Davos conferees look to embrace windfalls from populist political shift, for now


Populism isn’t necessarily bad for the global economy. It might even be boosting it — at least for now.

That’s one conclusion that could be drawn after a discussion Friday on the last day of the World Economic Forum, attended by policymakers including International Monetary Fund Managing Director Christine Lagarde, Bank of Japan Gov. Haruhiko Kuroda and German Finance Minister Wolfgang Schaeuble.

Shocks such as the U.K.’s decision to leave the European Union or uncertainty after Donald Trump’s win may not be automatic downers for growth as newly empowered voters spend more, and promised infrastructure spending and cuts in regulation spur business confidence. With the economic cycle already turning, developed markets may even be able to escape the low-growth, low inflation trap that’s gripped them since the financial crisis.

Trump voters and Brexit backers have “changed policy,” said BlackRock Chief Executive Officer Larry Fink. “Right or wrong they believed the past policies were wrong for them. They’re encouraged and they’re spending more money and they’re optimistic on spending more money in the future.”

And whether growth is firming because of or despite populist politics, panelists welcomed the fact that momentum is returning, even as political developments shake the foundations of the globalized system that Davos represents.

Kuroda pointed to improvements in global manufacturing and a recovery in Asia, and said there’s upside risk to U.S. growth. Schaeuble said the euro area is “doing economically and fiscally a little bit better,” and that his own economy, Europe’s largest, is in fine form.

“The global economy seems to be going through a turning point,” Kuroda said. “It is not a coincidence that global economic growth, commodity prices, inflation expectations and long-term interest rates all bottomed out in the first half of last year.”

Business executives at the Alpine retreat in Davos, Switzerland, agreed.

Trump “will be disruptive and bring the economy forward,” Indian billionaire Anil Agarwal said in an interview. Bank of Montreal Chief Executive Officer Bill Downe said the U.S. economy “is going to expand, I believe, faster than it otherwise would have.”

Even Lagarde, who led earlier discussions about the concerns of those who say they’ve been left behind, said the IMF is more upbeat. The institution this month said global growth will accelerate to 3.4 percent in 2017 and 3.6 percent in 2018.

“In Davos I’ve got the impression that the Trump election is being interpreted as thoroughly positive in economic terms,” Swiss Finance Minister Ueli Maurer told reporters on Friday.

Still, Lagarde said it’s not clear what the balance will be between Trump’s intentions to boost growth and use more protectionist policies. And while the halls of the meeting largely hummed with optimism, some voices struck more cautionary tones.

Billionaire investor George Soros said euphoria will end as uncertainty takes over. Former U.S. Treasury Secretary Lawrence Summers told attendees that populism is “invariably counterproductive” for those it claims to help.

Leaders who “two, three months ago were saying he was a man they’d never do business with are now hailing him as a great economic statesman,” Summers said in an interview.

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