Globalization and Populism: Eswar Prasad Reveals the Mutually Reinforcing Negative Effects

Esteemed economist Eswar Prasad reveals serious issues in the dynamics between two contemporary global phenomena. Through his analysis shared on Bloomberg and X platform, Prasad shows how the negative impacts of globalization and waves of populism reinforce each other, creating layered challenges for the world economy.

How the Negative Effects of Globalization Cause Economic Inequality

Globalization has indeed driven overall economic growth across many countries. However, these benefits are not evenly distributed across all segments of society. The negative impacts of globalization actually create sharp income disparities between winners and those left behind by global market integration. Some traditional industries are forced to shut down due to international competition pressures, resulting in structural unemployment and ongoing economic inequality.

Populism Exploits Social Tensions Caused by Globalization’s Negative Effects

When inequality and social unrest generate dissatisfaction, populist movements find momentum to grow. These groups exploit public frustration with the negative impacts of globalization by offering simple yet often unrealistic solutions. Targeting international institutions and open trade policies, populism exploits societal anxieties, further deepening social polarization and complicating economic stability.

The Vicious Cycle: Consequences for Global Stability

Prasad calls this phenomenon a “vicious cycle” — a cycle where the negative effects of globalization create ideal conditions for populism to flourish, which then leads to protectionist and isolationist policies. These actions threaten global trade stability, slow economic growth, and worsen social conditions already affected. This recurring cycle demonstrates how these two phenomena are interconnected and reinforce each other’s negative impacts.

Balanced Policies Are Needed to Address These Challenges

In facing this complexity, Prasad emphasizes the need for careful and balanced policy approaches. Governments should design progressive redistribution mechanisms, strengthen social safety nets, and ensure that the benefits of globalization are felt by a broader segment of society. Investing in education, skills training, and local infrastructure can help minimize the negative impacts of globalization while maintaining the advantages of economic integration. Only through inclusive and well-planned policies can global stability and sustainable development be achieved.