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The Rise of Populism and Its Global Economic Implications

The current context of populism

In recent years, the phenomenon of populism has gained ground in many Western nations, leading to a significant change in the political landscape. The presidential elections in the United States, as well as those in Europe, have seen the emergence of political forces that detach themselves from traditional centrist positions. This change is the result of a growing polarization, also fueled by the evolution of the mass media and by the disillusionment of citizens
with institutions.

Populism is characterized by its anti-establishment rhetoric and by the promise to represent the voice of the ‘people’ against the elites. However, this trend raises important questions regarding economic stability and future fiscal policies. The consequences of such governments could be significant, not only at the national level, but also at the global level.

Expansionary fiscal policies and their effects

One of the common characteristics of populist governments is the adoption of expansive fiscal policies. These measures, although they may lead to economic growth in the short term, present significant risks. Fiscal stimulus can in fact generate inflation, forcing central banks to intervene with increases in interest rates. In an environment of economic slowdown, this could lead to downward pressure on equity markets
.

In addition, the adoption of aggressive fiscal policies could compromise the sustainability of public budgets, leading to high deficits and an increase in debt. The long-term consequences of such choices could prove harmful, with lower economic growth than could have been achieved with more stable and responsible governments
.

Future prospects and challenges to be faced

Looking to the future, it is crucial to consider the challenges that populism presents to the global economy. A recent study has shown that populist governments tend to generate high economic costs, with a negative impact on per capita GDP. After 15 years of populist rule, per capita GDP is 10% lower than in alternative scenarios
.

In addition, commercial isolation policies and high budget deficits represent common legacies of these administrations. These factors can hinder economic growth and compromise long-term competitiveness. It is therefore essential that investors and policy makers pay attention to these dynamics, to navigate an increasingly complex and uncertain economic environment
.

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