A picture of ‘emerging markets’ at an art gallery
So what do you say when you bump into a noted economist in an art gallery? In my case this week, I reflexively sought to camouflage my innumeracy.
I mumbled a few platitudes about the eurozone, mused about trying to analyze the future and grasped for the last economics topic I had read: the agonizing at this week’s Davos summit on the “death of capitalism as we know it.”
In case you missed the debate among the lords of Davos, the world is at a crossroads: Either liberal democratic capitalism will prevail, or the future will be the authoritarian “state-led” model of such “emerging markets” as China.
It’s an interesting debate. But the economist wouldn’t bite. Instead he offered a seeming heresy.
“If you think about it,” he said, “the only real emerging markets left in the world are those countries to Turkey’s immediate east.” By this he meant Iran, Azerbaijan, the republics of Central Asia and Afghanistan.
On the face of it, this is an outrageous statement. Investors of late have flocked to countries from Indonesia to South Africa to Brazil and, of course, Turkey to escape the meager returns in the “developed” countries. In the reverse direction, India has picked off such British icons as Rover while China is the world’s export powerhouse. Hedge funds in these emerging markets mobilized more than $120 billion in capital last year, which, upon reflection, may be the economist’s point. There are at least a dozen ways to define “emerging markets.” Standard & Poor’s has one. The FTSE Group has another. BBVA Research has a system that divides them into “EAGLE” vs. “NEST” countries.”
The term really took hold in the early 1980s as a politically correct way to avoid the phrase “Third World.” While there seems to be a lot of frustration with its outdatedness, nothing new has gained traction. The most intriguing new definition I could find came from Ian Bremmer, founder of the risk consultancy Eurasia Group: “A country where politics matters at least as much as economics.”
But another way to consider these countries is as those which, after the Cold War, emerged from economic ignominy to capture the imagination of the West – and ultimately the West’s investment.
But today, none of these countries “to Turkey’s east” appear on anyone’s emerging list. This region might be compared to the state of the former “emergents” a generation ago. Yes, they have many problems including sectarian unrest, strongman rule and testy neighbors. Sure, we know them as resource economies for their oil and gas, of which most have large amounts.
But Kazakhstan and Turkmenistan have vast areas suitable for expansion of agriculture in a hungry world. Uzbekistan is a major producer of gold. All those in the former Soviet space have universal literacy. Iran, should she get her geopolitical house in order, has a sophisticated and well-educated population. Even poor Afghanistan, should it ever claim a modicum of peace and stability, has mineral reserves calculated to be worth $3 trillion, yet only China has taken heed.
If my economist friend is right, this could be the new economic frontier. Mind you, this is not an idea worthy of Davos – just a quick observation, shared at an art gallery.