Global economic growth is lagging. The question is why. For insight into this, we asked readers of CFA Institute NewsBrief what they believe is the single biggest obstacle to global economic growth.
I believe the biggest obstacle to global economic growth is . . .
Currently, populism is most visibly reflected in the UK vote for Brexit and the election of President Donald Trump in the US. There are also surging populist candidates in critical upcoming elections in France, the Netherlands, Italy, and even Germany.
Poll results reflect these trends: 35 per cent of the 820 respondents identified the rise of populism as the principal constraint on growth. Nobody knows where global populism will lead and, thus, this category could also be called uncertainty.
Populists take a very different approach to foreign policy. They tend to favour stronger defence, more aggressive diplomacy, and an “us-versus-them” mentality. About a quarter (26 per cent) of respondents believe geopolitical tensions now constitute the primary restraint on economic growth.
Populists are also leading a reassessment of global trade policy. Voters throughout the world are casting their ballots for candidates who support nationalistic economic policies. In fact, 20 per cent of poll respondents believe the potential drawbacks of trade wars and new tariff walls are the main check on growth.
One of the dividends of a stable international system of both politics and trade is global economic coordination.
In the heart of the Great Recession, central banks and regulators coordinated their responses to the economic meltdown. Now central banks are diverging in their policy responses as they turn their eyes to the domestic theatre and away from the international stage. Of respondents, 16 per cent believe this is the largest obstacle to economic growth.
The post-Great Recession era is the lowest interest rate environment in recorded human history. Yet inflation is beginning to rise in some of the large economies, including the US and the EU.
In response, central banks — the US Federal Reserve, among them — are considering normalising interest rates by raising them. Will this hinder economic growth? Nobody knows — which may explain why just 4 per cent of poll respondents focused on interest rates.
So what’s the lesson in all of this?
Whatever their cause, impediments to global economic growth are on the rise.
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