Rosa & Roubini Associates

118 Pall Mall London SW1Y 5ED | +44(0)207 1010 718

Making sense of this world

For any enquiry, please contact

Rosa & Roubini Associates is a consultancy firm providing independent research and advisory services

To discuss subscribing to our services, please contact us

About us

Independent Research and Advisory Services

Advisory Services

R&R provides independent advice on global issues

Find out more

Independent Research

R&R provides truly independent research on the global economy

Find out more

R&R Weekly Column

Inequality As A Cause Of The “Populist International”


By Brunello Rosa

19 August 2019  


We have written several times about the rise of populism at global level, and its repercussion on the political, economic, and financial developments of the countries in which the populist phenomenon is strongest. We have also discussed the potential repercussions for the liberal order and its institutions, such as the European Union, that were created after Word War II as a response to the damage caused by the nationalistic and populist movements of the first half of the 20th century. 

Plenty of studies have been published that discuss the origin of this new wave of populism. A useful taxonomy is one in which contemporary populists have been classified into three categories: those who reached power for cultural or “identity-related” reasons (e.g. Brexit); those who claim to be anti-establishment (e.g. Donald Trump), and finally, those who came to power as a result of a widespread socio-economic malaise (e.g. Five Star and Lega in Italy). In this column we want to focus on the underlying causes of the last of these three categories: socio-economic populism. At the core of any economic malaise there is under-development and lack of opportunity, especially in emerging markets. In developed economies, however, where per capita income is much higher, it is the uneven or unfair distribution of income and wealth that seems to be the driving force behind the rise of populist forces in recent years. 

As discussed in our recent in-depth analysis, income and wealth inequality (or lack of “inclusion”, to use the expression of the IMF/World Bank) is one of the main causes of subdued growth and historically low real interest rates. As the IMF said in its 2018 Annual Report, “reducing inequality can open doors to growth and stability.” Yet by causing subdued and uneven growth, inequality is also a primary origin of protest movements that want to rectify this situation, which sometimes are or have been classified as “populist.”   

In our analysis we discuss how income inequality has been increasing since the 1970s, when the primary distribution of income began to become skewed more towards profits, interests and rents and less to labour.  

Click here to read previous columns



At the same time, the neo-liberist revolution of Ronald Reagan and Margaret Thatcher also made the redistribution of income via taxation and subsidies less effective, on the back of what was labelled as trickle-down economics. Many years of increased globalisation, with its inherently deflationary forces (including on wages), reduced labour share of income in the most advanced economies (and parallel increase in the profit and interest share of income), diminished power of trade unions, mass privatisation of public goods, and inability of taxation and subsidies to redistribute income in a fairer way, have led to the current situation. Workers in many countries feel deprived, and are therefore willing to give a chance to political leaders who claim to be on their side, however inconsistent with this claim those leaders’ biographies might be. 

The policy solution to this problem seems quite straightforward: a more active role of fiscal policy, to promote income redistribution, increased public expenditure in infrastructure and education, the provision of job opportunities to younger generations by the public and private sectors. Some of these solutions are becoming popular even among the US electorate, with the rise of political leaders such as Bernie Sanders and Alexandria Ocasio-Cortez, who are not afraid of being labelled “socialists,” a description which just a few years ago would have killed any political career. Nevertheless these solutions are easier said than done. Once in power, even their proponents realise how difficult implementing such policies tends to be, given binding budget constraints. 

Wealth inequality is even harder to assess than is income inequality, as it is often a legacy issue (as wealth is accumulated over generations), and as it is the result of the cumulative effect of income inequality over a long period of time. A group of economists has suggested the adoption of a “wealth tax” as a solution to this issue. This might well be a solution, but the political economy of adopting such a tax would be complicated, and so might ultimately prove to be counter-productive. 

All this is to say that income and wealth inequality are here to stay for the time being, and will continue to feed populist movements around the globe. Policy solutions are available, but their implementation is complicated and sometimes politically toxic. This means that probably things will have to get worse before they can get better.   


