Perhaps many of my associates have been waiting patiently for frontier markets equity funds to produce some positive returns. Frontier markets number some 63 nations that are so latently emergent that they are not classified as “emerging”, the more common satellite asset class in advisor portfolios. So what is the prospect that we will see some progress by them? Part of the issue is the continuing divide; even antagonism between the economically developed world and the global frontier economies. Critics decry “neoliberal” policies demanded by the US and European dominated World Bank and the International Monetary Fund that steer emergent economies away from socialism. The US and European dominated World Bank and International Monetary Fund, for instance may demand the privatization of state-owned infrastructure such as railroads in exchange for credit. These policies, critics argue do more to open developing economies to predatory multinational corporations than strengthening these economies. This fosters dependence on the developed world economies and do little to foster development; the key element in frontier markets returns.
Mark Weisbrot, Co-Director of the Center for Economic and Policy Research takes issue with President Obama’s assertion at the UN yesterday that “globalization” is responsible for a substantial reduction in world poverty. Inadvertently, Weisbrot argues, the President gave high marks to the Chinese economic miracle and its patient transition from a planned (sometimes called “command”) economy to an economy of mixed socialism and capitalism. Weisbrot observes that most of the 1.1B people who have moved out of extreme poverty in the last 25 years live in China. Weisbrot argues that the Chinese economy is hardly the poster-child of “open markets”; the “way forward, not backward” in Obama’s words. China has also had a great impact on other frontier economies through liberal trade with these markets; increasing their share of frontier markets exports from less than .1% in 1980 to more than 3% in 2010. China, Weisbrot observes has also “provided hundreds of billions of dollars in investment, loans, and aid to low- and middle-income countries in the 21st century”. Weisbrot does not support the Trans Pacific Partnership; the 11 country trade deal that has become a signature policy of Obama’s.