While major developed countries are still in recovery mode, emerging markets are racing ahead. They have even found their voice at global economic summits
The Group of 20 (G20) summit in Seoul was notable for the increasing political weight of the emerging economies. Not only was it located in one, but, in many ways, it was also dominated by them.
In two crucial areas, macroeconomics and global economic development, the emerging economies' view prevailed. And an excellent proposal to link the two agendas - macroeconomics and development - emerged from the summit of leading and emerging economies.
A key feature of the world economy today is that it is running at two speeds. The US and much of Europe remain mired in the aftermath of the financial crisis that erupted in the fall of 2008, with high unemployment, slow economic growth and continuing bank-sector problems.
Emerging markets, however, have generally surmounted the crisis. Whereas last year was tough for the entire global economy, emerging markets bounced back strongly this year, while rich countries did not.
Recent data from the IMF's World Economic Outlook tell the story. This year, high-income countries are expected to achieve modest annual GDP growth of about 2.7 per cent, while the G20's emerging economies, together with the rest of the developing world, are expected to grow at a robust 7.1 per cent rate. Asia's developing economies are soaring, with 9.4 per cent growth. Latin America is expected to increase at 5.7 per cent and even sub-Saharan Africa, the traditional laggard, is expected to grow at 5 per cent this year.
This two-speed global economy largely reflects the fact that the 2008 financial crisis began with over-borrowing by the rich countries themselves.
Emerging economies, for the most part, avoided this disastrous over-borrowing.
One reason, certainly, was the vivid memory in Asia of the 1997 financial crisis, which underscored the need for limits on bank borrowing and capital inflows. By and large, Asian emerging economies were more prudently managed during the past decade. The same can be said about Brazil, which learnt from its own crisis in 1999, as well as Africa and other regions.
In the run-up to Seoul, the US government put forward a proposal that the surplus regions of the world should increase their domestic demand - to boost imports and thereby help the deficit regions (including the US) to recover.
The emerging economies were not impressed. Their answer was straightforward: the crisis began with US over-borrowing, so it is America's responsibility, not theirs, to clean up the mess.
For their part, emerging economies wanted to change the subject from short-term macroeconomic stimulus and imbalances to longer-term development issues. The host government, South Korea, was especially dynamic here. South Korea called on the G20's members to focus on challenges such as meeting the UN's Millennium Development Goals, raising agricultural production, and building sustainable infrastructure.
This was the first time that long-term development issues had been put so clearly on the G20 agenda, and it is a sign of the growing geopolitical weight of the group's emerging-market members.
The result of the deliberations is a new framework for the G20's engagement with the rest of the developing countries, known as the Seoul Development Consensus for Shared Growth.
The new G20 development agenda offers an excellent way to merge concerns about global imbalances with the need to accelerate the pace of development in the poorer countries.
Manmohan Singh, the Indian prime minister, put the matter perfectly. He noted that sub-Saharan Africa is now in a position to absorb more capital inflows to build infrastructure.
He recommended that G20 surpluses be recycled to those countries, and to other poor countries, to finance such investments. "In other words," said Mr Singh, "we should leverage imbalances of one kind to redress imbalances of the other kind."
By channelling the savings of China, Germany, Japan and other surplus countries into infrastructure investments in the poor countries, the world's economies truly would be working in harmony. The Seoul gathering may well have initiated that important process.
Jeffrey D Sachs is professor of economics and director of the Earth Institute at Columbia University. He is also special adviser to the UN secretary-general on the Millennium Development Goals.
* Project Syndicate
