The adverse consequences were not limited to overly unbalanced analysis and partial economic management responses. Consistently disappointing economic conditions also have fueled political polarization, which, in turn, has complicated economic management.
It's no wonder that advanced economies have experienced the kind of events that are unfamiliar (and in some cases, deemed improbable or even unthinkable), but are quite common in the emerging world. The most striking of these include:
The stubbornly persistent new normal of unusually sluggish economic growth despite huge monetary policy stimulus. High levels of underemployment and/or unemployment. The risk that an alarming number of young people could go from being unemployed to joining the ranks of the unemployable. The euro zone’s debt crisis.
This is why officials from advanced economies would be well-advised to be more open to the lessons from the developing world. Indeed, last week provided yet more illustrations of the unusually fluid structural conditions in the West and, therefore, the need for greater intellectual and analytical curiosity.
The shock Brexit vote brought volatility to the pound, unanchored by fluidity in both the current and capital account of the U.K.'s balance of payments. It suddenly introduced structural complexity to the U.K.'s commercial relationships with its most important trading partners, which, combined, also constitute the largest economic area in the world. Simultaneously, a central attraction for companies to set up shop in the U.K. -- the ability to serve the whole EU -- also is in play. This raises questions about the future of foreign interests implanted in Britain and, more immediately, will slow inflows of direct investment and portfolio capital.
This kind of uncertainty, which is more common to developing than advanced economies, can severely destabilize the currency. What's more, these developments are taking place as the Bank of England -- unusually -- lacks feasible and effective interest-rate measures to stabilize its foreign exchange markets.
The U.S. also finds itself in an unusual situation, though it is a lot less extreme.
As a large country, the U.S. traditionally has had control over both its economic and financial destinies. Although it still can determine its economic future, it has less control when it comes to the yield curve on its Treasuries, which has been exceptionally subject to influences from abroad.
The consequence is that neither the level of U.S. interest rates nor the relative valuations of various Treasury bond maturities is now closely linked to domestic economic fundamentals. Instead, rates and relative prices are more indicative of the economic and policy prospects in Europe (and, to a lesser extent, Japan). That means the Fed must spend an unusual amount of time assessing external developments and the way they affect domestic variables.
None of these developments is likely to go away soon. In fact, we are likely to see an even longer list of improbables and unthinkables come to pass in the advanced world. And Western policy makers will have an even more urgent need to supplement their conventional economic understanding with insights from the experiences of the developing world.
Mohamed El-Erian is chief economic advisor at Allianz SE.