Austria Economics - How The Pro-Growth Populist Revolt Made It One Of The World's Best Performing Countries

Jerry Bowyer
Posted: Jan 31, 2018 9:38 AM
Austria Economics - How The Pro-Growth Populist Revolt Made It One Of The World's Best Performing Countries

Look at the chart below and you will see that Austria was the best performing easily-investible country in the world last year. The data looks at countries which have MSCI data for indices. In other words, they are sufficiently liquid and developed that it was worth it for the world's largest investment index creator to create a distinct index just for that country. There have been countries in which the 'stock exchange' has been basically a guy with a white board and an erasable marker - those aren't in this list.

Austria's index returned 58.3%, more than doubling the Dow's 26.7% annual return. Not too shabby. What did Austria have going for it? First of all, it entered 2017 at a reasonable discount.








Extremely high.

Slightly unattractive

Very high

Ruling party pro economic reform, opposition very ineffective



Extremely high.


Very high

Pro-market and nationalist parties took power



Very high

Slightly attractive

Extremely high

 Generally pro-growth culture, by a left of center leader who was expected to be more anti-growth.



Very high.


Very high


South Korea

Very high

Very attractive


Export growth, delay in rate hikes


As you can see, Austrian change in earnings for 2017 was very high, and the P/E at the end of December 2016 was attractive. The bottom line is that the performance story for Austria was a combination of growth and value (signified by G&V in the grid above), but mostly growth.

Why did it grow so fast? There were many factors, but a big one was based on the principle of Leadership and Governance, which holds that investment performance over the long run tends to be better when a nation (or a company) has better governance and leadership rather than worse. Austria is interesting in comparison with the rest of Europe in that, in general, populist parties have not won enough elections to actually govern. Yes, the populists have won some referenda - Brexit and the Catalonia secession ballots come to mind. But in general governing parties have either held off populist victories through opposition, or have coopted some of the movement's momentum. The Tories under Theresa May have coopted the Brexit cause to some degree, and the Macron government in France has absorbed elements of pride in Western achievements in contrast with much of the 3rd world.

But in Austria, the populist/nationalist freedom party got enough votes to govern. The current coalition is between nationalist Freedom Party and libertarian People’s Party. This coalition took power in December 2017, and the election was in October. Economic metrics have been positive since then. One of the most interesting things about the Austrian political dynamics is that it represents a coalition not just of parties, but of agenda items. The political coalition first focused on nationalist issues such as curbing immigration from the Muslim world, and last year the coalition pivoted to the growth agenda. The results were both economically and financially fruitful.

In some ways, Austria is a smaller scale but more dramatic microcosm of the political realignment in the United States, in which Christian traditionalism and growth economics are part of a larger nationalist coalition. We need to keep our eyes on other European nations to see if they will also effectively embrace this same ruling coalition and achieve similar stratospheric return effects.

To read more of Jerry's financial analysis, please visit Vident Financial.