News and Analysis: 1-12 Aug 11 | EmergingFrontierMarkets.com

Based in: Manila, Philippines

Posted on Fri, 12 Aug 11:

Dani Rodrik: The manufacturing imperative, Proj Syndicate, 11 Aug 11 [courtesy Mmegi/ Botswana]:
We may live in a post-industrial age, in which info technologies, biotech, and high-value services have become drivers of econ growth. High-tech services demand specialized skills and create few jobs, so their contribution to aggregate employment is bound to remain limited. For developing nations, the manufacturing imperative is nothing less than vital. Industrialization was the driving force of rapid growth in southern Europe during the '50s and '60s, and in East and SE Asia since the '60s, says Harvard prof

I Azis and C Park: Financial integration, contagion in Asia, Jakarta Post, 9 Aug 11 [courtesy Asian Dev't Bank]:
Nervous sell-offs in Asia’s equity markets in response to debt problems in the US and euro zone underscore the region's growing links to financial events on the other side of the world. But with increased integration comes the increased threat of contagion. It is therefore not only in Asia's interest to promote global financial stability -- increasingly, its econ fate depends on it. So how can emerging Asia's policy makers contribute to financial stability as the region's markets develop?, ask ADB reg'l econ integration ofc head and principal economist

Brazil jumps to 1st place in ranking of top developing economies for global retail expansion, A T Kearney, June '11:
Brazil rose to 1st place from no.5 last year in the recent annual Global Retail Development Index. The GRDI helps retailers prioritize their global dev't strategies by ranking the retail expansion attractiveness of emerging markets based on 25 variables. Nos.2-5 are Uruguay, Chile, India and Kuwait, while China is no.6. With the study's 10th anniversary, the key learning from the last decade is that global retail expansion is a portfolio game. Retailers must have an optimal mix of nations, formats and operating models to succeed (Shifting global biz environ reshuffles deck for global offshoring destinations, Feb '11 | Global Services Location Index)

Posted on Wed, 10 Aug 11:

J Ponticelli and H Voth: Austerity and anarchy - Unrest and budget cuts over the long run, Vox EU, 10 Aug 11:
This week has seen nights of rioting in London and other UK cities. In Spain, demonstrators known as 'indignados' recently occupied town squares and demanded a full-scale change of the political system. And Greece continues to see violent clashes between the police and demonstrators protesting vs round after round of budget cuts. However, all of these are still quite mild - nowhere near the property damage and human cost of, say, the '05 violence in France. What should gov'ts expect if the scale of cutbacks increases? What drives such outbursts of violence vs property and people, leading to buildings and vehicles burned, confidence in civic institutions and the police severely dented, and ultimately lives lost?, ask Univ Pompeu Fabra (Spain) PhD cand and econ historian/ Ctr Econ Pol Res (UK) res fellow

Kenneth Rogoff: The bullets yet to be fired to stop the crisis, FT, 8 Aug 11 [courtesy Harvard]:
Four years into the financial crisis, it is becoming increasingly clear that the biggest deficit is not in credit, but credibility. Markets can adjust to a downgrade of global growth, but they cannot cope with a spiraling loss of confidence in leadership and a growing sense that policy makers are disconnected from reality. If they can at least get the diagnosis right, it would be a major step on the road to recovery. After a long series of half-steps and mis-steps, their options are narrowing, but they are not out of bullets. What then needs to be done to move away from the precipice?, asks Harvard prof/ co-author, with C Reinhart, of This Time Is Different (2009) (Market turmoil fuels gold rush, Nat'l Public Radio, 8 Aug)

Book value: The geniuses who crafted capitalism, Fortune, 5 Aug 11:
In A Beautiful Mind (1998) Sylvia Nasar told, with a novelist's eye for narrative and detail, the tragic tale of a solitary genius, Nobel Laureate '94 / mathematician John Nash. Her reward: critical acclaim and a bestseller that later became a hit movie. With her 2nd book Grand Pursuit: The story of economic genius, she shifts from micro to macro. However, this is not a traditional history of econ thought or a conventional string of bios of great men. Rather it is the story of the evolution of a radical, planet-reshaping idea - "the idea that humanity could turn tables on econ necessity - mastering rather than being enslaved by material circumstances." If only Econ 101 had been this interesting (Publishers Weekly book rev | Making economics exciting)

