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<strong><br /></strong><ul><li><strong>The World Trade Organisation (WTO), the <keyword id="6354424" type="COMPANY" weightage="20" keywordseo="world-bank">World Bank</keyword>, and the <keyword id="6366068" type="COMPANY" weightage="20" keywordseo="international-monetary-fund">International Monetary Fund</keyword> (IMF) all came together to ask for urgent reforms in international trade. </strong></li><li><strong>In a joint report, the institutions focused on modernising the WTO regulations to focus on the digital arena in order to ‘harness the unique strength’ of the organisation in changing times.<br /></strong></li><li><strong>The Director General of the WTO, has earlier stated that the current global trade tensions have the potential to undermine the economic order that was established after <keyword id="6357515" type="UNKNOWN" weightage="20" keywordseo="World-War-II">World War II</keyword>.</strong></li></ul>The functions of the World Trade Organisation (WTO), International Monetary Fund (IMF) and the World Bank may vary, but the three institutions came together to publish a joint report expressing the urgency to reform international trade. <br /><br />They expressed the importance of ‘harnessing the unique strength of the WTO’ by focusing on global e-commerce regulations, improved negotiating mechanisms, and increased transparency in trade policies around the world.<br /><br />The report titled, ‘<a href="https://www.imf.org/en/Publications/Policy-Papers/Issues/2018/09/28/093018-reinvigorating-trade-and-inclusive-growth">Reinvigorating Trade and Inclusive Growth</a>’ comes right after the president of the United States, <keyword id="6354484" type="PERSON" weightage="20" keywordseo="Donald-Trump">Donald Trump</keyword>, harshly questioned America’s involvement in global institutions like the WTO.<br /><br /><strong>The question for India<br /></strong><br />Ordinarily, the WTO has seven judges in its Dispute Settlement Court, but currently, only four are in positions of appointment. Reports indicate that the US has been blocking more people from coming on board. If the number of judges gets any lower, the WTO won’t have enough people on the panel to deliver rulings. <br /><br />It’s <a href="https://www.dailyo.in/business/wto-donald-trump-trade-wars-world-bank-agriculture-subsidies/story/1/26544.html">popular</a> opinion is that the organisation is currently failing its role and being used as an instrument for retaliatory tariff wars. <br /><br />The question for India is a little more complicated than just being protectionist or pro-globalisation because the WTO, though a global institution, has often been accused of being biased against developing nations. <br /><br />Last year India even <a href="https://www.livemint.com/Politics/z5KwdAVralEF8wAsSxfTaL/India-accuses-WTO-of-raking-up-new-issues.html">told the WTO</a> that, “Such presentations by the secretariat within or outside the WTO go far beyond the remit of the functions of the WTO secretariat, and violate the letter and spirit of the agreement establishing the WTO,” when the organisation was seeking outcomes on e-commerce and investment facilitation initiatives.<br /><br />Director General, Roberto Azevedo, had earlier <a href="https://www.businessinsider.in/The-man-in-charge-of-overseeing-global-trade-says-the-first-shots-have-been-fired-in-a-trade-war-and-the-situation-is-extremely-serious/articleshow/65344601.cms">warned</a> world leaders that the current trade tensions have the potential to cause great harm to the world economy and it undermines the trading order that was established after World War II. <br /><br />The ripple events will cause job loss and hit economic growth, with the under-developed and developing nations bearing the brunt.<br />

Three of the world’s leading financial institutions band together for international trade reforms

<strong><br /></strong><ul><li><strong><keyword id="164502" type="PERSON" weightage="20" keywordseo="Sundar-Pichai">Sundar Pichai</keyword>, the CEO of <keyword id="6355629" type="COMPANY" weightage="20" keywordseo="google">Google</keyword>, wrote a letter to the government of India to highlight the importance of data sharing. </strong></li><li><strong>In his opinion, the free flow of data would help the Indian digital economy grow as well as assist the startups. </strong></li><li><strong>It’s a tall order at a time when most nations are implementing protectionist data policies</strong></li></ul>What seems to be a response to the draft bill on the Data Protection Law, the CEO of Google wrote a letter to the Indian government emphasizing the importance of the free flow of data across borders. <br /><br />Sundar Pichai added that the free flow of data is a win-win situation for all stakeholders since it will help global tech companies assist the domestic digital economy as well as Indian startups grow. His letter indicated that the <keyword id="45395" type="CITY" weightage="20" keywordseo="Google-India">Google India</keyword> team would follow up with the government to discuss some of these issues in order to reach a consensus.<br /><br />At a time when most countries around the world are employing protectionist policies across the board, digitally and economically, this is a big ask of Pichai. It’s important to look at the pros and cons of being liberal with user data. <br /><br /><strong><keyword id="6867307" type="UNKNOWN" weightage="20" keywordseo="data-protectionism">Data protectionism</keyword><br /></strong><br />One of the main concerns of data protectionism is that excessivr regulation can create <a href="https://hbr.org/2018/08/the-dangers-of-digital-protectionism">data islands.</a> Basically, the digital economy would get divided into pockets and there would be an uneven distribution of benefits such as global supply chains or access to information.<br /><br />In fact, experts speculate that there actually three data realms that are being created. Namely the US, the EU and China.<br /><br />With India, the concern is specifically that the <keyword id="2617070" type="PERSON" weightage="20" keywordseo="Personal-Data-Protection-Bill">Personal Data Protection Bill</keyword> will hamper the growth of the digital payments sector that’s currently booming at 30% per year. As per the Global Commission of <keyword id="1062334" type="PERSON" weightage="20" keywordseo="internet-governance">Internet Governance</keyword>, the restrictions on data in the EU <a href="https://www.cigionline.org/publications/tracing-economic-impact-regulations-free-flow-data-and-data-localization">costs</a> them 0.5% of their GDP.<br /><br />Even China, home to startups like Alibaba and Tencent, may face a loss of 1.8-3.4% in its GDP if it localises its data any further <a href="https://www.uschamber.com/sites/default/files/documents/files/preventing_deglobalization_1.pdf">according</a> to the US Chamber of Commerce. <br /><br />In addition to the loss of productivity to the economy, there is also a cost. As the amount of data that can potentially be shared increases, as it inevitably will, the cost of blocking or protecting it will increase alongside. The cost will not only be borne by the government, in terms of surveillance, but also by the companies who will continually have to add new data centers in each country.<br /><br />Data localisation measures also lead to a decrease in efficiency as data chains will be divided into smaller fragments. <br /><br />Sachin Bansal, the co-founder of Flipkart, <a href="https://tech.economictimes.indiatimes.com/news/internet/indias-data-policy-should-factor-in-local-problems-not-mimic-west-sachin-bansal/65443337">stated</a> that the <keyword id="1127619" type="PERSON" weightage="20" keywordseo="data-protection-laws">data protection laws</keyword> in India need to be in line with the requirements of the local economy instead of mimicking what the west has implemented. <br /><br />That being said, the Indian Finance Ministry has proposed to adopt a ‘mirroring’ approach. Essentially multinational companies would still be allowed to aggregate global data provided that a copy data that specifically pertains to Indian citizens, is stored locally as well. <br /><br />Experts argue that, ideally, that the developed economies should lead the conversation on a global scale rather than leave the field open to China, but the stark absence of leadership didn’t leave much of a choice.<br /><br />Putting the free flow of data in the context of laissez faire, the digital economy would definitely benefit from the complete absence of government intervention. But, it would come at a cost. As it is with the concept of free trade in economics, business could engage in risky behaviours that could lead to bigger problems down the road. <br /><br />

