Uprising E-Book

George Magnus

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 493

Veröffentlichungsjahr: 2010

Beschreibung

Emerging markets are big news. But after the financial crisis, what does the future really hold for them? And what does this future mean for global business?

George Magnus, one of the world's most respected economic analysts, is your guide through the challenges and opportunities for emerging markets and those doing business in them.

This magisterial book looks in detail at China and India – the big players – and also less hyped but crucial markets, including Eastern European countries and Turkey. Magnus takes in his sweep everything from commodity prices to climate change, and from comparative advantage to demographic to provide a compelling analysis of what the future might look like – not just for emerging markets, but for investors, businesses and economies everywhere.

Uprising is a must-read for anyone who cares about the future of the global economy.

Leseprobe

Table of Contents

Title Page

Copyright Page

Dedication

Acknowledgments

Introduction

The crisis as a catalyst

BRICs in the wall of the future

Chapter One - Back to the Future?

Once upon a time

A change of heart

People power

The lie of the land

Standing on the shoulders of giants

Innovation, imagination and institutions

That was then

It’s a good cat so long as it catches mice

Chapter Two - Who Are Those Guys?

From Third World to emerging markets

The globalisation of emerging markets

PPP beauty contest

Playing catch-up

Chapter Three - To Armageddon and Back

How the subprime minnow became a monster

A ‘Minsky Moment’

The search for villains

A short history of busts

The global savings glut

Back from Armageddon

Chapter Four - Atomic Clouds of Footloose Funds

The $11 trillion elephant in the room

Twentieth-century imbalances

The new imbalances

The end of the renminbi regime

So what is to be done?

Chapter Five - After the Crisis: Catharsis or Chaos?

Euphoria in context

Will the Sun also set on China?

Catch-up constraints

India’s opportunity

The rebalancing of China

Taming the investment boom

The consumer and the countryside

Planning for the next five years

Chapter Six - Older and Wiser: Demographic and Technological Challenges

Why demographics matter

Malthusian flashpoints

Getting old before getting rich

Ageing in China

Ageing in India

Top dogs in technology

Technical progress versus technical prowess

The race for technological leadership

Will China eat our technological lunch?

Chapter Seven - The Climate Change Catch-22

Damned if you grow, damned if you don’t

Climate debate

Essence of climate change science

Bare necessities for emerging markets

Water

Breaking the link between growth and emissions

Dash for growth and be damned

Chapter Eight - Who Will Inherit the Earth?

Contours of power

Rule of law and enduring economic power

America RIP?

Current bones of contention

Leading to a new world order?

Conclusions

Notes

Index

This edition first published 2010

© 2010 George Magnus

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Library of Congress Cataloging-in-Publication Data

Magnus, George.

Uprising : will emerging markets shape or shake the world economy / George Magnus.

p. cm.

ISBN 978-0-470-66082-9 (hardback)

1. Economic development-Developing countries. 2. Investments, Foreign- Developing countries. 3. Developing countries-Economic policy. 4. Developing countries-Foreign economic relations. I. Title.

HC59.7.M244 2011

337.09172’4-dc22

2010034792

A catalogue record for this book is available from the British Library.

Set in 10.5 on 15 pt Monotype Janson by Toppan Best-set Premedia Limited

To My Mother

Acknowledgments

The financial crisis that began in 2007 has been shocking in every sense of the word, and the consequences will be felt for many years to come. The enormity of this phenomenon dawned on me in March 2007, and I have explored and examined its dynamics at length for UBS clients and in the media ever since. The book about it I intended to write, however, barely got off the ground when I was persuaded to think about a different kind of crisis book, one that looked at the implications of the crisis for emerging markets.

For this, I have to thank Ellen Hallsworth, Commissioning Editor with John Wiley & Sons in the UK, who planted the idea and then offered me a continuous and regular menu of suggestions and corrections that were invaluable in helping me to develop the structure and the narrative.

My purpose is to re-examine the claims made and prospects for major emerging markets in the wake of the crisis. There is, inevitably, a substantial focus on China. But because the global economic system we have grown up with these last 25 years is in flux, we have to put to one side the linear, spreadsheet-type projections which still abound, and consider the strengths and weaknesses of emerging markets anew, seen through a global, as well as a local, lens. I have had the fortune to be able to look to and consult with several people whose expertise and knowledge have filled many gaps.

I’d like to thank several colleagues at UBS Investment Bank: Terry Keeley, formerly Global Head of Sovereign Relations, whose sharp mind is now considering a new challenge outside UBS; Jonathan Anderson, Head of Emerging Markets Economics, whose prolific work and ideas are an inspiration; Paul Donovan, Senior Global Economist, whose irreverent view about economic research and conventional economic thinking is always refreshing; and Geoffrey Yu, foreign exchange strategist, whose youthful perspective and knowledge are a match for any more seasoned analyst.

