DAVOS, Switzerland — The world today looks very much the way it did in the 1930s, and Ray Dalio doesn’t like it one bit.
Referring to increasing wealth inequality, the rise of nationalism, and a rebellious middle-class voting for Donald Trump and Brexit, the founder of the massive Bridgewater Associates hedge fund warned that Europe and the US face a dark future unless they turn back the rising tide of populism. Populism usually devolves into extremism, Dalio said.
Dalio was careful to not say that the West is literally on a descent into fascism again. But he hinted it was one possible path by mentioning Huey Long, the Louisiana populist who was shot to death after he announced a run for president in 1935.
“Populism scares me. I want to be loud and clear, populism scares me. It is the extremes,” Dalio said during a debate with Harvard professor Larry Summers, IMF chief Christine Lagarde, and others on a Bloomberg panel at Davos. “Where are we headed and what does that look like? Define its left version, define its right version.”
“The left becomes more left, the right becomes more right. This is the first year that populism is the most important issue globally,” he said.
This chart from a study by Emmanuel Saez and Gabriel Zucman shows what he was talking about:
“If you study the 1930s to understand what the wealth gap was in the 1930s, it rhymes. Populism is not just the belief that there is a wealth gap, although the wealth gap is the highest since the 1930s,” he said.
“In the 1930s every government that existed practically was populist. So populism by definition is nationalist and protectionist. And it’s also a matter of values. There is a sense of threat, my country is losing its values to internationalism.”
“Every country in the 1930s ended up becoming more extreme. Bernie Sanders was Huey Long,” Dalio said.
Long was a Louisiana senator who favoured wealth redistribution. He was assassinated in 1935 after launching a campaign for the presidency as a Democrat. Long was allied with Father Coughlin, the anti-Semitic radio broadcaster who sympathised with the Nazis and Mussolini in the early 1930s.
“If you look at those elements they have repeated over time. … it’s not just income,” Dalio said.
Summers poured some cold water on the idea that Trump’s election was a response to American concern about inequality. “The US has just elected the world’s most visible symbol of conspicuous consumption — that is a bizarre manifestation of a concern about inequality,” he said.