Here’s what Sundar Pichai had to say to the Indian government

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>Reuters</span></p></div><p></p></div></div>Globalisation has reached its peak and we're about to witness an unwinding of the trend that has dominated economics and trade for decades, according to one of Deutsche Bank's best-known strategists.</p><p>Writing in the bank's FX Blog, chief forex strategist George Saravelos argues that eight years on from the collapse of Lehman Brothers, numerous signs point to the slow death of globalisation.</p><p>"If 2008 marked the trigger, this year is likely to be remembered for signaling the persistence of a new mega-trend: the peak, and likely unwind of globalization," Saravelos writes. </p><p>"The world has been on a 'globalising' trend since the end of World War II. But looking at evidence this year, there is compelling evidence to argue that this is being reversed."</p><p>Saravelos argues that there are three crucial aspects that point towards the decline and fall of globalisation over the coming years.</p><p style="padding-left: 30px;"><strong>1. Cross-border trading and finance are shrinking</strong> - "World exports as a percent of GDP have peaked and have been on a steady, slow decline over the last two years. Crossborder gross financial flows into the US peaked in 2008 and are now at best going sideways. The number of new trade deals is at its lowest in more than two decades."</p><p style="padding-left: 30px;"><strong>2. Anti-globalisation sentiment is growing in politics</strong> - As Saravelos argues, Britain will most likely have left the European single market within years, and that the US election has been almost entirely focused on concerns around immigration and globalisation.</p><p style="padding-left: 30px;">"The world's most historic trading nation will exit the world's biggest free trade area by the end of this decade. The US presidential election is dominated by anti-trade and immigration concerns that are unlikely to shift, whatever the outcome. The political discourse is shifting in many other countries too," he says.</p><p style="padding-left: 30px;"><strong>3. Changes in regulation worldwide suggest that globalisation is waning </strong>- "China has slammed the brakes on its capital account liberalization program and is more likely to tighten further, rather than reverse any time soon. Banking regulation is increasingly balkanized, forcing greater national reporting and capital standards and raising the cost of crossborder business. Fines on multinationals have reached record levels this year," Saravelos notes.</p><p>Alongside the strategist's commentary, Deutsche Bank includes four key charts to illustrate its point about the coming decline of globalisation:</p><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Deutsche Bank</span></p></div><p></p></div></div></p><p>The FX Blog concludes by saying (emphasis ours):</p><p style="padding-left: 30px;">"Whatever the outcome of today's US election, <strong>it is hard to avoid the conclusion that globalization has peaked and most likely embarked on a reversal over the last few years</strong>. Perhaps the only exception is the global dissemination of ideas, helped by persistent innovations in technology such as social networks. Political freedom is helping the globalization of ideas, the polity institute's index of democracy."</p><p>Saravelos is by no means the first person to suggest that we're on the brink of a drastic shift in global economic trends. <a href="http://uk.businessinsider.com/deutsche-bank-on-the-end-of-an-economic-era-2016-9">In September, fellow DB <span>strategists Jim Reid, Nick Burns, and Sukanto Chanda argued that "the current economic age we're in is coming to an end."</span></a></p><p><span>In the past couple of weeks, several prominent figures in British economics have said as much. <a href="http://uk.businessinsider.com/george-osborne-democracy-free-trade-open-society-threat-fight-values-2016-11">Former Chancellor George Osborne said at a Bloomberg event</a>: "At the moment, if you look around western societies, the support for democracy is declining, the forces of protectionism are rising, the concern about the pace of technology is growing, [and] technology is being used to echo back people's prejudices rather than challenge them."</span></p><p><span>Alongside Osborne,<a href="http://uk.businessinsider.com/lord-adair-turner-tech-capitalism-wages-inequality-precariat-2016-11"> Lord Turner, </a><span><a href="http://uk.businessinsider.com/lord-adair-turner-tech-capitalism-wages-inequality-precariat-2016-11">the former </a>vice chairman<a href="http://uk.businessinsider.com/lord-adair-turner-tech-capitalism-wages-inequality-precariat-2016-11"> of Merrill Lynch Europe and ex-head of the Britain's financial watchdog thinks</a> "</span></span>We may be at a turning point in the nature of capitalism."</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/ex-wells-fargo-employee-bankers-abused-customers-2016-10">Ex-Wells Fargo employees reveal how some bankers abused customers</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="lyNTR3NjE6eeFw_BqaT6rpuP-DCPt7nU" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

DEUTSCHE BANK: 'Bye, bye globalisation'

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>PwC</span></p><p class="caption">PwC Global Chairman Bob Moritz.</p></div><p></p></div></div>DAVOS, SWITZERLAND - The bulk of the world's CEOs are more concerned about the burgeoning workers' skills gap than political uncertainty from Brexit, US President-elect Donald Trump's policies, or the rise of populism across Europe.</p><p>According to the <span>20th annual survey of CEOs worldwide by one of the largest accounting firms in the world - PwC - the leaders of companies are growing more confident in their groups' growth prospects. </span></p><p><span>The survey was conducted </span>between September and December 2016, and 1379 CEOs responded from 79 countries.</p><p>The break down of the CEO numbers are as follows:</p><ul><li>57%of the CEOs worked in privately owned companies.</li><li>43% in publicly listed companies.</li><li>36% worked at companies with revenues over $1 billion annually.</li></ul><p>Key findings from the report show:</p><ul><li>38% (2016: 35%) are very confident about their company's growth prospects in the next 12 months.</li><li>29% (2016: 27%) believe global economic growth will pick up in 2017.</li><li><span>As a result of growing confidence, 52% of CEOs plan to increase the number of jobs in their companies.</span></li></ul><p><span><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>PwC</span></p></div><p></p></div></div></span></p><p><span>But there are heaps of issues that still worry CEOs - and concerns over the employment market dominate the survey.</span></p><p><span>According to the PwC report, the availability of workers with the key skills to fill positions is high at 77%, while in comparison, "</span>worries about protectionism are growing," with 59% of CEOs concerned about protectionism.</p><p> <div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>PwC</span></p></div><p></p></div></div></p><p>"Despite a tumultuous 2016, CEO confidence is moving back up - albeit slowly and still a long way from the levels we saw back in 2007. But there are signs of optimism right across the globe, including in the <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword> and US, where despite predictions of a Trump slump and a Brexit exit, CEOs confidence in their company's growth are up from 2016," said Bob Moritz, Global Chairman at PwC in a statement.<span><br /></span></p><p>"And that mood is reflected elsewhere, with more CEOs across the world targeting the US and UK for investment than a year ago.</p><p>"While CEOs are more confident in the opportunity for growth, this year they told us these three concerns that were top of mind: a people and technology strategy that creates a workforce fit for the digital age; preserving trust in their businesses in a world of increasingly virtual interactions; and making globalisation work for everyone by engaging ever more with society and collaborating to find solutions. All topics that will be high up the Davos agenda."</p><p>Earlier on Monday, <span>Dr. Nariman Behravesh, the chief global economist at </span><a href="https://ihsmarkit.com/" target="_blank" data-saferedirecturl="https://www.google.com/url?hl=en&amp;q=https://ihsmarkit.com/&amp;source=gmail&amp;ust=1484401929432000&amp;usg=AFQjCNFlQAc1wXpk-hVge0vG-Kg2i4fu0Q">IHS Markit</a><span>, told Business Insider that <a href="http://uk.businessinsider.com/ihs-markits-nariman-behravesh-at-davos-2017-protectionism-trump-brexit-populism-jobs-and-skills-technology-2017-1">one of the biggest challenges facing Davos goers this year is how to tackle the problem of globalisation taking away lower-skilled workers' jobs.</a></span></p><p>"The challenge for the Davos elite is this - how can you help these people in the developed world to get the skills to take on new jobs and what policies can be put in place? If they don't, Davos will become irrelevant. This is a call to action," said Dr. Behravesh to BI.</p><p>"I am not being negative on Davos, I just think we are at a crossroads right now and we can't just keep talking. We need to do something. Meanwhile, other newer jobs being created are in higher tech industries and require higher skills. The workers who have lost their jobs need new skills to get those newer ones."</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/harvard-business-professor-explains-legal-insider-trading-2017-1">A Harvard business professor explains a legal form of 'insider trading' in America</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="JycTF1ODE6xSMcxb1pL5O_DLp0i295v_" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

