Essay common economic & political factors in emerging markets


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The essay tries to figure out correlation between economic development and political uncertainty in the emerging countries. Through examples and others, it tries to find out whether political uncertainty has slowed down development and lower the economic development and other related parameters of emerging markets - once considered the bright stars of the future.

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Essay common economic & political factors in emerging markets

  1. 1. COMMON THREADS OF DISATISFACTION IN EMERGING MARKETS ‘All happy families are alike; each unhappy family is unhappy in its own way.’ As the world passed through the tumultuous phase of the 1990s and tumbled through the recessionary phase of 2007-11, there were a few countries that stood resilient, still growing fast and pulling more sections of its population from the depths of poverty. These countries separated geographically, often by large distances, and each distinct in its growth patterns, culture, language, thoughts and policies have been simply referred to as the emerging markets (EM)/countries. They have further been grouped together based on their relative positions within the emerging markets; BRICS (comprising of Brazil, Russia, India, China and South Africa) being one of the front runners. The others within this EM fold include Egypt, Ukraine, Turkey, Argentina, Venezuela, Thailand etc., coming under different sub-groups like the Next Eleven, MIKT (Mexico, Indonesia, South Korea and Turkey), CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) etc. Similar to the strides in economic progress that these countries have recorded there is another common thread that runs through these nations. These countries, most of which are democracies and were once seen as the golden promises of the future in terms of economic health, social development and political stability, today witness massive public unrest and political turmoil. While each of these countries saw distinctly different events spark the final plug of discord and unrest on its streets, the underlying causes and pent up frustration seem to share many commonalities, ranging from anger at corrupt incumbent governments, economic inequality and uncertainty, among other issues. A closer look at some of these factors shows the many common evils that these nations share and how they have led these nations to become unhappy and disturbed families in a similar manner. Anti-Incumbency Factor A quick look at the various emerging markets that have faced significant unrest show that the governments/ruling political parties in these countries have been in power for more than five – six year. A general sense of complacency, policy inaction and distrust, led by rising corruption levels, have led to significant protests against the government and other elected representatives. A general fall in economic conditions of the country and non-fulfilment of promises are reasons for the wide-spread protests.
  2. 2. Figure 1: Incumbent government rule period (in years) Corruption Corruption and leakage of money allocated for welfare and development are the primary and most common reason for the distrust, anger and dissatisfaction in these countries. The mass movements that India witnessed for a brief period, led by Anna Hazare on his crusade for the Jan Lokpal bill for effective measures against corruption was a result of the growing anger at the many huge corruption that rocked the country recently, with the main accused in these scams being members of the ruling party. The Brazilian protests were also results of the government’s many unaccounted and corrupt extravagances and anger at the uncalled for burden being passed on to the masses in the form of hike in transport prices. Country/Year 2013 2012 2011 Venezuela 160 165 172 Ukraine 144 144 152 Russia 127 133 143 Egypt 114 118 112 Thailand 102 88 80 India 94 94 95 South Africa 72 69 64 Brazil 72 69 73 Turkey 53 54 61 Figure 2: Corruption - Transparency International Rankings Economic inequality and rapid urbanization While the economic transition of these emerging markets has created an expanding middle class, it has also widened the gap between the poor and rich. While the rich have grown richer, the poor and the lower middle income group live in continuous uncertainty of their economic well-being, leading to frustrations when the government fails to keep its promises of development. The rapid migration of population from rural to urban areas and unplanned and disorganized urbanization leading to congestion and chaos have also led to an underlying current of anger directed at the government and the upper sections of the society that live unaffected by the daily worries of food, shelter, clothing, education, transport, jobs and money. Venezuela is one classic example where this divide has led to
  3. 3. wide spread protests where the poor and the middle income see the government and rich hand in hand in corruption and hoarding of essentials. Country GINI Coefficient (Latest available) Brazil 54.69 Venezuela 44.77 Thailand 40.02 Turkey 38.95 India 33.38 Egypt 30.77 Ukraine 26.44 Figure 3: GINI Coefficient for Income Distribution (Higher value indicates higher inequality) Inflation There is nothing that hurts normal living more than inflation. And when the rapidly growing rates of inflation are not matched by rise in wages and job creation, public anger is directed at the government that is supposed to be maintaining stable economic conditions and growth. And high inflation that co- exists with high degrees of corruption and inequality led to unrest and demonstrations on the streets. High inflation rates coupled with fluctuations in the currency and high lending rates and bad economic policies have been one of the primary causes of turmoil in most emerging markets. Brazil, India, South Africa, Venezuela – all are going through such phases. Figure 4: Inflation Rate Comparison Technological Advancement (Key Enabler)
  4. 4. Another common thread that runs through these protests is the role of internet and social media as the key enabler to the mass movements. These are countries that have a large number of users on Facebook. These technology tools have helped the masses connect faster and easier, vent their grievances and communicate their plan of actions. The uprising in Egypt saw the massive use of Facebook to let protestors know the time and venue for demonstrations and to post updates about the revolution. Figure 5: No: of Facebook Users (2013) Participation of Middle Class The emerging countries that have faced unrest recently are all middle income countries or those that have just clambered out of this bracket. All these countries have seen the size of their middle income population grow rapidly. Its vast majority of citizens is literate and expects the government to provide the infrastructure for decent jobs and standard of living conditions. Though out of poverty, they are still not economically comfortable. Despite high rates of GDP growth, there still exists a fear of uncertain future economic situations as these countries try to grapple out of the abyss of poverty and stand knocking at the doors of the economic and social conditions similar to those in developed nations. They expect the government to perform efficiently and accountably so that the future for themselves and their children is secure and in line with their aspirations to move up the rungs of the economic ladder. And hence the otherwise politically-neutral middle class plunge into the movement because their hopes are tied to it. The middle class in India, fed up of the many corruption scandals lend its support to Anna Hazare for his Jan Lokpal bill; Brazilian middle class came down heavily on the extravagances of the
  5. 5. Dilma Rousseff government and Turkish middle class vehemently protested the closure of its city’s breathing spaces. Figure 6: Middle Class as a % of Total Population (2012) Aspirations - More than just a democracy The world has witnessed bloody protests and revolutions as masses rose to demand democracy. But today what the masses are rising for is not just democracy – it is democracy that is accountable and responsible. Protests in Ukraine, Thailand and Turkey are trying to overthrow an elected government, which is infested by the parasites of corruption, complacency and nepotism. What these protests seek is an accountable government that can preserve the nation’s economic and political integrity and work to put in place structures that will enable the continued growth and prosperity of the land its people. Conclusion The countries that were till a few years back considered the lands of future promise, once again stand at a ground where uncertainty of future performance looms large. The middle class that has largely been unconcerned about politics and policy making have been awakened by the fear of being pushed back into the poverty circles which they had so pain stakingly climbed out from, working hard day and night. This fear of future uncertainty combined with higher rates of literacy and awareness and help of social media tools and other technology in communication and expression of opinion have led to protests in countries which have atleast a few of the factors listed above. All nations go through such phases before entering the threshold of prosperity. The US has witnessed it, so has UK, France and Germany. But how quickly and smoothly the transition happens depends on the emergence of strong leaders, good economic policies and cooperation of the masses.
  6. 6. References    idUSL2N0K90V020131230  this-year/  income-inequality.html#axzz2xTnnOjFe    turmoil.aspx?PageID=238&NID=62837&NewsCatID=430       class/article5846668.ece