The Bulletin with UBS Scapegoat economics and the cost of prejudice politics
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Jul 13, 2025 
Paul Donovan, UBS Global Wealth Management Chief Economist, dives into the complexities of scapegoat economics and prejudice politics. He discusses how certain groups, especially immigrants, are unjustly blamed for economic woes, masking underlying issues. Donovan explores the dangers of economic nationalism, emphasizing that irrational choices can harm market efficiency. He also highlights the cyclical nature of political scapegoating in the U.S. and the potential repercussions of upcoming trade tariffs on competitiveness and pricing.
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The Mechanics of Scapegoat Economics
- Scapegoat economics blames a particular group for societal problems during times of uncertainty.
- Foreigners, both immigrants and foreign nations, are common scapegoats for economic anxiety.
Economic Nationalism Breeds Inefficiency
- Economic nationalism and prejudice politics lead to inefficient markets and second-best outcomes.
- Rejecting the best talent or goods due to bias causes market failure and reduces economic efficiency.
Markets Expect Tariff Policy Retreats
- Markets often expect policy retreats after extreme tariff proposals because such policies harm the economy.
- The risk exists that political defiance could prevent this retreat, escalating economic damage.