The world's CEOs are more worried about a burgeoning jobs problem than Brexit or populism

<ul><li><strong>IHS Markit chief economist says protectionism biggest threat to global economy;</strong></li><li><strong>Dr. Behravesh says election of Trump and Brexit 'a slap in the face' for 'the elite';</strong></li><li><strong>Issues 'call to arms' for Davos 2017, saying companies and governments must work out how to help those 'left behind'.</strong></li></ul><p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>Reuters</span></p><p class="caption">U.S. President-elect Donald Trump speaks at the USA Thank You Tour event at the Iowa Events Center in Des Moines, Iowa, U.S., December 8, 2016.</p></div><p></p></div></div>One of US President-elect Donald Trump's key strategies to help get more Americans into work is to introduce protectionist trade measures.</p><p>The idea is that by raising taxes on goods imported overseas it will encourage businesses to bring jobs back to America as it is no longer economical to manufacture elsewhere and then ship to the US.</p><p>But Dr. Nariman Behravesh, the chief global economist at <a href="https://ihsmarkit.com/" target="_blank" data-saferedirecturl="https://www.google.com/url?hl=en&amp;q=https://ihsmarkit.com/&amp;source=gmail&amp;ust=1484401929432000&amp;usg=AFQjCNFlQAc1wXpk-hVge0vG-Kg2i4fu0Q">IHS Markit</a>, told Business Insider that this effort to try and solve the employment problem is, in fact, the biggest economic risk of 2017 globally.</p><p>"I worry a lot about the world sliding or drifting into protectionism. The biggest single economic risk is protectionism," Dr. Behravesh told BI. He was speaking to BI ahead of the World Economic Forum meeting in Davos, Switzerland, this week.</p><p>"If you look at the risks in the coming year, it is political uncertainty - vis-a-vis what Trump may do and what happens with Brexit. If we do go down the path [of more protectionist measures] then it could massively impact the US economy, as well as the rest of the world.</p><p>But he added: "However, for 2017, the probability isn't high."</p><p>Trump plans to <a href="https://assets.donaldjtrump.com/trump-tax-reform.pdf">overhaul the US tax code in 2017</a> and give <a href="https://assets.donaldjtrump.com/trump-tax-reform.pdf">greater tax relief to middle-class Americans</a>. He claims this will grow jobs <a href="https://www.donaldjtrump.com/policies/tax-plan">by two million and boost the economy</a>. His <a href="http://uk.businessinsider.com/trump-trade-war-enemy-2016-12">protectionist trade plans</a> are the most controversial aspect of his stated policies so far.</p><h2>'It certainly won't help people get jobs in the mid-West'</h2><p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>IHS Global Insight</span></p><p class="caption">Nariman Behravesh, Chief Economist from IHS Global Insight spoke to Business Insider in Davos for the WEF meeting.</p></div><p></p></div></div>At the beginning of December, Trump said the US should view trade "<a href="http://uk.businessinsider.com/trump-trade-war-enemy-2016-12">almost as a war</a>" and vowed to implement protectionist policies. He said that his administration would renegotiate trade deals and "defeat the enemy on jobs. And we have to look at it almost as a war, because that's what's happened to us. That's what's happened to our workers."</p><p>According to an HSBC report entitled "Unlocking the Growth Potential of Services Trade," released in December, if Trump goes ahead with his protectionist trade plans the combination with a "hard Brexit", where Britain leaves the EU single market,<a href="http://uk.businessinsider.com/hsbc-services-trade-report-donald-trump-brexit-article-50-2016-12"> could kill $1.2 trillion of global trade value.</a></p><p>That's because higher tariffs and other trade barriers will reduce the total amount of trade, which means less production, which means fewer jobs. It also means more expensive goods, as import taxes are factored into prices.</p><p>Dr. Behravesh said: "Protectionism doesn't help people, it certainly won't help people get jobs in the mid-West in the US and any promises to that effect are very misleading.</p><p>"For example, if Trump did raise tariffs and costs for Chinese goods, it would hit inflation and hurt poor people because they are typically the demographic that benefits from low-priced goods. It hurts the people he says he wants to help.</p><p>He added: "The good news is that heightened political uncertainty has not had much of an impact on outlook - businesses and consumers have shrugged off [this]."</p><h2>Brexit and Trump: 'It was a slap in the face'</h2><p>Dr. Behravesh believes 2017 is a crunch year for Davos and says "the elite" at the high-end conference - attended by world leaders, celebrities, and business people - must find away to help those "being left behind" by globalization.</p><p>"The single biggest challenge to the WEF crowd, the elite, is the think about how Brexit and the election of Trump came about," he says. "To put it crudely, it was a slap in the face. A lot of people are angry at being left behind because of tech and globalisation. This is because they're losing jobs but don't have the kind of higher level skills to fulfil new roles being created.</p><p>"Workers in older, traditional industries are being left behind and they are clearly scared and angry and they've essentially taken it out on the political establishment."</p><p>WEF said in a 2016 report entitled "<a href="http://www.weforum.org/reports/the-future-of-jobs">The Future of Jobs</a>" that 7.1 million jobs could be lost through redundancy, automation, or disintermediation by 2020. While the creation of 2.1 million new jobs - mainly in more specialised areas such as computing, math, architecture, and engineering - could offset some of the losses, that's still a net reduction of 5 million.</p><p>Dr. Behravesh told BI that there is no longer time for "navel gazing" and business and political leaders need to do something right now to help skill-up those "left behind" workers who have lost their jobs to technology but are not skilled enough to take on those that are being created.</p><p>"The challenge for the Davos elite is this - how can you help these people in the developed world to get the skills to take on new jobs and what policies can be put in place? If they don't, Davos will become irrelevant. This is a call to action," said Dr. Behravesh.</p><p>"I am not being negative on Davos, I just think we are at a crossroads right now and we can't just keep talking. We need to do something.</p><p>"Other newer jobs being created are in higher tech industries and require higher skills. The workers who have lost their jobs need new skills to get those newer ones."</p><p>What is the solution? Dr. Behravesh says the mantra of companies and governments should be: "Don't protect jobs, protect the people."</p><p>In other words, invest in people's skillsets so that when society evolves through globalisation, workers will be able to chop and change roles without getting left behind.</p><p>"This is the time businesses have to put their money where their mouth is and find a way to work with the government. Businesses can't sit back anymore, they have to be part of the solution," he added.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/royal-mint-new-twelve-sided-one-pound-coin-queen-elizabeth-hologram-2017-1">Take a look at the new 12-sided £1 coin</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="N0aW1wODE6jQB25FprTUffuW8b_d13GC" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

The biggest economic risk in 2017 is the one thing Trump thinks will rescue US jobs

