Atlantico: In an interview given to the economic daily Les Echos, the head of the IMF, Christine Lagarde is worried about the rise of populism but also the slowdown in global growth. Beyond these remarks, is there a link between these two phenomena, can we accuse the populists of causing this slowdown?
Rémi Bourgeot: The slowdown in global growth is mainly due to the somewhat artificial or mechanical nature of the recovery after the global crisis, a recovery that has not translated into significant productivity gains, whether in developed or developing countries. emerging. In a number of countries, monetary stimulus programs have helped to revive the dynamics of demand and credit, sometimes simultaneously leading to bubbles on various financial and real estate assets, or the flight of certain currencies. under the influx of capital from developed countries and then to their downfall. The withdrawal of these monetary programs, and the tightening of the policies of the big central banks more generally, leaves a world economy somewhat weakened by the lack of engines to fuel growth.
Productivity gains are capping at low levels almost everywhere, and we are experiencing deindustrialisation, which is spreading in emerging countries in addition to developed countries, in favor of less productive niches of service. The public authorities found themselves armed, when they wanted to, to fight against the crisis by using these tools of revival; this has gradually countered, to a certain extent, weak demand and deflationary trends.
In Europe, the very political response to the crisis has long been to aggravate the symptoms by thinking so cure the evil, following a system of thought that evokes aspects of medieval medicine, and is widely criticized now by the IMF , publication after publication. Mario Draghi, in transforming the ECB into a real central bank, managed to maintain the European edifice; but the continent's general tendency to compress demand (and especially investment) in order to generate trade and budgetary surpluses is even more harmful to growth, which is accompanied by a lack of interest in technological modernization issues. The weakness of European growth, after a modest recovery, is as much a problem of supply as of demand; that is, substantive economic strategy. And this approach is reflected, because of the weakness of the economy, by a steady rise in public debt which weighs all the more on the dynamics of investment, in infrastructure and research in particular, despite the prospects offered by the revolution industrial in progress in the world.
With regard to populism, it is difficult to identify what could be described as a unified populist economic approach. When we study the parties in question, we see that they have an economic discourse that is fairly entrenched, certainly, but which differs considerably from one movement to another, and from one country to another. These marked differences, both among populists and traditional leaders, call into question the pretension of certain populist groups to embody an alternative on a global scale as much as the idea of a great progressive European or world united front to fight it.
It is enough to compare the programs of the FN and the AfD to realize it. Marine Le Pen was accused of "socialism" last year at a summit of the AfD by executives of the far right German ulcerated by its economic positioning. On the Hungarian side, Viktor Orban, for his part, practices a rather restrictive tax policy that he inscribes in the context of his political doctrine. The Italian populist coalition, for its part, follows an approach centered on the idea of a form of fiscal stimulus, while, moreover, quite clearly deadlock on the question of investment, infrastructure and modernization technological development of the Italian economy. In this, the government facilitates the work of its European detractors, who do not hesitate in all cases to brandish the Maastrichtian commands.
In the last few weeks, Jair Bolsonaro has also been featured as a kind of Brazilian Donald Trump. This comparison makes little sense economically. While Trump has focused his policy on fiscal stimulus by lowering taxes to achieve current growth figures, which allows him to maintain a substantial electoral base, Bolsonaro promises the opposite.
Christine Lagarde cites a set of risks that are commonly mentioned, without necessarily associating them with each other in terms of causality. Concern about the rise of populism also refers to the more general phenomena of political decomposition, of which populism is one of the symptoms, and the lack of economic strategy to take advantage of current technological developments in favor of a model of shared prosperity. . Traditional parties have the greatest difficulty in reorienting their economic thinking in a pragmatic sense and in restoring the means for deep technological competence, despite the encouraging signs now coming from a few responsible democrats in the United States.
Nicolas Goetzmann: With US growth pushing up the numbers of Western economies, it would seem paradoxical to link populism and slower growth. Donald Trump is the troublemaker of this reasoning. However, the populists that pop up all over the planet are not uniform. As far as the economy is concerned, these populists could be a laboratory form of a post-neoliberal world, but many of them seem to want to strengthen the previous system, as is the case in Brazil, for example. Some of them will fall, others are succeeding on the economic theme, which is the case, for the moment, of Donald Trump.
If we want to take a closer look at the causes of the global slowdown, we can look at China and some emerging countries like Argentina or Turkey. However, the Argentine government was quickly presented as a liberal model, far from any populism. Here again, the paradigm of populism = economic downturn is irrelevant.
It is also useful to look at what is happening in Europe, with a current economic slowdown on the continent that would like to embody the "free world" and "progress", while refusing any questioning of its economic model. . What makes it a continent hermetic to the relentless reality of the moment: that of the need to review the copy of the economic model of the last 30 years. With an unemployment rate of 8% in the euro area, the continent is an anomaly in the Western countries, which as a whole are close to full employment. This refusal to think another model on the part of the governments in place opened the two doors of political power to the populists. Europe is becoming, without realizing it, the conservative (economically) party of revenue that has destabilized the West politically in recent years. The fight against populism requires a capacity to question the economic certainties of our leaders.
