This isn’t to say that recoveries are permanent. Smith’s description of Russia in 1997, when he and others bought in heavily on the assumption that Russia was too big to fail, inadvertently reminds us of Russia in 2007: too dependent on high oil prices and with weak regulations and enforcement. Just over a decade ago, the Russian stock market lost 75 percent of its value; in 2009, it has lost at least 60 percent. Emerging markets can always submerge again.
In the evolution from Smith’s boots-on-the-ground adventures to Bremmer and Keat’s more detached, methodological approach, an interesting mutual appreciation appears: Smith thinks that his adventurous tactics are no longer relevant in a world of real-time, electronic information, yet Bremmer and Keat argue that local political knowledge is still essential to staying ahead of the curve. In other words, paying more attention to data is not enough — good instincts are also essential to figuring out all the unknowns.
A Warning to Established Players
An unmistakable conclusion that we share with all the books featured in this essay is the assertion that the U.S. has lost its status as the preeminent driver of globalization. Thus, we predict that two trends will typify the next phase of globalization: First, stronger regionalism in terms of deepening economic integration in areas such as East Asia, Latin America, and the Arab world will be driven by local powers such as China, Brazil, and Saudi Arabia. Second, the global playing field for firms, capital, and strategies will become much more level as Western companies lose the automatic edge they once held in trust and credibility. (See “Capturing the Asian Opportunity,” by Andrew Cainey, Suvojoy Sengupta, and Steven Veldhoen, s+b, Winter 2009.) Companies in emerging and frontier markets may not become global leaders in their own right, but they will surely be powerful players in their own domains and beyond.
- Ayesha Khanna is managing director of Hybrid Realities, a research and strategy consulting firm, and author of Straight Through Processing for Financial Services: The Complete Guide (Elsevier, 2008).
- Parag Khanna is a senior research fellow at the New America Foundation and author of The Second World: How Emerging Powers Are Redefining Global Competition in the Twenty-first Century (Random House, 2009).