Democrats good for the economy: Economists hope for a Biden boom

Democrats good for business
Economists hope for a Biden boom

Worldwide, the change in power in the USA is largely received with relief. This also applies to economists. Their expectations for the economy have improved significantly with the election of the Democrat Biden.

In the deep crisis of the world economy, Joe Biden's inauguration gives economists hope. The impending change of power has raised the expectations of hundreds of experts around the world for economic growth in their respective homeland by an average of almost one percent. This is what the Ifo Institute found out in an experiment with 843 economists from 107 countries. "After the ongoing Corona crisis and its drastic effects, respondents believe that Biden's presidency could be a glimmer of hope for the development of the global economy in the coming year," wrote Niklas Potrafke, head of the Ifo Center for Public Finances and Political Economics, and his Co-authors in an article for the magazine "Ifo Schnelldienst".

The researchers surveyed scientists around the world in two randomly divided groups shortly before and after the presidential election at the beginning of November last year. The first group therefore did not know who would rule the United States for the next four years. The second group, however, already knew the news of Biden's victory. These experts expected an average of 0.89 percent higher economic growth in their country in 2012 than their colleagues surveyed before the election.

The study does not reveal the reasons for this optimism. It can be assumed that there is hope in many countries that Biden will settle or at least defuse the trade disputes sparked by his predecessor Donald Trump. In addition, economists could trust Democrat Biden to stimulate the economy in the USA. Many countries around the world would benefit from higher economic growth in the US – especially exporting nations such as Germany. Even before the election, Biden had announced spending packages worth billions of dollars, including investments in infrastructure and renewable energies.

USA grows faster under Democrats

A look back over the past decades also confirms the hope of an economic boost from a democratic president. In the period from 1949 to 2012, economic growth under democratic administrations was on average almost 1.8 percentage points higher, as the study authors write. Whether this is due to differences in economic policy is controversial. Some scholars explain this phenomenon by saying that in economic crises, voters tend to prefer the Democrats, who promise more social benefits than the Republicans. When the elected take office, the economic cycle will start to pick up anyway. Biden could also benefit from this effect if he manages to get the pandemic under control.

While economists in other countries have raised their economic expectations through the Biden election, the change in power in their own country leaves US economists of all places largely cold. In the case of American US economists, the survey does not reveal any significant difference between those who knew of Biden's election victory and those who were interviewed before the election. The authors of the study can only guess why this is so. It is possible, they write, that American experts estimate the influence of their own head of state on the economy less than their foreign counterparts, especially in view of the Corona crisis.