Do Emerging Markets Represent the New Frontier for Globalization ?

Ever since the onset of the global economic crisis, there has been much talk about how globalization has reached its nadir and that the concept of an integrated global economy leading to prosperity has been discredited. The reason for this cynicism was that many commentators blamed globalization for causing the global economic crisis and plunging the world into a new Great Depression.

However, not all is lost since the emerging markets or the BRICS (Brazil, Russia, India, China, and South Africa) have more or less weathered the initial hiccups of the crisis though in recent months, they seem to be faltering mainly because of domestic reasons.

The point here is that these economies have used globalization to their advantage instead of being the victims of too much integration like the economies of the west. They managed to do this with some astute planning by insulating themselves largely from the worst effects of the global economic crisis.

The recent troubles with China and India along with Brazil and Russia are mainly due to internal dynamics and the policy responses that the governments have taken is to attract more global capital rather than turning away global capital.

The point here is that these countries want to be the beneficiaries of globalization rather than the victims and it is with this in mind that they are becoming competitive again. For proof of this, we need not look farther than India that has taken a series of bold reform initiatives in recent weeks known as the “Big Bang Friday” measures. Though these measures are not sufficient in totality, they go a long way in addressing some fundamental defects with the economy. Hence, the move to go in for reforms like opening up the retail and the aviation sector to FDI and slashing subsidies.

Hence, it cannot be said that globalization has had its day as is evident from the eagerness shown by these countries to attract global capital. Indeed, one can safely say that we might see a rebalancing of the global economy wherein global capital again finds its way to these BRICS as well to other emerging markets like Vietnam. This is the way forward for globalization and the direction of the emerging world order. Though the previous statement needs qualifiers since these economies are not completely out of the woods, one can still speculate about the drivers of globalization coming from the East in the future.

Finally, globalization while not being a total zero sum game is not a win-win situation either if the incentives are not in place. Hence, for globalization to succeed and flourish like the way it was during the heady days of the economic boom, governments in the BRICS have to ensure that they are open to global capital and they are reform minded as well. In conclusion, while the future of the global economy is still uncertain, the pointers available now indicate that the East might do well than the West in the coming years.