Via Mohamed El-Erian for Bloomberg
The blunt remarks by Jamie Dimon, the highly successful chief executive of JPMorgan Chase, during a conference call on July 14, have triggered a wide range of reactions, from supportive to accusations that he is anti-patriotic:
It’s almost an embarrassment be an American citizen traveling around the world and listening to the stupid shit we have to deal with in this country and at one point we all have to get our act together.
Put in a proper context, the comments speak to four consequential realities in the U.S. and global economies:
- Dimon’s main worry, which is rightly shared by many in this country, is that by unnecessarily increasing contextual uncertainty and delaying the implementation of sensible economic policies, political gridlock in Washington has for years undermined growth, made it less inclusive, and denied many Americans the higher level of prosperity that is both desirable and feasible.
- Dimon was correct in observing during the call that, despite the “dysfunction” in Washington, the U.S. economy has still managed to deliver annual growth in the 1.5 percent to 2 percent range — an outcome that illustrates the resilience of the private sector. Yet the longer this low growth equilibrium persists, the greater the downward pressure on the country’s potential and its future prosperity.
- Given the role and importance of the U.S. in an interconnected global economy, much of the rest of the world — and especially America’s friends and allies — has gone from looking at this situation with curiosity and bemusement to confusion and concern. For decades, America’s traditional values, institutions and entrepreneurship have been the source of inspiration for efforts to improve the well-being of many people around the world. And America remains a very important growth locomotive for the global economy, and its most important anchor of financial stability.
- American credibility and leadership still form the most critical elements for effective global policy coordination. Without them, the global economy will be subject to the uncertainties and challenges that come with greater fragmentation pressures, including the redefinition of regional economic orders that will be difficult to add up well at the international level.
It is one thing for foreign business and government leaders to express concern about the damage of U.S. political dysfunction. It is quite another for such comments to come from one of the country’s most influential and respected CEOs. In doing so, Dimon rang an alarm bell about both foregone opportunities at home and eroding influence internationally.
The timing of Dimon’s remarks also was important.
Delays in formulating and passing pro-growth legislation (such as tax reform and infrastructure investments), together with the diminishing effectiveness of Federal Reserve policies in continuing to buy time for the economy, expose the U.S. to a higher risk of a downward drift. The low level of global policy coordination, as illustrated most recently by the outcome of the G-20 meeting in Germany, would make the potential economic, political and social consequences of such a move even more disturbing were it to occur.
Rather than dismiss Dimon’s remarks as unpatriotic and the product of an unfortunate outburst, the nation would be best served if they were to provide a wake-up call for Washington, which remains divided and distracted, and continues to fall short in stepping up to its important economic governance responsibilities.