Businesses face challenges ‘operating in polarised societies’
Increased political violence and unpredictable oscillations in government policies have resulted in political polarisation surging around the world.
According to the Political Risk Index by professional service firm Willis, which examines more than 200 countries, affective polarisation is at a historic high, with the fastest growth in democracies such as the US, Germany, India, Brazil, and Bulgaria.
The report found that in democracies, surges in polarisation tended to follow economic crises or corruption scandals, which appeared to discredit traditional political leaders.
These surges were often accompanied by the growth of populist political movements and an increased frequency of political violence events.
The report also covered ideological polarisation, which refers to the degree to which people agree on core policy issues, and elite polarisation, the degree to which political rivals consider each other legitimate.
US as an outlier
The findings revealed that the US is the only country globally where affective, ideological and elite polarisation have all increased at a rapid pace over the past 15 years.
One of the “most striking figures” came from a question about marriage, which appeared repeatedly in some US opinion polls.
The report cited data from 1960, indicating that about 5 per cent of US voters would be displeased if their child married someone from another political party. However, by 2016, that figure had risen above 60 per cent among supporters from both political parties.
However, despite the high record figure in the US, polarisation and populism are rising in both Europe and the emerging world in addition to the US.
Sam Wilkin, director of political risk analytics at Willis, explained that “Businesses face growing challenges from operating in increasingly polarised societies.”
As he explained, “polarisation is also being felt on a more personal basis, such as how we perceive our friends and colleagues.”
This comes after a Willis survey of global businesses last month found that a large portion of respondents (nearly 40 per cent) said they had experienced a negative financial impact from the conflict in the Middle East – in most cases, due to disruption of supply chains.
While US policy was highlighted as a driver of political risk after nearly 60 per cent said they expected the trade conflicts of President Trump’s administration to have a negative impact on their finances.
On 2 April, Trump’s announcement of his global tariffs resulted in the most violent shock to international financial markets since the Covid-19 pandemic, with every single stock closing that week in the red.