national and international conflict. Because these figures tend to be more polarising and hostile than diplomatic, conflicts can become forceful and self-reinforcing. Populist Trend
Within countries themselves, conflicts can lead to social disruption and further divides people when more individuals believe that their differences are too large to overcome and order must be restored by repressing the opposing faction. Populist Trend
Populist Trend Today
Though populism today is often characterized as a right-leaning movement in Europe, and given Donald Trump’s election in the United States, this is not always true. Populism can fit both a leftist and rightist mould, and leftist populists will tend to embrace the elements of attacking the political establishment, calling for stronger executive powers, and condemning bankers and the corporate elite.
Historically, many populist leaders have been left-leaning, such as Roosevelt (US), Huey Long (US), William Jennings Bryan (US), Thälmann (Germany), Lenin (Russia), Peron (Argentina), Chavez (Venezuela), Woodsworth (Canada), and Blum (France). More recently, Bernie Sanders (US) and Jeremy Corbyn (UK) have been left-leaning populists.
The election of Donald Trump represented a form of populist revolt, as his core base is mostly comprised of working class, non-coastal voters who have felt politically ignored or marginalized by mainstream politicians on both sides of the aisle in Washington. Populist terminology, such as “the deep state” and “the swamp” have been used to characterize his political opponents and bureaucratic adversaries. Populist Trend
The US mainstream media, which mostly operates out of the north-eastern part of the country – a leftist stronghold – has largely failed to understand the popular appeal of his campaign and have provided almost uniformly negative coverage on his administration. In turn, the media has become a targeted faction and given its own popular moniker, “the fake news”, which has entered the mainstream to concisely describe spurious reporting or mistruths stemming from news organizations. Populist Trend
Populism has also deepened its popularity in Europe by seeing some level of elevated electoral success, with Marine Le Pen’s FN in France, Fortuyn’s LPF in the Netherlands, Conte’s Lega-Five Star coalition in Italy, and in the UK under Corbyn’s Labour Party and Farage’s UKIP. Populist Trend
Populism is a political uprising of “the people” against the elites and a prevailing system that’s perceived to be ineffective. Naturally this leads to conflict between opposing factions domestically and against other countries/foreigners who are perceived to not serve the interests of the common man. Populist Trend
The uprising and conflict occurs to varying degrees. Back in the 1930s, this led to eventual war and a major disruption in who the global powers are. History does not mean destiny, and populism does not always mean the system being revolted against breaks entirely.
Namely, the principles that bind us together can often be greater than those that tear us apart. How the system plays out and what type of conflict manifests, and to what scale, depends on how circumstances are managed by the populist figures in charge and how well established the system is. Populist Trend
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