There are many theories as to why exactly the global conomy is so lacking in dynamism at the moment. Some pin the blame on a shortage of innovations. Others see inequality in income and wealth distribution as the stumbling block. Those versed in history urge patience, saying that after severe financial crises, it always takes a long time for the economy to truly recover.
No matter which of these factors has the greatest influence, it is clear that large segments of humanity have lost the assurance that their lives will improve in the future. This is especially true of residents of the established industrialized countries.
The extent of the pessimism is revealed in a representative survey of citizens of the G20 countries, which Handelsblatt conducted with YouGov, the market research institute.
The largest number of optimists when it comes to social advancement are in China, the G20 country with the least equitable income distribution.
It shows that a majority is optimistic about development of the global economy in the coming three years in only the three most populous of these 20 leading countries, India, China and Indonesia. It is also in these three countries, together with Russia and Argentina, where people believe that their children will be better off than they are.
In other words, the G20 countries with the most catching up to do when it comes to affluence are those with the greatest optimism. People in these countries believe that they and subsequent generations will continue their current ascent, which is also the reason why they tend to have a relatively bright view of the general economic situation.
In contrast, the majority of the Germans and French predict a global economic decline. Pessimists are also clearly in the majority among the British and Italians. This also applies to the question of prospects for the next generation. Some 58 percent of Germans and 65 percent of Frenchmen expect that children born now will eventually be in worse shape than they themselves are today.
The pessimism is not limited to Europe. It also predominates in the established industrialized countries of Asia, Japan and South Korea. Even in the United States, people are growing less confident that their own futures are headed in a positive direction. Some 48 percent of Americans do not expect their own economic situation to improve in the next three years, and 49 percent believe that the next generation will be worse off.
Under these circumstances, the appeal of populist politicians like America’s Donald Trump, France’s Marine Le Pen and Germany’s Frauke Petry comes as no surprise. They give a voice to people plagued by fears of decline and promise them simple answers to their questions and problems.
A look at outcomes in the large emerging economies reveals what the established industrialized counties lack: the feeling that it is possible to achieve social advancement. Two-thirds of people under 35 in India and three-quarters in China believe that their economic situation will improve in the coming years. Only half of Americans, about 40 percent of Germans, only about 30 percent of Frenchmen and fewer than 20 percent of Japanese under 35 believe that this is the case.
In a comparison of these six important countries, income distribution apparently has no effect on whether people believe that they can improve their situation. In fact, the Japanese are the least likely to hold this belief, even though their country has the most uniform income distribution.
The largest number of optimists when it comes to social advancement are in China, the G20 country with the least equitable income distribution. Residents of the United States and India also see their prospects for advancement more optimistically than those of Germany and France, even though income distribution is less equitable in those two countries.
This casts an interesting light on the debate over the harmless consequences of supposedly growing inequality. Apparently a greater leveling of incomes would not alleviate the fear of social decline among people in Western industrialized nations. What matters instead is that they are able to feel, once again, that they and their children can ascend the income pyramid through education and hard work.
This should give pause to anyone who believes that higher government transfer payments – paid for with higher taxes – are the right solution to the growth problem.
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