“Extremely grim and complicated” is how the Chinese describe the global outlook these days; the Indians are warning that they and others face much worse conditions as Europe’s austerity drive kicks in. This (paywall protected) FT story offers a useful overview of the reaction in the two largest developing economies to the disquieting news coming out of Europe these days.Export oriented economies remain dependent on demand elsewhere; India and China are now feeling the effects of their vulnerability to forces that they cannot control. But something else is at work. American economic policy has been growth oriented since World War Two and that approach helped spur the greatest wave of economic growth the world has ever seen, providing the conditions in which developing countries in Asia and elsewhere were able to lift more than a billion people out of abject poverty.As Europe contemplates its choices in the rubble of its current monetary union, one hopes European leaders will spare a thought for the huge numbers of people in the developing world whose hopes of escaping poverty depend on growth in the west.For students of politics and history, and for policy makers, investors and corporate risk managers, the conclusion to be drawn is that austerity in Europe, whatever the long term outcome, will in the next few years undermine political and economic stability in even the strongest developing countries, and likely promote new tensions in the Pacific and Indian Oceans. Sub-Saharan Africa and export-oriented Asian economies with large exposure to Europe will be hardest hit, but there will be additional effects in places like Brazil.Europe may or may not save the euro. But the costs of the euro, and of the frantic efforts being made to sustain it, are making the world a nastier and poorer place.
India, China in Economic Warnings: Eurofail Damages World
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