Mohamed El-Erian

By Mohamed El-Erian
The opinions expressed are his own.

European officials must feel like that they were just on the receiving end of an “intervention” staged by their colleagues from other countries – a process whereby a group of people come together to “shock” a friend/family member into recognizing the depth of a personal crisis and the urgency of embarking on proper corrective actions.

The venue was this past weekend’s Annual Meetings of the IMF and World Bank. This event brings together policymakers from almost 190 countries, along with business leaders and media. It is full of formal meetings, seminars, press conferences, and bilateral discussions.

It is a well-attended gathering that serves many purposes. One of them is to enable policymakers to collectively get a feel for the state of a highly inter-connected and complex global economy. At times in the past, this has proved absolutely critical for designing policy responses that avoided terrible collective outcomes.

This was certainly the case in 2008. On that occasion, a series of consultations and discussions led policymakers from around the world to the startling conclusion that, after the disorderly collapse of Lehman Brothers, the global economy risked tipping into a great depression.

The follow-up was one of the most impressive examples of global policy coordination that culminated in the highly successful G-20 Summit in London in April 2009. The world averted an economic depression that would have spread unemployment, poverty and misery all over the world.

By Mohamed A. El-Erian
The opinions expressed are his own.

Unlike recent G-7 meetings of finance ministers and central bankers that were essentially ignored, there was quite a bit of interest in the one held over this past weekend in Marseille. That interest turned out to be misplaced, however, as the G-7 delivered little of substance yet again.

Once more, the G-7 issued a communiqué whose disappointing lack of content contrasts sharply with the deteriorating health of the global economy, the intense risks ahead, and legitimate policy confusion. As an illustration, try reconciling the G-7′s “catch all” wording on fiscal policy — “we must all set out and implement ambitious and growth-friendly fiscal consolidation plans rooted within credible fiscal frameworks” — with the two strikingly opposing views expressed last week by Germany’s Finance Minister and the U.S. Secretary of the Treasury.

It is not just that the G-7 disagrees on policy prescriptions; the group failed again to converge to the type of common analysis that lies at the root of any coherent policy formulation.

By Mohamed El-Erian
The opinions expressed are his own.

This weekend’s Labor Day celebrations in America mark a difficult time for workers. Having experienced a multi-year decline in their share of national income, they are now suffering the brunt of the current economic malaise; and there is little to suggest that the situation will improve any time soon. As a result, the country’s economic hardships risk morphing from pressuring specific segments of the population to undermining more general aspects of social justice.

The numbers are striking — and worrisome. Over the last 30 years, labor’s share of the national pie has declined to 44 percent from 52 percent, with profits growing at twice the annual rate for average wages.

This morning’s monthly employment report adds to the concerns. Unemployment remains very high, whether measured by the most-quoted unemployment rate (9.1 percent), the less partial under- and un-employment rate, (16.2 percent) or, most comprehensively, the proportion of total adults who are not working (42 percent compared to 35 percent 10 years ago).