The concept of “emerging markets” came up in the last few years as an idea associated with the future of the world. Demographics, territorial scale, low production costs, easy access to commodities – all signs of change in the geo-economic axis.
Countries such as the BRICs (Brazil, Russia, India and China) reached the status of “engines of growth.” Export-driven growth in China; “transition economy” for Russia’s market; “outsourcing” and technological innovation in India; and “import substitution 2.0” in Brazil kept these economies booming – and social tensions quelled.
They successfully adapted to both the “deep globalization”, which gained steam with the end of the Cold War, and the “deglobalization” logic of "every-nation-for itself" that has influenced international behavior since the 2008 crisis.
This context brought about a naïve expectation. The BRICs were destined, slowly but surely, to lead a process of convergence involving emerging markets and the development pattern of advanced economies. In case of crises however, we would see a much desired “decoupling” – the inflexibility of development markets, and the dynamism of emerging ones.
In the last few months, those pro-convergence drivers seemed to change course. The honeymoon with emerging markets apparently came to an end. Their economies have been slowing down. In contrast, the United States and Japan are recovering. Although sluggishly, Europe is coming out of its recession. This has of course taken a toll on the outlook for the direction of international capital flows.
But this supposed "end of the affair" with emerging markets has taken many to rush to superficial conclusions: no more talk of convergence or decoupling, but instead a return to the old “North-South” economc hierarchy.
In reality, performance in the coming years will be judged less by what we today label either "advanced" or "emerging" economies, and more by a country's ability to competitively shape up to the “reglobalization” now in the making.
Reglobalization, the new age in world affairs we are stepping into, does not comprise a renewed set of tenets and trends that allows us to believe we continue to operate in a scenario where the "world is flat".
Reglobalization will not promote a sharp verticalization of cross-border dynamics of regional economic, political and legal integration. Regional entitites will not take precedence over nations as the main actors in global affairs. It will not aspire to bring about a far-reaching communion of different world views. It will not come under a new global compact stitched together by most nations at either the United Nations or the World Trade Organization.
Reglobalization will be more “superficial” than the idealized "End of History" kind of world order we might have experienced at some point since the Cold War was dismantled. It will be mostly focused on trade, investment and the strengthening of global production networks. It will also be more selective - and therefore emerge as the result of the proliferation of multiple FTAs (free trade agreements) at both bilateral levels or else involve some of the most powerful economic regions of the world. On the one hand, this is what may come out of the current negotiations involving the United States and Europe (the so-called "TTIP", the Transatlantic Trade and Investment Partnership). On the other, similar dynamics are observd in a process involving the US and other countries bordering the Pacific in the Americas, Asia and Oceania.
China's success or failure in turning itself into a consumption-led economy producing high value-added goods will also be central to how reglobalization might take shape. In it, there will be little room for the Asian “neomercantilism” practiced by China since Deng Xiaoping stipulated that the color of the cat doesn’t matter, so long as it catches the mouse. Reglobalization will also offer less of a privileged platform for regional cooperation projects forged as of the ideological predilection for autarkic neo-developmentalism advocated by countries like Venezuela or Argentina.
Thus, those we once called "emerging markets" may very well stagnate. But the same is also true of "advanced economies" who set aside the imperatives of hard work and constant reinvention – and revel at expensive, ill-budgeted welfare states. Opportunities will decline for those countries which, having integrated themselves into a trade bloc or regional economic and political community, flirt with the luxury of fiscal irresponsibility and the granting of unsustainable labor and social security benefits without gains in productivity to support their economies. Mediterranean Europe – with the severe adjustment that it has been undergoing for a few years now – obviously comes to mind.
Whether this or that country might have at one point been coined "developed" or "emerging", they will greatly gain by letting go of the certainty that either their "advanced status" or their "rise" are inevitable. In the global race for competitiveness and development, nothing is automatic or ever-lasting.
Reglobalization will belong to those countries that create business-friendly ecosystems, well-established and transparent market rules, and steadfast connections to transnational economic networks.
Those countries, whether they might have once belonged to one or another side of the old North-South economic geography, will be the true “Reemerging Markets”in the years to come.