Preparing for the paradigm shift

Global outlook

Two political earthquakes reverberated around the world in 2016: Donald Trump’s

victory in the US presidential election and the UK’s decision to leave the EU. In 2017,

as business leaders around the world have started to grapple with the consequences

of these seismic events, three key questions have emerged. Where will populism

strike next? Has the era of globalisation drawn to a close? And with nationalism and

protectionism on the rise, which economies are best placed to benefit?

WHERE WILL POPULISM STRIKE NEXT?

The parallels between the “Brexit” vote and the outcome of the US election are

manifold. In both cases, the electorate defied the political establishment. Both

votes represented a rebellion from below against out-of-touch elites. Both were the

culmination of a long-term, secular trend of declining popular trust in government

institutions, political parties and politicians, exacerbated by a rise in income

inequality. They showed that society’s marginalised and forgotten voters, often

Joseph Lake

Director of Global Forecasting

Source: IMF.

Higher income inequality has reduced trust towards others and government

Trust and inequality in the US

1970 75 80 85 90 95 2000 05 10 15

Inequality

Trust towards others

45

35

50 1.

1.

1.

1.

1.

1.

40

% of population responding that people can be trusted Change of inequality index (90/10 ratio)