And nowhere is that illustrated better than in the sickly, emaciated condition of what was once the toast of Big Money everywhere - emerging markets! As Jeremy Warner points out in an excellent article in The Telegraph today, around 25-30 years ago:
From Unilever to GlaxoSmithKline, investment plans were turned on their heads. On a hitherto unprecedented scale, capital poured into Brazil, Russia, India, China – the Bric countries – and just about any other developing economy worthy of the name. Low-growth home economies were neglected as all eyes turned East. The corporate charge was followed by an even bigger shift in portfolio investment; everyone wanted a share of the promised riches of the developing world.
I would add the likes of BP who were amongst the first to get their foot in the Russian door in an effort to exploit their natural resources. I can honestly say that at the time I thought it was foolhardy simply because Russia, like many of the other emerging markets, is a kleptocracy with no rule of law and anyone doing business there needs their bumps felt! But at the time Western economies were written off as being past their 'sell by' date and the money-men like a herd of sheep followed the rule of the day - 'go East, young man, go East!'.
However, in effect, Warner reminds us of the saying which is my title to this post:
The idea that China and others could cram into 20 years what it took the advanced economies of the West 150 years to achieve was always fanciful. As the economist George Magnus points out, there are no precedents for populous countries sustaining double-digit growth for more than a 10-year period, yet such fantastical assumptions became the basis for many predictions about China and others.
The reality is that almost everywhere, emerging markets are bumping up against the so-called “middle income trap”, the idea that the first stage of development – where markets open themselves up to global trade, put in place basic infrastructure and adopt Western technologies and systems – is relatively easy, but can only be done once. Eventually, wages start to rise, eroding competitiveness in export markets.
The Chinses, in particular, are bumping up against this rock-hard ceiling and efforts to go upwards and onwards are exceedingly difficult especially if you do not have the legal structures to support it:
The next stage, where nations ascend the value chain beyond commodity manufacturing, is more difficult, as China, with a dramatically slowing growth rate, is now discovering. To achieve advanced economy status you need top-class universal education and training, deep and liquid capital markets, properly functioning tax systems, trusted institutions, exceptional levels of innovation and entrepreneurship, and last but not least, rule of law and rock-solid protection of property rights. You need to know, in the words of Lloyd Blankfein, chairman of Goldman Sachs, that you can sue your own government and expect to get a fair hearing. These are not the characteristics of many emerging markets. [My emphasis]
"Sue your own government", in China, or Russia? Well, you could die trying! Anyway, now the tide turns and the money and the investment is flowing back west, to the good ol' US of A and even to this, Her Maj's 'septic Isle'!