In an interview, Stanford economist Nicholas Bloom, 43, discusses the era of political uncertainty that has been unleashed with Donald Trump’s presidency and Britain’s decision to leave the European Union.
SPIEGEL: Professor Bloom, Donald Trump was sworn in as the President of the United States on Friday. Does this mark the start of an era of unpredictability for politics and the economy?
Bloom: Yes, you could say that. The indicators we use to measure political uncertainty have never been as high as they are today, and we have collected data that reaches back to the beginning of the 20th century.
SPIEGEL: And that’s all because of the election of Trump as president
Bloom: … and the vote in the United Kingdom to exit the European Union, correct. But these two phenomena are the expression of a much more fundamental problem: The rise of populist parties such as the Five Star Movement in Italy and the Front National in France are rocking the political certainties of the last decades. And that also affects the economy.
SPIEGEL: Together with colleagues, you have developed methods of measuring political uncertainty and its consequences. In what situations does uncertainty increase?
Bloom: To put it into a simple equation: Decreasing economic growth and increasing inequality leads to increased uncertainty. The U.S. and, to a certain extent, countries in Europe as well, have experienced growing inequality within their population for decades — a small group of people own the lion’s share of the wealth. Populists take advantage of this, and their policies are extremely hard to predict. And this has serious consequences. Companies shy away from risk, postponing their investment decisions in times of uncertainty, the stock markets get nervous and unemployment threatens to increase.
SPIEGEL: Important elections are taking place in Europe this year — the presidential elections in France this spring, and the federal elections in Germany a few months later. What impact will they have?