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span><a href="https://www.flickr.com/photos/socsci/25052616862/in/photolist-EaPdb3-qVyCum-q3YpSi-HWeBv7-bHGwuV-ow7XAn-spCdkJ-8nnv7V-tnSVVd-ow9PCC-99Ra4S-ovb6np-w36YWB-8tocuz-oy5Nrz-8gLyR8-9GgHNj-rYF1cG-AZA4VM-5UJqTC-6uCTvg-BmE44R-5VSJWv-CQ1Whx-hXzr7d-pfyK83-od9U5p-s7Ww1h-tCZ2tv-ovCj6F-6v53Xe-oeQzCt-8gQU1J-ouJzT8-odbR5T-hWhBwo-hRX9Fv-r5onZk-65xPNk-5HnSyU-mGQF2X-wT1TPW-zrH7WA-hS1EL3-sGbGb4-hXDe2A-ourhTM-5HiHTn-hWjqyA-hXvnLK">Mr. Gray/Flickr</a></span></p></div><p></p></div></div><span></span></p><p><span>"T</span>he development of an increasingly integrated global economy marked especially by free trade, free flow of capital, and the tapping of cheaper foreign labor markets."</p><p>That's the Merriam-Webster definition of globalization, the trend that<span> has dominated economics and trade for decades.</span></p><p><span>And now, it might be about to go into reverse. </span></p><p><span>From the financial crisis to Brexit to the</span><span> election of Donald Trump, globalization has flatlined, and has taken one blow after another. Now, it likely to see at least a partial unwind. </span></p><p><span>"The political backdrop looks negative for globalization," Bridgewater's Jason Rotenberg and Jeff Amato wrote in a client note Friday, a copy of which was viewed by Business Insider. </span>Bridgewater is the world's biggest hedge fund firm with about $150 billion under management.</p><p>This was a recurring theme in Wall Street's analysis of Trump's victory. </p><p>"Globalisation, competition, internationalism are now firmly in the retreat," hedge fund manager Crispin Odey said in a note to clients. "Inflation and protectionism promise a future which is not as kind to financial assets as QE and deflation has been."</p><p>And even prior to Trump's victory, strategists and analysts were signalling the significance of this "mega-trend."</p><p><span>"If 2008 marked the trigger, this year is likely to be remembered for signaling the persistence of a new mega-trend: the peak, and likely unwind of globalization," Deutsche Bank's <span>chief forex strategist <a href="http://www.businessinsider.com/deutsche-bank-research-on-reaching-peak-globalisation-2016-11">George Saravelos said prior to the election</a>.</span></span></p>

Goodbye, globalization

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span><a href="https://www.paimages.co.uk/search-results/fluid/?q=make%20america%20great%20again&amp;amber_border=1&amp;category=A,S,E&amp;fields_0=all&amp;fields_1=all&amp;green_border=1&amp;imagesonly=1&amp;orientation=both&amp;red_border=1&amp;words_0=all&amp;words_1=all">AP Photo/Charles Krupa</a></span></p><p class="caption">Fitch says Trump's election and the surprise triumph of Brexit is likely to lead to 'economic nationalism.'</p></div><p></p></div></div>Rating agency Fitch expects 2017 to be a year of "economic nationalism," with both Fitch and Deutsche Bank warning of the growing possibility of a trade war between the US and China.</p><p>Fitch predicts a decline in international trade <a href="https://www.fitchratings.com/site/pr/1015433">in a note published on Tuesday</a>, as governments focus on pumping investment into their own economies and embracing protectionist policies.</p><p>The rating agency says its prediction is driven by "the surge in populism and anti-establishment sentiment witnessed in the Brexit vote and Donald Trump's victory in the US presidential election."</p><p>President-elect Trump has promised a <a href="http://uk.businessinsider.com/trump-campaign-1-trillion-infrastructure-plan-with-no-tax-hike-2016-10">$1 trillion spending spree on US infrastructure as part of his campaign promise to "make America great again."</a> <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword> Chancellor Philip Hammond last week announced a <a href="http://uk.businessinsider.com/autumn-statement-2016-national-productivity-investment-fund-housing-technology-transport-2016-11">£23 billion of investment in British housebuilding, technology, and transport.</a></p><p>Fitch says these policies are likely to lead to a short-term boost in global and local GDP growth. The agency raises its growth forecasts for the US from 2% to 2.2% in 2017 and from 2.2% to 2.3% in 2018. The global forecast is also hiked from 2.8% to 2.9% in 2017.</p><p>But Chief Economist Brian Coulton warns in Tuesday's release: "In the long term, there is little doubt that increased trade protectionism and weaker migration flows would dampen growth in the advanced economies."</p><p>Fitch adds that there is "sizeable and increasing downside risks," meaning the there's a growing chance that things could go wrong and send economies spiralling off course.</p><p>The agency writes:</p><p style="padding-left: 30px;">"First, the populist surge could exacerbate fragmentary tensions within the eurozone, with non-mainstream anti-EU parties gaining in popularity ahead of a series of key elections. Second, in the event of the US imposing punitive trade restrictions on China, retaliatory actions could see a trade or currency war develop. This would be highly damaging for global market sentiment and would reduce world growth."</p><p>Deutsche Bank raises the risk of a US-China trade war in a note sent on Monday, saying: "We need to think of the previously unthinkable as risk scenarios," in the wake of the Brexit and Trump votes. The investment bank says Trump may consider targeted tariffs on Chinese goods in a bid to reduce the trade deficit and "bring back jobs" to the US.</p><p>Deutsche Bank has already declared it <a href="http://uk.businessinsider.com/deutsche-bank-research-on-reaching-peak-globalisation-2016-11">believes the world has reached "peak" globalisation</a>, supporting Fitch's forecast of a fall in global trade.</p><p>Fitch adds in its Tuesday note that there is "potential for a reversal of globalisation to push up prices in the advanced countries over the medium term." British think tank the Institute for Fiscal Studies last week warned that Britain is facing <a href="http://uk.businessinsider.com/institute-of-fiscal-studies-research-uk-wage-growth-2016-11">an "extraordinary and dreadful" wage crisis</a> as a result of the expected return of inflation next year.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/richard-branson-entrepreneurs-government-lacking-2016-11">Richard Branson: Entrepreneurs need to fill the gap where government is lacking</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="V1dXVsNzE65h4lISR4rnnLRSgszALLD8" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

2017 will be a year of 'economic nationalism'

