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1/Today's @bopinion post is about why developing nations are in big trouble -- both from coronavirus, and from the decline of the United States. https://www.bloomberg.com/opinion/articles/2020-08-03/covid-19-and-declining-u-s-pose-double-hit-to-developing-nations
2/Starting in the 1990s, developing countries started gaining on rich ones. https://www.bloomberg.com/opinion/articles/2018-10-18/why-the-developing-world-started-gaining-on-the-west
3/Everyone knows about China's amazing growth. But a number of other countries have also done quite well, such as Malaysia, Turkey, and Thailand.
4/In addition, international migration has sent large flows of remittances back to developing countries. https://www.bloomberg.com/opinion/articles/2019-07-24/immigrants-should-do-more-than-just-send-money-home?sref=R8NfLgwS
5/Together, growth and remittances have dramatically lowered extreme poverty throughout most of the world. https://www.bloomberg.com/opinion/articles/2019-03-07/global-poverty-is-in-retreat-as-poor-countries-catch-up?sref=R8NfLgwS
6/But this trend is in big trouble. Coronavirus is shrinking the world economy, which is going to hit developing nations hard. https://www.bloomberg.com/news/articles/2020-06-24/imf-forecasts-deeper-global-recession-from-growing-virus-threat?sref=R8NfLgwS
7/It has also cut remittances dramatically, unlike former recessions. https://www.bloomberg.com/opinion/articles/2020-04-30/coronavirus-remittances-shrink-with-migrants-trapped-in-limbo?sref=R8NfLgwS
8/Coronavirus is also hurting world trade, causing globalization to begin to unwind.
9/And there are signs that the crisis is pushing countries toward protectionism. https://www.cnbc.com/2020/04/10/coronavirus-expect-a-lot-more-protectionism-says-trade-expert.html
10/Already, the U.S.-China economic relationship is beginning to unwind. https://macropolo.org/digital-projects/china-footprint/
11/With Trump pushing trade wars and Biden promising to "Buy American", the U.S. looks much less interested in buying what developing countries produce. https://www.bloomberg.com/opinion/articles/2020-07-10/biden-s-economic-plan-is-good-start-that-needs-some-improvements?sref=R8NfLgwS
12/This is a problem, because exporting manufactured goods to rich countries is a big part of how developing countries get rich. https://www.imf.org/en/Publications/WP/Issues/2019/03/26/The-Return-of-the-Policy-That-Shall-Not-Be-Named-Principles-of-Industrial-Policy-46710
13/U.S. openness was a big part of this. We allowed countries like South Korea, Taiwan, Malaysia, etc. to export goods to us relatively freely, to keep their currencies cheap against the dollar, and to absorb and copy our technology.
This helped those countries get rich.
This helped those countries get rich.
14/But the U.S. is in steep decline. https://www.bloomberg.com/opinion/articles/2020-06-29/coronavirus-brings-american-decline-out-in-the-open?sref=R8NfLgwS
15/We might even lose reserve currency status, making it hard if not impossible for us to act as the buyer of last resort for developing countries' manufactured exports. https://www.bloomberg.com/news/articles/2020-07-28/goldman-warns-dollar-s-role-as-world-reserve-currency-is-at-risk?sref=R8NfLgwS
16/U.S. decline + protectionism will leave China as the center of the global economic order.
But a China-centric global economy will be far different from a U.S.-centric one.
But a China-centric global economy will be far different from a U.S.-centric one.
17/If you think China is going to buy up massive amounts of manufactured goods from Vietnam, Bangladesh, Ethiopia, Rwanda, etc....might want to think again.
And if you think China is going to let poor countries have its technology...ha.
And if you think China is going to let poor countries have its technology...ha.
18/So the threat to developing country catch-up is about more than just coronavirus. And it's about more than just protectionism. The U.S. was not a perfect steward of the global economy, but the developing world will miss us when we're gone.
(end) https://www.bloomberg.com/opinion/articles/2020-08-03/covid-19-and-declining-u-s-pose-double-hit-to-developing-nations?sref=R8NfLgwS
(end) https://www.bloomberg.com/opinion/articles/2020-08-03/covid-19-and-declining-u-s-pose-double-hit-to-developing-nations?sref=R8NfLgwS
