- Inequality since crisis has led to `scapegoat economics'
- Lower trade and labor mobility would have negative effect
Economists, take note: “Anti parties” and “scapegoat economics” are here, and they’re yet another risk to global growth.
Since the financial crisis, a rise in inequality has helped lead to an increase in support for political parties that are opposed to specific groups, according to Paul Donovan, an economist at UBS Group AG in London. That can bolster trade protectionism, curb labor mobility and hinder expansions, he said.
“The politics of prejudice is never likely to be economically helpful, but it is considered peculiarly unhelpful at the current stage,” Donovan wrote in a report published Tuesday. “Scapegoat economics replaces a vague, uncontrollable cause of relative economic loss -- the global financial crisis -- with a specific, controllable target, generally a minority in society.”
Germany and the Netherlands have seen a clear increase in opposition to immigration, alongside the U.S., Australia, Japan and Singapore, Donovan said. Economic dissatisfaction has been highlighted as the fuel behind populist presidential candidates in the U.S., and German Chancellor Angela Merkel’s Christian Democratic Union also suffered losses this month as an anti-immigration party surged in state elections.
Much of the argument made by British campaigners seeking to leave the European Union in the U.K.’s forthcoming referendum on membership of the bloc has focused on immigration. Countries exhibiting higher levels of prejudice are less likely to be economically competitive, Donovan said.
“Political developments over the next few years are something that economists will have to monitor closely,” he said. “They will determine much about the relative trend rates of growth in different economies around the world.”