The essay tries to figure out correlation between economic development and political uncertainty in the emerging countries. Through examples and others, it tries to find out whether political uncertainty has slowed down development and lower the economic development and other related parameters of emerging markets - once considered the bright stars of the future.
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Essay common economic & political factors in emerging markets
1. COMMON THREADS OF DISATISFACTION IN EMERGING MARKETS
‘All happy families are alike; each unhappy family is unhappy in its own way.’
As the world passed through the tumultuous phase of the 1990s and tumbled through the recessionary
phase of 2007-11, there were a few countries that stood resilient, still growing fast and pulling more
sections of its population from the depths of poverty. These countries separated geographically, often
by large distances, and each distinct in its growth patterns, culture, language, thoughts and policies have
been simply referred to as the emerging markets (EM)/countries. They have further been grouped
together based on their relative positions within the emerging markets; BRICS (comprising of Brazil,
Russia, India, China and South Africa) being one of the front runners. The others within this EM fold
include Egypt, Ukraine, Turkey, Argentina, Venezuela, Thailand etc., coming under different sub-groups
like the Next Eleven, MIKT (Mexico, Indonesia, South Korea and Turkey), CIVETS (Colombia, Indonesia,
Vietnam, Egypt, Turkey and South Africa) etc.
Similar to the strides in economic progress that these countries have recorded there is another common
thread that runs through these nations. These countries, most of which are democracies and were once
seen as the golden promises of the future in terms of economic health, social development and political
stability, today witness massive public unrest and political turmoil.
While each of these countries saw distinctly different events spark the final plug of discord and unrest
on its streets, the underlying causes and pent up frustration seem to share many commonalities, ranging
from anger at corrupt incumbent governments, economic inequality and uncertainty, among other
issues. A closer look at some of these factors shows the many common evils that these nations share
and how they have led these nations to become unhappy and disturbed families in a similar manner.
Anti-Incumbency Factor
A quick look at the various emerging markets that have faced significant unrest show that the
governments/ruling political parties in these countries have been in power for more than five – six year.
A general sense of complacency, policy inaction and distrust, led by rising corruption levels, have led to
significant protests against the government and other elected representatives. A general fall in
economic conditions of the country and non-fulfilment of promises are reasons for the wide-spread
protests.
2. Figure 1: Incumbent government rule period (in years)
Corruption
Corruption and leakage of money allocated for welfare and development are the primary and most
common reason for the distrust, anger and dissatisfaction in these countries. The mass movements that
India witnessed for a brief period, led by Anna Hazare on his crusade for the Jan Lokpal bill for effective
measures against corruption was a result of the growing anger at the many huge corruption that rocked
the country recently, with the main accused in these scams being members of the ruling party. The
Brazilian protests were also results of the government’s many unaccounted and corrupt extravagances
and anger at the uncalled for burden being passed on to the masses in the form of hike in transport
prices.
Country/Year 2013 2012 2011
Venezuela 160 165 172
Ukraine 144 144 152
Russia 127 133 143
Egypt 114 118 112
Thailand 102 88 80
India 94 94 95
South Africa 72 69 64
Brazil 72 69 73
Turkey 53 54 61
Figure 2: Corruption - Transparency International Rankings
Economic inequality and rapid urbanization
While the economic transition of these emerging markets has created an expanding middle class, it has
also widened the gap between the poor and rich. While the rich have grown richer, the poor and the
lower middle income group live in continuous uncertainty of their economic well-being, leading to
frustrations when the government fails to keep its promises of development. The rapid migration of
population from rural to urban areas and unplanned and disorganized urbanization leading to
congestion and chaos have also led to an underlying current of anger directed at the government and
the upper sections of the society that live unaffected by the daily worries of food, shelter, clothing,
education, transport, jobs and money. Venezuela is one classic example where this divide has led to
3. wide spread protests where the poor and the middle income see the government and rich hand in hand
in corruption and hoarding of essentials.
Country
GINI Coefficient
(Latest available)
Brazil 54.69
Venezuela 44.77
Thailand 40.02
Turkey 38.95
India 33.38
Egypt 30.77
Ukraine 26.44
Figure 3: GINI Coefficient for Income Distribution (Higher value indicates higher inequality)
Inflation
There is nothing that hurts normal living more than inflation. And when the rapidly growing rates of
inflation are not matched by rise in wages and job creation, public anger is directed at the government
that is supposed to be maintaining stable economic conditions and growth. And high inflation that co-
exists with high degrees of corruption and inequality led to unrest and demonstrations on the streets.
High inflation rates coupled with fluctuations in the currency and high lending rates and bad economic
policies have been one of the primary causes of turmoil in most emerging markets. Brazil, India, South
Africa, Venezuela – all are going through such phases.
Figure 4: Inflation Rate Comparison
Technological Advancement (Key Enabler)
4. Another common thread that runs through these protests is the role of internet and social media as the
key enabler to the mass movements. These are countries that have a large number of users on
Facebook. These technology tools have helped the masses connect faster and easier, vent their
grievances and communicate their plan of actions. The uprising in Egypt saw the massive use of
Facebook to let protestors know the time and venue for demonstrations and to post updates about the
revolution.
Figure 5: No: of Facebook Users (2013)
Participation of Middle Class
The emerging countries that have faced unrest recently are all middle income countries or those that
have just clambered out of this bracket. All these countries have seen the size of their middle income
population grow rapidly. Its vast majority of citizens is literate and expects the government to provide
the infrastructure for decent jobs and standard of living conditions.
Though out of poverty, they are still not economically comfortable. Despite high rates of GDP growth,
there still exists a fear of uncertain future economic situations as these countries try to grapple out of
the abyss of poverty and stand knocking at the doors of the economic and social conditions similar to
those in developed nations. They expect the government to perform efficiently and accountably so that
the future for themselves and their children is secure and in line with their aspirations to move up the
rungs of the economic ladder.
And hence the otherwise politically-neutral middle class plunge into the movement because their hopes
are tied to it. The middle class in India, fed up of the many corruption scandals lend its support to Anna
Hazare for his Jan Lokpal bill; Brazilian middle class came down heavily on the extravagances of the
5. Dilma Rousseff government and Turkish middle class vehemently protested the closure of its city’s
breathing spaces.
Figure 6: Middle Class as a % of Total Population (2012)
Aspirations - More than just a democracy
The world has witnessed bloody protests and revolutions as masses rose to demand democracy. But
today what the masses are rising for is not just democracy – it is democracy that is accountable and
responsible. Protests in Ukraine, Thailand and Turkey are trying to overthrow an elected government,
which is infested by the parasites of corruption, complacency and nepotism. What these protests seek is
an accountable government that can preserve the nation’s economic and political integrity and work to
put in place structures that will enable the continued growth and prosperity of the land its people.
Conclusion
The countries that were till a few years back considered the lands of future promise, once again stand at
a ground where uncertainty of future performance looms large. The middle class that has largely been
unconcerned about politics and policy making have been awakened by the fear of being pushed back
into the poverty circles which they had so pain stakingly climbed out from, working hard day and night.
This fear of future uncertainty combined with higher rates of literacy and awareness and help of social
media tools and other technology in communication and expression of opinion have led to protests in
countries which have atleast a few of the factors listed above.
All nations go through such phases before entering the threshold of prosperity. The US has witnessed it,
so has UK, France and Germany. But how quickly and smoothly the transition happens depends on the
emergence of strong leaders, good economic policies and cooperation of the masses.