Pimco’s El-Erian: Divided US Government No Longer Good for Economy

thedailybell.com / By Staff Report / January 2, 2013

A divided government no longer benefits the U.S. economy as it did in the past, said Mohamed El-Erian, CEO of fund giant Pimco. In the past, indecisiveness and political stalemates in Washington prevented policymakers from passing laws that got in the way of the private businesses, which were otherwise free to go to work with Washington out of their hair. “It was once fashionable to argue that a divided government was good for the economy,” El-Erian wrote in an OpEd appearing in The Huffington Post. “The view then was that politicians would be too busy with political brinkmanship to get in the way of a dynamic private sector. As a result, unfettered by government interference, the private sector was more likely to invest, hire and prosper … It is hard — very hard — to make this argument today.” – MoneyNews

Dominant Social Theme: Government needs to get back to work.

Free-Market Analysis: Presumably, this is an emergent dominant social theme that Mohamed El-Erian is giving voice to. Perhaps it is a subdominant social theme, as well.

The dominant social theme is, of course, that government is good and among humankind’s most necessary inventions. The subdominant social theme could be that government has never been more necessary than NOW.

Why? Well, as El-Erian suggests, the world in general, and the US specifically, has a need for a steady hand on the tiller. What he doesn’t indicate, of course, is that it is government and central bank monetary policy that has placed Western economies in jeopardy in the first place.

To some degree, of course, El-Erian is “talking his book.” He manages US Treasuries and it is not in his interest if the US as an entity and its fixed income instruments are downgraded. He wants the US – and government in general – to be responsive and make necessary changes.

For this reason, he’s made this statement – which certainly goes against what has often been repeated in the business community. The idea that a divided government is good for the economy and the private sector has been a favorite truism of political analysis as well.

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