El-Erian: This is How Toxic Politics Can Lead to an Economic Crisis

Populist movements, like Donald Trump’s, are founded upon incoherent strategies

by Mohamed A. El-Erian
Market Watch

NEW YORK (Project Syndicate) — The relationship between politics and economics is changing.

Advanced-country politicians are locked in bizarre, often toxic, conflicts, instead of acting on a growing economic consensus about how to escape a protracted period of low and unequal growth. This trend must be reversed, before it structurally cripples the advanced world and sweeps up the emerging economies, too.

Obviously, political infighting is nothing new. But, until recently, the expectation was that if professional economists achieved a technocratic consensus on a given policy approach, political leaders would listen. Even when more radical political parties attempted to push a different agenda, powerful forces — whether moral suasion from G7 governments, private capital markets, or the conditionality attached to International Monetary Fund and World Bank lending — would almost always ensure that the consensus approach eventually won the day.

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