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span><a href="https://www.flickr.com/photos/y_i/2330044065/">i_yudai/Flickr (CC)</a></span></p></div><p></p></div></div>Europe has reached a crossroad and European leaders need to fundamentally alter the way the continent's economic and political landscape is laid out, or risk seeing continued unrest and a potential domino effect of more and more countries choosing to leave the EU in the coming years, according to HSBC.</p><p>In the bank's quarterly report on the state of the European economy, Karen Ward and Fabio Balboni at HSBC argue that the continent's leaders, particularly those in Brussels, have two options.</p><p>They can continue to "muddle through" with current economic policies that are providing steady but unspectacular growth and possibly helping to fuel political discontent, or they can "rethink the current direction and consider changes" and fundamentally alter the continent's direction.</p><p>Here is the key extract from HSBC's research (emphasis ours):</p><p style="padding-left: 30px;">"The problems run deep. Growth is still anaemic, unemployment in parts of the periphery still painfully high. Part of society is not doing well out of globalisation, while ageing populations fear they will not get the pensions and healthcare they were promised. Many EU voters can't accept sending payments to other parts of the EU, or being given bad news about their retirement expectations by Brussels.</p><p style="padding-left: 30px;"><strong>"Economists are starting to realise that our solution to the problem - investing in skills and productivity to maximise both employment and potential national income to meet pension promises - may not be politically deliverable.</strong> It's too long term. The populist alternative - bigger hand-outs, protectionism, nationalism - is more enticing."</p><p>Essentially, HSBC argues that the current predominant economic thinking within Europe, particularly with regards to the <a href="https://www.google.co.uk/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;uact=8&amp;ved=0ahUKEwj94rqV9urNAhUoD8AKHbebBrMQFggeMAA&amp;url=http%3A%2F%2Fuk.businessinsider.com%2Feuropean-central-bank-meeting-june-2016-6&amp;usg=AFQjCNGG_WSdNjYSIBnCBqdPNR439qb2pg">sustained quantitative easing being carried out by the European Central Bank</a>, means that governments are able to provide growth, but not enough to appease the people who are not seeing direct benefits from that growth. That, in turn is helping to fuel the increasing populist tide behind things like the <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword>'s Brexit vote, the rise of France's Front National, and Austrian far-right politician Norbert Hofer's <a href="http://uk.businessinsider.com/everything-you-need-to-know-about-austrias-donald-trump-far-right-presidential-candidate-norbert-hofer-2016-7">march towards the country's presidency.</a></p><p>Here is HSBC again (emphasis ours):</p><p style="padding-left: 30px;">"And so the EU now appears at a fork in the road. It can continue to do more of what it's doing today. QE helps governments continue to muddle through. Meanwhile, officials at the European Commission and the ECB continue to make plans for closer union - capital markets, banking, political and fiscal, all of which are encountering more and more opposition at the national level.</p><p style="padding-left: 30px;">"Or it can take this as an opportunity to<strong> rethink the current direction and consider changes needed to improve sentiment towards the EU and help fix some of the underlying economic problems.</strong> Just as capital controls are sometimes needed to control the flow of money across borders, it might be worth reconsidering whether the complete free flow of labour is politically possible in a world in which globalisation is being rejected by parts of society."</p><h2>The domino effect</h2><p>HSBC cites evidence of referendums in Hungary and non-EU member state Switzerland, which showed that many people are fearful about having limited control over immigration in their countries, as evidence that, as it notes "globalisation is being rejected by parts of society." Capping free movement in some way could be a way of appeasing those who oppose globalisation, and potentially stemming the tide of populism.</p><p>While the bank is keen to argue that the EU should use Britain's vote to leave as a catalyst for change to the way Europe's political and economic systems functions, it is not hopeful that Brussels will do so any time soon. Here's the bank's conclusion (emphasis ours):</p><p style="padding-left: 30px;">"Essentially, <strong>we are assuming that the EU continues to muddle through on the back of more QE and bigger deficits.</strong> But this may not be sustainable. We hope instead that the Brexit vote becomes a catalyst for positive change. The EU might be wise to do this for its own sake. Resisting it may mean the UK is not the only domino to fall in the years ahead."</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/omaha-steaks-unboxed-mail-order-2015-5">Here's what you get when you order 'Omaha Steaks' in the mail </a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="BxanQ3dTqLutSb3FfaAJBvFo3VETCmUT" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

HSBC: Europe has reached a fork in the road

<p><div class="KonaFilter image-container display-table click-to-enlarge"><div><div class="image on-image"><a title_source="WEF" title_caption="Philip Hammond addresses the WEF in Davos." class="zoomin" href="https://static-ssl.businessinsider.com/image/5884bed4dd0895524f8b4783-960/screen shot 2017-01-22 at 134908.png"><span class="sprites click-to-enlarge-icon" title="Click to enlarge"></span></a><p class="source"><span><a href="https://www.weforum.org/events/world-economic-forum-annual-meeting-2017/sessions/global-economic-outlook">WEF</a></span></p><p class="caption">Philip Hammond addresses the WEF in Davos.</p></div><p></p></div></div></p><p>I introduced myself to Chancellor of the Exchequer Philip Hammond at Davos last week. I was on a mission to find someone - anyone - at the World Economic Forum who believed Brexit was a good idea. After shaking his hand and saying hello, I asked him whether he believed Brexit would create jobs or destroy jobs.</p><p>Hammond declined to answer, said he could not talk, and walked away. Hammond spoke on two panels last week, and on neither did he mention jobs.</p><p>He was one of only three people at Davos I could find who thought Brexit was a good idea. The others were Prime Minister Theresa May and, possibly, Anthony Scaramucci, the hedge funder who is now an advisor to President Trump. (Although <a href="https://twitter.com/scaramucci/status/739772264351182848">Scaramucci was against Brexit</a> before <a href="https://twitter.com/Scaramucci/status/820992081002921984">he was in favour of it</a>, according to his tweets.)</p><p>The 2,500 attendees are billionaires, presidents, prime ministers, investment bankers and Noble prize winners. All the panels are about "inclusion" or "inequality" or "poverty." They are the very definition of the global liberal elite.</p><p>And almost universally they regard Brexit - the withdrawal of the <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword> from the second largest free trade zone on the planet - as economic suicide.</p><p>Davos is a notorious bubble, of course.</p><p><div class="KonaFilter image-container display-table float_right click-to-enlarge"><div><div class="image on-image"><a title_source="REUTERS/Ruben Sprich" title_caption="Christine Lagarde, Managing Director, International Monetary Fund at Davos, Switzerland." class="zoomin" href="https://static-ssl.businessinsider.com/image/5884bed4dd0895524f8b4781-960/undefined"><span class="sprites click-to-enlarge-icon" title="Click to enlarge"></span></a><p class="source"><span>REUTERS/Ruben Sprich</span></p><p class="caption">Christine Lagarde, Managing Director, International Monetary Fund at Davos, Switzerland.</p></div><p></p></div></div>And this year, the bubble was even more separated from reality than usual. Scaramucci was one of very few representatives of the Trump administration present.</p><p>Trump, the rise of UKIP and Brexit in the UK, the increasing strength of Marine Le Pen's National Front in France, and Beppe Grillo's Five-Star Movement in Italy are the real political forces shaping the world. But they were not represented on Davos's many stages last week.</p><p>Instead, on panel after panel, centrist investors and leaders begged us all to preserve the globalisation of trade and open borders policies.</p><p>The conference reached its surreal peak when China's president Xi Jinping spoke from the main stage to a packed audience to make the case for free global trade and for action to meet internationally agreed goals that will reduce climate change. "Protectionism is like locking oneself in a dark room. Wind and rain may be kept outside but so are light and air," he said.</p><p>That's how upside-down the world is right now: The communists are in favour of free trade and the conservatives are not; the liberals now distrust Russia while the conservatives say we should be Putin's friend; and Red China is now more concerned about global warming than the West.</p><p>You can dismiss all this as the bleating of rich liberals struggling to understand a world that is running against them. That would be naive. They might live in a bubble but they do know how the world works. They have a pretty good idea of whether Brexit will be good or bad for Britain; whether leaving a free trade zone will make it easier or harder to trade. It's not hard to guess how this is going to turn out (<a href="http://uk.businessinsider.com/hard-brexit-pound-falls-against-dollar-euro-2016-10">the pound has already signalled the future</a>).</p><p>So don't be too surprised if you hear a whole lot more silence from Hammond when it comes to post-Brexit jobs.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/michael-moore-president-obama-legacy-2017-1">MICHAEL MOORE: These are Obama's biggest failures and accomplishments</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="84MWZsNzE6QHCX0nDFS_R2_6XQ00TsUY" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

