Mohamed A. El-Erian, chief economic advisor at the financial services company Allianz, visited SIPA on February 10 to discuss his new book, The Only Game in Town.
In his talk, El-Erian suggested that central banks have become the essential policymakers, if not the only policymakers, in the global economy, and explained why this positioning is increasingly unsustainable. As a result of this trend, he said, governments have let monetary policy become “the only game in town,” and the west can no longer grow without artificial investment.
El-Erian said the finance industry has made the wrong investments to date, overlooking essential needs in areas such as infrastructure and education. This process continues, with the deterioration of economic, political, and social stability serving as an indicator that that focusing on the financial system has weakened resiliency.
“Why is financial risk-taking so high and economic risk-taking so low?,” he asked. As a result of the imbalance, El-Erian said, the world is currently at a “T-junction,” with the opportunity for things to go in the right direction or very much in the wrong direction.
In order to move towards the positive direction and bring growth and stability to economies, El-Erian said policy is needed to adjust this paradigm. He said the U.S. Congress needs to take a leadership role, and said government representatives around the world also need to enhance “cognitive diversity, leverage a strong brand, overcome blind spots, tap into innovation,” and more.
El-Erian, a former CEO and co-CIO of the investment management firm Pimco, is chair of President Obama's Global Development Council. He is also a columnist for Bloomberg View and a contributing editor to the Financial Times. He was named to Foreign Policy's list of Top 100 Global Thinkers for four consecutive years (2009-2012), and to the magazine’s list of the 500 most powerful people on the planet in 2013.
The event was moderated by Patricia Mosser, senior research scholar and director of SIPA’s Initiative on Central Banking. Richard Clarida, the C. Lowell Harriss Professor of Economics and a professor of international and public affairs, introduced the event.
— Kristen Grennan MPA ’16
Pictured (from left): Mohamed El-Eiran, Patricia Mosser