2009 Articles

BRICs, the Chinese Engine, and the Humbling of Market Fundamentalism

Arbix, Glauco

The present economic crisis is not a regional or local crisis, but a systemic one, which originated and expanded at the core of developed countries. In the 1980s, a debt crisis shook Latin America and Africa. Another one then hit Asia, Russia and again Latin America at the end of the 90s. Many countries had their trajectories momentarily interrupted, even though they were able to recover rapidly in tune with the global economy. In the current recession, it is the developed countries that are under the eye of the hurricane. Nevertheless, the impact on the emerging countries will be strong. Both for those that grew rapidly and benefited from a global environment marked by liquidity and low interest rates, a weak dollar and the rise of commodity prices; as well as for the more fragile countries, who will be, once again, the big losers. The crisis will not leave developing world unscathed. However, I argue that the current financial crisis will not sound the death knell for developing countries' recent economic success, as the debt crisis of the 1980s sounded for import substitution industrialization (lSI). They will suffer a strong downturn, but some of them could emerge stronger from the crisis.