No one inside the Davos liberal billionaire bubble thinks Brexit is a good idea

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>Gerald Herbert/AP</span></p><p class="caption">Republican presidential candidate Donald Trump welcomes Nigel Farage, ex-leader of the British UKIP party, to speak at a campaign rally in Jackson, Miss., Wednesday, Aug. 24, 2016.</p></div><p></p></div></div>The strains of a global economy mired in a low growth, lowinflation and low interest rate regime are starting to show.</p><p>Populist, anti-establishment and anti-globalisation sentiment is on the rise across the developed markets. If this leads to a marked deterioration in the quality of economic decision making, it could spell the end of a seven-year period of growth - however weak - for the global economy.</p><p>But there are alternative possibilities: a new wave of insurgent politicians could shake things up for the better; or incumbent politicians and central bankers could raise their game and deal with economic headwinds once and for all.</p><p>The sad reality, however, is that the most likely scenario for 2017 is more of the same: sluggish growth, low inflation, and sub-optimal policy settings. This mix won't satiate the thirst of people for change, meaning popular discontentment may well only grow.</p><p>The most striking feature of the global economy as we head into 2017 is how weak GDP growth remains. This is despite exceptionally loose monetary policy in many economies, easing credit conditions, and the era of fiscal consolidation largely coming to an end. But while the immediate legacies of the global financial crisis have faded, structural headwinds remain: ageing populations, a long period of underinvestment in the capital stock, slowing technological change and subdued 'animal spirits' are all weighing on spending and investment, lowering the potential growth rate of the global economy.</p><p>Weak global economic growth is generating a populist, anti-establishment and anti-globalisation backlash that is likely to have a significant bearing on economies and financial markets in 2017. A host of referendums and elections that have either recently past or are soon to come have been or likely will be heavily influenced by popular discontentment: the UK's referendum on European Union membership, the Italian referendum on constitutional reform, the Hungarian referendum on refugee quotas, presidential and congressional elections in the US, federal elections in Germany, presidential elections in France and Austria, and general elections in Spain and Holland.</p><p><div class="KonaFilter image-container display-table float_left"><div><div class="image on-image"><p class="source"><span>Thomson Reuters</span></p><p class="caption">File photo of Italian PM Renzi greeting supporters during a rally in downtown Rome</p></div><p></p></div></div>If 2017 brings further electoral success for populist, anti-establishment politicians, it could lead to a marked deterioration in the quality of economic and political decision making. That may spell the end of a seven-year period of growth - however weak - for the global economy. Rising protectionism, higher trade tariffs, crumbling free trade areas, reduced support for multilateral institutions, and less economic migration could all knock the global economy off the rails.</p><p>But this is not inevitable. Perhaps a new wave of insurgent politicians could shake things up for the better. The current policy mix - loose monetary policy, tight fiscal policy, and little in the way of much-needed structural reform - could hardly be called optimal, after all. Many of the policy changes that populist politicians are calling for could feasibly support economic growth: lower taxation, especially for the less well off; higher government spending, financed by debt issuance; and a decreased reliance on loose monetary policy as the primary policy lever.</p><p>Alternatively, 2017 could mark the year that incumbent politicians and central bankers raise their game and deal with global economic headwinds once and for all. There is certainly much that could be done, if only the incumbents mustered the political will. A globally-coordinated government investment push; a lowering of the labour tax wedge; an innovation-friendly overhaul of the patent system; corporate governance reform that encourages firms to spend and invest large cash hoards; a more redistributive tax system; and the completion of the Eurozone banking and fiscal unions would all help.</p><p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>Thomson Reuters</span></p><p class="caption">U.S. Democratic presidential candidate Clinton reacts before boarding her campaign plane at Miami international airport in Miami</p></div><p></p></div></div>Sadly, the most likely outcome is that 2017 is another year of 'muddle through' for the global economy and the politicians and central bankers who oversee it. The low growth and low inflation regime is likely to continue, with its over-reliance on monetary policy stimulus and little in the way of fiscal support or structural reform. The ability of monetary policy to support growth and inflation seems to be increasingly limited.</p><p>Policy interest rates in many developed markets seem to be at or close to the 'effective lower bound' where further cuts would trigger cash-hoarding. While large-scale asset purchase programmes may soon run into a shortage of assets to buy.</p><p>Meanwhile the unintended consequences of very loose monetary policy are starting to build. Very low interest rates are lowering banks' net interest margins, increasing the size of pension fund deficits, and may be encouraging dangerous risk taking in financial markets.</p><p>But, despite a widespread recognition that something must be done, this does not necessarily mean that all the good words on fiscal policy will translate into concrete action. Europe, in particular, is divided on the need for looser fiscal policy.</p><p>In this environment, we can expect little progress in dragging the global economy out of its torpor. Easy money may well mean that the prices of equities, bonds, property and other assets continue rising more or less in unison. That would benefit the owners of capital, but it will do little to satiate the widespread thirst for change. Popular discontentment, sadly, may only grow.</p><p><em>Paul Diggle is Senior Economist, Investment Solutions at Aberdeen Asset Management. </em></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/xiaomi-new-mi-mix-better-than-iphone-2016-10">The 'Apple of China' just unveiled a phone that's more powerful and better looking than the iPhone</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="5tamMwNzE6XQnLV5ixV8UUd-PSbdYX4A" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

