Leading Global Economist on COVID-19 and Financial Recovery: “We Cannot Win the War But Lose the Peace”
In Latest Episode of Podbridge, Mohamed El-Erian, Chief Economic Adviser at Allianz, discusses present economic challenges; warns the U.S. and China are headed toward “divorce”
WASHINGTON, DC (4 August 2020) – The economic scars caused by COVID-19 will be felt for a long time, but future shocks must be avoided through strong global leadership, advanced public-private partnerships, renewed international cooperation, and increased social responsibility across industries, according to Allianz’s Chief Economic Advisor Mohamed El-Erian.
Speaking on Podbridge, a new podcast series launched by the UAE Embassy and hosted by UAE Ambassador to the US Yousef Al Otaiba, El-Erian described the systemic economic risks caused by COVID-19, while in contrast, the Great Recession of 2008 was concentrated within the financial system. Today’s economic crisis will demand ongoing and complex interventions by international institutions, central banks, and national governments. Many people will require sustained economic relief simply to survive. Until a vaccine is proven effective, measures must be taken to ensure the ongoing health, safety, and economic productivity of society.
The Cambridge and Oxford trained economist noted that while interventionist policies during the 2008 financial crisis prevented an economic depression, they did not foster long lasting, durable and inclusive growth across all segments of society. This failing resulted in financial insecurity for many households which was worsened by the pandemic. “We cannot repeat the mistake of the global financial crisis, which was to win the war against the depression, but fail to secure the peace,” El-Erian warned.
COVID-19 has exposed just how contentious the U.S.-China relationship has become. “This is no longer a separation with a view to getting back together – this is a divorce; it either can be amicable or adversarial,” said El-Erian. As the onshoring of U.S. industries from China occurs, this decoupling should be gradual, but also requires a basic level of cooperation by both parties in areas where there are joint responsibilities. “Partnerships must be maintained on issues of global concern from tackling climate change to the pandemic response – the divorce is real, but we still have kids and joint responsibilities,” El-Erian noted.
Ambassador Al Otaiba and El-Erian agreed that a unified international approach will be necessary to revitalize the global economy. This requires making capitalism more inclusive and solving for globalization’s shortcomings, just as we make corrections for market failures.
Despite the challenges ahead, El-Erian closed on a hopeful note, observing a few silver linings emerging from the pandemic. “COVID-19 has sparked an emphasis on technological innovation and Artificial Intelligence applications; scientists across the world are collaborating on vaccine developments; and with the disruption to normal life, a renewed focus on corporate social responsibility, health and wellness, and caring communities has emerged,” El-Erian added.
“In the UAE, the pandemic has taught us to accelerate our focus on technology, to continue breaking barriers in fields like space exploration, and to reimagine our education system,” said Ambassador Al-Otaiba. “Yet this national strategy is paired with an international approach. The global community must come together to tackle major issues affecting our societies from COVID-19 to climate change and nuclear nonproliferation. We will not succeed if nations pursue their own path, with some countries advancing forward and others left further behind.”
Mohamed A. El-Erian is the chief economic adviser at Allianz SE, the parent company of Pimco, where he served as CEO and co-CIO. He is president-elect of Queens' College, Cambridge, senior adviser at Gramercy and professor of practice at Wharton. His books include "The Only Game in Town" and "When Markets Collide."
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