Opinion
Emerging-Market Risk and Reward
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While market-oriented reforms are necessary, government has a key role to play in providing a social safety net for the poor; maintaining high-quality public services; investing in education, training, health care, infrastructure, and innovation; enforcing competition policies that constrain the power of economic and financial oligopolies; and ensuring genuine equality of opportunity for all.
By Nouriel Roubini
One definition of an emerging-market economy is that its political risks are higher, and its policy credibility lower, than in advanced economies. After the financial crisis, when emerging-market economies continued to grow robustly, that definition seemed obsolete; now, with the recent turbulence in emerging economies driven in part by weaker economic-policy credibility and growing political uncertainty, it seems as relevant as ever.
Consider the so-called Fragile Five: India, Indonesia, Turkey, Brazil, and South Africa. All have in common not only economic and policy weaknesses (twin fiscal and current-account deficits, slowing growth and rising inflation, sluggish structural reforms), but also presidential or parliamentary elections this year. Many other emerging economies – Ukraine, Argentina, Venezuela, Russia, Hungary, Thailand, and Nigeria – also face significant political and/or social uncertainties and civil unrest.
And that list does not include the perilously unstable Middle East, where the Arab Spring in Libya and Egypt has become a winter of seething discontent; civil war rages in Syria and smolders in Yemen; and Iraq, Iran, Afghanistan, and Pakistan form a contiguous arc of volatility. Nor does it include Asia’s geopolitical risks arising from the territorial disputes between China and many of its neighbors, including Japan, the Philippines, South Korea, and Vietnam.
Read full article as published in Project Syndicate
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Nouriel Roubini is a Professor of Economics and International Business and the Robert Stansky Research Faculty Fellow.
Consider the so-called Fragile Five: India, Indonesia, Turkey, Brazil, and South Africa. All have in common not only economic and policy weaknesses (twin fiscal and current-account deficits, slowing growth and rising inflation, sluggish structural reforms), but also presidential or parliamentary elections this year. Many other emerging economies – Ukraine, Argentina, Venezuela, Russia, Hungary, Thailand, and Nigeria – also face significant political and/or social uncertainties and civil unrest.
And that list does not include the perilously unstable Middle East, where the Arab Spring in Libya and Egypt has become a winter of seething discontent; civil war rages in Syria and smolders in Yemen; and Iraq, Iran, Afghanistan, and Pakistan form a contiguous arc of volatility. Nor does it include Asia’s geopolitical risks arising from the territorial disputes between China and many of its neighbors, including Japan, the Philippines, South Korea, and Vietnam.
Read full article as published in Project Syndicate
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Nouriel Roubini is a Professor of Economics and International Business and the Robert Stansky Research Faculty Fellow.