Negative Supply Shocks and Optimal Monetary Policy Response


 How Central Banks Should Respond To The Ongoing US-China Trade and Tech War and Potential US-Iran Oil War

by Nouriel Roubini

20 August 2019

read paper

Income And Wealth Inequality Continues To Weigh On Global Growth


by Francesca Panelli

16 August 2019

READ paper

Scenarios: Tension Between Iran and US Likely To Continue, With Increasing Risk Of Escalation


by Giorgio Cafiero, Nouriel Roubini and Brunello Rosa

14 August 2019

read paper

ITALY - Flash Update: Salvini Pulls The Plug On Conte’s Government and Seeks “Full Powers” With Early Election


    by Brunello Rosa

9 August 2019

read paper

Flash Preview: Norges Bank To Remain On Hold, But Still Open To Future Hikes


  by Brunello Rosa

9 August 2019

read paper

Flash Review: RBNZ Cuts Rates More Than Expected And Signals Further Easing


 by Brunello Rosa

7 August 2019

read paper

R&R offers yearly subscription services and tailored research

If you want to activate a trial of our research and services

CALL US ON  +44 (0)207 1010 718


The Geopolitical Corner by John Hulsman

India Lights The Kashmiri Powder-Keg


13 August 2019

Introduction: The Baleful Effect Of Hubris

Flush from his decisive victory in the Indian parliamentary elections of May 23, 2019—where his BJP-led coalition won an overwhelming 65% of the vote in the Lok Saba (India’s lower house)—resurgent Prime Minister Narendra Modi has seen to what he regards as unfinished business; nullifying the partial autonomy of Kashmir, India’s only Muslim-majority state. With the weight of the electorate firmly on his side, and with the opposition forces utterly in disarray, the Prime Minister has chosen this moment of maximum power to make good on his campaign promise to his Hindu nationalist base. 

But any good student of the classics can testify as to what is likely to happen next, hubris such as this is almost always followed be nemesis. In choosing to spend his political capital on such a fraught and controversial initiative, Prime Minister Modi is endangering the Indian renaissance, its rise once again to Great Power status. At the same time, he is lighting a fuse for possible wider, and far more perilous political risks ahead, including making Kashmir part of increased Sino-American tensions, serving as the possible detonator for future conflicts. 

The History 

On October 27, 1947, Maharaja Hari Singh, the Hindu ruler of the Muslim-majority state of Jammu and Kashmir (J & K), somewhat reluctantly signed India’s articles of accession, ceding control over defence and foreign affairs of his northern subcontinental state to Delhi, while retaining extensive and unique (for India) autonomy in all other matters. 

Article 370 of the Indian constitution accords special semi-autonomous status for J&K. In an effort to maintain Kashmir’s Muslim cultural heritage (the province was 68% Muslim according to 2011 figures), Article 35 was added to Article 370 in 1954, prohibiting outsiders (meaning Hindus) from buying land, holding state office, or settling in the province. 

In what would become a doleful pattern (and with this historical record, a future conflict cannot be laughed away), India went to war with Pakistan over the province in 1947, a state of affairs repeated in 1965, 1971, and 1999 (the last undeclared). 

Since the 1947 war, India has found itself in control of 45% of the territory, leaving Pakistan with 35%, while China retains a thinly-populated (but strategically significant) 20%. But this state of geopolitical play is fluid; no formal peace between Delhi and Islamabad has been reached, as both countries claim maximalist control of the entire territory. Even before Modi’s actions, Kashmir was one of the most dangerous potential flashpoints for political risk in the world, as both India and Pakistan are nuclear powers.

The long historical process that led to Modi’s highly controversial move was unleashed by the insurgency that has raged in Kashmir since the late 1980s; while its virulence has diminished in recent years, the restive province has seen 70,000 people (mostly civilians) killed over the past 30 years. India has blamed Pakistani-supported groups, such as The Jammu Kashmir Liberation Front (JKLF) and Hizbul Mujahadeen Islamic forces for the unrest, just as many Kashmiri locals resent the heavy-handed tactics of Indian troops in the region. 

Even before the recent crackdown, Kashmir was one of the most militarised places on earth, with 500,000 Indian troops stationed there. It was into this lake of gasoline that the Prime Minister has decided to throw his match.  

The Policy 

The pivotal event of the 2019 parliamentary election hinged on Kashmir. On February 14, 2019, a suicide attack on the Indian paramilitary police in the province killed 44, the deadliest attack on security forces in decades. True to his unapologetic nationalist ideology, Modi responded by launching air strikes on Pakistan itself, as he (most likely correctly) blamed Islamabad for sponsoring the groups which initiated the attacks. 

Read Previous Geopolitical Comments by John Hulsman

Further, Modi deftly used the attacks to his advantage, employing Hindu nationalist rhetoric to energise his political base. In policy terms the Prime Minister threatened to revoke J&K’s special status, a campaign promise he has now lived up to. This bravado in the face of danger was overwhelmingly rewarded by Indian voters, setting the stage for Modi’s efforts to bring the province back under more centralised control.

