PIMCO's El-Erian: Teamwork Suffers Amid US Turf Wars, Political Battles

(October 20, 2011) — Mohamed A. El-Erian, CEO and co-CIO of the Pacific Investment Management Co. (PIMCO), questions whether America is at stall speed. 

Teamwork has been scarified and turf wars and political battles have ensured, El-Erian asserted in an article originally published on Project Syndicate. “Little has been done to deconstruct structural complexity, let alone win sufficient public support for a medium-term vision, a credible implementation strategy, and a set of measures that is adequate to the task at hand,” he wrote.

“This situation is both understandable and increasingly unsettling for America’s well-being and that of the global economy,” he wrote. “It reflects the impact of fundamental (and historic) economic and financial re-alignments, insufficient policy responses, and system-wide rigidities that frustrate structural change. As a result, there are now legitimate questions about the underlying functioning of the US economy and, therefore, its evolution in the months and years ahead.”

According to El-Erian, the economic prospects in the United States are confusing, with markets and investors on a “roller-coaster ride.” Blaming America’s economic policymakers for falling short on a willingness to evolve, he wrote: “Rather than committing to a comprehensive set of urgently-needed reinforcing measures, they seem obsessed with the futile search for the one ‘killer app’ that will solve all of the country’s economic problems. No surprise that they have yet to find it.”

El-Erian has also recently voiced his dire outlook on the European economy, forecasting a European recession in 2012. He asserted that there will be little-to-no economic growth in industrial nations over the next year as Europe’s economy contracts by up to 2%. Meanwhile, he said that the US will stagnate yet volatility will continue as a result of policymakers in Europe and the US having failed to take corrective action.

“For the next 12 months, the global economy will slow materially with advanced economies struggling to grow much above zero. Emerging economies will maintain faster growth, albeit not as high as the last 12 months,” Bloomberg cited El-Erian as saying during a September 24 interview in Washington. His comments come as world leaders gathered in Washington last month for annual meetings of the International Monetary Fund (IMF) and the World Bank.

When asked for his thoughts on the crisis and about the seriousness of the situation by TheStreet, El-Erian replied: “This is a serious situation because the crisis in Europe is spreading. It’s still spreading today. So, not only have the Europeans not been able to contain it to Greece, they haven’t even been able to contain it to the periphery.”