(Bloomberg) -- Former Treasury Secretary Lawrence Summers said financial markets are underestimating risks of global political and social tumult resulting from populist policies and the potential erosion of rule of law.

“The world is potentially headed into a period where there is less of a sense of what the order is going to be and therefore more risk of disorder, chaos and associated suffering,” Summers said at the FII Priority conference in Miami on Thursday. “I’m not sure that kind of risk is fully priced in to markets.”

Summers emphasized that he wasn’t making predictions of such turmoil, but highlighting their potential and how that’s seen in markets. Geopolitical tensions have climbed in recent years amid the Russia-Ukraine and Israel-Hamas wars, while in the US, domestic political strains may intensify in the run-up to the presidential election in November.

Summers, who’s a paid contributor to Bloomberg Television, also raised concern about the broader implications for rule of law in the US in light of the upcoming ballot.

“The sense that the rule of law is enforced in ways that don’t depend on who the parties are — that’s something we sort of take for granted,” he said. “But I think it’s something that could be called into question in the context of the next election.”

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Summers highlighted the dangers posed by populist policies around the world, including protectionism and restrictions on the free flow of goods, capital, and people, calling them “very real risks.”

“One of the clearest lessons of economic history is that over a period of a decade, populism is almost always bad for economic performance,” he said. “Whether it’s right-wing populism or whether it’s left-wing populism, populism damages economies, damages markets.” 

The former Treasury chief added that such risks “seem to me to be insufficiently priced in right now to assessments of where markets are going to go.”

Summers was speaking in a discussion with Eric Schmidt, the former head of Google.

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