According to Mohamed El-Erian, chief economic adviser at Allianz, there is a common thread running through Brexit, claims of inconsistency in the Fed’s actions, the rise of negative interest rates and ‘strange politics”. Investment News reports that, in a recent media briefing, he described the commonality as “advanced economies’ inability to grow in an inclusive manner.”

El-Erian explains that when a small segment of the population reaps the benefits of a sluggish economy, “strange things start to happen. And we ain’t seen anything yet.” He refutes the notion that low growth is a cyclical issue. Instead, El-Erian blames an overreliance on central banks and “messy politics which contaminates good economic policy.” The widespread belief that the finance industry is an agent of growth is misguided, he says, asserting that fundamental elements such as infrastructure investment and corporate as well as labor market reform should be the focus. Further, he views the innovation of securitization in the financial sector as a culprit of “overproduction and overconsumption”.

What are the potential outcomes of the current low-growth scenario? El-Erian cites the following possibilities: (1) maintaining the status quo; (2) being on the cusp of improving; or (3) recession and instability.  He notes, “the evidence suggests that it’s actually not predestined in any way.”