Unexpected Outcomes

Unexpected Outcomes: How Emerging Economies Survived the Global Financial Crisis

Carol Wise
Leslie Elliott Armijo
Saori N. Katada
Copyright Date: 2015
Pages: 250
  • Cite this Item
  • Book Info
    Unexpected Outcomes
    Book Description:

    This volume documents and explains the remarkable resilience of emerging market nations in East Asia and Latin America when faced with the global financial crisis in 2008-2009. Their quick bounceback from the crisis marked a radical departure from the past, such as when the 1982 debt shocks produced a decade-long recession in Latin America or when the Asian financial crisis dramatically slowed those economies in the late 1990s. Why?

    This volume suggests that these countries' resistance to the initial financial contagion is a tribute to financial-sector reforms undertaken over the past two decades. The rebound itself was a trade-led phenomenon, favoring the countries that had gone the farthest with macroeconomic restructuring and trade reform. Old labels used to describe "neoliberal versus developmentalist" strategies do not accurately capture the foundations of this recovery. These authors argue that policy learning and institutional reforms adopted in response to previous crises prompted policymakers to combine state and market approaches in effectively coping with the global financial crisis.

    The nations studied include Korea, China, India, Mexico, Argentina, and Brazil, accompanied by Latin American and Asian regional analyses that bring other emerging markets such as Chile and Peru into the picture. The substantial differences among the nations make their shared success even more remarkable and worthy of investigation. And although 2012 saw slowed growth in some emerging market nations, the authors argue this selective slowing suggests the need for deeper structural reforms in some countries, China and India in particular.

    eISBN: 978-0-8157-2477-3
    Subjects: Political Science, Sociology

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Foreword
    (pp. vii-x)

    Emerging economies suffered a string of severe macroeconomic crises between 1994 and 2001, starting with Mexico (1994) and East Asia (1997) and continuing with Russia (1998), Brazil (1998–99), Argentina (2000–01), and Turkey (2000–01). Those crises coincided with a period of growing external financial integration. In spite of the reforms subsequently undertaken by emerging economies, few would have predicted that they would perform as well as they did during the 2008–09 global financial crisis and the accompanying Great Recession.¹ Not only did developing countries and emerging economies display considerable resilience during the 2008–09 crisis but their...

  4. Acknowledgments
    (pp. xi-xii)
  5. 1 The Puzzle
    (pp. 1-24)

    One of the more surprising features of the 2008–09 global financial crisis was the comparative ease with which emerging economies in Asia and Latin America rebounded. That rebound was a radical departure from the effects of previous crises on these regions, be it the decade-long recession wreaked on Latin America by the 1982 debt shocks¹ or the financial crisis that dramatically slowed Asian economies in the late 1990s.² The quick recovery of emerging economies in 2010–12 was, moreover, instrumental in deterring a full-blown global depression. The lingering phenomenon of the “Great Recession” has largely been limited to the...

  6. 2 Chinese Financial Statecraft and the Response to the Global Financial Crisis
    (pp. 25-47)

    In a comparative project such as this, which looks at emerging economy responses to the 2008–09 global financial crisis and the varieties of capitalist development that influenced them, the Chinese case seems to be a shining example of effective crisis management by a proactive developmentalist state. The government’s swift action to stimulate other sources of growth once exports declined dramatically in November 2008 was facilitated by prior macroeconomic reforms—which, crucially, were not neoliberal ones. A number of reforms to help strengthen the Chinese financial system had already been implemented; although they were undertaken largely to correct perceived domestic...

  7. 3 Korea’s Victory over the Global Financial Crisis of 2008-09
    (pp. 48-73)

    Korea’s response to the global financial crisis of 2008–09 was exemplary. Although the economy was negatively impacted, especially by massive capital outflows and the collapse of exports, government policy was able to offset the shocks. GDP growth was negative for only three quarters, measured year on year (from the fourth quarter of 2008 through the second quarter of 2009), and never turned negative on an annual basis. In 2010, the economy expanded by more than 6 percent. Moreover, the stimulus did not seriously undermine the country’s fiscal balance or the level of government debt. How can this positive scenario...

