Economic Experts Are Worried About the Populist Revolt, Blame Capitalism

A global risk report by the World Economic Forum lists populism and social division among the top five trends that will determine global markets in 2017 and beyond.

"The combination of economic inequality and political polarization threatens to amplify global risks," reads the World Economic Forum's global risk report. (Photo by Spencer Platt/Getty Images)

Beyond love of guns and God it’s difficult to imagine anything pundits cling to more than capitalism. The sentiment that it’s ‘the best system in the world’ is unquestioned. Is it though? Experts are having doubts.


The World Economic Forum is held every January in Davos, with 2,500 of the planet’s elite (and, some argue, elitist) bankers, business leaders, journalists, intellectuals, and political leaders discussing the state of the global economy. This year it turns out they’re rather miffed, and concerned, about the incoming American president.

Last year, the consensus here was that Trump had no chance of being elected. His victory, less than half a year after Britain voted to leave the European Union, was a slap at the principles that elites in Davos have long held dear, from globalization and free trade to multilateralism.

Preceding the nonprofit foundation’s annual meeting is its global risks report, which weighs a multitude of factors currently affecting financial markets: climate change, terrorism, infectious diseases, cyberattacks, immigration are but a few factors taken into consideration. With men like Goldman Sachs CEO Lloyd Blankfein and JP Morgan CEO Jamie Dimon on hand, it’s hard to imagine outright criticism of the very system that made them billionaires. You don’t bite the hand that feeds you.

Yet creeping populist trends in Hungary, Spain, France, Germany, and America have some worried. The global economy is rather healthy at the moment. The insular nature of populist ideologies can potentially cripple progress, the report states. As WEF founder and executive chairman Klaus Schwab notes:

... pervasive corruption, short-termism and unequal distribution of the benefits of growth suggest that the capitalist economic model may not be delivering for people.

Global cooperation is suffering under the weight of nationalism, he writes. Of the report’s top five risk factors, rising income and wealth disparity is a main driver of discontent (which feeds into unemployment, the number one concern). This comes just as Oxfam reports that the eight wealthiest people (all men) in the world hold as much capital as the bottom half of the world's population.

If widespread economic growth is not implemented in the next decade the writers foresee more anti-establishment policies being put into place, which in turn will keep nations hyper-localized. For this reason they suggest “reforming market capitalism.”

The top five trends that will determine global markets, according to the report:

  • Rising income and wealth disparity
  • Changing climate
  • Increasing polarization of societies
  • Rising cyber dependency
  • Aging population
  • What does market reform even look like? To begin with, the report considers the “apparent lack of solidarity” between top earners and those at the lower rungs of the economic ladder as the primary catalyst for populist movements. Interestingly, inequality has consistently fallen in the 20th century, but certain nations—specifically, the United States, UK, Canada, Ireland, and Australia—began rewarding the top 1 percent of earners more graciously in the 1980s. Decade by decade the trend has gotten worse.

    The financial crisis of 2008 (and how recovery has been handled) is largely responsible for this growing economic divide. Policies have been monetary instead of fiscal. Sustained low interest rates are undermining lower wage earners while rewarding the wealthiest, distorting perceptions of national gain. Lacking real fiscal stimulus—the wealthiest keep getting tax benefits, or, in the words of Bernie Sanders, “are not paying their fair share”—incentives for productivity growth are not apparent.

    What that translates to, in part, is fewer workers being tasked with more duties and less emphasis on projects like infrastructure—one of Trump’s promises which seems doubtful at the moment. The report concludes:

    The combination of economic inequality and political polarization threatens to amplify global risks, fraying the social solidarity on which the legitimacy of our economic and political systems rests.

    Among its solutions:

  • More effective human capital policies
  • Enable more people to benefit from skill-biased technological change
  • Better public goods (whether publicly or privately provided) to address the ambitions of the growing middle class around the world
  • More responsive government systems to empower individuals at the local level without sacrificing the many benefits of globalization
  • With promises of reviving the coal industry, walling off national borders (and making entry harder), and reducing the role of government through lower taxes and regulations (while increasing its role in women’s rights and health care, among others), little in Trump’s current agenda reflects the advice of the World Economic Forum. His entire business career is the result of the type of regulatory loopholes, political favors, and financial divisiveness that has created the problems those at the World Economic Forum are now warning against.

    This is going to be a continual problem for the Republican party in particular and America in general. In The Populist Explosion, John B. Judis writes,

    If Trump’s campaign does spawn imitators, the Republicans will face a continuing conflict between its white working class and business supporters.

    The last day of the forum in Davos will also be when President-elect Trump becomes President Trump. This report includes the committee’s sternest warning against aspects of capitalism that have been swept under the rug for too long. It has reached a head in the form of the numerous populist explosions occurring around the planet. And no greater figurehead exists than Donald Trump. Whatever they conclude will only be the beginning of what could be, ironically, the further dissolution of the capitalist project by a man who has benefited like no other thanks to the pitfalls they expect him to fix. 

    --

    Derek's next book, Whole Motion: Training Your Brain and Body For Optimal Health, will be published on 7/4/17 by Carrel/Skyhorse Publishing. He is based in Los Angeles. Stay in touch on Facebook and Twitter.

    The world and workforce need wisdom. Why don’t universities teach it?

    Universities claim to prepare students for the world. How many actually do it?

    Photo: Take A Pix Media / Getty Images
    Sponsored by Charles Koch Foundation
    • Many university mission statements do not live up to their promise, writes Ben Nelson, founder of Minerva, a university designed to develop intellect over content memorization.
    • The core competencies that students need for success—critical thinking, communication, problem solving, and cross-cultural understanding, for example—should be intentionally taught, not left to chance.
    • These competencies can be summed up with one word: wisdom. True wisdom is the ability to apply one's knowledge appropriately when faced with novel situations.
    Keep reading Show less

    What the world will look like in the year 250,002,018

    This is what the world will look like, 250 million years from now

    On Pangaea Proxima, Lagos will be north of New York, and Cape Town close to Mexico City
    Surprising Science

    To us humans, the shape and location of oceans and continents seems fixed. But that's only because our lives are so short.

    Keep reading Show less

    Six-month-olds recognize (and like) when they’re being imitated

    A new study may help us better understand how children build social cognition through caregiver interaction.

    Personal Growth
  • Scientists speculate imitation helps develop social cognition in babies.
  • A new study out of Lund University shows that six-month-olds look and smile more at imitating adults.
  • Researchers hope the data will spur future studies to discover what role caregiver imitation plays in social cognition development.
  • Keep reading Show less

    New study connects cardiovascular exercise with improved memory

    Researchers at UT Southwestern noted a 47 percent increase in blood flow to regions associated with memory.

    An elderly man runs during his morning exercises at the promenade on the Bund along the Huangpu Rive the Bund in Shanghai on May 18, 2017.

    Photo: Johannes Eisele/AFP via Getty Images
    Surprising Science
    • Researchers at UT Southwestern observed a stark improvement in memory after cardiovascular exercise.
    • The year-long study included 30 seniors who all had some form of memory impairment.
    • The group of seniors that only stretched for a year did not fair as well in memory tests.
    Keep reading Show less
    Scroll down to load more…