Economic Outlook: Isolationism, Who are the Winners and Losers?

In a webinar on November 3, our partners Fathom Consulting presented their Global Economic and Markets Outlook including possible scenarios for global trade and the impact on GDP.

View a summary of Fathom’s charts and analysis and listen to the webinar recording (60 minutes).

Highlights 

(opinions below are those of Fathom Consulting)

Growth and Debt

The current low growth in developed economies is largely due to high levels of debt. As the initial debt built up, growth was accelerated, but as borrowing continued the growth has since tapered off.

Source: Datastream / Fathom Consulting

Inequality of Wealth

In the last 30 years, the lowest earners in developed economies have seen no increase in their income. Globalization has meant employees in the lowest percentiles of income distribution globally can compete effectively with those low earners in developed economies.

Source: Datastream / Fathom Consulting

Global inequality has reduced. However, lower and middle income workers in developed economies have seen declines or static income growth, making inequality within developed economies larger, creating an apparent rise in anti-globalization sentiment.

“Isolationism would be good for Workers but a Disaster for Capitalists”

If US isolationism takes hold, Fathom predicts:

Source: Datastream / Fathom Consulting

1. GDP to fall
2. An increase in the labor share of income and the portion of the GDP that goes towards wages, resulting in employees getting a bigger share of a smaller pie.
3. Absolute levels of income to increase for labor, earned income goes up relative to the base line.
4. Resulting in a smaller pie and a bigger share of earning, therefore, earners have a smaller share of profits in a smaller pie and equity prices decrease.

Read “News in Charts: Trump Lite or Donald Dark?” for more on how a Trump presidency would potentially affect the US economy and “Donald Dark: more than just a peso problem” for potential affects on the global economy; and watch the webinar to get more detail from the Fathom economic outlook.

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