The strains of a weak global economy are starting to show

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span><a href="http://pictures.reuters.com/">REUTERS/Charles Platiau</a></span></p><p class="caption">IMF managing director Christine Lagarde. Lagarde is not one those questioning the neoliberal consensus.</p></div><p></p></div></div>Some of the most senior economists within the International Monetary Fund - often dubbed the "central bank's central bank" - are beginning to question parts of the neoliberal consensus that has dominated economic thinking for the past three decades.</p><p><a href="http://www.imf.org/external/pubs/ft/fandd/2016/06/ostry.htm">In an article published by the fund this week,</a> economists Jonathan Ostry, Prakash Loungani, and Davide Furceri argue that they see a growing movement against some of the principles of neoliberalism, and believe that two key areas of neoliberalism - namely the free movement of capital across borders, and the enforcement of austerity measures by global governments - are starting to hinder, rather than help the world.</p><p>Here's an extract from the article (emphasis ours):</p><p style="padding-left: 30px;">There is much to cheer in the neoliberal agenda. The expansion of global trade has rescued millions from abject poverty. Foreign direct investment has often been a way to transfer technology and know-how to developing economies. Privatization of state-owned enterprises has in many instances led to more efficient provision of services and lowered the fiscal burden on governments.­</p><p style="padding-left: 30px;">However, <strong>there are aspects of the neoliberal agenda [austerity and capital liberalisation] that have not delivered as expected.</strong></p><p>The post goes on to say that: "An assessment of these <em>specific</em> policies (rather than the broad neoliberal agenda) reaches three disquieting conclusions." Ostry, Loungani, and Furceri's "disquieting conclusions" are as follows:</p><ol><li>It is pretty hard to actually establish, "when looking at a broad group of countries" whether neoliberal policies have actually helped growth.</li><li>The increase in inequality is "prominent".</li><li>Increased inequality caused by specific parts of neoliberalism "hurts the level and sustainability of growth."</li></ol><p>Here's more from the report (emphasis ours):</p><p style="padding-left: 30px;">Since<strong> both openness and austerity are associated with increasing income inequality,</strong> this distributional effect sets up an adverse feedback loop. The increase in inequality engendered by financial <strong>openness and austerity might itself undercut growth, the very thing that the neoliberal agenda is intent on boosting</strong>. There is now strong evidence that inequality can significantly lower both the level and the durability of growth.</p><p style="padding-left: 30px;">The <strong>evidence of the economic damage from inequality suggests that policymakers should be more open to redistribution than they are</strong>. Of course, apart from redistribution, policies could be designed to mitigate some of the impacts in advance-for instance, through increased spending on education and training, which expands equality of opportunity (so-called predistribution policies). And fiscal consolidation strategies-when they are needed-could be designed to minimize the adverse impact on low-income groups.</p><p>Since the late 1980s and the so-called Washington Consensus, neoliberalism - essentially the idea that free trade, open markets, privatisation, deregulation, and reductions in government spending designed to increase the role of the private sector are the best ways to boost growth - has predominated in the thinking of the world's biggest economies and international organisations like the IMF, and the World Bank. However since the 2008 financial crisis, there has been a groundswell of opinion in both economic and political circles to suggest that the neoliberal consensus is the right way forward for the world.</p><p>As one of the report's authors, Ostry, <a href="http://www.ft.com/cms/s/0/4b98c052-238a-11e6-9d4d-c11776a5124d.html#axzz49eKFu6aS">put it in an interview with the Financial Times after the article's publication:</a> "There are a lot of people thinking the same thing at this point, that basically some aspects of the neoliberal agenda probably need a rethink," adding "The crisis said: 'The way we've been thinking can't be right'."</p><p>Clearly, one article by three economists inside the IMF doesn't suggest that the fund is about to totally shun neoliberalism and abandon its commitment to the Washington Consensus - in fact, earlier this week, deputy managing director David Lipton <a href="https://www.imf.org/external/np/speeches/2016/052416a.htm">gave a speech defending the values of globalisation, and calling protectionism "self-defeating."</a> It does, however, throw up an interesting insight into divisions developing within the IMF about the future of global economics.</p><p>In his FT interview, Ostry added that even being allowed to put the article in an official IMF publication showed how much things are starting to move away from the orthodoxy in terms of economic thinking. The post definitely doesn't represent the "mainstream culture" of the IMF he said, adding that "cultures are slow moving things."</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/goldman-sachs-interview-edith-cooper-tips-2016-5">Don't walk into an interview at Goldman Sachs without doing this first</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="tvZGNtMzE6fmGEHJcYiExg4AANBpiXWi" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

Even the IMF is starting to think we have an inequality problem

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span><a href="https://commons.wikimedia.org/wiki/File:Lange-MigrantMother02.jpg">Wikimedia Commons/Library of Congress</a></span></p><p class="caption">A photo of farm worker Florence Thompson with several of her children in a photograph taken in 1936 during the Great Depression and known as "Migrant Mother".</p></div><p></p></div></div>German investment bank Berenberg believes that "some aspects of Donald Trump's successful election campaign evoke memories of the dreadful 1930s."</p><p>The bank's chief economist Holger Schmieding says in a note sent out on Monday that: "After the Brexit vote and the triumph of Trump, the echo of the early 1930s sounds a little less faint than it did before."</p><p>Schmieding highlights populism, rising protectionism and nationalism, isolationism, and the erosion of the political middle ground as key features of both the current political climate and the 1930s.</p><p>"Populist" leaders - often dictators such as Hitler and Mussolini - came to power across Europe in the 1930s with promises to restore glory and honour to their countries, often blaming foreign races and religions for the problems.</p><p>Both recent the Brexit and Trump campaigns blamed outsiders for problems at home (the EU, Mexicans, Muslims) and had strong nationalist streaks (Make America Great Again, Take Back Control).</p><p>International trade tailed off in the wake of the 1929 Wall Street Crash as the US turned inwards. Schmieding says: "Two major policy mistakes turned the financial crisis into a depression" - the US fed tightening monetary policy and the 1930 Smoot-Hawley tariff act, which enacted protectionist taxes on imports.</p><p>Both Trump and the current pro-Brexit <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword> government have promised to reverse the rising tide of globalism. Trump plans to do this by scrapping or significantly changing a trade deal with Mexico and putting tariffs on imports from China. <a href="http://uk.businessinsider.com/r-pm-may-says-to-be-unashamedly-pro-business-as-uk-leaves-eu-2016-11">UK Prime Minister Theresa May has promised to reign in globalisation.</a></p><p>Schmieding calls the 1930s "dreadful" because the Great Depression, triggered by policy mistakes, led to widespread poverty. The potent economic and political cocktail of depression and nationalism also led to World War II.</p><p>But Schmieding says that "the [current] situation is very different in at least three key respects." These are:</p><ul><li><strong>Rising employment:</strong> "Despite widespread anger at the establishment, we are not quite living in pitchfork times again."</li><li><strong>Lack of ideology:</strong> "Trump and some other leading populists today come across as opportunistic self-promoters rather than incorrigible ideologues."</li><li><strong>International cooperation:</strong> "Institutions of international co-operation and the rule of law at home are much stronger in the developed world than they were in Europe in the 1930s."</li></ul><p>As a result, he does not think we are hurtling towards another major global conflict or serious economic crisis. Still, there are significant risks.</p><h2>'Try to see it through Putin's eyes'</h2><p>The first is Trump's attitude to the Middle East. Trump has signalled he will move the US to a more isolationist stance when it comes to international affairs and has no interest in getting involved in Syria. This could create a power imbalance in the region that creates trouble in Europe.</p><p>Schmieding says:</p><p style="padding-left: 30px;">"Having intervened forcefully to tilt the balance in Europe in WWI, the US thereafter did little to stabilise the fragile new order it had helped to establish, preferring to retreat instead. Could something similar happen again, this time in the Arab world in Europe's immediate neighbourhood? If so, the consequences including potential further flows of refugees would be a much bigger issue for Europe than for the US itself."</p><p><div class="KonaFilter image-container display-table float_left float_right"><div><div class="image on-image"><p class="source"><span>Reuters</span></p><p class="caption">Russian President Vladimir Putin.</p></div><p></p></div></div>The second risk is Russia.</p><p>Schmieding thinks that Trump's good relationship with Putin and his reputation as a "wheeler dealer" could lead to "a businessmen's deal on, say, new borders for Ukraine," which would destabalise Russia's relationship with the EU.</p><p>Schmieding says this is unlikely. A greater threat is, once again, Trump's isolationist views and his anti-NATO stance. Schmieding writes:</p><p style="padding-left: 30px;">"Try to see it through Putin's eyes. After Russia had invaded parts of Georgia in 2008, US President Barack Obama pushed the policy "reset" button upon coming to office in 2009. Putin's attack on Ukraine yielded visible gains (Crimea, Donetsk) for him in 2014 at limited Russian casualties. That boosted his popularity and stabilised his regime despite some significant economic costs. Why not do it again, unless the economic costs seem prohibitively high?"</p><h2>'Populists can promise their voters the moon. But they cannot deliver.'</h2><p>Finally, Schmieding flags perhaps the greatest global risk - that Trump and Brexit are just the start.</p><p>There is a risk of more contemporary fringe parties rising to power across Europe and while Schmieding does not believe France's far right National Front Party will get a Trump boost as <a href="http://uk.businessinsider.com/r-french-far-right-leader-hopes-for-trump-like-win-in-2016-election-2016-11">party leader Marine Le Pen has suggested</a>, he writes: "The experience that pollsters got the Brexit vote and the US elections so wrong adds to the concerns. In the same vein, the Italian risk is not trivial." (<a href="http://uk.businessinsider.com/morgan-stanley-chart-on-italy-referendum-2016-9">Italy will hold a constitutional referendum shortly and a loss could destabalise Prime Minister Matteo Renzi.</a>)</p><p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>REUTERS/Charles Platiau</span></p><p class="caption">Marine Le Pen, leader of France's far right National Front party.</p></div><p></p></div></div>HSBC and Macquarie last week <a href="http://uk.businessinsider.com/president-trump-brexit-global-populism-europe-eurozone-2016-11">flagged the danger that a Trump victory could make the rise of populist parties like the National Front and Italy's Five Star Party more likely.</a></p><p>And ultimately, Schmieding says that:</p><p style="padding-left: 30px;">"Populists can promise their voters the moon. But they cannot deliver." When Trump and Brexit fails to deliver everything people hoped it would - almost inevitable because the two movements meant so many different things to so many different people - there will be more anger.</p><p>He adds:</p><p style="padding-left: 30px;">"Who will rustbelt voters fall for next time if Trump does not bring back the jobs lost to China? What if Brexit results in fewer rather than more jobs in UK industry? What if curbs on immigration stoke inflation and damage the National Health Service (NHS) in the UK instead of raising the living standards of disgruntled voters in northern England?What comes after the current batch of populists is a key risk to watch."</p><p style="padding-left: 30px;">"What comes after the current batch of populists is a key risk to watch."</p><p>If the problems Brexit and Trump campaigners highlighted are not solved, a new batch of firebrand politicians could come along and exploit public anger to rise to power. Who knows what they may look like.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/100-dollars-states-america-money-country-2016-10">Here's how much $100 is worth in every state</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="VuNWkxNzE6A7vpY98CWqPiVi6-XwZ26y" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

