Catherine explains the economic and political constraints leaders face in responding to the recent wave of global protests.

Protest movements—most prominently in Latin America, the Middle East and Asia—have become a feature of the geopolitical landscape. Each protest is distinct, with different proximal causes, but there appear to be underlying patterns.

Concentrated wealth and income inequality are a key theme. Median incomes have stagnated around the world in recent decades, while the share of the top 1% of earners has grown sharply, as shown in the chart below. The rising gap between winners and losers has led to middle class discontent. At the same time, declining trust in governments has created a disconnect between the electorate and governing elites. Across the globe, technology is exacerbating the unrest – and has enabled disparate movements to learn from and coordinate with each other.

An economic-political feedback loop

The recent wave of protests has developed against a backdrop of economic expansion and strong asset returns. And to be sure, we expect a moderate uptick in global growth in 2020. But what happens in the next cyclical economic downturn? Some governments may be increasingly constrained – both economically and politically – in their ability to respond.

Monetary policy has little remaining room to provide stimulus, particularly in developed economies: Some countries are already in negative rates territory; many others are close to a lower bound – or the lowest level that rates can feasibly be set without adverse consequences for the financial system. See Dealing with the next downturn for details. Only several countries have decent policy space left – Russia and Mexico, for example.