Julie Hudson, Head of Socially Responsible Investment Research at UBS, gets very special thanks for contributing almost everything I now know about the challenge that climate change poses to emerging markets and their policies. She went to considerable lengths while pursuing a literary venture of her own.

I’d also like to thank Mark Steinert, Global Head of Research, and Larry Hatheway, Chief Economist, who supported my previous book on demographics, for their encore with this book. UBS takes its research product very seriously, and they have again allowed me to combine my research and client work with this project.

Two emerging market gurus took the time to digest and comment upon my work, offering me their particular insights into China, Asia and emerging markets in general. Guy de Jonquieres, formerly Asia editor of the Financial Times, and now Senior Fellow at the European Centre for International Political Economy, and Simon Ogus, a former colleague at UBS in Hong Kong, now running his own consulting firm, DSG Asia, gave me a lot of food for thought, and the benefits of their rich experience.

And since one of my recurring ideas through the book is that, over time, the quality of institutions matters more than, say, Gross Domestic Product or any cyclical phenomenon, I am grateful to Ed Gottesmann of Gottesmann Jones and Partners LLP, and David Ereira, Partner at Linklaters. These wise lawyers not only tried to straighten out my thinking about the role played by political and legal institutions in economic development, but also inadvertently stimulated me to ponder generally on the respective roles of lawyers and economists in trying to fix the world.

To all of these people I owe a debt of gratitude in helping me reflect on and refine the content of this book, and it remains only to say that I take full responsibility for errors and omissions.

They all made up different parts of an informal team, but as authors are apt to insist invariably and correctly, that team is never complete without spouses and partners. In my case, then, Lesley, my wife, had to put up with my disappearances for extended periods chained to the laptop in my office at home, my impromptu outbursts on often esoteric economic issues at moments that could have been better-timed, and with my sometimes single-minded focus on the book that caused me to hear, but not listen to what was being planned at home. But she also read my drafts, asked me poignant questions, and was, as ever, my rock, love and close companion.

Introduction

Not everything that counts can be counted, and not everything that can be counted, counts.

(attributed to Albert Einstein)

Tens of thousands of people poured spontaneously into Tiananmen Square on a July night in 2001 to celebrate the decision by the International Olympic Committee to award China the Olympic games in 2008. Former Chinese premier Li Peng watched with pride as workers and students danced the conga and sang patriotic songs. Ironically, those same songs had filled the square eleven years earlier when the same Li Peng declared martial law and sent the tanks in to crush the pro-democracy protests. This was 2001, however, and although China had already been making enormous economic progress for a decade or so, it was in the process of moving into top gear.

In 2008, then, the Olympic games provided the backdrop for the much-heralded demonstration of China’s modern image and self-confidence, which took place with great fanfare and to wide acclaim. The games symbolised China’s economic success, coincided with the fifth consecutive year of double-digit economic growth and were the perfect hors d’oeuvre for the 60th anniversary of the founding of the Peoples’ Republic in 2009.

Unfortunately, the games were sandwiched between two earthquakes, both of which served as a reminder that awesome economic achievement and serious political shortcomings were on two sides of the same coin. A geological earthquake that killed about 70,000 people struck in May in the province of Sichuan in central China. In the aftermath, there were allegations about the lax enforcement of building codes and political corruption. The decision to build a reservoir behind a major dam, which burst just a mile from the earthquake’s fault line, exemplified a system in which government takes place without challenge or openness to debate and dissent. These issues are hardly unique to China, but they form part of the mosaic of political and institutional weaknesses that I will argue compromise the country’s capacity to achieve sustained, linear and rapid economic growth as widely anticipated.

In October, a financial earthquake struck, following the collapse of the US investment bank, Lehman Brothers. This brought the world economy to the brink of an economic Armageddon, unrivalled since the Great Depression of the 1930s. Although this was first and foremost a Western crisis, it had a significant impact on China and, indeed, on all emerging markets. The idea that emerging markets would ‘decouple’, or remain aloof from the economic contraction in richer economies, proved wide of the mark.

In China, the authorities misread the signals in the form of the rising number of bankruptcies of small and medium-size enterprises, a fall in exports for the first time in seven years, and sharp declines in the output of electricity, automobiles and steel.

Yet China’s subsequent response was impressive. In November, it announced an economic stimulus programme of 4 trillion yuan ($590 billion), equivalent to 13% of GDP. With a strong emphasis on infrastructure and property projects, it was intended to turn around the slowdown in economic growth, which slipped below 5% in the year to the final quarter of 2008. It also encouraged state banks to make loans on a scale that had barely been rivalled before. China set an example to many other emerging economies and, by the spring of 2009, most emerging countries in Asia and Latin America had started to respond in a strong, positive way. A potential economic crisis had been averted successfully, but perhaps only by a whisker.