Review & Outlook: The Political Economy of Slow Growth

Gross domestic product per capita, a proxy for living standards, has slowed dramatically over the last 15 years. For equity investors, slower economic growth translates into reduced opportunity for revenue growth and increased risk for transitory shocks and market volatility. The biggest risk to the economy is that political leaders will respond to subpar growth in living standards by implementing anti-growth policies, including protectionist measures, higher taxes, restrictions on immigration and tighter government regulation of industry, which would likely slow growth even further. In this July 2016 Review & Outlook, the focus is on the political economy of slow growth and what to expect going forward.