El-Erian Sees ‘Politics of Anger’ Worsening as Economies Stall

  • Things start to break in politics when growth is low, he says
  • Economist sees ‘politics driving economics’ on trade policy

Mohamed El-Erian said that disruption from the “politics of anger” is inevitable unless democracies can create sustained expansion of their economies.

“When you run sophisticated, market-based economies at low speed, at low growth for a long time, things start to break,” El-Erian, Allianz SE’s chief economic adviser, said Tuesday in an interview on Bloomberg Radio.

El-Erian has lamented the political gridlock that he sees hindering the necessary fiscal stimulus and structural reforms. Unless political leaders can break the stalemate, growth could remain too low, fueling the sort of discontent that led British voters to opt to leave the European Union, he said.

“Politics is now driving economics,” said El-Erian, who is also a Bloomberg View columnist. “The politics of trade agreements has become very complicated, and because of that we are in this funny phase of anti-globalization, and it will continue as long as populism is on the rise.”

In the U.S., Donald Trump won the Republican presidential primary partly by breaking with the party’s traditional stance and opposing trade deals. His Democratic rival, Hillary Clinton, has increased criticism of the North American Free Trade Agreement and the Trans-Pacific Partnership during this campaign, even though she has spoken favorably of both in the past. El-Erian said that it looks like Clinton will win the election next month, but that challenges will be the same for either candidate.

U.S. gross domestic product has grown at an annualized rate of less than 3 percent for seven straight quarters. The figure was 1.4 percent in the three months ended June 30 as spending on equipment fell along with investment in nonresidential structures.

“Whoever comes to the White House, and whatever the final configuration of Congress ends up being, it’s going to be very important to recognize that we cannot continue in this low-growth equilibrium and not expect things to break,” El-Erian said.

    Before it's here, it's on the Bloomberg Terminal.