In what amounts to a highly-coordinated move, this month India dispatched an additional 38,000 paramilitary forces to the province. On the night of August 4, the Modi government cut internet services to J&K, while military police placed many of the province’s local government officials (overwhelmingly Muslim) under house arrest. The next day Modi and his enforcer, Interior Minister Amit Shah, introduced legislation (it was passed the next day) breaking Jammu and Kashmir into two separate administrative units, the smaller of which (Ladakh) will be directly under the control of Delhi, not even having its own regional legislature. 

Even more critically, the legislation allows for outside (meaning Hindu) purchases of land and settling in J&K, meaning that over time the demographic character of the province could well be altered (much as China has tried to do with the ‘settler colonies’ of Han Chinese in Tibet and Xinjiang). 

The Reason

The responses from outside powers to Modi’s reckless thrust were exactly what you would expect. The US reply was wishy-washy and forgettable, as Washington wants to tone down a crisis that pits its newly important Indian ally against Pakistan, perhaps the only country that can help Washington finally escape the morass of Afghanistan. China, with skin in the game on the Kashmiri scene, angrily called the policy ‘unacceptable’ and ‘non-binding.’

Pakistan, historical defender of the Indian Muslim minority, was incandescent, charging that the policy was ‘illegal’ and announcing it will break off all diplomatic relations with Delhi over the matter, as well as all bilateral trade. Delhi’s perpetual Cold War with Islamabad has just turned frigid. 

In turn, India has attempted to justify the policy based on the fact that J&K hasn’t experienced stability during the autonomy period, as the insurgency has raged, nor has it benefitted from economic prosperity, despite significant public investment from the centre. From Delhi’s point of view, given that autonomy as a policy has failed something new needs to be tried. But these pale justifications do not explain what is going on here, which only makes sense if we delve into the BJP’s Hindu nationalist ideology.

The BJP has long viewed J&K’s autonomy as a slap in the face to India’s Hindu majority, as it discriminates against them buying land or even settling in the province. Modi sees the new policy through this Hindu nationalist lens as an egalitarian standardisation of India’s administrative system and a levelling of the playing field for India’s majority Hindus. In fact, with his victory Modi has tied majoritarianism to Hindu nationalism in a new and potent way. 


(This is an excerpt of Dr. Hulsman's latest article, which you can read here)

Dr. John C. Hulsman is the widely-read Senior Columnist for City AM, the newspaper of the city of London. Dr. Hulsman is also a Life Member of the US Council on Foreign Relations. His most recent work, the best-selling, To Dare More Boldly; The Audacious Story of Political Risk, was published by Princeton University Press in April 2018 and is available for order on Amazon. He can be reached for corporate speaking and private briefings at 

Looking Ahead

The Week Ahead


Week 19  - 25 August 2019


The Week Ahead: In The EZ Manufacturing Weakens And FED Soon To Announce Future Movements

In the EZ, manufacturing sector activity is expected to weaken (Markit Manuf. PMI Aug., c: 46.3; p: 46.5), led by a sluggish industrial activity in Germany (Markit Manuf. PMI, c: 43.0; p: 43.2); yet, PMI indicators in the services sector are likely to remain expansionary (c:52.7; p: 53.2). Inflation is expected to slow (CPI Jul., c: 1.1% y-o-y; p: 1.3; Core CPI, c: 0.9% y-o-y; p: 1.1). 

In the US, Chairman Powell will deliver a speech at the Fed’s Jackson Hole symposium on Aug 23; the markets will focus on whether the Fed’s is planning: i) a long-term cutting cycle, against a global recession; or ii) a few insurance cuts, against an economic downturn.  

The Quarter Ahead



The Quarter Ahead: Geopolitical Tensions Will Remain High and Central Banks Are Ready to Ease Policy

In the US, President Trump announced the delay tariffs on Chinese imports “until December to shield US consumers during the Christmas shopping season”; however, some goods such as clothing, watches, and electronics will face levies of 10% starting September 1. Overall, 69% of Chinese consumer goods will be subject to tariffs by September 1, up from the current 29%. Although economic data indicate: i) resilience in manufacturing and services; and, ii) a pick-up in inflation - market expectations for “one rate cut” at the Fed’s September meeting remain high, at 78.8% (p: 84.6), due to rising concerns over trade and weaker global conditions.

