Email of the day on the health of the global middle class
Comment of the Day

April 17 2014

Commentary by Eoin Treacy

Email of the day on the health of the global middle class

“Does the following analysis in the FT raise questions about a central plank our your argument in favour of a long term secular bull market in Autonomies?” 

Eoin Treacy's view

Thank you for this question which others may also have an interest in. Here is a section:

In an interview, Kaushik Basu, the World Bank’s chief economist, warned that many of those people who had emerged from poverty in recent years remained “very vulnerable” to slipping back. He also said the world economy faced risks, including the possibility that China’s growth could slow even more than it has already, something that would have big repercussions for the developing world.

Even if that risk did not materialise, Mr Basu said, current growth would not be enough to return to the sort of poverty reduction seen in recent decades.

To make up for that, he said, “governments need to do more, much more, in terms of structural reforms in developing countries”.

As we have said for decades “Governance is Everything” and the trajectory of standards of governance must be perceived to be improving. To move from $1 per day to $2 does not require the same improvement in governance and market conditions as a move from $5 to $10. The larger an economy becomes the harder it is to sustain outsized growth rates. In short, yes a failure by high population countries to embrace reform would jeopardise the bullish case for some of the Autonomies. However if we look around how likely is such an outcome?

India looks likely to elect a reform minded new government, Indonesia looks set to do the same in a few months. China is engaged in the greatest social engineering project in history and is putting progressively more focus on human capital. Nigeria’s governance is improving from a very low base. The new Mexican government passed a raft of reforms in its first month in office not least opening up its energy sector to foreign investment. Needless to say we see the world from an optimistic perspective but I trust not an unrealistic one.


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