  8. 4 India’s Response to the Global Financial Crisis: From Quick Rebound to Protracted Slowdown?
    (pp. 74-101)

    At first glance, India’s response to the global financial crisis (GFC) appears to be one of the most successful of the responses analyzed in this volume. According to data reported by the International Monetary Fund, India’s growth rate, at an annual average of 8.6 percent from 2005 to 2007, was second only to that of China among the large emerging economies (EEs). (See table 1-2, chapter 1.) During the crisis, India’s growth rate dropped to 2.9 percent, higher than the rate in all countries but China. India’s average growth rate during recovery, 5.2 percent, was the fourth-highest rate among all...

  9. 5 Southeast Asia’s Post-Crisis Recovery: So Far, So Good
    (pp. 102-122)

    Trying to make meaningful generalizations about a group of countries as diverse as those found in Southeast Asia is difficult enough at the best of times. Analysis is made even more challenging by a paradox: a region that was synonymous with economic (and political) failure scarcely a decade ago is now considered one of the few bright spots in a global economy weighed down by a rolling series of crises that have yet to be definitively resolved. The key question about the various economies of Southeast Asia is whether their generally strong rebound from their own earlier crises and their...

  10. 6 The Global Financial Crisis and Latin American Economies
    (pp. 123-147)

    Conventional wisdom concerning the economic turmoil that reverberated from the United States during 2008 anticipated that the impact of the global financial crisis on emerging economies, including those in Latin America, would be highly negative, as had been the case during previous crises.¹ It turns out that the impact of this external shock varied in both degree and duration across different countries and subregions of Latin America. Several factors were responsible for the differences in outcomes, including domestic economic conditions at the onset of the crisis, the capacity and willingness of governments to deploy countercyclical policies, and the sectoral and...

  11. 7 Macroprudence versus Macroprofligacy: Brazil, Argentina, and the Global Financial Crisis
    (pp. 148-180)

    At first glance, both the trajectories of economic growth in Brazil and Argentina during 2000–10 and the effective responses of the two countries to the 2008–09 global financial crisis appear to closely overlap. Both countries had implemented important market reforms through the 1990s, and each in its own way rebounded successfully from the 2000–03 world recession triggered by the dotcom bust in the United States in the late 1990s and the 9/11 terrorist attacks in New York and Washington in 2001. Although both countries had suffered serious currency crises in the decade prior to the global financial...

  12. 8 Mexico’s Recovery from the Global Financial Crisis
    (pp. 181-201)

    Reports from international media outlets as well as multilateral institutions have conveyed the notion that Mexico’s economic recovery after the 2008–09 global financial crisis was buoyant. In fact, thanks to such coverage, it is often assumed that Mexico’s economic future is bright, and some have recently labeled Mexico “the new China” or an “Aztec Tiger.” Others have even predicted that as an emerging economy, Mexico will become “the more dominant economic power in the 21st century.”¹ Such interpretations, however, stand in sharp contrast with several recent academic studies that suggest that the Mexican economy continues to be plagued by...

  13. 9 Lessons from the Country Case Studies
    (pp. 202-230)

    This book investigates an unexpected outcome: the quick rebound of most emerging economies around the Pacific Rim (which we define expansively to include Brazil, Argentina, and India) from the 2008–09 global financial crisis. The previous seven chapters delved into economic policy choices and outcomes in key countries. In this concluding chapter we combine insights from those country case studies with quantitative data on 14 emerging economies in Asia and Latin America. We begin with a brief roundup of the findings from the case studies; we then revisit the four hypotheses laid out in chapter 1 to explain the quick...

  14. Contributors
    (pp. 231-232)
  15. Index
    (pp. 233-244)
  16. Back Matter
    (pp. 245-245)