BERENBERG: Politics right now 'evokes memories of the dreadful 1930s'

<p><em><div class="KonaFilter image-container"><div class="image"><p class="source"><span>Alexander Zemlianichenko/AP</span></p></div><p></p></div></em></p>
<p><em>Why Europe's populists and radicals admire Vladimir Putin.</em></p>
<p>If Europe's far-right parties do as well as many expect in May's European election, no world leader will be happier than Vladimir Putin. For a man who claims to be defending Russian-speakers in Ukraine against fascists and Nazis, the Russian president has some curious bedfellows on the fringes of European politics, ranging from the creepy uniformed followers of Jobbik in Hungary to the more scrubbed-up National Front in France.</p>
<p>There was a time when Russia's friends were principally on the left. There are still some pro-Moscow communists, for instance in Greece. But these days the Kremlin's chums are most visible on the populist right. The crisis in Ukraine has brought out their pro-Russian sympathies, most overtly when a motley group of radicals was invited to vouch for Crimea's referendum on rejoining Russia.</p>
<p>The "observers" included members of the National Front, Jobbik, the Vlaams Belang in Belgium, Austria's Freedom Party (FPö) and Italy's Northern League, as well as leftists from Greece and Germany and an assortment of eccentrics. They declared that the ballot, denounced by most Western governments as illegitimate, had been exemplary.</p>
<p>So what does Europe's far right see in Mr Putin? As nationalists of various stripes, their sympathies might have lain with their Ukrainian fellows fighting to escape Russian influence. In fact, argues Peter Kreko of Political Capital, a Hungarian think-tank, beyond favourable treatment in Russian-sponsored media, many are attracted by Mr Putin's muscular assertion of national interests, his emphasis on Christian tradition, his opposition to homosexuality and the way he has brought vital economic sectors under state control.</p>
<p>For some, pan-Slavic ideas in eastern Europe play a role. A common thread is that many on the far right share Mr Putin's hatred for an order dominated by America and the European Union. For Mr Putin, support from the far right offers a second channel for influence in Europe.</p>
<p>The flirtation with Russia first became apparent in eastern Europe some years ago, despite memories of Soviet occupation. Jobbik, which took 20% of the vote in Hungary's recent election, denounced Russian riots in Estonia after the removal of a Soviet war memorial in 2007. But a year later it backed Russia's military intervention in Georgia. Far-right parties in Bulgaria and Slovakia also supported Russia.</p>
<p>Since then, Russian influence has become apparent in western Europe, too. Marine Le Pen, leader of the National Front, has been given red-carpet treatment in Moscow and even visited Crimea last year. At December's congress of Italy's Northern League, pro-Putin officials were applauded when they spoke of sharing "common Christian European values". Among those attending were three nascent allies: Geert Wilders of the Netherlands' Party for Freedom, Heinz-Christian Strache of the FPö, and Ludovic de Danne, Ms Le Pen's European adviser.</p>
<p>For Mr de Danne the parties share an aversion to the euro and, more widely, to the EU's federalist dream. They oppose globalisation and favour protectionism. They seek a "Europe of homelands", stretching from Lisbon to Vladivostok. As for Ukraine, he calls the revolution in Kiev "illegitimate" and says the referendum in Crimea was justified by the pro-Russian sentiment of the Crimean population. By attaching themselves to the EU and America, Ukraine's new rulers expose their country to IMF oppression and the pillage of its natural resources.</p>
<p>Such dalliance with Mr Putin may create trouble for Mr Wilders, who sees the EU as a monster but is a strong supporter of gay rights. According to Mr de Danne, the Eurosceptic alliance has agreed to co-ordinate only on internal EU matters, not international affairs.</p>
<p>A degree of admiration for Mr Putin also stretches to Britain's UK Independence Party (UKIP). It sees Ms Le Pen and Mr Wilders as too tainted by racism and is parting ways with the Northern League. But UKIP's leader, Nigel Farage, while insisting he dislikes Mr Putin's methods, thinks the Russian leader has skilfully wrong-footed America and Europe.</p>
<p>The EU, he declared in a televised debate, "has blood on its hands" for raising Ukraine's hopes of EU membership and provoking Mr Putin. Mr Farage's critique is perhaps a way of attacking the EU's enlargement policy, which is now linked by many to immigration. Yet it is also an implicit admission that the club remains attractive to those outside it.</p>
<h3>Hello, Comrade</h3>
<p>Mr Putin is too clever to rely only on Europe's insurgent parties, successful as some may be. So as well as cultivating anti-establishment groups, he has worked to entice national elites. While Jobbik advocates closer economic relations with the east, Hungary's prime minister, Viktor Orban, is already doing it. A veteran of the struggle against communism, embodying the catchphrase "Goodbye, Comrade", Mr Orban recently signed a deal with Russia to expand a nuclear-power plant, financed by a EUR10 billion ($14 billion) Russian loan.</p>
<p>He has sought to weaken European sanctions against Russia. In Italy the Northern League's leader, Matteo Salvini, may shout "viva the referendum in Crimea", but Matteo Renzi, the centre-left prime minister, has also been assiduous in resisting tough sanctions.</p>
<p>Anti-EU parties will no doubt become stronger and noisier, but they lack the numbers and the cohesion fundamentally to change EU business in the European Parliament. Their effect will be more subtle. They may force mainstream parties in the parliament into more backroom deals, deepening the EU's democratic deficit.</p>
<p>Their agitation is more likely to influence national politics and to push governments into more Eurosceptic positions. And they will provide an echo chamber for Mr Putin, making it harder still for the Europeans to come up with a firm and united response to Mr Putin's military challenge to the post-war order in Europe. There is more at stake in May than a protest vote.</p>
<p>Click <a href="https://subscriptions.economist.com/nwcd">here</a> to subscribe to The Economist.</p>
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