Posted on Mon, 8 Aug 11:

A Q&A on S&P's downgrade of US debt, AP, 6 Aug 11 [courtesy Times Union]:
What does a downgrade mean? Does it mean US interest rates will go up? Wasn't this what the debt limit agreement in Congress was supposed to prevent? What did the other ratings agencies do? How many times has the US been downgraded below AAA? How has a downgrade affected other countries? What other countries have AAA ratings from S&P? How long might it take for the US to regain a AAA rating? (S&P sovereign ratings list | The last of the AAA countries, 24/7 Wall St) [courtesy Biz Insider]

Joseph Stiglitz: A contagion of bad ideas, Project Syndicate, 6 Aug 11 [courtesy Reporter/ Ethiopia]:
There has been much concern about financial contagion between Europe and America. After all, America's financial mismanagement played an important role in triggering Europe's problems, and financial turmoil in Europe would not be good for the US. But the real problem stems from another form of contagion: bad ideas move easily across borders, and misguided econ notions on both sides of the Atlantic have been reinforcing each other. The same will be true of the stagnation that those policies bring, says Nobel Laureate '01/ Columbia U prof

The post-Western world, by K Rapoza, Weblog at Forbes, 6 Aug 11:
The econ crisis in advanced economies is accelerating the timeline in which big emerging nations like China rule the global economy. Instead of the market focusing on American shopping habits, they'll be focused on consumers in Shanghai and Mumbai. Unless the US can recover the 8.5 mln jobs it lost in the recession, and unless incomes begin rising, the US will be knocked off its pedestal within a generation. If the 19th century belonged to Europe and the 20th century belonged to the US, the 21st century will likely belong to another region. The post-Western world is coming faster than we think (The Special Drawing Rights [SDR]'s potential as an int'l reserve asset, Economic Premise, May '11) [PDF]

Posted on Fri, 5 Aug 11:

EU leaders to hold crisis talks, ECB offers only, Reuters, 5 Aug 11 [auto-updating link]:
The leaders of Germany, France and Spain will hold crisis talks about the spiraling euro zone debt crisis on Fri after China and Japan called for global policy cooperation following a market rout. European markets hit a 14-month low in early trading, following sharp falls in Asia and on Wall St. The European Central Bank offered only limited help and told Italy and Spain - now at the eye of the storm - to take tougher austerity measures before it will step in to buy their bonds. The comments from China and Japan, America's 2 biggest foreign creditors, highlighted fear that the euro zone debt crisis could spin out of control and the US economy may go into reverse

Martin Feldstein: A falling dollar will mean a faster US recovery, Wall St Jl, 1 Aug 11 [courtesy Nat'l Bur Econ Res]:
Despite the euro zone financial crisis, the dollar has fallen 15% vs the euro during the past 12 months and more than 10% in inflation-adjusted terms vs all currencies. Looking ahead, fundamental market forces are likely to drive the dollar down further over at least the next few years relative to a broad basket of other currencies. If that happens, it may be the only major econ change that can accelerate the anemic pace of recovery and prevent a new econ downturn, says fmr US pres.'s Council Econ Advisers chair/ Harvard prof

P Boone and S Johnson: Europe on the brink - Three scenarios for future of Euro zone, Peterson Inst, 21 July 11:
Europe's efforts to stabilize its finances are failing and the euro zone needs to prepare for widespread restructuring of sovereign and bank debt. The euro zone financial system has relied on a policy of protecting creditors from default and has thus spread pervasive moral hazard - a presumption by creditors that they will not take losses on their loans to Greece and other ailing nations. We argue that this situation is no longer tenable and examine 3 possible scenarios for what might happen in coming months as the euro zone debt crisis evolves, say Inst senior fellow and fmr IMF chief economist/ MIT prof

