A top economic adviser on Sunday asserted inflation and supply chain delays mostly hit rich people the hardest — a controversial position taken last week by White House chief of staff Ronald Klain.
In an interview on “Fox News Sunday,” Mohamed El-Erian, chief economic adviser at Allianz, said “there are things that involve a change in behavior.”
“I agree that it's a ‘high class problem’,” he said about Klain’s position on economic issues including inflation and supply chain delays.
“It is not transitory. Part of it is transitory… but there are things that involve change in behavior.”
“There's a lot of purchasing power in the economy,” he said. “It is the supply-side and everything shortage, if you like, that is the problem. Hopefully that can be addressed. Part of this inflation is good inflation. Part is that [transitory] inflation.”
El-Erian said the infrastructure debate in Congress is getting “stuck” because “the argument is all on the demand-side.”
“Fiscal infrastructure is something that everyone can agree on,” he said. “The more we can improve on infrastructure, the more we can supply goods to the marketplace, and the more inflationary pressures come down. I don't [think] there's much disagreement on that element of the package.”
“Where there is disagreement is on human infrastructure which is enhancing human productivity in order to bring more people into the labor force,” he continued. “We have a problem of labor shortages. If it is targeted well in the supply side that could help with growth and it could help with inflation. Right now, the argument is all on the demand-side and that is why this thing is getting stuck.”
The expert also said it’s not entirely clear what’s keeping the labor force from returning after the expiration of COVID-19 benefits from the government.
“What is clear is that the expiration of the benefits has not led to more people coming into the labor force,” he said. “What's not clear is what is keeping labor from coming in.”
He said one issue is “the greater bargaining power” of workers, and that “we should expect … strikes going forward.”
“Why is that happening? Part is the excess demand from people looking to hire quickly but part of that is changed behaviors,” he said. “Now we can negotiate higher wages without losing [a] job. We feel that we can go from one job to another and get sign-up bonuses. And some people don't want to come back into the labor force. They've changed their views about work-life balance.”
El-Erian said the supply chain crisis is due in part from “underinvestment” in port facilities.
“The more we worry about shortages, the more we bring forward demand,” he argued. “Another [part] is COVID related. When your computer turns off and comes back on, it does not come on perfectly. It takes time for different things to start working again… That's what's happening with the global economy. When it started functioning again, it did not start simultaneously. Then you had … shutdown ports around the world. And …underinvestment. For a long time, we've under invested in our port facilities and that is now coming and biting us.”
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