The NYT today gives a nice overview of the debate on the future of global markets. Among those cited is Jeremy Grantham an astute analyst and one of those who was quite early to predict the current crisis. I think Grantham makes excellent points when he argues:
He does not think that the world’s economies are unrelated to one another. The expansion of global trade and capital flows, which could be the most significant economic development of the last 20 years, means “we’re all horribly coupled,” he said.
BUT that connection has created a widening disconnection, in his view, not between the United States and everything else but between emerging and developing economies.
“Growth rates in the developed world have been slowing without much fanfare for the last dozen years,” Mr. Grantham said. “I expect emerging markets to do much better and become the only game in town.”
His version of decoupling may seem at odds with Mr. Sri-Kumar’s, but they can be compatible. All it takes is time.....
, Mr. Grantham expects emerging markets to shine only after the “current unpleasantness” in the global economy and financial system abates and a recovery is under way.
Mr. Grantham is so optimistic about long-run prospects for the developing world because its economies and societies are decoupling in important ways from those in mature countries. Population growth, university graduation rates, the ratio of workers to retirees, rates of saving and investment — all factors that determine long-term growth rates — are higher in the emerging world. In many cases they are rising there and falling in the West and Japan. With the outlook so promising in emerging markets, Mr. Grantham said, “why wouldn’t you invest there?”
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