Benzinga - by Shanthi Rexaline, Benzinga Editor.
A fresh approach to growth is necessary, and doing the same thing over and over again and hoping for a different result is silly, said economist Mohamed-El Erian, President of Queens’ College, Cambridge, and chief economic adviser at Allianz.
What Happened: Part of the fresh approach is focusing on deregulating and also emphasizing on “growth areas of tomorrow” and unleashing labor and capital in a better way,” El-Erian said in an interview with BBC’s Newsnight segment.
“The problem we have is that we’re not looking forward, we’re looking back,” the economist said. “Discussions about tax cuts, about inheritance tax, may not be economically beneficial, but it may be politically beneficial.”
“I would rather see the head rule being used to encourage the reallocation of resources to things like green energy, life sciences, generative AI,” El-Erian said. Those are going to be determinants of the future, he added.
Why It’s Important: El-Erian’s comments imply that maneuvering with fiscal policies may only provide a temporary reprieve. This is exemplified by the situation that prevails in the U.S. now.
Stimulatory policies of the government and the central bank to shepherd the economy out of a global pandemic in 2020 resulted in the unintended consequence of fanning inflationary pressure.
The central bank could not but act by raising rates successively for over a year and this has left the economy staring at a potential hard landing. The mounting government debt is also seen as a threat to growth.
Most analysts see disruptive innovations as primary vehicles of growth going forward. Ark Investment Management founder Cathie Wood for one bet on growth stocks with disruptive innovation potential. Despite muted expectations for the economy in the near term, a convergence of new and exciting technologies will likely fuel exponential growth in the future, Wood said in a conference in early October.
Some of the areas the fund manager outlined include AI, robotics, and energy storage.
Wood’s flagship actively-managed exchange-traded fund, the Ark Innovation ETF (NYSE:ARKK) ended Tuesday’s session down 2.25% at $43.87, according to Benzinga Pro data.
Read Next: Mohamed El-Erian Says Deluge Of ‘Fedspeak’ Fueling Market Volatility Worries
Photo by International Monetary Fund on Flickr
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