We invited readers to send questions this week to Martin Wolf, the FT’s chief economics commentator. Here is the seventh question, from Ali Ahmed. Martin’s response is below.
Ali Ahmed: As the dust settles from the crisis, what now for the Decoupling theory that asserts that emerging markets can grow rapidly and sustainably even as the developed economies go through a prolonged slowdown? This theory was in fashion at the beginning of the crisis, out of fashion as we went through 2009 and saw massive drops in production in emerging markets bearing the brunt of the collapse in world trade. What is your assessment as we enter 2010?
Martin Wolf: At present, we can say that decoupling has some credibility, but it is not unlimited. We know that when the developed world suffers a huge financial crisis and recession, the whole world is indeed affected, via reductions in access to credit, rising prices of credit, falling volumes and prices of exports and collapsing remittances. But we also know that emerging markets with strong domestic and external fiscal and financial positions have been able to offset these forces. China and, to a lesser extent, Brazil and India, are noteworthy examples. So a degree of decoupling has indeed occurred, despite the crisis. But it has also greatly helped that, in the end, a depression was averted.
