As the 2008 crisis has shown, EM may still experience significant economic and financial volatility on account of large capital in/outflows and increased trade openness. Nonetheless, the likelihood of a (systemically destabilizing) sovereign debt crisis over the coming years in the major EM is much smaller than it was in the past. Perhaps the greatest "known unknown" in this equation is political risk. Ian Bremmer from Eurasia Group has defined an EM as a "country where politics matter at least as much as economics to the market". The top-10 emerging markets do, arguably, face higher average levels of political risk, both domestic and external, than the DM. Naturally, it is always possible to come up with a political event that could throw a country into political chaos and economic turmoil. Maybe this sort of "tail risk" or low probability/high impact risk, or call it what you will, justifies keeping EM credit ratings at levels below the DM, even if they have credit metrics comparable to DM. Nonetheless, in order to justify this difference, it would be helpful if the agencies provided an analysis of how the actualization of political risk would affect a government's debt-servicing capacity - in both DM and EM.

In summary, the distinction between EM-DM obscures more than it enlightens. When the world's major economies were the largest economies with the highest degree of financial stability, the strongest external financial position (at least vis-à-vis less developed countries) and the highest per capita incomes, this distinction may have made sense. But following what may be in the future be recalled as the "great risk shift" regarding "developed" and "emerging economies", it may be time to re-think old labels and traditional distinctions - and established views of economic and financial risk.

Eoin Treacy's view This article is very much in line with the Fullermoney view. We prefer to describe nations as progressing or regressing rather than developed or emerging because the latter classification is far too limiting considering the advances made by a number of countries, particularly in Asia and Latin America over the last two decades.

An anecdote I've related before but which is no less relevant today stems from a conversation I had with a consultant for the World Bank while we waited for a plane in Xian airport a couple of years ago. He said that China is the only country which can tell the World Bank how much it wants to borrow because of its strong financial position.

Whether standards of corporate, civil and economic governance are improving or deteriorating is an important consideration. The trajectory in standards of governance in most of Asia and much of Latin America has improved considerably over the last couple of decades. Arguably the opposite has occurred in the USA and much of Europe. Therefore this is a useful barometer for gauging where investment risks are mounting or subsiding . The continued outperformance of Asian and Latin American stock markets is testament to the reassessment of risk taking place following post Lehman bankruptcy panic.