Opinion

The Edgy Optimist

In emerging countries, focus on progress — not market volatility

Zachary Karabell
Feb 4, 2014 20:43 UTC

The start of the year has not been an easy one for financial markets. The Federal Reserve is continuing its policy of trimming its bond purchases by $10 billion a month, and the immediate result has been a sharp pullback of the currencies, and to some degree equities, of countries such as Indonesia, Turkey, India, South Africa and Argentina. The reason? According to traders, commentators, and even the head of Brazil’s central bank, Fed policy will trigger interest rate rises around the world, staunching the flow of easy money that has purportedly fueled global growth — and leading to struggles everywhere.

That thesis is hardly new. It was widely circulated last summer, when the Fed first hinted that it might begin to wind down its more aggressive measures to stimulate economic activity, which it introduced after 2009. In this reading, the boom times of many countries around the world has had nothing to do with the change in economic fortunes, or skilled leadership, or shifting global sands. It was and is simply a derivative of U.S. policies.

This view has wide play, and goes nearly unchallenged. That does not make it correct.

Indeed, it is likely wrong for at least two major reasons: it forgets that financial markets are not perfect proxies for real world economies, and it misses the fundamental transformation in countries around the world that has taken place over the past few decades and is about to accelerate this year.

As I wrote in a column last August, a U.S.-centric view extends well back into the 20th century, and the only wrinkle today is that China has now entered the mix. Low and behold, China, too, has recently seen some slowing of its growth, largely because of the determination of the Chinese government to shift the mix of its economic growth from state-led infrastructure and exports to domestic consumption. That transition will, inevitably, result in diminishing demand for commodities and raw materials, and that demand had also been a key factor in the strength of other economies, including many of the ones above.

When did America get so pessimistic?

Zachary Karabell
Nov 15, 2012 15:46 UTC

Barely had the counting ceased in last week’s presidential election when the news took a somber turn. Two of the next day’s headlines read “Back to Work, Looming Fiscal Crisis Greets Obama” and my favorite, “America has Sown the Seeds of Its Own Demise.” Politicians either celebrated or decried the results, but regardless of party affiliation most warned of formidable challenges and a perilous future.

How did it come to pass that even the resolution of a contested election brings almost zero relief from the relentless focus on problems and threats? How did a country that for much of its history exhibited a (sometimes naive) willingness to ignore obstacles and plunge forward become a society that struggles to turn its gaze away from the dangers that loom just ahead? In short, how did the United States become so pessimistic?

Some of it surely has to do with how the past decade has unfolded.  Without question, this has been a challenging time for America and much of the Western world. We can all recite the crises, disasters and failures: Y2K, the bursting of the Nasdaq stock market bubble in 2001, 9/11, Iraq, Afghanistan, Enron, WorldCom, the bursting of the housing bubble, the Wall Street implosion of 2008, the euro zone’s troubles, chronically high unemployment, anemic growth, the continued emergence of China as a global economic force. I could go on.

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