After all, if there’s a clash between what policies would be good for PIMCO’s investment positions and what policies would be good for the global economy, El-Erian has a responsibility to push for policies that would be good for PIMCO’s investment positions. Is there such a clash? Well, readers of The Washington Post op-ed page have no way of knowing. So what’s the point of publishing it?
Felix Salmon (blog at Reuters) comes to the defense:
The oversimple answer to the question is that El-Erian controls over $1 trillion in assets: if you wanted to put a face to the famous bond vigilantes, it would probably feature that famous moustache. If you care what the bond vigilantes might be thinking, then you can probably get a pretty good sense of it by reading El-Erian’s frequent op-eds.
A better answer is that there simply isn’t a clash between what’s good for the global economy and what’s good for Pimco, which is overwhelmingly a long-only investment house.
Wow. Let me summarize the two “axioms” which has driven policy in the US in the last decades:
- What is good for Wall Street is good for America.
- What is good for America is good for Wall Street.
I’ve heard 1. more often than 2, I think. However, after the crisis I thought it would be understood that both are wrong. Financial firms do not care as much about the long run as about pretty short-term profits (since this is what drives the bonus payments). And yes, as a consequence of this some banks have gone bust and there is no long run for them. Other banks were saved but without the bail-out they too wouldn’t have been around for the long run. Regarding 2.: adding some regulation in the financial sector is bad for some banks, while it is good for America.
Mohamed El-Erian might have a point in his article (and I do believe he is an excellent economist), but that is not the question. The question is whether this can be counted as independent journalism. Hugo Chavez gets a lot of time on Venezuelan TV and it is interesting to hear his position since he is the president, but he must be biased. Does he deserve to get this much air time? Or should unbiased journalists get a bigger share in order to enlighten the lay reader?
Here is a word from somebody thinking about this in a more abstract way (my highlighting):
Enlightenment is man’s emergence from his self-incurred immaturity. Immaturity is the inability to use one’s own understanding without the guidance of another. This immaturity is self-incurred if its cause is not lack of understanding, but lack of resolution and courage to use it without the guidance of another. The motto of enlightenment is therefore: Sapere aude! Have courage to use your own understanding!
Written in Königsberg in Prussia, 30th September, 1784, by Immanuel Kant.