In the same interview, Christine Lagarde says: "But the bottom line is that globalization must evolve in a different way, with greater respect for the rules of the game, as well as the environment and a deliberate concern for the inclusion of peoples. On the same points, Donald Trump is right: Free competition must be "fair" in all areas, and I am delighted that the Chinese authorities have recently announced their willingness to tackle all subjects! " Would there be a shift in consensus on Donald Trump's economic action?
Rémi Bourgeot: This is a real evolution, based on an old awareness of the problems of trade imbalances. In the United States, Barack Obama insisted on this point about China and Germany. Especially at the end of his term, he had made the mistake of focusing on free trade agreements, such as the Trans-Pacific Free Trade Agreement, whose goal was, however, to contain China's strategy. The recipe was different from Trump's, but the political debate was not entirely deadlocked on the trade issue, unlike Hillary Clinton, whose approach has now been widely rejected by the party.
The election of Donald Trump paradoxically gave rise to a revival of the theses of the nineties in some economic commentators. The idea of happy globalization is still over. Most policymakers are aware of trade imbalances and the damage caused by the unstable waves of financial flows that systematically accompany them. Trump puts his foot in the plate and raises sharp criticism, but behind the violence of the American debate, the evolution is palpable on a certain number of economic subjects. The US financial press gives some credit to this debate while criticizing Trump on his approach, especially with regard to his stalemate on issues of technology strategy. It is not surprising that Christine Lagarde, at the head of the IMF, echoes this debate. The question is not that of an accounting rebalancing of trade. It is, more deeply, to recreate in the developed countries, but also in emerging countries in reality, the conditions for sustainable growth that can be based on the significant potential for current technological development and the preservation of opportunities commercial.
Nicolas Goetzmann: Christine Lagarde takes a courageous step by recognizing this to Donald Trump. This step is important because it avoids making a distinction between the good guys and the bad guys, and it puts critics of Donald Trump's commercial approach to China or Europe, to the trailer current reflections. It is easy for Europeans to criticize the United States' trade bellicosity against them, while agreeing to reap solid trade surpluses by surfing on US growth. This shameful reality of a Europe that represses its domestic demand to heal its trade balance is disastrous and has a double effect: to excite the United States in its will to move towards protectionism, and plunge a large part of the European population in a precarious situation. It is also this reality that is regularly criticized by the IMF, that is, the lack of support from the European continent for its own domestic demand.
While China could be singled out as the lone rider of the global economy in recent years, it is the European continent that has taken this place today, with Germany and the Netherlands in the lead gondola of the most aggressive countries in the field. In such conditions of lack of fair play, and in view of the economic results of the European continent (its unemployment rate), Europe still seems to act as if nothing had happened since 2008. That's the whole model capitalist born of the 80s is being rethought, this is what Christine Lagarde says when she says "But the bottom line is that globalization must evolve in a different way, with a better respect for the rules of the play, as well as the environment and a deliberate concern for the inclusion of peoples ".
How to analyze the attitude of Europe in this respect?
Rémi Bourgeot: The United States would like to create a sort of community of strategic thinking with the Europeans to rebalance economic relations with China. The criticism of the German elite vis-à-vis China is comparable in many respects to that of the Trump administration. However, Germany is also in the crosshairs of the US government and Congress about its trade imbalance, which is much stronger than that of China and which is driving Europe as a whole, although are obviously different in nature.
In the European debates, global imbalances tend to obscure the issue of imbalances within Europe itself, and in particular the imbalances in Germany which, through the strength of the Euro crisis, have more generally European variant, but on the basis of rather mid-range technologies and a delay on the industrial revolution underway in the other powers. The reflection on China should be accompanied by a reflection on these internal imbalances in Europe. The question of rebalancing and macroeconomic coordination is now completely absent from the political debate. It is unlikely that it will last.
The reaction to Trump was based on the idea that the countries of Europe, especially Angela Merkel's Germany and Emmanuel Macron's France, would be the spearheads of world liberalism and that they would have received this prestigious title of the hands of Barack Obama in opposition to Donald Trump. Behind these symbolic balance mechanisms on a global scale, real debates take shape and will only find a positive outcome in a more balanced model of growth at the commercial, social, productive and technological levels, apart from the current rhetorical excesses. .
Nicolas Goetzmann: It is interesting to see that Angela Merkel's candidate for succession, Friedrich Merz, has just declared that Germany benefits from a currency that is too weak for her and too strong for many European countries. It is still surprising to see a leader – in the capacity to take control of the country – say what the French, though the main losers of this state of affairs, do not want to admit. If it is not yet time to be optimistic, we can still observe that the current certainty boat, especially in France, is taking water from all sides. From the recognition of Donald Trump's trade policy towards China, to the statements of Friedrich Merz – whose intentions we do not know – we see that a page is turning. Unfortunately the French political parties are well behind when they have a historic chance to raise the bar, both because of the political weakening of Angela Merkel, and the opportunity offered by the assaults of Donald Trump for rebalancing the European macroeconomy, making it a strong economic zone, based on strong domestic demand. Emmanuel Macron seems to be totally missing out on these issues.