In the UK, PM Johnson will reiterate at the upcoming G7 summit in France that the British parliament “will not, and cannot, cancel the referendum”. 

In the EZ, to support the flagging EZ economy amid trade uncertainties, according Governing Council member Olli Rehn the ECB is “preparing a 'very strong package' of stimulus measures that should exceed investors' expectations”, to be announced at the September policy meeting. 

In China, the PBoC is set to replace they key lending rate with a market-driven benchmark - aimed at lowering borrowing costs for companies that have faced: i)tighter access to credit; and ii) poor investor sentiment, caused by the ongoing trade war. 

Last week's Summary (12 - 18 August 2019)

Real Economy: Weak Economic Data Point To A Global Downturn

In the US, retail sales rose unexpectedly in July (a: 0.7% m-o-m; c:0.3; p: 0.3), indicating that personal consumption–about 70% of US GDP–remains strong. Inflation rose more than expected in July (CPI, a:1.8% y-o-y; c: 1.7; p: 1.6; Core CPI, a: 2.2% y-o-y; c:2.1; p: 2.1) as tariffs begin to impact prices. 

In the EZ, growth stagnated (GDP Q2; a: 0.2% q-o-q; c: 0.2; p:0.2), as: i) IP weakened more than expected (a: -2.6% y-o-y; c:-1.2; p: -0.8); and ii) Germany - the largest economy - contracted in Q2 (a: -0.1% q-o-q; c: -0.1; p: 0.4). Investor sentiment on Germany’s economic outlook fell to the lowest since 2011 (ZEW economic sentiment survey, a: -43.6; c: -21.7; p:-20.3). 

In Japan, manufacturing keeps contracting, albeit at a slower pace (IP Jun., a:-3.3% y-o-y; c: -3.6; p: -3.6). 

In the UK, inflation accelerated faster-than-expected (CPI Jul., a: 2.1% y-o-y; c: 1.9; p: 2.0). 

In China, economic activity continued to slow down, as in July: i) retail sales softened (a: 7.6% y-o-y; c: 8.6; p: 9.8); and, ii) industrial activity weakened (IP, a: 4.8% y-o-y; c: 5.8; p:6.3). 

In Turkey, industrial output fell for a 10-month running (IP Jun., a:-3.9% y-o-y; c: -1.0; p: -1.3). 

In Argentina, Fitch downgraded the country’s credit rating to CCC (p: B). 

In Mexico, BdeM cut its interest rate (a: 8.00%; c: 8.25; p:8.25). 

Financial Markets: Risk-Off Sentiment Driven By Trade-Related Uncertainties And EM Volatility

Market drivers: indicators pointing to a global downturn and persistent trade uncertainties drove investors to safe-haven assets. 

Stocks: w-o-w, global stocks fell (MSCI ACWI, -1.2%) driven by both the US (S&P500, -1.3% to 2,889) and EMs (MSCI EMs, -1.1% to 970). Volatility rose (VIX S&P 500, +4.4 points to 18.5, 52w avg.: 16.7; 10y avg.: 17.1). 

Bonds: w-o-w, global indices rose (BAML Global bond index, +0.9%). The 10y UST yield fell w-o-w by 19 bps, to 1.54%. In MENA, bond supply stands at USD 67.0bn y-t-d, compared to USD53.2bn in 2018. 

FX: the USD appreciated (DXY, +0.7%) against a basket of currencies. The EUR fell (EUR/USD, -1.0% to 1.109). EM FX fell (MSCI EMs, -0.3% at 1,607), bar the Chinese Renminbi (USD/CNY, +0.3% to 7.041). In Argentina, the incumbent President’s defeat in the primary elections led to a Peso sell-off (USD/ARS, -17.5% to 52.834). 

Commodities:Oil prices rose (Brent, 0.2% to 68.6 USD/b). Gold rose (1.1% to 1,514 USD/Oz.).     

Making Sense of This World

Subscribe to receive our free weekly Viewsletter "Making Sense of This World"

Read R&R's Past ViewsLetters

Go to The Archive

R&R Working Paper Series

The Importance Of Uttar Pradesh in the Political Success of Narendra Modi - 26 June 2019

Contact Us


For any enquiry please send an email to:

Rosa & Roubini Associates

118 Pall Mall, St. James's, London SW1Y 5ED, United Kingdom

+44 (0)207 1010 718