What did we do that was wrong?
El-Erian: It’s what we didn’t do. We made three basic mistakes. In the run-up to the global financial crisis, we overinvested in the financial services sector as an engine of growth. We wrongly believed as a society that finance was the next level of capitalism. You can see this in the way that countries were competing to become the global financial center; even smaller countries such as Switzerland, Ireland, Iceland and Dubai opted to grow their financial system to sizes bigger than their GDP. And regulators believed that they could reduce their oversight and regulation of the financial sector because, after all, it was the next level of sophisticated capitalism. So we stopped investing in industries that create growth, and we excessively embraced the financial sector. In fact, we changed its name from financial services to just “finance” – again the notion that it is a stand-alone. So, that was the first mistake.
