Emerging markets teach developed ones grownup ways

By Edward Hadas
July 8, 2010

The poor are teaching the rich a lesson. It used to be that the world’s less developed nations were the problem children — giving plutocrats too much power while running irresponsibly large budget deficits and failing to overcome deep internal imbalances. Now, rich countries look like the new poor.

Start with trade. China and middle income commodity exporters have most of the biggest trade surpluses while the world’s richest large economy, the United States, still runs the biggest deficit. With surpluses come financial clout and funds for investment. Deficits lead to dependency and, eventually, industrial weakness.

Fiscal deficits are too high everywhere, but after the financial crisis of 2008 the rich are in far worse shape than the poor. Deficits in developed economies like America and Britain have jumped by 7.7 percent of GDP, close to twice the 4.2 percent rise in middle-income countries, according to the International Monetary Fund.

And rich-country governments are finding it hard to summon the political will to reduce those outsized deficits. Leaders know they have a problem but can’t bring their people — and sometimes their political allies — along with them. Barack Obama and Nicolas Sarkozy are among them. That’s a big contrast to the strong and popular governments in countries such as Brazil.

Finally, rich countries seem unable to agree what they stand for. America’s culture wars define its politics. There are sharp disputes about the future of the European Union and the euro. Japan is forever searching for its role in the world. Poor countries have their fights, but much less doubt in their overarching goal of getting richer.

Sure, there are exceptions. Many poor countries, such as Thailand, are struggling. And some rich ones, including Germany, are doing relatively well despite the economic turmoil surrounding them. But the global balance does seem to have shifted.

This shouldn’t be too surprising. People in developing countries want more wealth, and are learning from those who amassed it before them. As for the cultural malaise of the already rich, almost two millennia after the Roman Empire started its decline, the jury is out on what exactly went wrong.

Comments

Sir,

Thank you so much for this thought provoking article. I am an American expat., living and teaching in South Korea. Almost daily, I am stumped with the vast differences between our two cultures. And without getting into them all right here, (as if you’re not aware of them), it is incredibly difficult to attempt to explain to their inquisitive minds how and why the U.S. is so “seemingly” wealthy – especially when I know the U.S. is a house of cards and perhaps on the verge of collapse. Of course there are many dynamics we cannot cover here, but the fact is that the U.S. has been hit hard by the global recession. The fact is that if the U.S. were a company, it would have been bankrupt and out of business long ago!

Posted by CKW27 | Report as abusive
 

More media rationalizing… Shifts in geopolitical power are the rule rather than the exception in history, and usually their causes can hardly be “explained”!

Posted by Mario09 | Report as abusive
 

As an American expat living in Thailand I can tell you that the poor nations learned their lessons well from the rich ones. Only trouble is the excessive greed in the developing nations will cause them to reach the rich nations current status much quicker. It took years for the rot in American to reach the point it is at. Greed will drive the local economy here to that point in under ten years.

Posted by Sonnyjc9 | Report as abusive
 

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