Posted on Wed, 3 Aug 11:

How do we 'get off this path of deficits as far as the eye can see?', Stanford Report, 2 Aug 11:
Q&A with John Shoven, Stanford Inst Econ Policy Res dir. For most of us, our minds go numb when people start speaking in trillions of dollars. In practical terms, how does this debt load affect our lives and our children's lives? In brief, can you describe the new deal that's been cut in Congress? What will it do? Can you summarize both sides of the discussion, how each sees the issues at stake? Some say the president 'surrendered' – did he have a choice?

One Family: Jeffrey Sachs--Famine and hope in the Horn of Africa, Proj Syndicate, 1 Aug 11 [courtesy Sun.'s Zaman/ Turkey]:
Yet again, famine stalks the Horn of Africa. More than 10 mln people are fighting for survival, mainly in pastoralist communities in the extremely arid regions of Somalia, Ethiopia, and northern Kenya. Every day brings news of more deaths and massive inflows of starving people into refugee camps in Kenya, across the border from Somalia. The immediate cause of this disaster is clear: the rains have failed for 2 years running in the dry regions of E Africa, says Columbia U Earth Inst dir (Forecasters 'warned of Horn of Africa drought' last year, SciDev, 14 July)

C-suite/Boardroom: N Bloom and R Homkes--Can US management stay ahead of China, India?, CSMonitor, 12 July 11:
Two decades ago, Japan was the world economy's new kid on the block. That econ miracle was built on strong mgmt. Japan developed and perfected the lean mgmt system, powering its corporations toward global supremacy. Today's new kids on the block, China and India, are powered by something quite different, say co-authors of World Mgmt Survey/ Stanford U prof and London Sch Econ's Mgmt Project dir (Why American mgmt rules the world, Weblog at Harvard Bus. Rev, June '11)

Posted on Mon, 1 Aug 11:

Highlights of US budget and debt limit pact, AP, 1 Aug 11 [courtesy Atlanta Journal-Constitution]:
Pres Obama and top congressional leaders have reached an agreement on a plan to pair an increase in the nation's $14.3 trillion borrowing limit with spending cuts and to create a special committee to recommend bigger savings for a vote later this year. The pact cuts more than $900 bln over 10 years from the budgets of Cabinet agencies. It caps spending passed by Congress for agency budgets at $1.043 trillion in '12, $7 bln below '11 levels (Bipartisan deal, bipartisan opposition) [courtesy Denver Post]

Push continues toward enhanced global financial safety net, IMF Survey Mag, 25 July 11:
New research outlines options to address crisis risks from the increasingly complex financial and econ links between nations and markets. The work is part of a broader effort to make the int'l monetary system less prone to crisis. Based on a new indicator that identifies systemic crises by synthesizing financial and econ stress across nations, the analysis identifies 4 systemic crises since '80: the '82 Latin American debt crisis, the 1992/93 European Exchange Rate Mechanism crisis, the Asian/ Russian/ Long Term Capital Mgmt combined crises of the late '90s, and the '08 global financial crisis

Otaviano Canuto: Navigating the road to riches, Proj Syndicate, 15 July 11 [courtesy Malta Independent]:
A switchover of global growth engines is taking place. Developing economies as a whole are now the source of more than half of global GDP growth. As a result, concern has naturally shifted to a new question: are there risks that some or many of these developing nations could fall prey to the 'middle-income trap'? The so-called trap seems to have captured many developing nations: they succeeded in evolving from low per capita income levels, but then appeared to stall, losing momentum along the route toward the higher income levels of advanced economies, says World Bank vice-pres for poverty reduction/ econ mgmt (Climbing a tall ladder - Tech learning and innovation, Economic Premise, July '10 [PDF])

EmergingFrontierMarkets.com

emerging and frontier markets:

the unofficial field guide