The rise of populist leaders who are hostile to free trade is unlikely to abate in the short term, says Standard Life Investments.
The current backlash against globalisation is “going to matter a lot for politics and policy over the next few years”, Standard Life Investments chief economist Jeremy Lawson said, cautioning that the underlying pressures supporting the rise in populism “aren’t going away”.
“The really firm view that we have is that what we’re seeing now are the consequences of decades long trends that have effectively been accumulating pressure in the developed countries, and then the financial crisis has acted as the catalyst for realising some of those risks,” Mr Lawson said.
Mr Lawson said global economies may have to go through a “populist moment”, which is then seen to have failed before economies develop a shared understanding of what needs to happen to improve growth.
“Take Marine Le Pen – if she was to try and implement her current policy agenda, she will create a crisis in France on a scale much larger than occurred during the eurozone crisis,” Mr Lawson said.
“The problem is that not enough people think it will create a crisis, so sometimes it needs to be implemented, it needs to fail, you see that it fails, and then that prompts people to say ‘well alright, what’s the alternative?’”
Mr Lawson cautioned that there was an increased risk of these types of events happening now than there had been previously, and that scenario analyses provided one way to prepare for unexpected political events.