The G20 warned Friday of the risks to the global economy of populist politicians playing up anti-globalisation sentiments to win votes. The grouping of 20 international economic powers suggested that the forces that have put Republican Donald Trump a step from the US presidency and led to Britain''s vote to leave the European Union could drag down an already frail global economy.
While not mentioning Trump or other politicians by name, China''s Finance Minister Lou Jiwei, speaking on behalf of the G20, echoed worries expressed repeatedly by economic and finance leaders at the IMF-World Bank annual meetings in Washington this week. "This trend of deep anti-globalisation populism has driven politicians to come up with their campaign slogans and try to win the votes and support. That has brought us uncertainty," Lou said after a G20 finance ministers meeting.
He identified such populism as one of the largest threats to global growth, along with geopolitical conflicts and frail banking systems. "The uncertainty and the risks facing (the) global economy have increased, as some major economies have entered into general elections, the fallout of Brexit is uncertain, the vulnerabilities of the financial system are rising (and) the expectation of geopolitical tensions are growing," Lou said.
"We need to recognize some political risks such as the presidential election in some countries and in major economies," he added. Lou''s comments came as the US presidential race entered its final weeks with upstart Trump wielding potent anti-immigration, anti-free trade rhetoric in his battle with Democratic rival Hillary Clinton.
But also in the background are the populist currents in Europe behind the Brexit vote and affecting the coming French and German elections. IMF Managing Director Christine Lagarde and World Bank President Jim Yong Kim expressed similar concerns during the week, arguing that globalisation, especially free trade, has played a crucial role in helping pull developing countries out of poverty.
Lagarde said that with the world economy growing at a "sub-par" 3.1 percent this year, and advanced economies far slower than that, now is not the time to be erecting trade barriers. "Trade has become a political football," she said Friday. Kim urged world governments to banish "the storm clouds of isolationism and protectionism," saying that open borders had lifted a billion people out of poverty in over a quarter century.
Similar views came from finance ministers at the meetings. Pierre Moscovici, the EU economic affairs commissioner, noted that Trump''s actual policy prescriptions are not clear. Nevertheless, he said, Trump "is not the most reassuring choice from an economic point of view." And speaking at a conference on the fringes of the IMF-World Bank meetings, Tim Adamas, president of the Institute of International Finance, which has members in 70 countries, said that one month ahead of the US election, markets are being influenced by the candidates'' rhetoric.
"Policy-makers may be tempted by the siren songs of protectionism and nativism, but a retreat inward would be a break with the principles that have delivered unprecedented progress to literally billions of people throughout the world," he said. At the same time, all the officials acknowledged that, as politicians like Trump have been arguing, globalisation has hurt certain populations and in some cases exacerbated inequality.
"Our research shows that inequality is still far too high, both globally and within countries, constraining growth and breeding instability," Kim said Thursday. "We need to focus on growth and continue to reduce inequality - and we have to make growth more equitable, and more sustainable."