Former US Treasury Secretary Larry Summers said that markets may be underestimating the risks posed by escalating political unrest that threatens to undermine the fundamental system and stability that has underpinned US economic growth in recent decades.
The American economist said that the risks of political conflict are “actually much greater” now than they have been throughout his career, and he also warned that the rise of populism in the United States and the rest of the world threatens to ignite a period of political volatility. Which may hinder economic growth.
“The world is likely heading into a period in which there is less sense of what order will be, and so the risk of chaos and anarchy and the associated suffering is increasing, and I'm not sure that kind of risk is fully priced into the markets,” Summers said at the FII Summit.
Speaking in Miami with Eric Schmidt, the former CEO of Google, Summers said that markets take political stability in the United States for granted, and he said that this stability has driven the huge economic growth in the United States that has seen the valuations of American companies rise over the past 25 years. past. Years.
Instead, the economist argued that markets have “inadequately” priced in risks linked to the rise of “populist and nationalist politics” that could see a breakdown in the rule of law in the US, ahead of the next 2024 election, and increased trade protectionism abroad. .
“One of the clearest lessons of economic history is that over a decade, populism has always been bad for economic performance, whether right-wing populism or left-wing populism,” Summers said.
He explained that increasing restrictions on the flow of goods and people internationally, coupled with the collapse of international collective security arrangements, could undermine global economic growth in the future.
