Is the financial crisis spreading beyond Europe and the US — and how will it affect emerging markets?
Martin Wolf argues that the financial crisis threatens globalisation in three ways.
1. There will be less willingness to liberalise financial markets in emerging economies.
2. Free market capitalism’s credibility will take a big hit (that’s already happening, although Stumbling & Mumbling has a solution.). Says Wolf: “The more intrusive governments become in the high-income countries, the more unwilling the rest of the world will be to listen to their lectures on the virtues of free markets.
3. If the US and Europe go into recession, Wolf predicts a rise in economic nationalism. (Again, Iceland would argue that’s already happened.) China and India, which have been driving much of the global growth, could find their economies slowing. China’s financial centre, Hong Kong, is opening helplines as of Monday to counsel people affected by the financial crisis as Asian stocks dive. True, China’s got a huge internal market to supply, but there are rumours that dissatisfied manufacturers, tired of annual labour cost rises, are setting their sights on Vietnam.
“Lessons must indeed be learned. But among those lessons is not a need for self-sufficiency. That would add economic disaster to financial calamity.”
(Photo by Jez Arnold, CC2.0)
