In this issue we look back over the past 20 years in the worlds emerging markets. During those two decades the economic world has undergone a remarkable transformation. No longer simply sources of cheap manufacturing for the West, the so-called developing nations now harbor some of the worlds most coveted consumer markets. Nurtured and sustained by the seemingly unstoppable forces of globalization, many emerging markets have become economic and political titans in their own right.
The past 20 years have by no means been plain sailing, of course. Many countries in the developing world have suffered setbacks along the way. By and large, though, the countries that suffered the greatest shocksincluding Turkey, Thailand, Russia, Argentina, Brazil and Mexicohave not only recovered; they have grown stronger, more dynamic and more stable than before. Some of these countries are now so advanced economically and socially that they can realistically claim to have joined the ranks of the worlds developed economies: They have, as it turns out, emerged. For those nations that are still clearly in the emerging bracket, these success stories provide both hope and inspiration.
Further evidence of the coming of age of the emerging markets can be found in the fact that some of the biggest and most influential investors in emerging markets are from other emerging markets. US and other Western investors have been fighting shy of pouring money into Latin America, for example, deterred by the sharp rise in the region of what some are calling resource nationalism. Asian investors, unfettered by such concerns, are piling in, led by China, Japan and South Korea. In Africa, too, investment from China is rapidly eclipsing that coming from Western corporations, partly because China seems to have no qualms about investing in countries that have despotic or tyrannical regimes.
Perhaps the most remarkable development of all, though, is the sharp rise in the global influence wielded by these burgeoning economic powerhouses. The central banks of several of the larger emerging markets have built up such huge foreign exchange reserves that they are now in a position to manipulate not just their own currencys strength but the value of the dollarand, by inference, that of the euro and other major currencies. This is a remarkable transformation and one that is making policymakers in the so-called developed world increasingly uncomfortable.
It will take a while for the world to adjust to this changing balance, but, in the end, the transfer of economic and political power from the hands of a few to the hands of many can only be a good thing. Ultimately, it should lead to a fairer, more stable and prosperous world for everyone.
Until next month,