The world faces a monumental but “unsettling” choice right now, writes PIMCO CEO and co-chief investment officer Mohammad El-Erian in a Foreign Policy article published today.
“It can either break out of its current malaise and deliver economic prosperity, jobs, and greater social fairness; or, instead, it can slip deeper into unemployment, inequality, financial instability, and trade wars.”
The outcome of this make-it-or-break-it moment hinges on the outcomes of four major issues:
- “European economic and financial fragmentation,” which threatens to plunge the global economy into recession
- “Disruptions in the Middle East” that could disrupt the entire region
- “Central bank exhaustion” after they have run out of options to ease struggling economies
- “Social unrest,” in particular the inability of grassroots movements with complaints to transform themselves into forward-looking organisations that will influence policy
On the other hand, four “best case scenarios” could easily unsettle this trend. However, all these scenarios revolve around an efficient, forward-looking political leadership—and the people who vote that leadership into office:
It is not due to complicated technical difficulties that many of the world’s economic problems persist and deepen. In most cases, today’s malaise is a reflection of political dysfunction and ineffective leadership, both of which pre-empt any meaningful effort to take the difficult yet necessary decisions. Witness how the U.S. Congress has torpedoed President Barack Obama’s job initiative. As a result, the credibility of the system itself suffers. Fortunately, several key countries, including the United States, are holding elections this year, giving citizens an opportunity to send a message to their elected representatives. The greater the clarity and urgency of that message, the higher the probability that bickering politicians can overcome real and perceived legacies to unite in doing the right thing for current and future generations of citizens.