Socialist Hell Holes vs. Genuinely Emerging Markets
The Wall Street Journal was talking sense this morning about the riskiness of developing economies. Instead of the standard rhetoric that everyone outside of the developed world is in trouble, they’re starting to distinguish between socialist hell-holes like Venzuela and countries which have been rapidly increasing economic freedom like Mexico and Poland. Policies matter. Remember, once the whole world was the third world, once the whole world was undeveloped, but the countries which embraced freedom became the first ’emerging’ markets and eventually they became the developed world. The next generation of ‘developed’ countries is the generation of countries right now which are pushing stable currency, market systems, property rights and limited government.
“The pain is still spreading across markets. South Africa raised rates to 5.5% from 5%, but the rand continued to weaken against the dollar—even though the rate increase was unexpected. Once again, even emerging-market countries with good fundamentals, such as Mexico and Poland, saw their currencies suffer.
This still doesn’t appear to be a systemic emerging-market crisis: Investors should differentiate between countries with strong and weak fundamentals. Worries about Argentina, Ukraine or Venezuela shouldn’t bother most investors given their weak links with the global economy.”