Since the world’s developed economies nearly collapsed in 2008-2009, the United States and Europe have taken different paths on their way back to prosperity, with mixed results. As growth and stability slowly return, we talked to a group of financial leaders in business, policy, academia and media about the systemic risks that remain, how they view the effectiveness of reforms and the trajectory of growth on both continents. This is part one of our series.
Mohamed El-Erian, Chief Economic Adviser at Allianz and Chair of President Obama’s Global Development Council, helps explain the aftermath of the financial crisis by talking about what it was not: a cyclical shock. Though it’s easy to see now, the crisis of 2008-2009 took some time to fully comprehend.
In our interview with El-Erian, he says of the U.S. perspective, “We had fallen in love with growth as a consequence of debt, of credit entitlement, of leverage, and now we had to go back to something much more genuine and durable.” The U.S. lost the early years immediately following the crisis, El-Erian says, which have made reforms more difficult to take hold.
However, the U.S. has recovered faster than Europe and other parts of the world not just due to implementing new monetary policies and financial regulation, according to El-Erian.
“The U.S. is lucky because the U.S. has two things that other countries don’t. One is a very flexible system that heals, and second, massive entrepreneurship, especially in energy, especially in technology… so the U.S. is relatively well off despite the lack of structural reforms at the macro level.”
Watch El-Erian’s full response in the above video.